District Not Recorded

The Department of Justice announced today that it will require the divestiture of the North American commercial vehicle air springs business of Veyance Technologies, Inc. in order for Continental AG to proceed with its proposed $1.8 billion acquisition of Veyance.  The department said that, without the divestiture, the proposed acquisition likely would leave just two dominant firms and risk higher prices and decreased service for commercial vehicle air springs customers in North America. 

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

“The proposed acquisition would have eliminated one of only three significant suppliers of air springs for commercial vehicles in North America,” said Bill Baer, Assistant Attorney General in charge of the department’s Antitrust Division.  “Today’s proposed settlement will ensure competitive marketplaces for both North American commercial vehicle manufacturers and vehicle owners who purchase replacement air springs.”  Baer also noted the close cooperation between the department and foreign competition colleagues.  “We are pleased to have worked closely with our counterparts in Canada, Brazil and Mexico to coordinate our analyses and the formulation of our respective remedies.”

Commercial vehicle air springs are used in trucks, trailers and buses to provide stability to the suspension system, keep the tires in contact with the road and provide comfort and reduced driver fatigue in cabins and seats.

According to the complaint, the proposed acquisition would have reduced the number of suppliers of air springs to North American commercial vehicle manufacturers from three to two.  The creation of a virtual duopoly would have facilitated anticompetitive coordination between the two remaining suppliers and risked price increases and reductions in the quality of service by limiting availability or delivery options to original equipment manufacturers.  Similarly, the proposed acquisition would have reduced the number of significant suppliers of replacement air springs to commercial vehicle owners, which likely would have lessened competition in the North American aftermarket for commercial vehicle air springs. 

Under the terms of the proposed consent decree, Continental must divest Veyance’s North American air springs business, which includes air spring manufacturing and assembly facilities in San Luis Potosi, Mexico; research, development, engineering, and administrative assets in Fairlawn, Ohio; and certain other tangible and intangible assets.

In addition to the department’s competitive concerns relating to commercial vehicle air springs, the department was concerned that the proposed acquisition would reduce competition in the market for automotive air conditioning barrier hose (“barrier hose”), which is used to carry refrigerant in automotive air conditioning systems.  Veyance manufactures barrier hose.  Continental does not itself manufacture barrier hose, but does manufacture hose assemblies that incorporate barrier hose supplied by a third party.  Because Continental had an exclusive supply agreement with the only significant firm that competes with Veyance in the manufacture and sale of barrier hose in North America, the proposed acquisition raised additional competitive concerns.  Continental, however, has waived the exclusivity requirement in its supply agreement, so its supplier now may sell air conditioning hose products to any third party.

The department’s Antitrust Division, the Canadian Competition Bureau, the Administrative Council for Economic Defense in Brazil, and the Federal Competition Commission in Mexico cooperated closely throughout the course of their respective investigations.  

Continental is a corporation organized and existing under the laws of Germany, with headquarters in Hanover, Germany.  Continental is a leading German automotive manufacturing company, specializing in tires, brake systems, and components, and it is one of the world’s largest producers of rubber products.  Its annual sales for 2013 were approximately $40 billion.  ContiTech North America Inc., of Montvale, New Jersey, is a part of ContiTech AG, a division of Continental.  ContiTech North America produces and sells parts, components, and systems, including commercial vehicle air springs, for the automotive engineering industry in North America.

Veyance, incorporated in Delaware, is headquartered in Fairlawn, Ohio.  Veyance manufactures engineered rubber products for heavy-duty industrial, automotive, and military applications.  Veyance also produces and sells automotive and commercial vehicle parts, including commercial vehicle air springs, in North America.  In 2013, Veyance had $2.1 billion in sales. 

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

A California man pleaded guilty today in connection with his operation of the myRedBook.com website to facilitate prostitution.  This represents the first federal conviction of a website operator for facilitation of prostitution.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Melinda Haag of the Northern District of California, Special Agent in Charge David J. Johnson of the FBI’s San Francisco Field Office and Special Agent in Charge José M. Martinez of the Internal Revenue Service-Criminal Investigation’s (IRS-CI) San Francisco Office made the announcement.

Eric Omuro, also known as “Red,” 53, of Mountain View, California, pleaded guilty today before U.S. District Judge William H. Orrick of the Northern District of California to using a facility of interstate commerce with the intent to facilitate prostitution.  His co-defendant, Annemarie Lanoce, 40, of Rocklin, California, pleaded guilty on Nov. 20, 2014, for assisting Omuro with the operation of the myRedBook.com website.  Omuro’s sentencing hearing is set for March 26, 2015, and Lanoce’s sentencing hearing is set for March 19, 2015.

As part of the plea agreement, Omuro admitted that from April 2010 until June 25, 2014, he owned, managed, and operated a website known as myRedBook.com, which was previously known as sfredbook.com.  Omuro admitted that the website hosted advertisements posted by prostitutes containing explicit photos, graphic descriptions of sexual services offered, and rates for the sexual services.  The advertisements were searchable by geographic location, including cities throughout California, other U.S. states, and Canada.  

Omuro admitted that members of his website and prostitutes typically used acronyms for sex acts, which were defined in graphic detail in the website’s “Terms and Acronyms” section.  While prostitutes could post advertisements for free, myRedBook.com offered additional options for a fee.  For example, prostitutes could pay a fee to have their advertisement featured more prominently on the website.  Similarly, customers could access myRedBook.com for free.  If a customer purchased a membership, however, the customer obtained early and enhanced access to prostitute reviews, enhanced prostitute review search options, and access to additional VIP forums, among other things.

As part of the plea agreement, Omuro agreed to the forfeiture of the domain names sfRedBook.com and myRedBook.com and more than $1.28 million in cash and property as proceeds and other property involved in his unlawful activity.

Omuro was arrested on June 25, 2014, on a warrant issued following his indictment.

This case was investigated by the FBI’s San Francisco Field Office, the IRS-CI, and the Oakland Police Department.  The case is being prosecuted by the Criminal Division’s Child Exploitation and Obscenity Section and U.S. Attorney’s Office for the Northern District of California. The Criminal Division’s Office of International Affairs provided assistance to the prosecution. 

A Heber City, Utah, man was sentenced today to serve 78 months in prison for filing false claims for income tax refunds and for filing a fictitious financial instrument, announced Acting Deputy Assistant Attorney General Larry J. Wszalek for the Department’s Tax Division and the Internal Revenue Service (IRS). 

U.S. District Court Judge Clark Waddoups also ordered Dick Reid Jenkins, to pay $250,340 in restitution to the IRS and to serve three years of supervised released upon his release from prison. 

In June 2014, Jenkins, a certified public accountant, was convicted at trial of 18 counts of filing false claims for tax refunds and one count of presenting a fictitious financial instrument to the United States.  According to the superseding indictment and the proof at trial, in September 2008, Jenkins filed a false individual income tax return for himself for tax year 2007 which claimed an income tax refund of $402,920.  Then, in October 2008, Jenkins filed a false amended 2004 individual income tax return, which claimed an income tax refund of $434,261.  Both false claims were based on the use of a falsified IRS Form 1099-OID (Original Issue Discount), which is a form of accrued interest, to claim the false refunds.  From 2009 through 2014, the IRS has listed this scheme as one of its “Dirty Dozen” worst tax scams.

According to both the superseding indictment and the proof at trial, in addition to his own false returns, from September 2008 through February 2009, Jenkins caused 16 other false federal individual income tax returns to be filed on behalf of other individuals.  These false tax returns also used false Forms 1099-OID and claimed federal income tax refunds totaling $8,407,623.

Additionally, according to the superseding indictment and the proof at trial, on June 30, 2008, Jenkins presented a false and fictitious financial instrument to the U.S. Department of the Treasury in the amount of $300 million.

The case was investigated by special agents of IRS-Criminal Investigation.  Trial Attorney Stuart Wexler for the Tax Division prosecuted the case.

An Atlanta man was sentenced to 70 months in prison today for his role in the robbery of a jewelry courier, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Sally Quillian Yates of the Northern District of Georgia.

Jose Vicente Ramirez-Rodriguez, 40, of Atlanta, pleaded guilty on Dec. 10, 2014, to conspiracy to commit Hobbs Act robbery and interstate transportation of stolen property.  In addition to the prison sentence, U.S. District Judge Steve C. Jones of the Northern District of Georgia ordered Ramirez-Rodriguez to pay $122,398 in restitution.

According to admissions in his plea agreement, Ramirez-Rodriguez followed the jewelry courier to a QuikTrip gas station on Jan. 31, 2013.  As he was following the courier, Ramirez-Rodriguez contacted a co-defendant to help him with the robbery.  That co-defendant, in turn, contacted the other three defendants, all of whom came to the gas station together.  When the courier was putting gas in his car, two of the defendants approached him, one restrained him with a knife, while the other smashed the car’s window and took a briefcase containing over $125,000 in assorted jewelry.

Honorio Sanchez-Valenica, John Rodriguez, Ali Alejandro Godoy-Maximo, and Michael Alejandro Tovar-Vargas, were sentenced to serve 137 months in prison, 63 months in prison, 68 months in prison and 87 months in prison respectively on Oct. 27, 2014, for their involvement in the robbery.

This case was investigated by the FBI, Immigration and Customs Enforcement, and the Gwinnett County Police Department, with assistance from the Dallas Police Department.  The case is being prosecuted by Laura Gwinn of the Organized Crime and Gang Section and Assistant U.S. Attorney Kim Dammers of the Northern District of Georgia.

The Justice Department today filed a lawsuit against Southeastern Community and Family Services, Inc. (formerly Four-County Community Services, Inc.), a public housing agency that administers the Section 8 voucher program in Scotland County, North Carolina, along with two of its employees John Wesley and Eric Pender.  The lawsuit alleges that Wesley, the Section 8 housing coordinator, and Pender, the housing inspector, have sexually harassed female voucher program participants and applicants, in violation of the Fair Housing Act.

The complaint, filed in the U.S. District Court for the Middle District of North Carolina, alleges, among other things, that Wesley and Pender have subjected voucher program participants and applicants to unwanted sexual comments, sexual touching and other sexual acts, conditioned or offered Section 8 benefits in exchange for sexual acts and took adverse housing actions against those who rebuffed their sexual advances.  As alleged in the complaint, Pender and Wesley have engaged in this conduct while exercising their authority as employees of Southeastern Community and Family Services (SCFS), and SCFS has failed to take reasonable preventive or corrective measures.

“No one, including those who seek public assistance for housing benefits, should be subjected to sexual harassment, particularly by the very people tasked with providing critical assistance,” said Acting Assistant Attorney General Vanita Gupta for the Civil Rights Division.  “The Justice Department will continue its vigorous enforcement of the Fair Housing Act against those who abuse their power and authority.” 

“To invade the safety and security of someone’s home with sexually harassing and other abhorrent behavior will not be tolerated,” said U.S. Attorney Ripley Rand for the Middle District of North Carolina. “The goal of this lawsuit is to vindicate the rights of those subjected to the types of shameful conduct alleged in the Complaint – conduct that is a violation both of federal law and of basic human decency.”

The suit seeks monetary damages to compensate victims, civil penalties, and a court order barring future discrimination and requiring additional preventive measures.

The federal Fair Housing Act prohibits discrimination in housing based on race, color, religion, national origin, sex, disability and familial status.  More information about the Civil Rights Division and the laws it enforces is available at www.justice.gov/crt.  Individuals who believe that they may have been victims of housing discrimination by Southeastern Community and Family Services, John Wesley, or Eric Pender or have other information about this matter can contact the Justice Department at 1-800-896-7743, mailbox 94, or e-mail the Justice Department at fairhousing@usdoj.gov.  Persons who believe that they have experienced unlawful housing discrimination elsewhere can contact the Justice Department at 1-800-896-7743, or e-mail fairhousing@usdoj.gov, or contact the Department of Housing and Urban Development at 1-800-669-9777.

The complaint is an allegation of unlawful conduct.  The allegations must be proven in federal court.

The former Chief Executive Officer of TierOne Bank, a publicly traded commercial bank formerly headquartered in Lincoln, Nebraska, was charged today for his role in a scheme to defraud TierOne’s shareholders and mislead regulators by concealing the declining value of its loan and real estate portfolio.  Earlier this week, the former President and Chief Operating Officer pleaded guilty for his role in the scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Special Agent in Charge Thomas R. Metz of the FBI’s Omaha Division and Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Christy Romero made the announcement.  

“Today’s charges against the CEO of TierOne Bank represent our continuing drive to prosecute fraudulent conduct that jeopardizes our nation’s financial institutions,” said Assistant Attorney General Caldwell.  “We will continue to investigate and prosecute bank executives who engage in deceptive and fraudulent behavior, fueled by greed.”

“What Gilbert G. Lundstrom’s indictment demonstrates is that cheating and breaking the law will not be tolerated,” said FBI Special Agent in Charge Metz.  “This joint investigation, in conjunction with SIGTARP reflects the FBI’s nonstop commitment to protect our communities by aggressively investigating and bringing to justice individuals exploiting their influence or position for personal gain.”

“SIGTARP’s investigation with the FBI, DOJ, and the U.S. Attorney’s Office has resulted in criminal charges against Gilbert Lundstrom, former CEO of TARP applicant TierOne Bank, for hiding bank losses and past due loans arising from the bank’s aggressive expansion out of its traditional lending areas,” said Special Inspector General Romero.  “Lundstrom is essentially charged with having two set of books, with the books shown to regulators concealing tens of millions of dollars in delinquent loans.  Rather than tell the truth that this aggressive expansion resulted in a loan portfolio declining in value that threatened the bank’s capital position, this bank CEO is alleged to have engaged in a conspiracy to conceal the bank’s true financial condition from regulators who were examining the bank and reviewing the bank’s TARP application.  Taxpayers shouldered the burden of TARP to make our system safer, not to fill holes on bank’s books caused by fraud.” 

Gilbert G. Lundstrom, 72, of Lincoln, Nebraska was the CEO of TierOne Bank from 1999 to January 2010.  According to allegations in the indictment, during that time, he and others concealed the true value of TierOne’s loan and real estate portfolio and provided falsely inflated figures in its required reports to the U.S. Securities and Exchange Commission (SEC) and the Office of Thrift Supervision (OTS).  Specifically, Lundstrom and others allegedly used outdated property appraisals  and rejected new appraisals that would have required TierOne to mark down the value of its real estate holdings.  In addition, Lundstrom and others allegedly delayed seeking new appraisals to conceal the depreciating value of its loan collateral, and restructured loan terms to disguise the borrowers’ inability to make timely interest and principal payments.  As a result, Lundstrom and others were allegedly able to hide millions of dollars in losses from regulators and investors.

In 2008, TierOne submitted an application to the OTS seeking Troubled Asset Relief Program (TARP) funding.  Ultimately, TierOne withdrew its application and did not receive TARP funds.  TierOne filed for bankruptcy shortly after the bank was shut down by OTS in June 2010.

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

James A. Laphen, 65, of Omaha, Nebraska, the former President and Chief Operating Officer of TierOne, pleaded guilty earlier this week to conspiracy to commit securities fraud, wire fraud, making false entries in a bank’s books and records, and making false statements before U.S. Magistrate Judge Cheryl R. Zwart of the District of Nebraska.  His sentencing hearing is scheduled for February 27, 2015.  On Sept. 9, 2014, TierOne’s former Chief Credit Officer, Don A. Langford, also pleaded guilty for his role in the fraud.  His sentencing hearing will be scheduled at a later date. 

The case was investigated by the FBI’s Omaha Division and SIGTARP.  The SEC also provided substantial assistance in the investigation.  The case is being prosecuted by Trial Attorneys Henry P. Van Dyck and L. Rush Atkinson of the Criminal Division’s Fraud Section.

Dallas Airmotive Inc., a provider of aircraft engine maintenance, repair and overhaul services based in Grapevine, Texas, has admitted to violations of the Foreign Corrupt Practices Act (FCPA) and agreed to pay a $14 million criminal penalty to resolve charges that it bribed Latin American government officials in order to secure lucrative government contracts.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Special Agent in Charge Diego Rodriguez of the FBI’s Dallas Division made the announcement.

A criminal information, filed today in federal court in the Northern District of Texas as part of the deferred prosecution agreement, charges Dallas Airmotive with one count of conspiring to violate the FCPA and one count of violating the FCPA’s anti-bribery provisions.

According to Dallas Airmotive’s detailed admissions in the statement of facts accompanying the deferred prosecution agreement, between 2008 and 2012, the company bribed officials of the Brazilian Air Force, the Peruvian Air Force, the Office of the Governor of the Brazilian State of Roraima, and the Office of the Governor of the San Juan Province in Argentina.  Dallas Airmotive used various methods to convey the bribe payments, including by entering into agreements with front companies affiliated with foreign officials, making payments to third-party representatives with the understanding that funds would be directed to foreign officials, and directly providing things of value, such as paid vacations, to foreign officials.

This case is being investigated by the FBI’s Dallas Field Office and is being prosecuted by Trial Attorney David M. Fuhr of the Criminal Division’s Fraud Section.  Assistant U.S. Attorney Michael C. Elliott from the U.S. Attorney’s Office for the Northern District of Texas has provided assistance in the case.  The department acknowledges the assistance of law enforcement counterparts in Brazil.  The Criminal Division’s Office of International Affairs also provided significant assistance. 

Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands, announced that ALBERT ENTERA PINGUL was sentenced today by Chief Judge Frances Tydingco-Gatewood, in the U.S. District Court of Guam, to thirty seven months incarceration, and five years supervised release. 

Defendant PINGUL pled guilty on March 25, 2014, to one count of Abusive Sexual Conduct in violation of Title 18 U.S.C. Section 2244(a)(1).   Defendant PINGUL, a Manager at the Orote Point Bowling Lanes on the U.S. Naval Base, coerced a female employee to enter a mechanic room where he engaged in sexual contact through the use of force.  Defendant PINGUL was ordered to register with the Sex Offender Registry wherever he lives, works or attends school for the duration of his life.  PINGUL was also ordered to undergo a sex offender assessment.

U.S. Attorney Limtiaco states, “The aggressive prosecution of all sexual offenses is a priority of the United States Attorney’s Office.  The U.S. Attorney’s Office acknowledges the victim’s courage and strength in coming forward and reporting to law enforcement the unwanted sexual contact.”   

The U.S. Attorney notes that defendants who have committed sexual abuse of adults or children, have a duty to register and keep their registration current with the Sex Offender Registry in their jurisdiction.  Sex offenders who travel to Guam and who reside on Guam must inform the Guam Sex Offender Registry where they reside, work, or attend school - they must also periodically update their registration information.   The Sex Offender Registry was created in order to protect the public by protecting victims, preventing further victimization and informing the public of the whereabouts of sex offenders.  Guam’s Sex Offender Registry can be found online at www.guamcourts.org. 

U.S. Attorney Limtiaco also notes that this prosecution is part of the U.S. Department of Justice’s Project Safe Childhood (PSC) Initiative, a nationwide commitment to aggressively prosecute defendants who engage in the sexual victimization of children and adults, possess or receive child pornography, and sex offenders who fail to register with the jurisdiction’s Sex Offender Registry.      

Anthony Merrell Tyler, 34, of Yuba City, California, was sentenced today by U.S. District Court Judge John A. Mendez to serve 46 months in prison for violating the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act.  The crime involved a racially motivated attack by Tyler and two co-defendants, Billy Hammett, 30, and Perry Jackson, 29, on a white man and an African-American woman in Marysville, California, in 2011.  In addition to his term of incarceration, Tyler was ordered to serve three years of supervised release upon his release from prison and to pay $175 in restitution.

According to documents filed with the court, around 10:45 p.m. on April 18, 2011, a white man and an African-American woman parked their car at a convenience store in Marysville.  Shortly afterward, the three defendants attacked the man and woman because of their race.  Jackson punched him twice in the head through the open passenger window.  At the same time, Hammett opened the driver-side door and kicked the woman in the chest.  Seconds later, Tyler smashed the car’s windshield with a crowbar, sending shattered glass into the passenger compartment.  As the attack continued, the woman managed to take refuge inside the convenience store and the man struggled to get away.  All three assailants then descended upon the male victim and began attacking him in the parking lot.  He sustained abrasions on his right forearm and knees, while the woman suffered bruising to her chest.  None of the defendants knew their victims. 

In today’s hearing, and during Hammett and Jackson’s proceedings, Judge Mendez considered the defendants’ backgrounds and criminal histories.  Tyler has the words “white pride” tattooed down the backs of his arms and a swastika on his left upper arm.  He has previously acknowledged being a member of the Yuba County Peckerwoods, a local white supremacist group.  Hammett, who has a tattoo of the words “white power” across his abdomen, was previously convicted for the unprovoked assault on a 72-year-old African-American man and was sentenced on March 25, 2014, to 87 months in prison.  Jackson, who has the words “white power” tattooed in block letters down his shins, was sentenced on April 29, 2014, to 70 months in prison.  Tyler entered his guilty plea on March 11, 2014.

“These three defendants targeted the victims because of their race,” said Acting Assistant Attorney General Vanita Gupta for the Civil Rights Division.  “This type of attack causes harm not only to the immediate victims, but tears at the fabric of our communities and society itself.  The department will continue to vigorously prosecute such acts of racial violence.”

“Racially motivated violence not only threatens the harmony of our diverse communities, it undermines the principle of equality under law, which is a foundation of our society,” said U.S. Attorney Benjamin B. Wagner for the Eastern District of California.  “For these reasons, prosecuting hate crimes will continue to be one of our highest priorities.”

This case was investigated by the FBI, with assistance from the Yuba County Sheriff’s Office and the Yuba County District Attorney’s Office.  The case was prosecuted by U.S. Attorney Wagner and Trial Attorney Chiraag Bains of the Justice Department’s Civil Rights Division.

Three Aryan Brotherhood of Texas (ABT) gang members and associates from Houston and Dallas were sentenced to prison this week for their roles in the violent ABT enterprise, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas.

Today, James Francis Sampsell, 44, of Waco, Texas, Rusty Eugene Duke, 32, of Dallas, Texas, and Steven Worthey, 42, of Houston, Texas, were sentenced to serve respective terms of 140 months, 216 months and 240 months, in federal prison by U.S. District Judge Sim Lake in the Southern District of Texas.   

According to information presented in court, the three men were admitted members of ABT, a powerful race-based organization that operates inside and outside of state and federal prisons throughout Texas and the United States.  Along with other ABT gang members and associates, they agreed to commit multiple acts of murder, robbery, arson, kidnapping and narcotics trafficking on behalf of the ABT gang.  ABT gang members met on a regular basis at various locations throughout Texas to report on gang-related business, collect dues, commit disciplinary assaults against fellow gang members and discuss acts of violence against rival gang members, among other things. 

The ABT was established in the early 1980s within the Texas prison system.  The gang modeled itself after and adopted many of the precepts and writings of the Aryan Brotherhood, a California-based prison gang that was formed in the California prison system during the 1960s.  Previously, the ABT was primarily concerned with the protection of white inmates and white supremacy/separatism, but over time, the ABT has expanded its criminal enterprise to include illegal activities for profit, according to court records.

In order to be considered for ABT membership, a person must be sponsored by another gang member.  Once sponsored, a prospective member must serve an unspecified term, during which he is referred to as a prospect, while his conduct is observed by the members of the ABT.

Court documents allege that the ABT enforced its rules and promoted discipline among its members, prospects and associates through murder, attempted murder, arson, assault, robbery and threats against those who violated the rules or posed a threat to the enterprise.  Members, and oftentimes associates, were required to follow the orders of higher-ranking members, often referred to as “direct orders.”

The defendants sentenced this week are three of 36 defendants convicted of conducting racketeering activity through the ABT criminal enterprise, among other charges. The last defendants are set for sentencing next week.   

This Organized Crime Drug Enforcement Task Force case is being investigated by a multi-agency task force consisting of the Bureau of Alcohol, Tobacco, Firearms and Explosives; Drug Enforcement Administration; FBI; U.S. Marshals Service; Federal Bureau of Prisons; U.S. Immigration and Customs Enforcement, Homeland Security Investigations; Texas Rangers; Texas Department of Public Safety; Montgomery County, Texas, Sheriff’s Office; Houston Police Department-Gang Division; Texas Department of Criminal Justice – Office of Inspector General; Harris County, Texas, Sheriff’s Office; Atascosa County, Texas, Sheriff’s Office; Orange County, Texas, Sheriff’s Office; Waller County, Texas, Sheriff’s Office; Alvin, Texas, Police Department; Carrollton, Texas, Police Department; Mesquite, Texas, Police Department; Montgomery County District Attorney’s Office; and the Atascosa County District Attorney’s Office.

The case is being prosecuted by David Karpel of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorneys Ed Gallagher and Tim Braley of the Southern District of Texas.

Today the U.S. Department of Justice is announcing the launch of two new digital services for the American people: the DOJ News API and the DOJ Law Jobs API.  These web APIs (application programming interfaces) provide web developers the ability to build mobile apps and other software applications that can search, sort, and filter thousands of press releases, speeches, blog posts, and law job vacancy announcements published by the Department.  Consistent with the President's technology vision described in the Digital Government Strategy and Open Data Policy, this launch transforms collections of website documents into a transparent, interactive dataset.

Today's API launch is made possible by an effort led by the Office of the Chief Information Officer to replace the aging technology infrastructure of Justice.gov with a cloud-based, open source website management platform that will be used by hundreds of Department of Justice component offices across the country.  This website upgrade adds search, sort, and filter capabilities to thousands of Supreme Court briefs, legal opinions, Freedom of Information Act (FOIA) court decisions, Congressional testimony, and more.  To get started using the APIs or to learn more about developer resources from the Department, see www.justice.gov/developer. 

“The APIs are part of an effort to replace aging technology with a cloud-based, open source platform,” said Deputy Assistant Attorney General, Information Resources Management/Chief Information Officer Joseph F. Klimavicz.  “Website content that has been migrated to the new platform automatically adjusts to fit any device, including mobile devices and tablets, as well as desktops, making the Department's information assets more accessible than ever before.  The open source platform also enables the Department to refresh content rapidly, providing better access to information to the American public.

In developing the website management platform and APIs, the Department followed guidance from the U.S. Digital Service and collaborated with the 18F program at the General Service Administration.

“It’s wonderful to see the Justice Department building out their suite of APIs,” said GSA Senior API Strategist Gray Brooks.  “There's fantastic potential in government APIs, for the public as well as for agency operations.  Simply put, this is the future of digital government and the efforts that go into justice.gov/developer will result in a more efficient and productive operation.”

Additional details about digital strategy and open government at the U.S. Department of Justice are available at www.justice.gov/digitalstrategy and www.justice.gov/open. 

WASHINGTON – Daniel J. Casamatta has been appointed by Attorney General Eric Holder as Acting U.S. Trustee for Arkansas, Missouri and Nebraska (Region 13), effective on January 1, 2015, the Executive Office for U.S. Trustees announced today. Mr. Casamatta replaces Nancy J. Gargula, the U.S. Trustee for Region 10 (Indiana and Central and Southern Illinois), who concurrently has served as the U.S. Trustee for Region 13 since 2006.

Mr. Casamatta has served as the Assistant U.S. Trustee in the Kansas City, Mo., office of the U.S. Trustee Program (USTP) since 2008. Prior to that appointment, he served as Assistant U.S. Trustee in Grand Rapids, Mich., for 18 years, and for periods of time was also the Acting Assistant U.S. Trustee in Indianapolis and the Acting Chief of the USTP's National Bankruptcy Training Institute located in the National Advocacy Center in Columbia, S.C. Mr. Casamatta currently leads the USTP's Data Integrity Group to ensure the accuracy and completeness of data in the Program's enforcement reporting systems. Before joining the USTP more than 26 years ago, Mr. Casamatta engaged in the private practice of law in Cleveland, specializing in commercial litigation and bankruptcy matters. He received his law degree from Case Western Reserve University Law School in Cleveland, and his undergraduate degree from Cleveland State University.

The USTP is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. The USTP has 21 regions and 93 field office locations. Region 13 is headquartered in Kansas City, Mo., with additional offices in Little Rock, Ark., and Omaha, Neb.

Jane Limprecht, Public Information Officer
Executive Office for U.S. Trustees
(202) 305-7411

WASHINGTON – Andrew R. Vara has been appointed by Attorney General Eric Holder as Acting U.S. Trustee for Delaware, New Jersey and Pennsylvania (Region 3), effective on January 1, 2015, the Executive Office for U.S. Trustees announced today. Mr. Vara replaces Roberta A. DeAngelis, who is retiring after more than 15 years with the U.S. Trustee Program (USTP), including more than eight years as Region 3 U.S. Trustee or Acting U.S. Trustee.

Mr. Vara has served as the Assistant U.S. Trustee in the USTP's Cleveland office since 2008. He also previously has headed the USTP's offices in Wilmington, Del., and Manhattan, as Assistant U.S. Trustee and Acting Assistant U.S. Trustee, respectively. He frequently serves as a faculty member and lecturer at the USTP’s National Bankruptcy Training Institute located in the National Advocacy Center in Columbia, S.C. Mr. Vara serves as co-chair of education for the American Bankruptcy Institute's (ABI) Ethics and Professional Compensation Committee and recently served as a member of the ABI's Ethics Task Force. Before joining the USTP more than 20 years ago, he clerked for Hon. Laurence Howard, Chief Judge of the U.S. Bankruptcy Court in the Western District of Michigan. Mr. Vara received his law degree with honors from Ohio State University Moritz College of Law in Columbus, Ohio, where he was awarded membership in the Order of the Coif, and his undergraduate degree magna cum laude from Duke University in Durham, N.C.

The USTP is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. The USTP has 21 regions and 93 field office locations. Region 3 is headquartered in Philadelphia, with additional offices in Wilmington, Del.; Newark, New Jersey; and Harrisburg and Pittsburgh, Pa.

Jane Limprecht, Public Information Officer
Executive Office for U.S. Trustees
(202) 305-7411

Two Florida men were sentenced on charges of conspiracy and trafficking in protected timber rattlesnakes and endangered Eastern indigo snakes on Friday, Dec. 5.  A federal judge in Philadelphia sentenced Robroy MacInnes, 55, of Inverness, Florida, and Robert Keszey, 48, of Bushnell, Florida, to 18 months and 12 months in prison respectively for their role in trafficking in state and federally protected reptiles.  MacInnes and Keszey co-owned a well-known reptile dealership, Glades Herp Farm Inc., based in Florida, and Keszey formerly hosted the Discovery Channel show “Swamp Brothers.”  The defendants will also serve three years of supervised release.  MacInees was also sentenced to pay a $4,000 fine and Keszy will pay a $2,000 fine.

Between 2006 and 2008, the defendants collected protected snakes from the wild in Pennsylvania and New Jersey, purchased protected eastern timber rattlesnakes that had been illegally collected from the wild in New York, and transported eastern indigo snakes, which are listed under the federal Endangered Species Act, from Florida to Pennsylvania.  The evidence at trial showed that the protected rattlesnakes were destined for sale at reptile shows in Europe, where a single timber rattlesnake can sell for up to $800.  The eastern indigos were intended for domestic sale where a single snake is worth up to $1,000.  In addition to trafficking in illegal animals, the defendants attempted to persuade a witness not to provide the government with information regarding their illegal dealings. 

The eastern timber rattlesnake is a species of venomous pit viper native to the eastern United States, and is listed as threatened in New York.  It is also illegal to possess an eastern timber rattlesnake without a permit in Pennsylvania.  The eastern indigo snake, the longest native North American snake species, is listed as threatened by both Florida and federal law. 

Both MacInnes and Keszey were convicted on Nov. 15, 2013 after a jury trial in Philadelphia.  The case was investigated by the U.S. Fish and Wildlife Service, Office of Law Enforcement, with assistance from the New York Department of Environmental Conservation.  The case was prosecuted by Trial Attorney Patrick M. Duggan of the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division and Assistant U.S. Attorney Mary Kay Costello of the U.S. Attorney’s Office for the Eastern District of Pennsylvania.

OtisMed Corp. and its former chief executive officer (CEO) admitted today to intentionally distributing knee replacement surgery cutting guides after their application for marketing clearance had been rejected by the Food and Drug Administration (FDA), and the corporation agreed to pay more than $80 million to resolve its related criminal and civil liability, the Justice Department announced today.

OtisMed and its CEO, Charlie Chi, 45, of San Francisco, pleaded guilty in federal court in Newark, New Jersey.  OtisMed pleaded guilty before U.S. District Judge Claire C. Cecchi to an information charging it with distributing, with the intent to defraud and mislead, adulterated medical devices into interstate commerce in violation of the Food, Drug, and Cosmetic Act (FDCA).  Judge Cecchi also sentenced the company today, fining OtisMed $34.4 million and ordering $5.16 million in criminal forfeiture.  In a separate civil settlement, OtisMed agreed to pay $40 million plus interest to resolve its civil liability.  Chi pleaded guilty before U.S. Magistrate Judge Mark Falk to three counts of introducing adulterated medical devices in interstate commerce.  Chi will be sentenced by Judge Cecchi on March 18, 2015.

“Americans must be able to trust that they are treated with medical devices that have been shown to be safe and effective,” said Deputy Assistant Attorney General Jonathan Olin for the Justice Department’s Civil Division.  “The Department of Justice will not tolerate companies and individuals that cut corners when it comes to the public’s health.”

“It is vital that products like the OtisKnee are subjected to the appropriate level of scrutiny,” said U.S. Attorney Paul J. Fishman for the District of New Jersey.  “Patients seeking medical care are vulnerable; they are often afraid, and in pain.  They should be able to trust their doctors.  And they should be entitled to trust that the devices their doctors are using are safe, effective, tested and approved.  OtisMed and Charlie Chi betrayed that trust.”

The civil settlement resolves claims filed under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States and obtain a portion of the government’s recovery.  The civil lawsuit was filed in the District of New Jersey and is captioned U.S. ex rel. Adrian v. OtisMed Corp., et al.  

OtisMed was a privately held company when OtisMed and Chi committed the criminal conduct, and was later acquired by Stryker Corp., a medical technology company based in Michigan, in November 2009.  At the time the shipments were made in September 2009, Stryker executives were not aware that OtisMed and Chi had shipped cutting guides after the FDA had rejected the company’s application for marketing clearance for the device.  Stryker, OtisMed’s parent corporation, cooperated with the government with regard to Otismed’s pre-acquisition conduct throughout the investigation.  In addition to the criminal pleas and civil resolution, OtisMed also agreed to be excluded from participating in all federal health care programs for a period of 20 years and Stryker separately agreed to a series of compliance measures aimed at preventing future misconduct.

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

Chi was among the founders of OtisMed in August 2005, and conceived of the OtisKnee orthopedic cutting guide, its primary product.  Chi acted as OtisMed’s president, CEO and board of directors’ chairman 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 accurate bone cuts specific to individual patients’ anatomy based on magnetic resonance imaging (MRI) 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 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 and others at OtisMed were 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.  Both Chi and OtisMed admitted that Chi ordered the distribution a week after the FDA denied OtisMed’s request for clearance.

“Companies and individuals put the public health at risk by not complying with FDA regulatory requirements for the pre-market review of medical devices,” said Acting Director Philip J. Walsky for the FDA’s Office of Criminal Investigations.  “We will continue to assure consumer confidence in FDA-regulated products by investigating and bringing to justice those who endanger patient safety by distributing unapproved surgical devices.” “When OtisMed and its CEO, Charlie Chi, distributed medical devices that were not FDA-approved, they violated the trust that patients extend to health care professionals,” said Special Agent in Charge Thomas O’Donnell of the New York Regional Office of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).  “This outrageous behavior triggered our agency to exclude OtisMed from participating in Medicare and Medicaid for 20 years.  We will continue to work with our law enforcement partners to protect federally funded health care programs and the patients who rely on those programs.”

The civil settlement resolves allegations arising from the marketing and distribution of the OtisKnee without receiving approval or clearance from the FDA for the device.  Specifically, the settlement alleged that in May 2006, OtisMed, through co-promotion activities with Stryker Corporation, began commercially distributing the OtisKnee without having received clearance or approval from the FDA for the device.  OtisMed continued to distribute the device while its application was pending and even after the FDA informed OtisMed that the product could not be lawfully distributed until FDA approved the device.

The settlement also alleged that OtisMed encouraged health care providers to submit claims for MRIs that were not reimbursable because they were not performed for diagnostic use, but rather solely to provide data for the creation of the OtisKnee.  Except as admitted in the plea agreement, the claims settled by the civil settlement agreement are allegations only, and there has been no determination of liability as to those claims.

The company will 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.  Of that amount, approximately $41 million will be paid to the federal government.  Medicaid is funded jointly by the states and the federal government and participating Medicaid states will receive approximately $376,700 of the settlement amount.  As part of today’s resolution, the relator will receive approximately $7 million.

In addition to agreeing to continue to cooperate with the government’s investigation and maintain a compliance program, Stryker agreed to conduct a review and audit regarding whether other marketed devices have the appropriate FDA approvals and share the results of that audit with the government.  Stryker also agreed to annual certifications from the president of Stryker’s orthopedics group and from Stryker’s board of directors regarding the effectiveness of the compliance program.

Chi faces a statutory maximum sentence of one year in prison and a $100,000 fine, or twice the gain or loss from the offense, for each of the three counts of introducing adulterated medical devices in interstate commerce.

The guilty pleas and civil settlement are 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 HHS-OIG, under the direction of Special Agent in Charge O’Donnell.  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.

Additional assistance was provided by the Defense Health Agency and the Office of Personnel Management–Office of the Inspector General.

This resolution illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23.2 billion through False Claims Act cases, with more than $14.9 billion of that amount recovered in cases involving fraud against federal health care programs.

The government is represented in the criminal case by Chief Jacob T. Elberg of the U.S. Attorney’s Office Health Care and Government Fraud Unit and Trial Attorney Ross S. Goldstein of the Civil Division’s Consumer Protection Branch, and in the civil settlement by Assistant U.S. Attorney Charles Graybow of the District of New Jersey’s Health Care and Government Fraud Unit and Trial Attorney Charles Biro of the Civil Division.

U.S. Attorney Fishman reorganized the health care fraud practice at the U.S. Attorney’s Office for the District of New Jersey shortly after taking office, including creating the 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 $620 million in health care fraud and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the FDCA and other statutes.

OtisMed Documents

A Miami licensed nursing assistant was sentenced today to serve 150 months in prison for participating in a $200 million Medicare fraud scheme involving fraudulent billings by American Therapeutic Corporation (ATC), a mental health company headquartered in Miami.

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

Rodolfo Santaya, 55, of Miami, was convicted on July 18, 2014, after a six-day jury trial, of conspiracy to commit health care fraud and wire fraud, conspiracy to pay and receive bribes and kickbacks, and two counts of receipt of bribes and kickbacks in connection with a federal health care benefit program.  In addition to the prison sentence, U.S. District Judge Jose E. Martinez of the Southern District of Florida ordered Santaya to pay more than $18.2 million in restitution.

Evidence at trial demonstrated that, between 2006 and 2010, Santaya was paid thousands of dollars a month in cash kickbacks in exchange for referring Medicare beneficiaries to ATC, which operated purported partial hospitalization programs (PHPs) in seven locations throughout South Florida and Orlando.  A PHP is a form of intensive treatment for severe mental illness.

Evidence at trial also demonstrated that the Medicare beneficiaries Santaya sent to ATC did not need, qualify for, nor receive PHP treatment.  Nevertheless, ATC submitted false and fraudulent bills to Medicare for services purportedly provided to each of Santaya’s patients.  In order to justify ATC’s fraudulent billings, medical professionals, including doctors, fabricated and signed fraudulent medical documentation and patient files.        

ATC, an associated management company, and more than 20 individuals, including ATC’s owners, have all previously pleaded guilty or been convicted at trial.  Santaya has been in federal custody since his conviction.

The case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.  The case is being prosecuted by Assistant Chief Robert A. Zink and Trial Attorneys Nicholas E. Surmacz and Kelly Graves 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 nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 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 (HEAT), go to: www.stopmedicarefraud.gov.

Earlier this 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, and that the government would establish a mechanism that preserves the capabilities we need without the government holding this bulk data.  As a first step in that transition, the President directed the Attorney General to work with the Foreign Intelligence Surveillance Court (FISC) to ensure that, 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.  The President also directed that the query results must be limited to metadata within two hops of the selection term instead of three.  These two changes have been in effect since February 2014. 

In addition, the President also 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 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.  The President also noted that legislation would be required to implement this option, and he has called on Congress to enact this important change.

The Administration welcomes the opportunity to work with the new Congress to implement the changes the President has called for.  Given that legislation has not yet been enacted, and given the importance of maintaining the capabilities of the telephony metadata program, the government has sought a 90-day reauthorization of the existing program, as modified by the changes the President directed in January. 

Consistent with prior declassification decisions and in light of the significant and continuing public interest in the telephony metadata collection program, Director of National Intelligence James R. Clapper declassified the fact that the government filed an application with the FISC to reauthorize the existing program for 90 days, and that the FISC issued an order approving the government’s application.  The order issued on Dec. 4, 2014, expires on Feb. 27, 2015. The Administration is undertaking a declassification review of this most recent court order, and when complete, the Office of the Director of National Intelligence will post the document to its website and icontherecord.tumblr.com.

Noble Drilling (U.S.) LLC was charged with environmental and maritime crimes for operating the drill ship Noble Discoverer and the drilling unit Kulluk in violation of federal law in Alaska in 2012, the Department of Justice announced.

Under the terms of a plea agreement filed in federal court today, Noble will plead guilty to eight felony offenses, pay $12.2 million dollars in fines and community service payments, implement a comprehensive Environmental Compliance Plan, and will be placed on probation for four years. In addition, Noble’s parent corporation, Noble Corporation plc, headquartered in London, England, will implement an Environmental Management System for all Mobile Offshore Drilling Units (MODUs) owned or operated by Noble Corporation plc and its direct and indirect subsidiaries worldwide.

Noble Drilling (U.S.) LLC was charged in an eight-count Information with knowingly failing to maintain an accurate Oil Record Book and an accurate International Oil Pollution Prevention certificate, knowingly failing to maintain a ballast water record book, and knowingly and willfully failing to notify the U.S. Coast Guard of hazardous conditions aboard the drill ship Noble Discoverer. At the time of the offenses, the Noble Discoverer was operating under contract with Shell Offshore, Inc. and Shell Development, Ltd. for the purpose of drilling in the arctic in Alaska.

During the 2012 drilling season, Noble was the operator and bare boat charterer of the motor vessel Noble Discoverer and the drilling operator of the MODU Kulluk. The Kulluk was a conical-shaped vessel, weighing 27,968 gross tons, and measuring 265.7 feet in diameter. The Kulluk was not self-propelled, but rather had to be towed. The Noble Discoverer, a mobile drill ship, weighed approximately 15,296 gross tons, measured 572 feet long, and was propelled by a single main engine. In 2012, the Kulluk and the Noble Discoverer made several U.S. port calls in Washington and Alaska on their way to the Shell drilling site off the coast of Alaska. After leaving the drill site, the Kulluk ultimately ran aground off the coast of Unalaska when it broke free from its tow in bad weather, and the Noble Discoverer was dead-ship towed from Dutch Harbor to Seward due to failures with its main engine and other equipment.

Under the terms of the plea agreement, Noble admits that it knowingly made false entries and failed to record its collection, transfer, storage, and disposal of oil in the Noble Discoverer’s and the Kulluk’s oil record books in 2012. Oil record book entries falsely reflected that the Noble Discoverer’s Oil Water Separator (OWS) was used during periods of time when in fact the OWS was inoperable. Under the International MARPOL protocol and the Act to Prevent Pollution from Ships, all overboard discharges must pass through an operating OWS to insure that water pumped overboard does not contain more than 15ppm of oil.

Noble also admits that it failed to log numerous transfers and storage of machinery space bilge water and waste oil and failed to log that the Noble Discoverer’s oil content meter audible alarm was nonfunctional. Noble also made modifications to the Noble Discoverer’s new OWS system after the OWS system passed inspections by the Classification Society and the U.S. Coast Guard. Noble did not inform the U.S. Coast Guard or the Classification Society of the modifications and did not receive an International Oil Pollution Prevention certificate that documented the unapproved decanting system, the increased storage, or the new OWS piping arrangement.

Noble had problems managing the bilge and wastewater that was accumulating in the engine room spaces of the Noble Discoverer. This and other conditions led to a number of problems. Noble devised a makeshift barrel and pump system to discharge water that had entered the vessel’s engine room machinery spaces directly overboard from the Noble Discoverer without processing it through the required pollution prevention equipment as required by law. Noble failed to notify the Coast Guard about this system, and took steps to actively hide the fact that it was being used. These false and missing record entries and the use of the illegal overboard discharge system all violated the Act to Prevent Pollution from Ships.

In the factual basis of the plea agreement, Noble also admits that it negligently discharged machinery space bilge water from the Noble Discoverer into Broad Bay, Unalaska, on July 22, 2012. While anchored in Dutch Harbor, the Noble Discoverer’s bilge holding tank 27S overflowed and went overboard, creating a sheen in Broad Bay.

The Nonindigenous Aquatic Nuisance Prevention and Control Act requires vessels to maintain accurate ballast records reflecting the source of ballast water in the ballast water tanks, discharges from the tanks, and the total volume of ballast water onboard. By design, water ballast tanks should only contain uncontaminated seawater. Noble pumped oily skimmer tank fluids and deck water with a sheen into several ballast tanks on the Noble Discoverer. Noble then discharged those ballast tanks directly overboard instead of properly discharging the water through the OWS or transferring to a shore-side facility. Noble failed to record the transfers to the ballast tanks and the subsequent discharges in the ballast log.

The Ports and Waterways Safety Act regulations require that the owner, operator, or person in charge of a vessel must immediately notify the nearest Coast Guard office whenever there is a hazardous condition, either aboard a vessel or caused by the vessel or its operation. Noble knowingly and willfully failed on several occasions in 2012 to notify the U.S. Coast Guard of hazardous conditions aboard the Noble Discoverer. There were conditions aboard the Noble Discoverer that may have adversely affected the safety of the Noble Discoverer, other vessels, and the environmental quality of ports, harbors, and navigable waterways of the United States. During 2012, the Noble Discoverer experienced numerous problems with its main propulsion system, including its main engine and its propeller shaft, resulting in engine shut-downs, equipment failures, and unsafe conditions. At times, the condition of the Noble Discoverer’s main engine also created high levels of exhaust in the engine room, multiple sources of fuel and oil leaks, and backfires. Noble acknowledges that it failed to report any of these hazardous conditions to the U.S. Coast Guard.

The Noble Discoverer was initially detained in Seward by the Officer in Charge, Marine Inspection for the Western Alaska zone, following a Coast Guard Port State Control examination on November 29, 2012. This case was investigated by the U.S. Coast Guard Investigative Service and the U.S. Environmental Protection Agency Criminal Investigation Division and is being prosecuted by the Department of Justice’s Environmental Crimes Section and the United States Attorney’s Office for the District of Alaska.

Supreme Foodservice GmbH, a privately held Swiss company, and Supreme Foodservice FZE, a privately-held United Arab Emirates (UAE) company, pleaded guilty today to major fraud against the United States and agreed to resolve civil violations of the False Claims Act, in connection with a contract to provide food and water to the U.S. troops serving in Afghanistan, the Justice Department announced today.  The companies pleaded guilty in the Eastern District of Pennsylvania (EDPA) and paid $288.36 million in the criminal case, a sum that includes the maximum criminal fine allowed. 

In addition, Supreme Group B.V. and several of its subsidiaries have agreed to pay an additional $146 million to resolve a related civil lawsuit, as well as two separate civil matters, alleging false billings to the Department of Defense (DoD) for fuel and transporting cargo to American soldiers in Afghanistan.  The lawsuit was filed in the EDPA, and the fuel and transportation allegations were investigated by the Southern District of Illinois and the Eastern District of Virginia, respectively, along with the Department’s Civil Division. 

“The civil resolutions and agreements reflect the Justice Department’s continuing efforts to hold accountable contractors that have engaged in war profiteering,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “The department will pursue contractors that knowingly seek taxpayer funds to which they are not entitled.”

“These companies chose to commit their fraud in connection with a contract to supply food and water to our nation’s fighting men and women serving in Afghanistan,” said U.S. Attorney Zane David Memeger for the Eastern District of Pennsylvania.  “That kind of conduct is repugnant, and we will use every available resource to punish such illegal war profiteering.” 

The Criminal Fraud

In 2005, Supreme Foodservice AG, now called Supreme Foodservice GmbH, entered into a contract with the Defense Supply Center of Philadelphia (DSCP, now called Defense Logistics Agency – Troop Support) to provide food and water for the U.S. forces serving in Afghanistan.  According to court documents, between July 2005 and April 2009, Supreme Foodservice AG, together with Supreme Foodservice KG, now called Supreme Foodservice FZE, devised and implemented a scheme to overcharge the United States in order to make profits over and above those provided in the $8.8 billion subsistence prime vendor (SPV) contract.  The companies fraudulently inflated the price charged for local market ready goods (LMR) and bottled water sold to the United States under the SPV contract.  The Supreme companies did this by using a UAE company it controlled, Jamal Ahli Foods Co. LLC (JAFCO), as a middleman to mark up prices for fresh fruits and vegetables and other locally-produced products sold to the U.S. government, and to obscure the inflated price the Supreme companies were charging for bottled water.  The fraud resulted in a loss to the government of $48 million.  

Supreme AG, Supreme FZE and Supreme’s owners (referred to in court documents as Supreme Owners #1 and #2) made concentrated efforts to conceal Supreme’s true relationship with JAFCO, and to make JAFCO appear to be an independent company.  They also took steps to make JAFCO’s mark-up on LMR look legitimate, and persisted in the fraudulent mark-ups even in the face of questions from DSCP about the pricing of LMR. 

Even though the SPV contract stated that the Supreme food companies should charge the government the supplier’s price for the goods, emails between executives at the companies (referred to as Supreme Executive #1, #2, etc) reveal the companies’ deliberate decision to inflate the prices. Among other things, Supreme Owner #1 increased the mark-up that JAFCO would impose on non-alcoholic beer from 25 percent to 125 percent.  On or about Feb. 16, 2006, during a discussion about supplying a new product to the U.S. government, one Supreme executive wrote to another, “I am very sure the best option is to buy it from Germany and mark up via [JAFCO], like [non-alcoholic] beer.”

In early March 2006, after a DSCP contracting officer told the Supreme food companies that she wanted to see a manufacturer’s invoice for specific frozen products, Supreme Foodservice GmbH lowered its prices for those products to prices that did not include a JAFCO mark-up.  On March 14, 2006, instead of disclosing that the initial pricing had included a mark-up, a Supreme executive misled the DSCP representative by saying, “Based on more realistic quantities, we have been able to negotiate a better price,” to explain the change in pricing. 

In June 2006, when a DSCP contracting officer raised questions about pricing focusing on four specific items, Supreme executives again misled the DSCP, claiming that the high prices were for a high quality of product, and offering to sell lower quality products for lower prices.  Supreme Foodservice GmbH did this even after analyzing its JAFCO margin on the four items in question and finding its profit margins were between 41 and 56 percent.

In September 2007, after a fired Supreme executive threatened to tell the DSCP about the fraud, his former employer entered into negotiation of a “separation agreement” with that executive to induce that executive not to disclose the ways in which the Supreme food companies were overcharging the DSCP.  The agreement stated that the executive would receive, among other things, a payment of 400,000 euros in September 2010, provided that the executive did not cause: a deterioration in the economic situation linked to the SPV contract; the termination of the SPV contract; or a decrease in the price levels for products, specifically including LMR and bottled water provided to the U.S. government.   

Defendant Supreme GmbH pleaded guilty to major fraud against the United States, conspiracy to commit major fraud and wire fraud.  Supreme FZE, which owns JAFCO, pleaded guilty to major fraud against the United States.  The Supreme companies agreed to jointly pay $48 million in restitution and $10 million in criminal forfeiture.  Each company also agreed to pay $96 million in criminal fines.  In addition, as a result of the criminal investigation, the Supreme companies paid $38.3 million directly to the DSCP as a refund for separate overpayments on bottled water.

The Civil Settlements

In a related civil settlement, Supreme Group agreed to pay another $101 million to settle a whistleblower lawsuit, filed in the U.S. District Court for the EDPA by a former executive, which alleged that Supreme Group, and its food subsidiaries, violated the False Claims Act by knowingly overcharging for supplying food and water under the SPV contract.  The payment also resolves claims that, from June 2005 to December 2010, the Supreme food companies failed to disclose and pass through to the government rebates and discounts it obtained from its suppliers, as required by its SPV contract with the United States.

“Today’s results are part of an ongoing effort by the Defense Criminal Investigative Service (DCIS) and its law enforcement partners to protect the integrity of the Department of Defense's acquisition process from personal and corporate greed,” said Deputy Inspector General for Investigations James B. Burch for the U.S. Department of Defense’s Office of the Inspector General.  “The Defense Criminal Investigative Service will continue to pursue allegations of fraud and corruption that puts the Warfighter at risk.”

“We are very pleased with this resolution, and are gratified that the public can now see what we've been aggressively investigating,” said Director Frank Robey of the U.S. Army Criminal Investigation Command's Major Procurement Fraud Unit (MPFU).  “Companies that do business with the government must comply with all of their obligations, and if they overcharge for supplying our men and women in uniform who are bravely serving this nation, they must be held accountable for their actions.”

Separately, Supreme Site Services GmbH, a Supreme Group subsidiary, agreed to pay $20 million to settle allegations that they overbilled for fuel purchased by the Defense Logistics Agency (DLA) for Kandahar Air Field (KAF) in Afghanistan under a NATO Basic Ordering Agreement.  The government alleged that Supreme Site Services’ drivers were stealing fuel destined for KAF generators while en route for which the company falsely billed DLA.

“It is important that government contractors supporting conflicts abroad be held accountable for their billings to the government,” said U.S. Attorney Dana J. Boente for the Eastern District of Virginia.  “The DoD investigating components are instrumental in protecting the interests of the government, and their efforts in this investigation are to be commended.”

Supreme Group’s subsidiary Supreme Logistics FZE also has agreed to pay $25 million to resolve alleged false billings by Supreme Logistics in connection with shipping contracts between the U.S. Transportation Command (USTRANSCOM), located at Scott Air Force Base in Illinois, and various shipping carriers to transport food to U.S. troops in Afghanistan during Operation Enduring Freedom.  The shipping carriers transported cargo destined for U.S. troops from the United States to Latvia or other intermediate ports, and then arranged with logistics vendors, including Supreme Logistics, to carry the cargo the rest of the way to Afghanistan.  The United States alleged that Supreme Logistics falsely billed USTRANSCOM for higher-priced refrigerated trucks when it actually used lower-priced non-refrigerated trucks to transport the cargo. 

“The U.S. Attorney’s Office for the Southern District of Illinois is committed to protecting the integrity of all of the vital missions carried out at Scott Air Force Base, including the mission of the U.S. Transportation Command,” said U.S. Attorney Stephen R. Wigginton for the Southern District of Illinois.  “These vital services carried out by the brave men and women of the armed forces of the United States deserve, and will receive, our full support, and this office will do everything possible to protect their missions.”

“These settlements are victories for American taxpayers,” said Special Inspector General John F. Sopko for Afghanistan Reconstruction.  “It sends a clear signal that whether a case involves a mom and pop outfit or a major multinational corporation, we will work tirelessly with our investigative partners to pursue justice any time U.S. dollars supporting the mission in Afghanistan are misused.”

The EDPA lawsuit was initially filed under the qui tam or whistleblower provisions of the False Claims Act, by Michael Epp, Supreme GmbH’s former Director, Commercial Division and Supply Chain.  The False Claims Act prohibits the submission of false claims for government money or property and allows the United States to recover treble damages and penalties for a violation.  Under the Act’s whistleblower provisions, a private party may file suit on behalf of the United States and share in any recovery.  The case remained under seal to permit the United States to investigate the allegations and decide whether to intervene and take over the case.  Epp will receive $16.16 million as his share of the government’s settlement of the lawsuit.

The criminal and civil matters in the EDPA were the result of a coordinated effort by the Department of Justice’s Civil Division, the U.S. Attorney’s Office for the Eastern District of Pennsylvania, DCIS, U.S. Army’s Criminal Investigative Command’s MPFU and the FBI. 

The investigation of Supreme Site Services ’ alleged false billings for fuel was conducted by the Civil Division and the U.S. Attorney’s Office for the Eastern District of Virginia, and the investigation of Supreme Logistics’ alleged false invoices for transportation was handled by the Civil Division and the U.S. Attorney’s Office for the Southern District of Illinois.  Both matters were investigated by the Defense Contract Audit Agency Office of Investigative Support, the Army Audit Agency, the International Contract Corruption Task Force, the U.S. Army’s Criminal Investigative Command’s Major Procurement Fraud Unit, the DoD Office of Inspector General’s DCIS, the Special Inspector General for Afghan Reconstruction, the U.S. Air Force Office of Special Investigations and the Naval Criminal Investigative Service.

The claims resolved by the civil settlements are allegations only, except for the conduct for which the Supreme food companies have pleaded guilty.  

Attorney General Eric Holder and Secretary of Education Arne Duncan today announced a Correctional Education Guidance Package aimed at helping states and local agencies strengthen the quality of education services provided to America’s estimated 60,000 young people in confinement every day.

This guidance package builds on recommendations in the My Brother’s Keeper Task Force report released in May to “reform the juvenile and criminal justice systems to reduce unnecessary interactions for youth and to enforce the rights of incarcerated youth to a quality education.”  Today’s guidance package is a roadmap that states and local agencies can use to improve the quality of educational services for confined youth.

“In this great country, all children deserve equal access to a high-quality public education - and this is no less true for children in the juvenile justice system,” said Attorney General Holder.  “At the Department of Justice, we are working tirelessly to ensure that every young person who's involved in the system retains access to the quality education they need to rebuild their lives and reclaim their futures.  We hope and expect this guidance will offer a roadmap for enhancing these young people's academic and social skills, and reducing the likelihood of recidivism.”

“Students in juvenile justice facilities need a world-class education and rigorous coursework to help them successfully transition out of facilities and back into the classroom or the workforce becoming productive members of society,” said Secretary Duncan.  “Young people should not fall off track for life just because they come into contact with the justice system.”

“Today's announcement directly responds to the call to action made by President Obama's My Brother's Keeper Initiative,” said Broderick Johnson, White House Cabinet Secretary and Chair of the My Brother’s Keeper Task Force.  “It is imperative that we ensure that incarcerated youth are receiving a quality education and provide them with the necessary tools for a second chance.  I applaud Attorney General Eric Holder and Secretary Arne Duncan for highlighting this critical issue.”

The guidance package includes four components:

• A set of Guiding Principles for Providing High-Quality Education in Juvenile Justice Secure Care Settings, outlines five principles and supporting core activities to improve education practices, or implement new ones. Authored jointly by the U.S. Departments of Education and Justice, the guide is meant to help agencies and facilities serving youth in correctional education provide education services comparable to those available to students in community schools.

• A Dear Colleague Letter on the Individuals with Disabilities Education Act for Students with Disabilities in Correctional Facilities from Education’s Office of Special Education and Rehabilitative Services to clarify state and public agency obligations to ensure the provision of a free appropriate public education to eligible students with disabilities in correctional facilities.

• A Dear Colleague Letter on the Civil Rights of Students in Juvenile Justice Residential Facilities clarifying how the Federal civil rights laws that prohibit race, color, national origin, sex, religion and disability discrimination against students in traditional public schools also apply to educational services and supports provided to youth in juvenile justice residential facilities.

• A Dear Colleague Letter on Access to Federal Pell Grants for Students in Juvenile Justice Facilities explains the extent to which confined youth may be eligible for the Federal Pell Grant Program, and is accompanied by a fact sheet for students and a detailed set of questions and answers for institutions of higher education

“High-quality correctional education is thus one of the most effective crime-prevention tools we have,” Attorney General Holder and Secretary Duncan wrote in a dear colleague letter to chief state school officers and state attorneys general.  “High-quality Correctional education – including postsecondary correctional education, which can be supported by Federal Pell Grants – has been shown to measurably reduce re-incarceration rates. Less crime means not only lower prison costs – it also means safer communities.”

The President has set a goal that, by 2020, our nation will have the highest proportion of college graduates in the world and that all Americans complete at least one year or more of college or career training.  The Administration believes that even youth in correctional facilities can play their part in helping us achieve that vision. 

Providing young people in confinement with access to the education they need is one of the most powerful and cost-effectives strategies for ensuring they become productive members of their communities.  The average cost to confine a juvenile is $88,000 per year – and a recent study showed that about 55 percent of youth were rearrested within 12 months of release.  Inmates of all ages are half as likely to go back to jail if they participate in higher education – even compared to inmates with similar histories.

This joint effort by the Departments of Education and Justice is one of a number of notable actions that they have taken to ensure that education programming in juvenile justice residential facilities is comparable to services provided in any school.  The departments have been working together to help communities reduce the number of youth entering the justice system and to ensure that those in the system return to their communities with dignity, skills and viable education and employment opportunities including the following efforts this year:

• Justice and Education jointly released a School Climate and Discipline Guidance Package to provide schools with a roadmap to reduce the usage of exclusionary discipline practice and clarify schools’ civil rights obligation to not discriminate on the basis of race, color, or national origin in the administration of school discipline.

• Education released the results of the 2011-2012 Civil Rights Data Collection, which includes school discipline data from most every school in the country and certain juvenile justice facilities.

• Justice and Education filed a joint Statement of Interest in the G.F. v. Contra Costa County lawsuit in support of confined youth with disabilities who alleged that they were placed in solitary confinement for 22 hours or more per day, discriminated against on the basis of their disability, and denied their right to a free, appropriate public education.

• Attorney General Holder and Secretary Duncan met with leaders from 22 agencies for a Federal Interagency Reentry Council meeting to discuss actions to reduce reentry barriers to employment, health, housing and education for individuals who are transitioning from incarceration to community.

• Justice and Education engaged with various philanthropies to commission a School Discipline Consensus Project, led by the Council of State Governments, to bring together practitioners from the fields of education, juvenile justice, behavioral health and law enforcement to develop recommendations to address the school-to-prison pipeline, including recommendations for strengthening services to youth in confinement.

• Justice and Education coordinated and supported the National Leadership Summit on School Climate and Discipline in Washington, D.C. The summit focused on deepening partnerships between local and state education and justice officials, and community stakeholders.

All youth are deserving of an appropriate, high-quality education.  This guidance package clarifies that obligation for confined youth, as well as advocating that they have a real chance at a second chance in their lives.  A solid education that unleashes and expands their potential to contribute to their communities is a step in the right direction.

WASHINGTON – U.S. Attorney General Eric Holder announced Monday that the Justice Department will take new steps to bar profiling by federal law enforcement agencies, building upon a 2003 policy that had previously only addressed the consideration of race and ethnicity in conducting federal investigations. The new policy will address the use of other characteristics as well—including national origin, gender, gender identity, religion, and sexual orientation—and applies a uniform standard to all law enforcement, national security, and intelligence activities conducted by the Department’s law enforcement components. The new guidance also applies to state and local law enforcement law officers who participate in federal law enforcement task forces.

The issuance of the new policy completes a thorough review first launched by the Attorney General shortly after taking office, and reaffirms the federal government’s deep commitment to ensuring that its law enforcement agencies conduct their activities in an unbiased manner. 

In announcing the new policy, the Attorney General said that biased law enforcement practices not only perpetuate negative stereotypes and promote mistrust of law enforcement, but also are counterproductive to the goal of good policing.

“As Attorney General, I have repeatedly made clear that racial profiling by law enforcement is not only wrong, it is misguided and ineffective – because it can mistakenly focus investigative efforts, waste precious resources and, ultimately, undermine the public trust.  Particularly in light of  recent incidents we’ve seen at the local level – and the concerns about trust in the criminal justice process which so many have raised throughout the nation – it’s imperative that we take every possible action to institute sound, fair and strong policing practices.”

The Attorney General added: “With this new Guidance, we take a major and important step forward to ensure effective policing by federal law enforcement officials – as well as state and local law enforcement participating in federal task forces throughout the nation.  This Guidance is the product of five years of scrupulous review.  It codifies important new protections for those who come into contact with federal law enforcement agents and their partners.  And it brings enhanced training, oversight, and accountability to federal law enforcement across the country, so that isolated acts do not tarnish the exemplary work that’s performed by the overwhelming majority of America’s hard-working law enforcement officials each and every day."

The new policy, which is spelled out in a memorandum circulated Monday, instructs that, in making routine or spontaneous law enforcement decisions, officers may not use race, ethnicity, gender, national origin, religion, sexual orientation, or gender identity to any degree, unless listed characteristics apply to a suspect description. Under the policy, federal law enforcement officers will be prohibited from acting on the belief that possession of a listed characteristic by itself signals a higher risk of criminality. 

In all activities other than routine or spontaneous law enforcement, officers may consider the listed personal characteristics only to the extent there is trustworthy information, relevant to the locality or timeframe, that links individuals with a listed characteristic to a particular criminal incident, criminal scheme, organization, a threat to national or homeland security, a violation of federal immigration law or an authorized intelligence activity.  In relying on any of the listed characteristics, an officer must also reasonably believe that the activity to be undertaken is merited under the totality of the circumstances.

 A copy of the memorandum outlining the new policy is available here.

An armed drug trafficker was sentenced today to serve 57 years in prison for his involvement in a decade-long cocaine-trafficking conspiracy in Newport News, Virginia. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia, Special Agent in Charge Royce E. Curtin of the FBI’s Norfolk Field Office and Chief Richard W. Myers of the Newport News Police Department made the announcement after U.S. District Judge Robert G. Doumar of the Eastern District of Virginia imposed the sentence.

Kelvin L. Brown, aka, “Doom,” 34, of Newport News, was convicted by a jury on July 30, 2014, of participating in a drug conspiracy, distribution of cocaine and crack cocaine, possession with intent to distribute cocaine and crack cocaine, two counts of possession of a firearm in furtherance of a drug trafficking crime, and being a felon in possession of a firearm.  Evidence presented at trial detailed various drug sales by Brown and his coconspirators, the use of firearms by Brown and others to protect the drug-trafficking enterprise and its proceeds, and threats made by Brown against a cooperating witness to dissuade him from cooperating with police.  In one incident, on Sept. 13, 2013, Newport News Police Department officers entered Brown’s apartment after he barricaded himself inside, and seized a firearm, scale and cocaine.

This investigation was led by the FBI Safe Streets Task Force, Newport News Police Department and Virginia State Police, and was prosecuted by Trial Attorney Joseph K. Wheatley of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Howard J. Zlotnick of the Eastern District of Virginia. 

Mostafa Ahmed Awwad, 35, of Yorktown, Virginia, was arrested today on charges of attempting to steal schematics of the Navy’s newest nuclear aircraft carrier, the USS Gerald R. Ford, and pass the schematics to whom he believed was an Egyptian government official.

Assistant Attorney General for National Security John Carlin, U.S. Attorney Dana J. Boente for the Eastern District of Virginia, Special Agent in Charge Royce E. Curtin of the FBI’s Norfolk Field Office and Special Agent in Charge Susan Triesch of the Naval Criminal Investigative Service's Norfolk, Virginia, Field Office made the announcement. 

Awwad is charged with two counts of attempting to export defense articles and technical data, and faces a statutory maximum sentence of 20 years in prison on each count if convicted.  The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.  Criminal indictments are only charges and not evidence of guilt.  A defendant is presumed to be innocent until and unless proven guilty.

According to an FBI affidavit submitted to the court in support of search warrants, Awwad began working for the Department of Navy in February 2014 as a civilian general engineer in the Nuclear Engineering and Planning Department at Norfolk Naval Shipyard. 

Based on joint investigation, an FBI undercover agent speaking in Arabic contacted Awwad by telephone on Sept. 18, 2014, and asked to meet him the following day.  Without seeking additional information from the caller, Awwad agreed.  The next day, Awwad met with the undercover FBI agent, who was posing as an Egyptian intelligence officer, in a park in Hampton, Virginia.  During the meeting Awwad claimed it was his intention to utilize his position of trust with the U.S. Navy to obtain military technology for use by the Egyptian government, including but not limited to, the designs of the USS Gerald R. Ford nuclear aircraft carrier.  Awwad agreed to conduct clandestine communications with the undercover FBI agent by email and unattributable telephones and to conduct “dead drops” in a concealed location in the park.

On Oct. 9, 2014, Awwad and the undercover FBI agent met at a hotel where Awwad described a detailed plan to circumvent U.S. Navy computer security by installing software on his restricted computer system that would enable him to copy documents without causing a security alert.  At this time, Awwad also provided the undercover FBI agent four computer aided drawings of a U.S. nuclear aircraft carrier downloaded from the Navy Nuclear Propulsion Information system.  These drawings were marked with warnings that foreign distribution could result in criminal prosecution.  During the discussion, Awwad indicated his understanding that the drawings would be sent to and used in Egypt.  Awwad also asked the undercover FBI agent for $1,500 to purchase a pinhole camera he would wear around the shipyard to photograph restricted material.  At the conclusion of the meeting, Awwad agreed to provide the undercover FBI agent with passport photos which would be used to produce a fraudulent Egyptian passport so that Awwad could travel to Egypt without alerting U.S. government officials.

On Oct. 23, 2014, Awwad traveled to the pre-arranged dead drop site, situated on a secluded hiking trail in a park, and utilized a concealed container disguised in a hole in the ground.  He retrieved $3,000 in cash before placing a one-terabyte external hard drive and two passport photos inside.  The FBI later collected the contents of the dead drop container.

On Nov. 28, 2014, Awwad was observed entering his office at the Norfolk Naval Shipyard holding a cardboard tube about three feet long.  Once in his office, Awwad opened the cardboard tube and took out several white sheets which appeared to be design schematics of an aircraft carrier.  Awwad then placed the schematics on the floor of his office and photographed them.  After approximately 45 minutes of viewing the schematics and taking photographs, Awwad placed all the schematics back in the cardboard tube and left his office.

Awwad made his initial appearance in federal court today, and is scheduled to appear for a detention hearing on Dec. 10, 2014, at 3:30 p.m. at the federal courthouse in Norfolk.            

This case was investigated by the FBI’s Norfolk Field Office and the Naval Criminal Investigative Service, in cooperation with the Department of Navy.  Prosecuting the case on behalf of the United States are Assistant U.S. Attorneys Benjamin L. Hatch and Joseph E. DePadilla for the Eastern District of Virginia and Department of Justice, Trial Attorney Heather M. Schmidt for the Justice Department’s National Security Division Counterespionage Section. 

A copy of this press release may be found on the website of the U.S. Attorney’s Office for the Eastern District of Virginia.  Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 2:14-cr-163.

The Justice Department announced today that it has entered into a settlement under the Americans with Disabilities Act (ADA) with DC Trails Inc., a bus transportation company in Lorton, Virginia, that ensures that their buses are accessible to people with disabilities, including individuals who use wheelchairs or other mobility aids.  DC Trails is a covered large, fixed-route over-the-road bus operator under the ADA.

The settlement is the result of collaborative enforcement efforts between the Civil Rights Division at the Justice Department, the United States Attorney’s Office for the Eastern District of Virginia and the Federal Motor Carrier Safety Administration (FMCSA) of the U.S. Department of Transportation (DOT).  The agreement remedies violations by DC Trails, including failing to provide accessible buses for all trips, failing to report the number of passengers with disabilities that used the lift to board, requiring individuals with disabilities to provide advance notice prior to a trip and failing to train its staff on accessibility requirements.  The settlement agreement requires DC Trails to:

• Comply with all ADA requirements for accessible service, and not exclude persons with disabilities from their transportation services;

• Ensure that the company’s employees and contractors do not require or otherwise inform passengers with disabilities who use or seek to use DC Trails’ fixed route service that they must provide advance notice in order to use an accessible bus;

• Ensure that DC Trails only uses wheelchair-accessible buses for its fixed route service; and

• Train all employees and contractors on the requirements of the ADA for large, fixed-route over the road bus operators.

“Intercity bus service is a growing and effective means of affordable transportation across this country,” said Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “People with disabilities must be able to count on accessible bus service that is equal to the service provided to others.”

“This settlement agreement demonstrates the United States Attorney’s Office’s commitment to ensure that individuals with disabilities receive equal access to public accommodations, including transportation services that are operated out of Northern Virginia,” said U.S. Attorney Dana Boente for the Eastern District of Virginia.

This is the Justice Department’s 24th settlement with bus companies over the past several years to ensure compliance with accessibility obligations.

Title III of the ADA prohibits discrimination against people with disabilities by public accommodations, including large over-the-road bus companies.  DOT’s regulations implementing the ADA require that these companies perform regular maintenance checks to ensure that wheelchair lifts work, provide prompt accessible service with an alternative carrier if the company does not have a lift-equipped bus, train their employees on accessibility requirements, and file annual accessibility reports with the FMCSA.

This matter was handled for the Department by Assistant United States Attorney Steven Gordon, Coordinator of the United States Attorney’s Office’s Civil Rights Enforcement Program, and David W. Knight of the Civil Rights Division.

People interested in finding out more about the ADA or this settlement can call the toll-free ADA Information Line at 800-514-0301 (TDD 800-514-0383) or access the ADA website at www.ada.gov.

(Saipan, MP), ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), announced that ANNETTE NAKATSUKASA BASA, was sentenced today, December 5, 2014, in the U.S. District Court of the Northern Mariana Islands by Chief Judge Ramona V. Manglona, for sex trafficking of children.  Defendant BASA received a sentence of 17.5 years incarceration with credit for time served, five years supervised release upon release from prison, 500 hours of community service, $100 special assessment fee and was ordered to pay restitution in the amount of $9,102.39.  She was further ordered to undergo a mental health assessment and receive any corresponding treatment that may be appropriate while in the Bureau of Prisons custody.  Defendant Basa is not to unlawfully use controlled substances or alcohol.  Basa will also have to register as a sex offender under the SORNA program.    

Defendant BASA pled guilty on February 20, 2014, to one count of sex trafficking of children, in violation of Title 18 U.S.C. Section 1591(a)(1).  Defendant BASA took in minor runaways, allowed them to live with her, gave them methamphetamine and then demanded they perform sexual acts for money.

U.S. Attorney Limtiaco stated, “The sexual exploitation and abuse of vulnerable individuals is an affront to fundamental human rights and will not be tolerated. The defendant preyed on these young victims, manipulating and sexually exploiting them.  Today’s sentence sends the critical message that human trafficking is a crime that violates the very core and dignity of a human being and traffickers face severe punishment.  The Department of Justice and U.S. Attorney’s Office remain committed to vigorously prosecuting and holding accountable those who perpetrate these heinous crimes." 

U.S. Attorney Limtiaco additionally reminds defendants who have committed sexual abuse of children, that under federal and local law, all sex offenders have a duty to register and keep their registration current with the Sex Offender Registry in their jurisdiction.  Sex offenders who travel to the CNMI and who reside in the CNMI must inform the CNMI DPS Sex Offender Registry where they reside, work, or attend school - they must also periodically update their registration information.   The U.S. Attorney notes that the sex offender registry was created in order to protect the public by protecting victims, preventing further victimization and informing the public of the whereabouts of sex offenders.  CNMI’s Sex Offender Registry can be found online at http://cnmi.nsopw.gov/.

This prosecution is part of the U.S. Department of Justice’s Project Safe Childhood (PSC) Initiative, a nationwide commitment to aggressively prosecute defendants who engage in the sexual victimization of children and adults, possess or receive child pornography, and sex offenders who fail to register with the jurisdiction’s Sex Offender Registry.  The investigation was conducted by the Federal Bureau of Investigations.  The case was handled by Assistant U.S. Attorneys Rami Badawy and Ross Naughton.

A California attorney was sentenced to serve 17 years in prison today in the Southern District of Florida for operating a five-year, multi-million dollar market manipulation and fraud scheme, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.

Mitchell J. Stein, 53, of Hidden Hills, California, was convicted by a jury on May 20, 2013, of conspiracy to commit mail and wire fraud, three counts of wire fraud, three counts of securities fraud, three counts of money laundering, and one count of conspiracy to obstruct justice.  In addition to the prison sentence, U.S. District Judge Kenneth A. Marra of the Southern District of Florida ordered Stein to forfeit $5.3 million.  Restitution will be determined at a later date. 

“Lawyers for companies are supposed to guide their clients through the important reporting and regulatory requirements that ensure the integrity of our financial markets,” said Assistant Attorney General Caldwell.  “Stein abdicated his responsibility, and instead abused his position of trust to defraud a public company, its shareholders, and the investing public of millions of dollars.”

“The ‘pump and dump’ scheme orchestrated by Stein and his co-conspirators was extremely elaborate,” said U.S. Attorney Ferrer.  “In an effort to conceal his fraudulent financial scheme, Stein falsely testified before the SEC and used his position of trust to arrange for others to do the same.  The sentencing announced today underscores the department's commitment to hold liable those individuals who profit from manipulating the financial markets and violating securities and other laws that are intended to protect investors and markets.”

According to evidence presented at trial, Stein’s wife held a controlling majority interest in Signalife Inc., a publicly-traded company currently known as Heart Tronics that purportedly sold electronic heart monitoring devices.  While acting as Signalife’s outside legal counsel, Stein engaged in a scheme to artificially inflate the price of Signalife stock by creating the false impression of sales activity at the company.  Specifically, the evidence at trial showed that Stein and his co-conspirators created fake purchase orders and related documents from fictitious customers, then caused Signalife to issue press releases and file documents with the Securities and Exchange Commission (SEC) trumpeting these fictitious sales.  Evidence at trial also proved that in a further effort to create the false appearance of sales activity, Stein arranged to have Signalife products shipped to and temporarily stored with an individual who had not purchased any products.

Evidence at trial further proved that Stein disguised his selling of Signalife stock at artificially inflated prices by placing shares in purportedly blind trusts, and having a co-conspirator sell the shares after Stein caused the false sales information to be disseminated to the public.  Stein also caused Signalife to issue shares to third parties so that those third parties could sell the shares and remit the proceeds to Stein.  From one co-conspirator alone, Stein received illicit gains of over $1.8 million from those sales. 

In addition, evidence at trial proved that Stein conspired to obstruct the SEC investigation into Heart Tronics by testifying falsely and arranging for others to testify falsely in an effort to conceal the fraud scheme.

This case was investigated by the U.S. Postal Inspection Service, with assistance from the Office of the Special Inspector General for the Troubled Asset Relief Program.  The SEC referred this matter to the Justice Department, conducted a parallel investigation resulting in a civil enforcement action against Stein and others, and provided substantial assistance in this investigation.  The Financial Industry Regulatory Authority’s Criminal Prosecution Assistance Group likewise provided substantial assistance in this matter.     

This case was prosecuted by Assistant Chief Albert B. Stieglitz Jr., Assistant Chief Kevin B. Muhlendorf, and Trial Attorney Andrew H. Warren of the Criminal Division’s Fraud Section and Assistant Chief Darrin McCullough of the Criminal Division’s Asset Forfeiture and Money Laundering Section.

The Justice Department announced that Christopher Hall, a former Sergeant for the Correctional Emergency Response Team (CERT) at Macon State Prison (MSP) in Oglethorpe, Georgia, and two former CERT officers, Ronald Lach and Delton Rushin, were sentenced on Thursday, December 4, 2014, for offenses related to the beating of an MSP inmate in 2010 and the cover-up that followed.  All three officers were convicted by a federal jury on June 20, 2014.   

Hall was sentenced to 72 months in prison for conspiracy to obstruct justice and two obstruction-related offenses.  Lach was sentenced to 90 months in prison for his involvement in the beating of the inmate, for conspiring to cover up the beating and for writing a false report.  Rushin was sentenced to 60 months in prison for conspiring to obstruct justice and obstruction-related offenses.  All three have two years of supervised release.

Evidence at trial, and a series of guilty pleas that preceded trial, showed that Lach was one of several MSP officers who participated in a retaliatory beating against an inmate in order to punish the inmate for his prior misconduct.  Hall, Lach and Rushin then conspired with other officers to cover up the beating by providing false and misleading statements to investigators and writing false reports.

To date, eight former MSP officers have been convicted in connection with the beatings of inmates at Macon State in 2010 and the cover-up that followed.

“Eight former corrections officials from Macon State Prison now stand convicted for their involvement in beating inmates or in the coordinated cover-ups that followed each assault,” said Acting Assistant Attorney General Vanita Gupta for the Civil Rights Division.  “These officers betrayed the public trust by using their official positions to commit violent civil rights abuses and then to try to hide what they had done.  The Department of Justice will continue to vigorously prosecute corrections officers who use their power to violate federal law.”

"When individuals are sentenced to prison, we expect that they will serve their time under the supervision of dedicated correctional officers and staff,” said U.S. Attorney Michael J. Moore for the Middle District of Georgia.  “What we don't expect, and will not tolerate, is for the people in charge of supervising and protecting the prisoners to beat the inmates and then try to cover it up when word of those crimes makes its way outside the prison walls.  The inmates in prisons across the state are serving a sentence of incarceration, and that doesn't include being subject to beatings and the abuse of power by corrections officers.  And while being a prison guard is both an important and challenging task, it is a job that requires adherence to the law.  We are lucky in Georgia to have many outstanding corrections officers who do their jobs every day with unmatched professionalism.  The defendants in this case broke the law and the trust they were given."

These cases were investigated by the Macon Resident Agency of the FBI, with the support of the Georgia Bureau of Investigation.  The cases were prosecuted by Special Litigation Counsel Forrest Christian and Trial Attorney Tona Boyd for the Civil Rights Division, with the assistance of the United States Attorney’s Office in Macon.

A grand jury in Santa Ana, California, indicted three individuals for allegedly operating fraudulent debt relief services companies that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service announced.

Jeremy Nelson, 29, Elias Ponce, 27, and John Vartanian, 55, all of Orange County, California, were charged with conspiracy, mail fraud, and wire fraud in connection with their roles at companies known as Nelson Gamble & Associates and Jackson Hunter Morris & Knight LLP.  According to the indictment, the defendants portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors. Clients made monthly payments expecting the money to go toward settlements.  But the defendants instead took at least 15 percent of the total debt as company fees, with the first six months of payments going almost entirely towards undisclosed up-front fees.

If convicted, the defendants face a maximum penalty of 20 years in prison and a $250,000 fine for each count of conspiracy, mail fraud, and wire fraud, or an alternate fine of twice the loss or twice the gain, whichever is greater, along with mandatory restitution. 

“Americans facing credit card debts are sometimes desperate to improve their financial situations,” said Acting Assistant Attorney General Joyce R. Branda for the Civil Division.  “The Civil Division will vigorously pursue those who take advantage of vulnerable consumers trying to dig themselves out of debt.”

“Lying to victims to get their money is not only wrong, it is criminal,” said Acting Inspector in Charge Troy Raper of the U.S. Postal Inspection Service.  “Postal Inspectors aggressively investigate any operations that use the U.S. mail to perpetrate frauds on the American public.”

According to the Indictment, the scheme ran from February 2010 to September 2012. The Indictment alleges that Jeremy Nelson changed the name of the company from Nelson Gamble to Jackson Hunter after a series of complaints and refund requests.  Nelson allegedly directed his co-conspirators and employees to tell victims that Nelson Gamble had gone bankrupt, and that Jackson Hunter was an unrelated company that had purchased the right to service some of Nelson Gamble’s files.  The defendants and others allegedly blamed past problems on Nelson Gamble and assured victims that Jackson Hunter was a more experienced and better-run company. Some victims who previously demanded refunds accepted the explanation that Nelson Gamble was bankrupt and did not pursue complaints against Jackson Hunter.

Acting Assistant Attorney General Branda commended the Postal Inspection Service team assigned to the Civil Division’s Consumer Protection Branch for their investigative efforts and thanked the U.S. Attorney’s Office for the Central District of California for their contributions to the case.  The case is being prosecuted by Trial Attorneys Dan Baeza and Alan Phelps with the Consumer Protection Branch.

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

Attorney General Eric Holder announced today that the Justice Department’s civil rights investigation into the use of force by the Cleveland Division of Police has found a pattern or practice of unreasonable and unnecessary use of force.  To address these findings the Justice Department and the city of Cleveland have signed a statement of principles committing them to develop a court enforceable consent decree that will include a requirement for an independent monitor who will oversee and ensure necessary reforms.

“Accountability and legitimacy are essential for communities to trust their police departments, and for there to be genuine collaboration between police and the citizens they serve,” said Attorney General Eric Holder.  “Although the issues in Cleveland are complex, and the problems longstanding, we have seen in city after city where we have been engaged that meaningful change is possible.  There are real, practical and concrete measures that can be taken to ensure not only that police services are delivered in a constitutional manner, but that promote public safety, officer safety, confidence and collaboration, transparency, and legitimacy.”

The investigation, launched in March, 2013, assessed use of force practices of the Cleveland Division of Police following a number of high profile use of force incidents and requests from the community and local government to investigate the division.  The investigation concluded that there is reasonable cause to believe that Cleveland police officers engage in a pattern or practice of unreasonable and in some cases unnecessary force in violation of the Fourth Amendment of the Constitution.  That pattern or practice includes:

• The unnecessary and excessive use of deadly force, including shootings and head strikes with impact weapons;

• The unnecessary, excessive or retaliatory use of less lethal force including Tasers, chemical spray and fists;

• Excessive force against persons who are mentally ill or in crisis, including in cases where the officers were called exclusively for a welfare check; and

• The employment of poor and dangerous tactics that place officers in situations where avoidable force becomes inevitable.

After determining that a pattern or practice of unconstitutional conduct exists, the investigation assessed the causes for the pattern and developed recommended remedial action.  The investigation concluded that Cleveland officers are not provided with adequate training, policy guidance, support, and supervision.  Additionally, systems of review that would identify problems and correct institutional weaknesses and provide individual accountability are seriously deficient. The investigation found that division fails to:

• Adequately review and investigate officers’ uses of force;

• Fully and objectively investigate all allegations of misconduct;

• Identify and respond to patterns of at-risk behavior;

• Provide its officers with the support, training, supervision, and equipment needed to allow them to do their jobs safely and effectively;

• Adopt and enforce appropriate policies; and

• Implement effective community policing strategies.

The investigation also found that this pattern of excessive force has eroded public confidence in the police.  The trust between the Cleveland Division of Police and many of the communities it serves is broken.  As a result, public safety suffers and the job of delivering police services is more difficult and more dangerous.  Throughout the investigation, the Department of Justice provided its observations and concerns to the city, and in response, the division has begun to implement a number of remedial measures, however much more work is needed.  This afternoon Attorney General Eric Holder, Acting Assistant Attorney General Vanita Gupta and U.S. Attorney Steven Dettelbach will host a joint meeting with community leaders, law enforcement officials and elected officials to discuss how to improve their working relationship and address the problems and challenges identified by the Department of Justice.

“We look forward to working together with the city of Cleveland, members of the Cleveland community and Cleveland police officers to address the deficiencies that have led to this pattern of unnecessary and excessive force,” said Acting Assistant Attorney General Gupta.  “Together, we can build confidence in the division that will ensure compliance with the Constitution, improve public safety and make the job of delivering police services safer and more effective.” 

“Our independent investigation, conducted at the request of the Mayor and others, revealed troubling patterns of the use of force in the Cleveland Division of Police,” said U.S. Attorney Dettelbach.  “We applaud the division and the city for beginning to implement necessary reforms and are pleased that the city has entered into a statement of principles agreeing to negotiate a consent decree with outside monitoring that will guide the development of a sustainable blueprint for reform.  It will take a joint effort by all stakeholders to ensure that this critical initiative is a success.”

The investigation was conducted jointly by the Civil Rights Division’s Special Litigation Section and the U.S. Attorney’s Office for the Northern District of Ohio.  The investigation involved an in-depth review of thousands of pages of documents, including written policies and procedures, training materials, and internal reports, data, video footage and investigative files.  Department of Justice attorneys and investigators also conducted interviews with officers, supervisors and command staff, and city officials; and spoke with hundreds of community members and local advocates.  This investigation was separate from any criminal investigation of any specific incident of alleged misconduct.

The Justice Department announced today that it reached a settlement with Life Generations Healthcare LLC, doing business as Generations Healthcare (GHC), a company that runs assisted living facilities throughout California.  The settlement follows an administrative court decision finding that GHC engaged in a pattern and practice of discrimination against individuals born abroad, including naturalized U.S. citizens, in violation of the Immigration and Nationality Act.

On Sept. 30, 2011, the Justice Department filed a lawsuit against GHC alleging that the company discriminated against authorized workers born abroad.  Specifically, GHC required these immigrants to produce more documents to establish authority to work than it required of citizens born in the United States.  After a trial, the Office of the Chief Administrative Hearing Officer -- the administrative court that hears such claims -- ruled in the department’s favor.   

Today’s settlement resolves the remedial issues in the case, which the court did not address in its earlier ruling.  Under the terms of the settlement agreement, GHC will pay a total of $119,313 in back pay to two victims of discrimination, and $88,687 in civil penalties to the United States.  GHC will also be subject to monitoring of its hiring practices for a period of two years.

“Both the court’s ruling and this settlement underscore the importance of complying with the anti-discrimination provision of the Immigration and Nationality Act and the consequences for failing to do so," said Acting Assistant Attorney General Vanita Gupta for the Civil Rights Division.  “Employers should review their hiring policies and employment eligibility verification practices to ensure that they comply with federal anti-discrimination law.”

The case was litigated and settled by the department’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC), which is responsible for enforcing the anti-discrimination provision of the Immigration and Nationality Act.  The statute prohibits employers from placing additional documentary burdens on work-authorized applicants or employees during the employment eligibility verification process because of their citizenship status or national origin.  The statute also prohibits citizenship status and national origin discrimination in hiring, firing, or recruitment or referral for a fee, as well as retaliation and intimidation.

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

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

Attorney General Eric H. Holder Jr., announced today that Charisse Arce, of Bristol Bay, Alaska, has been selected as the first-ever Gaye L. Tenoso Indian Country Legal Fellow, part of the Attorney General’s Honors Program. 

Arce was chosen from a large pool of highly-qualified applicants and will be appointed to a three-year term position in the United States Attorney’s Office in the District of Arizona, where she will be assigned to the district’s Indian Country Crime Section.  Arce will also serve a portion of her appointment in the Pascua Yaqui tribal prosecutor’s office. 

This is the first year of the Gaye L. Tenoso Indian Country Fellowship within the Attorney General’s Honors Program, and it is awarded to an extraordinarily well-qualified new attorney with a deep interest in and enthusiasm for improving public safety in tribal communities.

“This is an investment in the future of the department, named for a beloved and extraordinary member of our DOJ family – and an enrolled member of the Citizen Potawatomi Nation of Indians – who sadly passed away this summer, but devoted her career to advancing the federal government’s relationships with sovereign tribes.  This program exemplifies how we are seeking to institutionalize the department’s commitment to justice in Indian country,” said Attorney General Holder. “The Indian Country fellowship will give each candidate an opportunity to gain significant experience and exposure to the work of the Justice Department in Indian country, and in the long term help us build a cadre of legal talent in the department with expertise in federal Indian law.”

“We are excited to welcome Charisse Arce to the District of Arizona as the first Gayle Tenoso Indian Country Fellowship recipient,” said U.S. Attorney for the District of Arizona John S. Leonardo.  “The U.S. Attorney’s Office is committed to making this inaugural fellowship a success for all involved and a model for future fellowships in Arizona and in districts around the country.  Ms. Arce has demonstrated a strong commitment to American Indian and Alaska Native communities, and we look forward to having her in our Tucson office and working closely with the Pasqua Yaqui Tribe.”

Ms. Arce is currently a fellow at Bristol Bay Native Corporation, one of thirteen Alaska Native Regional Corporations created under federal law.  Ms. Arce received her law degree from Seattle University School of Law, where she was a member of the editorial staff for and published an article in the American Indian Law Journal.  During law school, Ms. Arce served as an extern for the United States Attorney’s Office for the Western District of Washington, for the Washington State Supreme Court, and for the Department of Interior’s Office of the Solicitor.  She also worked as a legal research assistant for a law professor and for a private law firm.  Prior to law school, Ms. Arce graduated, cum laude, with a B.A. in Marketing from Seattle University. 

The Pascua Yaqui Tribe, located near Tucson, Arizona, is one of three tribes – along with the Tulalip Tribes of Washington, and the Umatilla Tribes of Oregon – participating in a pilot project under the 2013 reauthorization of the Violence Against Women Act (VAWA 2013) to exercise special domestic violence criminal jurisdiction over certain defendants, regardless of their Indian or non-Indian status, who commit acts of domestic violence or dating violence or violate certain protection orders in Indian country.  The pilot is authorized by the Department of Justice.  This new law generally takes effect on March 7, 2015, but also authorizes the pilot project to allow certain tribes to begin exercising special jurisdiction sooner.   Since the pilots began, more than 20 criminal cases have been charged by tribal prosecutors against non-Indian domestic violence offenders, and several have been convicted of domestic violence crimes. 

“The Pascua Yaqui Tribe is pleased to have the opportunity to partner with the District of Arizona U.S. Attorney’s Office and the Attorney General’s Honors Program, through the Gaye L. Tenoso Indian Country Fellowship,” said Pascua Yaqui Tribal Chairman Peter Yucupicio. “We welcome the new Department of Justice fellow and look forward to a productive partnership as we fight violent crime, work to keep our community safe, and continue to implement the Violence Against Women Act (VAWA), and Special Domestic Violence Criminal Jurisdiction (SDVCJ).”

The Fellowship is named in honor of Department of Justice attorney, the late Gaye L. Tenoso. Gaye’s distinguished service to the Department and the people it serves spanned 30 years. For the last six years of her life Gaye served as the Deputy Director the Office of Tribal Justice. Gaye’s expertise in Federal Indian law and knowledge of tribes enabled her to be an exceptionally effective advisor on litigation and policy matters. She worked tirelessly to ensure that specific protections for American Indian women were included in VAWA 2013. Gaye also mentored many legal interns during her time at the Office of Tribal Justice, and was an inspiration and guide who left a deep impression on many young attorneys.

Read more about the work of the Department of Justice in Indian Country at www.justice.gov/tribal/accomplishments

A Pelham, Georgia, man was sentenced on Dec. 2 in the U.S. District Court for the District of Nebraska to serve 10 years in prison followed by three years of supervised release for filing false retaliatory liens against federal government officials, announced Acting Deputy Assistant Attorney General Larry J. Wszalek for the Justice Department’s Tax Division. 

On Sept. 4, David Randall Due was convicted by a jury on all seven counts charged in the superseding indictment.

At trial, the evidence showed that David Randall Due and Donna Kozak, a resident of La Vista, Nebraska, and member of the sovereign citizen group “Republic for the united States of America,” conspired and agreed to retaliate against several federal officials in Nebraska by filing false liens claiming false interests in the officials’ property for millions of dollars.  Due prepared the false liens in Georgia and Kozak filed them in Nebraska counties.  Kozak and Due filed the liens in retaliation for the federal criminal tax prosecution and trial convictions of associates David and Bernita Kleensang.  Each targeted federal official had some connection to either a tax prosecution of David and Bernita Kleensang in June 2012 or the subsequent indictment of Kozak for tax offenses. 

In September 2012, Kozak and Due filed one $19 million false lien in Boyd County, Nebraska, on property owned by the federal U.S. District Court judge who presided over the Kleensang trial.  Kozak was subsequently indicted by a federal grand jury for filing the false lien and for other tax-related charges.  While she was on release pending trial, Due provided her with five more false liens, which she filed in Washington County, Nebraska, on properties owned by a second federal U.S. District Court judge, the U.S. Attorney, two Assistant U.S. Attorneys, and an Internal Revenue Service-Criminal Investigation (IRS-CI) special agent.

On Aug. 1, Kozak was tried and convicted by a jury in the U.S. District Court for the District of Nebraska.  Her sentencing is scheduled for Jan. 6, 2015.

This case was investigated by special agents of the FBI and IRS-CI, and was prosecuted by trial attorneys from the Tax Division.

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

Four Philippine nationals were indicted today on conspiracy, hostage-taking, and weapons charges stemming from the kidnapping in the Philippines of a mother and her then 14-year-old son in July of 2011.  The indictment alleges that the group held the mother for approximately 82 days and the son for approximately 151 days, and forced the family to pay ransom for their return. The victims, both U.S. nationals, were in the Philippines on a family trip.

The indictment, returned by a grand jury in the U.S. District Court for the District of Columbia, was announced by John P. Carlin, Assistant Attorney General for National Security; Ronald C. Machen Jr., U.S. Attorney for the District of Columbia; Stephanie Yonekura, Acting U.S. Attorney for the Central District of California, and Bill L. Lewis, Assistant Director in Charge of the FBI’s Los Angeles Field Office.

The four men are identified as John Does, but are also known as Furuji Indama, Radzmil Jannatul, Muadz, and Abu Basim.  Each is charged with one count of conspiracy to commit hostage-taking, two counts of hostage-taking, one count of conspiracy to use, carry, brandish and discharge a firearm during a crime of violence and one count of using, carrying, brandishing and discharging a firearm during a crime of violence and aiding and abetting and causing an act to be done.  None of the defendants is in custody.

If extradited to the United States and convicted of these charges, each defendant would face a maximum term of life in prison.

“The four men indicted are alleged to have been involved in the hostage-taking of two U.S. citizens vacationing in the Philippines more than three years ago,” said Assistant Attorney General Carlin.  “Hostage-takers who target our citizens with captivity and violence anywhere in the world should know that we will pursue them and seek to bring them to justice, however long it takes.”

“While on a family vacation overseas, a Virginia mother and her teenage son were captured, forced into boats at gunpoint, and taken to an island where they were held hostage for ransom,” said U.S. Attorney Machen.  “This indictment charges four Philippine men for their alleged roles in taking these Americans hostage and holding them captive for months in terrifying conditions.  We remain focused on apprehending and extraditing these men so that they can face these charges in a courtroom in our nation’s capital.”

“The victim family in this case experienced great suffering when a mother and son were violently kidnapped and held by the defendants overseas, while family members in the United States endured for months without knowing the fate of their loved ones,” said Assistant Director Lewis, of the FBI’s Los Angeles Field Office.  “It should be noted that, following the mother’s release, her son was held for months before valiantly escaping his captors.  The charges in this case are the result of a joint investigation by the FBI and law enforcement partners in the Philippines, one of many countries with whom we work to identify those responsible for victimizing American citizens abroad and build cases for potential prosecution.”

According to the indictment, the defendants and co-conspirators kidnapped the two United States nationals on or about July 12, 2011.  The woman, then age 43, and her then 14-year-old son were taken hostage from a beach cottage on Tictabon Island, several miles from the mainland of Zamboanga City in the southern Philippines.

Both hostages were forced into boats at gunpoint, brought to another island, Basilan Island, and forced to march to a camp where they were held until September 2011.  The two were then forced to march to another camp, also on Basilan Island. 

The indictment alleges that the defendants and their co-conspirators threatened to kill the hostages, and that they used firearms, including handguns, semiautomatic assault weapons, and destructive devices to keep and detain them.  The indictment also alleges that the group demanded ransom from a family member of the hostages and did, in fact, cause a family member to make bank transfers as ransom payments.

The group released the mother on or about Oct. 2, 2011, but retained her teenage son as a hostage, and demanded that she pay a large ransom for his release.  The son eventually escaped from his captivity on or about Dec. 9, 2011. 

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

The charges were the result of an investigation led by the FBI’s Los Angeles Field Office. The case is being prosecuted by Assistant U.S. Attorneys Courtney Spivey Urschel and Thomas A. Gillice of the U.S. Attorney’s Office for the District of Columbia, Assistant U.S. Attorney Christopher Grigg of the U.S. Attorney’s Office for the Central District of California, and Trial Attorney T. J. Reardon III of the Counterterrorism Section of the National Security Division of the Department of Justice.  Former Assistant U.S. Attorney Anthony Asuncion and Assistant U.S. Attorney George P. Varghese, now with the U. S. Attorney’s Office for the District of Massachusetts, investigated the case prior to indictment. 

The former Principal Vice President of Bechtel Corporation and General Manager of the Power Generation Engineering and Services Company (PGESCo) pleaded guilty today in connection with a $5.2 million kickback scheme intended to manipulate the competitive bidding process for state-run power contracts in Egypt.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Rod J. Rosenstein of the District of Maryland, Special Agent in Charge Stephen E. Vogt of the FBI’s Baltimore Division and Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service-Criminal Investigation (IRS-CI) Washington D.C. Field Office made the announcement.

“Asem Elgawhary took more than $5 million in kickbacks from companies trying to manipulate a competitive bidding process in their favor,” said Assistant Attorney General Caldwell.  “Foreign corruption is an international scourge, and we will pursue those who take bribes, whether they are government officials or high-ranking corporate executives, like Elgawhary.  Every corruption conviction is a step towards rooting out and deterring this global problem.”

“Our economy is so global in this day and age that if we allowed corrupt practices overseas such as taking bribes in exchange for special consideration when comparing bids, it would seriously impact our international trade.  What Mr. Elgawhary admitted to doing has a dramatic affect on U.S. companies being able to expand and grow their work forces overseas in a fair market place, which in the long run hurts our economy,” said Special Agent in Charge Vogt of the FBI in Maryland and Delaware.  “He displayed his blatant disregard for our rule of law when he used a portion of the bribe payment to purchase a house for $1.6 million in cash.  This should send a message to others like Mr. Elgawhary, that hiding behind a foreign government won’t protect you from prosecution.”

“Mr. Elgawhary allowed greed to compromise his business practices by taking kickbacks to provide unfair advantages to companies willing pay for power contracts,” stated Special Agent in Charge Kelly of IRS-CI’s Washington D.C. Field Office.  “He compounded his criminal activities by failing to report any of the kickback payments as income on his tax returns.  It is imperative that honest companies know IRS Criminal Investigation will investigate and bring to prosecution those willing to line their pockets through unethical business practices.”

Asem Elgawhary, 73, of Potomac, Maryland, pleaded guilty today before U.S. District Judge Deborah K. Chasanow of the District of Maryland to mail fraud, conspiracy to commit money laundering, and obstruction and interference with the administration of the tax laws.  Sentencing is scheduled for Mar. 23, 2015.

In his plea agreement, Elgawhary admitted that, from 1996 to 2011, he was assigned by Bechtel – a U.S. corporation engaged in engineering, construction and project management – to be the general manager at PGESCo, a joint venture between Bechtel and Egypt’s state-owned and state-controlled electricity company (EEHC).  PGESCo assisted EEHC in identifying possible subcontractors, soliciting bids and awarding contracts to perform power projects for EEHC.  Elgawhary admitted to accepting a total of $5.2 million from three power companies, which they paid to secure a competitive and unfair advantage in the bidding process.  According to court documents, the power companies and their consultants paid more than $5.2 million in kickback payments into various off-shore bank accounts under the control of Elgawhary, including various Swiss bank accounts.

As Elgawhary admitted in his plea agreement, he attempted to conceal the kickback scheme by routing the payments through various off-shore bank accounts, including Swiss bank accounts, under his control.  Elgawhary also sent various documents and “Representation Letters” to Bechtel executives and members of the PGESCo Board of Directors in Maryland, falsely certifying that he had no knowledge of any fraud or suspected fraud at PGESCo, and that there were no violations or possible violations of law or regulations that should have been considered for disclosure in PGESCo’s financial statements.  Elgawhary also admitted that, in further attempt to conceal the scheme, he made misrepresentations to counsel for Bechtel when he was interviewed in April 2011.

Elgawhary also admitted to conspiring to launder the proceeds of the scheme and to obstructing and impeding the administration of U.S. tax laws by falsely claiming that he maintained only one foreign bank account, denying that he received any income from a foreign bank account, and failing to report any of the kickback payments as income for the tax years 2008 through 2011.

Elgawhary, a dual U.S. and Egyptian citizen, was arrested on a complaint when he flew into the United States on Nov. 26, 2013, and was indicted on Feb. 10, 2014.   

The case is being investigated by the FBI’s Baltimore Division and IRS-CI’s Washington D.C. Field Office.  Significant assistance was provided by the Criminal Division’s Office of International Affairs, and law enforcement counterparts in Switzerland, Germany, Italy, Saudi Arabia and Cyprus.  The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David I. Salem of the District of Maryland.    

Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

 El Departamento de Justicia anunció hoy que llegó a un acuerdo con Life Generations Healthcare LLC, conocido comercialmente como Generations Healthcare (GHC), una compañía que opera asilos de ancianos por todo California. El acuerdo sigue una decisión de un tribunal administrativo que determinó que GHC incurrió en un patrón y práctica discriminatoria contra individuos nacidos al extranjero, incluyendo ciudadanos naturalizados estadounidenses, en violación de de la Ley de Inmigración y Nacionalidad.

El día 30 de septiembre del 2011, el Departamento de Justicia presentó una demanda en contra de GHC en la que alegaba que la compañía discriminó en contra de los trabajadores nacidos al extranjero y que eran autorizados a trabajar. Específicamente, GHC requería que estos inmigrantes proporcionaran más documentos de lo que requería de los ciudadanos nacidos en los Estados Unidos para establecer autorización de trabajar. Después de un juicio, la Oficina del Funcionario Administrativo Principal de Audiencias - el tribunal administrativo que recibe tales demandas - decidió en favor del Departamento.

El acuerdo de hoy resuelve los asuntos correctivas en el caso, que el tribunal no abordό en su decisión anterior. Bajo el acuerdo, GHC pagará un total de $119,313 en pago atrasado a dos víctimas de discriminación, y $88,687 en sanciones civiles a los Estados Unidos. GHC también será sujeto a monitoreo por el departamento de sus prácticas de contratación por un periodo de dos años.

“Tanto la decisión de la corte como este acuerdo destacan la importancia de cumplir con la provisión antidiscriminatoria de la Ley de Inmigración y Nacionalidad, y las consecuencias al no hacerlo,” dijo Vanita Gupta, Sub-Procuradora General Interina para la División de Derechos Civiles. “Empleadores deben revisar sus pólizas de contratación y prácticas de verificación de elegibilidad de empleo para garantizar que cumplen con las leyes federales contra la discriminación.”

El caso fue litigado y resuelto por la Oficina del Consejero Especial para Prácticas Injustas en el Empleo Relacionadas a la Inmigración (OSC) en el Departamento de Justicia, que también es la oficina responsable por hacer cumplir con la provisión antidiscriminatoria de la INA.  La ley prohíbe a los empleadores imponer cargas adicionales de documentos a los solicitantes autorizados a trabajar o empleados durante el proceso de verificación de elegibilidad de empleo a causa de su estado de ciudadanía o nacionalidad. La ley también prohíbe discriminación por estatus de ciudadanía o del origen nacional durante la contratación, el despido, el reclutamiento o la referencia por comisión, represalias, e intimidación.

Para más información sobre las protecciones contra discriminación en el empleo según las leyes migratorias, llame a la línea directa de OSC para trabajadores al 1-800-255-7688 (1-800-237-2515, TTY para personas con discapacidad auditiva), llame a la línea directa de OSC para empleadores al 1-800-255-8155 (1-800-237-2515, TTY para personas con discapacidad auditiva), o para registrarse para un seminario gratis ofrecido a través del internet visite http://www.justice.gov/crt/about/osc/webinars.php, envíe un correo electrónico al osccrt@usdoj.gov, o visite el sitio de Internet http://www.justice.gov/crt/about/osc.

Los solicitantes o empleados que consideren que fueron sujetos a (1) diferentes requisitos de verificación por su estatus de ciudadanía, estatus migratorio u origen nacional, o (2) discriminación por estatus de ciudadanía, estatus migratorio, u origen nacional con relación a la contratación, el despido y el reclutamiento o la referencia por comisión, deberán comunicarse a la línea de dedicada a trabajadores  de OSC para asistencia.

The U.S. District Court for the Central District of California entered a consent decree of permanent injunction on Dec. 1 against Neptune Manufacturing Inc. of Los Angeles and its corporate officers, Alexander Goldring, Peter Oyrekh and Semyon Krutovsky, to prevent the distribution of adulterated seafood products, the Department of Justice announced today.

The department filed a complaint in the U.S. District Court for the Central District of California on Nov. 21 at the request of the U.S. Food and Drug Administration (FDA), alleging the company’s seafood products are produced under conditions that are inadequate to ensure the safety of its products.  The complaint alleges that Neptune prepares, processes, packs, holds and distributes ready-to-eat smoked and salt-cured seafood including pickled herring, smoked steelhead trout, smoked halibut, smoked whitefish, smoked salmon and smoked mackerel.  The complaint also alleges that defendants Goldring, Oyrekh and Krutovsky are Neptune’s corporate officers with the authority and responsibility for preventing and correcting violations of federal law at the company. 

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 Neptune to cease all manufacturing operations and requires that, in order for defendants to resume distributing seafood products, the FDA first must determine that Neptune’s manufacturing practices have come into compliance with the law. 

“Neptune was repeatedly informed that the sanitation practices at its facility were deficient,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “The failure to actively plan for and control the presence of bacteria and neurotoxins commonly found in seafood processing facilities can pose a serious risk to the public health.”

According to the complaint, since 2006, FDA inspections have documented a pattern of continuing conduct of insanitary conditions resulting in the persistent presence of Listeria monocytogenes (L. mono).  These insanitary conditions were the result of deviations from current good manufacturing practices such as not adequately cleaning surfaces and utensils used for cutting fish.  Further, according to the complaint, the FDA’s most recent inspection in December 2013 documented the defendants’ failure to have and comply with adequate Hazard Analysis and Critical Control Point (HACCP) plans that control for Clostridium botulinum (C. bot) and L. mono hazards.  L. mono is the bacterium that causes listeriosis, a serious and sometimes fatal infection for vulnerable groups such as newborns, the elderly and those with an impaired immune system.  Ingestion of the neurotoxin C. bot can cause botulism.  Though the incidence of botulism is rare, its effect is severe and the disease can cause paralysis or death if not promptly treated.

According to the complaint, the FDA has performed seven inspections of the defendants’ facility since 2006 and documented seafood HACCP or current good manufacturing practice violations every time.  The complaint alleges that these inspections revealed that the company’s products are adulterated within the meaning of the Food, Drug, and Cosmetic Act.  As alleged in the complaint, the company was told to take certain precautions while brining fish to control potential C. bot hazards but failed to take appropriate corrective action.  Further, according to the complaint, cutting utensils were seen with dried pieces of fish on them, and exposed cracks, pits and crevices on the floor allowed water to pool in them, increasing the risk of L. mono contamination.  The complaint alleges that FDA environmental samples taken around the facility tested positive for L. mono in critical areas such as the brining room, smoking/drying room and the walk-in cooler where finished products are stored.

The government is represented by Trial Attorney Dan Baeza of the Civil Division’s Consumer Protection Branch, with the assistance of Assistant U.S. Attorney Deborah Yim for the Central District of California and Assistant Chief Counsel for Enforcement Yen Hoang of the U.S. Department of Health and Human Services’ Office of General Counsel’s Food and Drug Division. 

On the heels of President Obama’s national call to foster strong, collaborative relationships between local police and the communities they protect and serve, the U.S. Department of Justice announced today the upcoming cities where Attorney General Eric Holder will hold regional roundtable meetings as part of the department’s Building Community Trust initiative.  Those cities are: Cleveland, Memphis, Tennessee, Chicago, Philadelphia, and Oakland, California.

The roundtables will serve as an opportunity to bring law enforcement, elected officials and members of the community together to discuss next steps that the administration will take to improve relationships between law enforcement and the community, increase the integrity within our justice system, and share best practices for policing.

The Attorney General hosted the first such Building Community Trust roundtable meeting at Ebenezer Baptist Church in Atlanta on Monday.  There, he discussed President Obama’s announcement to create the Task Force on 21st Century Policing, the federal review on the use of military-style equipment for local law enforcement, and the new Community Policing Initiative to fund up to 50,000 additional body-worn cameras for law enforcement agencies.  At a community town hall meeting held at the Ebenezer Baptist Church, the Attorney General announced that the department will soon release new guidelines on the use of racial profiling by federal law enforcement agencies. 

The next Building Community Trust roundtable meeting will be held in Cleveland on TODAY DECEMBER 4, 2014, at 2 p.m. EST.  The meeting will include law enforcement, local officials, community leaders, student leaders and faith leaders.  Additional details on the other four upcoming regional roundtables will be released in the coming weeks.

ATTORNEY GENERAL HOLDER HOLDS BUILDING COMMUNITY TRUST MEETING IN CLEVELAND:

WHO:           U.S. Attorney General Eric Holder

U.S. Attorney Steven Dettelbach for the Northern District of Ohio

Acting Assistant Attorney General Vanita Gupta for the Civil Rights Division

WHEN:        THURSDAY, DECEMBER 4, 2014

2:00 p.m. EST

WHERE:     U.S. Attorney’s Office

801 West Superior Avenue

Cleveland, OH 44113               

PHOTO SPRAY AT THE BOTTOM (Media Gather Time: 1:45 p.m. EST)

NOTE:  All media must present government-issued photo I.D. (such as a driver’s license as well as valid media credentials. Press inquiries regarding logistics should be directed to Kevin Lewis at kevin.s.lewis@usdoj.gov or Sabrina Curtis at  sabrina.curtis@usdoj.gov.  

Rite Aid Corporation, a Delaware corporation and national retail drugstore chain with its principal place of business in Camp Hill, Pennsylvania, has paid the United States $2.99 million to resolve allegations that it violated the False Claims Act by inappropriately using gift cards as inducements, the Department of Justice announced today. 

The settlement resolves allegations that Rite Aid offered illegal inducements to Medicare and Medicaid beneficiaries to transfer their prescriptions to Rite Aid pharmacies.  The government alleged that from 2008 to 2010, Rite Aid had knowingly and improperly influenced the decisions of Medicare and Medicaid beneficiaries to transfer their prescriptions to Rite Aid pharmacies by offering them gift cards in exchange for their business.

“This case demonstrates the government's ongoing commitment to enforcing accountability, transparency and fairness in the retail pharmacy industry,” said Acting Assistant Attorney General Joyce R. Branda for the Civil Division.  “The government will continue to advocate for the best interests of Medicare and Medicaid patients, and prevent pharmacies from improperly manipulating their healthcare choices.” 

“This settlement holds Rite Aid accountable for exerting undue influence on individuals when they make important healthcare decisions about where and when to fill prescriptions,” said Acting U.S. Attorney Stephanie Yonekura for the Central District of California.  “Corporate profit should never steer an individual away from making the right healthcare decision.” 

“Pharmacies are not allowed to improperly influence the decision-making of Medicare and Medicaid patients about where to fill prescriptions,” said Special Agent in Charge Glenn R. Ferry for the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).  “Pharmacy chains that manipulate patient choices in this way will be held accountable.”

The settlement resolves allegations filed by Jack Chin under the qui tam, or whistleblower provisions of the False Claims Act, which authorizes private parties to sue for fraud on behalf of the United States and share in the recovery.  Chin will receive approximately $508,300 of the settlement.       

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23.2 billion through False Claims Act cases, with more than $14.9 billion of that amount recovered in cases involving fraud against federal health care programs.

This case was investigated jointly by the Commercial Litigation Branch of the Civil Division, the U.S. Attorney’s Office for the Central District of California, the National Association of Medicaid Fraud Control Units and HHS-OIG.

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

Charges have been unsealed against husband and wife owners of an Orlando health care clinic for their roles in a fraud scheme that resulted in the submission of more than $3 million in allegedly fraudulent claims to Medicare.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney A. Lee Bentley III of the Middle District of Florida and Special Agent in Charge Derrick Jackson of the U.S. Health and Human Services Office of Inspector General’s (HHS-OIG) Florida region made the announcement after the defendants were taken into custody last night and this morning.

A federal grand jury in the Middle District of Florida returned an indictment on Nov. 19, 2014, against Juan Carlos Delgado, 58, and Nereyda Infante, 48, both of Orlando, Florida, charging them with one count of conspiracy to commit health care fraud, five counts of health care fraud, and one count of conspiracy to commit money laundering.  According to the indictment, Delgado and Infante owned and operated Prestige Medical Services and Rehab Center, a health care clinic that purportedly provided medical services to Medicare Part B and Medicare Part C beneficiaries, and three other similarly named clinics that also purportedly provided medical services to Medicare Part C beneficiaries. 

Between February 2012 and September 2014, the defendants allegedly submitted claims to Medicare that falsely represented that medical services were provided, medically necessary, and prescribed by a physician, when they were not.  The health care fraud counts specifically allege fraudulent claims involving Pentostatin prescriptions, an expensive chemotherapeutic medication, that were not medically necessary, not prescribed by a physician, and not provided.  The indictment also alleges that the defendants transferred proceeds obtained as the result of fraudulent claims and diverted them for their personal use.  According to the indictment, the defendants obtained more than $1.8 million in proceeds from the alleged fraud.   

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

The case is being investigated by the HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Middle District of Florida.  The case is being prosecuted by Trial Attorney Andrew H. Warren 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 nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 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 (HEAT), go to: www.stopmedicarefraud.gov.

The Justice Department announced today a settlement with Franciscan St. James Health (St. James), to ensure that patients and companions who are deaf or hard of hearing receive sign language interpreters and other services necessary to ensure effective communication, in compliance with Title III of the Americans with Disabilities Act (ADA).  St. James is a healthcare system providing comprehensive healthcare in Illinois including hospitals in Chicago Heights and Olympia Fields.  This settlement is part of the department’s Barrier-Free Health Care Initiative (initiative), a partnership of the Civil Rights Division and U.S. Attorney’s offices across the nation to ensure that people with disabilities, including those who are deaf or hard of hearing, who have HIV, and who have mobility disabilities, have equal access to medical services. 

The settlement with St. James is the fourth under the initiative since the start of the new fiscal year on Oct. 1, 2014, joining agreements signed in Edmonds, Washington; Stafford and Lake Ridge, Virginia; and Vero Beach, Florida.  Since its launch three years ago, the department has reached 25 agreements under the initiative.

The agreement was reached after the department investigated a complaint that a patient who is deaf was denied a sign language interpreter throughout her four day stay in the hospital. Title III of the ADA requires health care providers to ensure that their communications with people with hearing disabilities are as effective as their communications with people without disabilities. 

Under the settlement agreement, St James will ensure that the hospitals:

• Provide auxiliary aids and services, including sign language interpreters, to people who are deaf or hard-of-hearing, within prescribed time frames and free of charge;

• Designate an ADA Administrator;

• Utilize their grievance resolution systems to investigate disputes regarding effective communication with deaf and hard of hearing patients;

• Post notices of their effective communication policy;

• Train hospital personnel on the effective communication requirements of the ADA;

• File compliance reports with the Department of Justice; and

• Pay damages in the amount of $70,000.00 to the complainant in this case.

“Next year as we mark the 25th anniversary of the enactment of the ADA, we will celebrate a quarter century of progress in eliminating the barriers that have historically kept people with disabilities from equal access to and the full enjoyment of services readily available to persons without disabilities,” said Acting Assistant Attorney General Vanita Gupta for the Civil Rights Division.  “But we must also acknowledge that even after all this time, there is still much to be done.  Effective communication in healthcare is one of those critical areas.”

The department has a number of publications available to assist entities to comply with the ADA, including a Business Brief on Communicating with People Who Are Deaf or Hard of Hearing in Hospital Settings, www.ada.gov/hospcombr.htm,  and publications specific to health care providers, HIV discrimination, and effective communication with people with hearing and vision disabilities, as well as publications about tax credits available for providing access. 

For more information on the ADA and to access these publications, visit www.ada.gov.    For more information on the Barrier Free Health Care Initiative visit www.ada.gov/usao-agreements.htm.  Those interested in finding out more about this settlement or the obligations of public accommodations under the ADA may call the Justice Department’s toll-free ADA information line at 800-514-0301 or 800-514-0383 (TDD), or access its ADA website at www.ada.gov.   ADA complaints may be filed by email to ada.complaint@usdoj.gov.

A leader of a Puerto Rican identity trafficking organization was sentenced today to serve 81 months in prison. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Rosa E. Rodríguez-Vélez of the District of Puerto Rico, Principal Deputy Assistant Secretary Thomas S. Winkowski of U.S. Immigration and Customs Enforcement (ICE), Chief Postal Inspector Guy J. Cottrell of the U.S. Postal Inspection Service (USPIS), Director Bill A. Miller of the U.S. State Department’s Diplomatic Security Service (DSS) and Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI) made the announcement.

Enrique Rogelio Mendez-Solis aka Rogelio Quero-Mendez, Roberto Marquez-Prada, 40, a Mexican national formerly of Seymour, Indiana, was sentenced today by U.S. District Judge Juan M. Pérez-Giménez in the District of Puerto Rico for his leading role in trafficking the identities and corresponding identity documents of Puerto Rican U.S. citizens.  Judge Pérez-Giménez also ordered the defendant to serve three years of supervised release and to forfeit $422,793 in illegal proceeds.  Mendez-Solis illegally entered the United States and the government will seek his deportation following the service of his prison sentence.  On Dec. 3, 2013, Mendez-Solis pleaded guilty to one count of conspiracy to commit identification fraud, one count of conspiracy to commit human smuggling for financial gain and three counts of aggravated identity theft. 

According to court documents, individuals located in the Savarona area of Caguas, Puerto Rico, obtained Puerto Rican identities and corresponding identity documents.  Other conspirators located in various cities throughout the United States solicited customers and sold Social Security cards and corresponding Puerto Rico birth certificates for prices ranging from $700 to $2,500 per set.  The identity brokers in the United States ordered the identity documents from the document suppliers in Savarona on behalf of their customers by making coded telephone calls.  The conspirators were charged with using text messages, money transfer services and express priority or regular U.S. mail to complete their illicit transactions.

Court documents allege that some of the conspirators assumed a Puerto Rican identity themselves and used that identity in connection with the trafficking operation.  Their customers generally obtained the identity documents to assume the identity of Puerto Rican U.S. citizens and to obtain additional identification documents, such as legitimate state driver’s licenses.  Some customers obtained the documents to commit financial fraud and attempted to obtain a U.S. passport.  According to court documents, the organization trafficked at least 1,500 identities.  

Various identity brokers were operating in Rockford, DeKalb and Aurora, Illinois; Seymour, Columbus and Indianapolis, Indiana; Hartford, Connecticut; Clewiston, Florida; Lilburn and Norcross, Georgia; Salisbury, Maryland; Columbus and Fairfield, Ohio; Dorchester, Lawrence, Salem and Worcester, Massachusetts; Grand Rapids, Michigan; Nebraska City, Nebraska; Elizabeth, New Jersey; Burlington and Hickory, North Carolina; Hazelton and Philadelphia, Pennsylvania; Houston, Texas; Abingdon and Albertville, Alabama; and Providence, Rhode Island. 

To date, 53 individuals have been charged for their roles in the identity trafficking scheme.  All 49 arrested defendants have pleaded guilty and 46 defendants have been sentenced, including:

• Jorge Luis “Daniel” Mendez, 38, a Dominican national formerly of Rio Piedras, Puerto Rico, sentenced to 75 months in prison on April 28, 2014, followed by 3 years of supervised release;

• Daniel Aparicio-Lara, 30, a Mexican national formerly of Burlington, North Carolina sentenced to 65 months in prison on Dec. 18, 2012, followed by 3 years of supervised release;

• Rafael Joaquin Beltre-Beltre, 36, a Dominican national formerly of Caguas, Puerto Rico, sentenced to 63 months in prison on Sept. 4, 2012, followed by deportation;

• Wilfredo Blanco-Diaz, 41, a Dominican national formerly of Caguas, Puerto Rico, sentenced to 61 months in prison on March 11, 2014, followed by deportation; 

• Jose Sergio Garcia-Ramirez, 39, a Mexican national formerly of Rockford, Illinois, sentenced to 54 months in prison on Nov. 26, 2012, followed by deportation; 

• Moises Lara-Ceballos, 37, a Mexican national formerly of Seymour, Indiana, sentenced to 54 months in prison on Jan. 21, 2014, followed by deportation; and

• Wilson Antonio Hernandez-Fernandez, 40, a Dominican national formerly of Caguas, Puerto Rico, sentenced to 48 months in prison on Feb. 4, 2014, followed by 3 years of supervised release.

The charges are the result of Operation Island Express, a nationally coordinated investigation led by the ICE Homeland Security Investigations’ (ICE-HSI) Chicago Office and USPIS, DSS and IRS-CI offices in Chicago, in coordination with the ICE-HSI San Juan Office and the DSS Resident Office in Puerto Rico.  The Illinois Secretary of State Police; Elgin, Illinois Police Department; Seymour, Indiana Police Department and Indiana State Police provided substantial assistance.  The ICE-HSI Assistant Attaché office in the Dominican Republic and International Organized Crime Intelligence and Operations Center (IOC-2) as well as various ICE, USPIS, DSS and IRS-CI offices around the country provided invaluable support.

The case is being prosecuted by Trial Attorneys James S. Yoon, Hope S. Olds, Courtney B. Schaefer, and Christina Giffin of the Criminal Division’s Human Rights and Special Prosecutions Section, with the assistance of the Criminal Division’s Asset Forfeiture and Money Laundering Section and the support of the U.S. Attorney’s Office for the District of Puerto Rico.  The U.S. Attorney’s Offices in the Northern District of Illinois, Southern District of Indiana, District of Connecticut, District of Massachusetts, District of Nebraska, Middle District of North Carolina, Southern District of Ohio, Middle District of Pennsylvania, District of Rhode Island, Southern District of Texas and Western District of Virginia provided substantial assistance.

Potential victims and the public may obtain information about the case at: www.justice.gov/criminal/vns/caseup/beltrerj.html.  Anyone who believes their identity may have been compromised in relation to this investigation may contact the ICE toll-free hotline at 1-866-DHS-2ICE (1-866-347-2423) and its online tip form at www.ice.gov/tipline.  Anyone who may have information about particular crimes in this case should also report them to the ICE tip line or website.

Anyone who believes that they have been a victim of identity theft, or wants information about preventing identity theft, may obtain helpful information and complaint forms on various government websites including the Federal Trade Commission ID Theft Website, www.ftc.gov/idtheft.  Additional resources regarding identity theft can be found at www.ojp.usdoj.gov/ovc/pubs/ID_theft/idtheft.html; www.ssa.gov/pubs/10064.html;   www.fbi.gov/about-us/investigate/cyber/identity_theft; and www.irs.gov/privacy/article/0,,id=186436,00.html.

A man formerly of Neptune, New Jersey, was sentenced today in the U.S. District Court for the District of New Jersey to serve 54 months in prison to be followed by five years of supervised release, the Justice Department and the Internal Revenue Service (IRS) announced. 

In February 2014, a jury convicted David Moleski, a pilot and former chiropractor, of 14 counts of mail fraud, one count of wire fraud, one count of corruptly endeavoring to obstruct and impede Internal Revenue laws and three counts of submitting false claims for tax refunds.  Moleski was sentenced by U.S. District Judge Freda L. Wolfson, who also ordered that Moleski pay a $10,000 fine and, as a condition of release, $48,199 in restitution. 

According to the evidence presented in court, Moleski submitted three false tax returns in 2009 for tax years 2006 through 2008 that collectively requested more than $1.3 million in income tax refunds to which he was not entitled.  Prior to filing these returns, Moleski failed to file tax returns from 1999 through 2005, even though he was legally required to file.  When the IRS assessed taxes for those years and began collecting, Moleski obstructed the collection efforts and demanded that a third-party financial institution not comply with an IRS levy.  In addition, Moleski attempted to pay credit card bills and other debts with fake financial instruments that claimed to draw on an account at the U.S. Treasury that did not actually exist.  For instance, Moleski sent a fake financial instrument for $500,000 in alleged payment of a mortgage debt.  

The case was investigated by special agents of IRS-Criminal Investigation.  Trial Attorneys Tino M. Lisella and Yael T. Epstein of the Tax Division prosecuted the case, with the assistance of the U.S. Attorney’s Office for the District of New Jersey.

A federal grand jury in San Francisco returned a nine-count indictment against five real estate investors for their role in bid rigging and fraud at foreclosure auctions in Northern California, the Department of Justice announced.

The indictment, filed today in U.S. District Court for the Northern District of California in Oakland, California, charges Northern California real estate investors John Michael Galloway, Nicholas Diaz, Glenn Guillory, Thomas Joyce and Charles Rock with participating in a conspiracy to rig bids and a scheme to defraud mortgage holders and others.  The indictment alleges that the defendants agreed not to compete at public foreclosure auctions in Contra Costa County, California, and diverted money to themselves and others that should have gone to mortgage holders and other beneficiaries. 

To date, 50 individuals have pleaded guilty or agreed to plead 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 five multi-count indictments for their roles in bid rigging and fraud schemes at foreclosure auctions in Alameda, Contra Costa and San Francisco counties. 

“The Antitrust Division will continue to cooperate with its law enforcement partners to bring to justice those who undermine the competitive market for foreclosed properties,” said Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program.  “Public auctions are meant for the public, not for an elite group conspiring together for their own profit.” 

The indictments allege, among other things, that as early as June 2008 until about January 2011, the defendants conspired to rig bids to obtain numerous properties sold at foreclosure auctions in Contra Costa County, negotiated payoffs for agreeing not to compete, held second, private auctions known as “rounds,” concealed those rounds and payoffs, and, in the process, defrauded mortgage holders and other beneficiaries.

“These charges demonstrate our continued commitment to investigate and prosecute individuals and organizations responsible for the corruption of the public foreclosure auction process,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office.  “The FBI is committed to work these important cases and remains unwavering in our dedication to bring the members of these illegal conspiracies to justice.” 

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  Each count of 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 participating in the mail fraud schemes.  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.

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, California.  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.  Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.  For more information on the task force, please visit www.StopFraud.gov.

Independent Auditor Finds Citigroup Properly Redacted
Personal Information of Nearly 150,000 Consumers

Under the settlement, Citi agreed to redact proofs of claim filed in bankruptcy cases nationwide in which the personal information of consumer debtors and third parties, including Social Security numbers and birthdates, had not been properly redacted by Citi as required by the bankruptcy rules. Also under the settlement, Citi agreed to notify all affected consumers and offer them one year of free credit monitoring and to change its internal practices and procedures so the redaction error does not recur. The settlement called for the appointment of a privacy expert to serve as independent auditor to review and certify the accuracy of the remediation process.

“It is important for creditors and other parties who file documents in consumer bankruptcy cases to understand their legal duty to protect certain personal information, and to take corrective action when they have not done so,” stated Executive Office for U.S. Trustees Director Cliff White. “This settlement helps to ensure that a bankruptcy filing does not make a consumer’s privacy protected information vulnerable to misuse by wrongdoers.”

Settlement Resolved U.S. Trustee’s Objection

The settlement resolved the U.S. Trustee’s objection to a motion filed by Citi admitting that personal information that should have been redacted under bankruptcy court rules had not been properly redacted when Citi’s subsidiaries filed bankruptcy proofs of claim seeking payment of amounts allegedly owed by debtors. The U.S. Trustee had objected to Citi’s motion because it did not provide public notice of the nationwide scope of the breach or mandate a verifiable solution to correct the problem and prevent its recurrence. The settlement between the U.S. Trustee and Citi was approved by the U.S. Bankruptcy Court for the Southern District of New York on March 13, 2012.

In his report filed with the bankruptcy court on December 1, 2014, independent auditor Eric Dieterich of Sunera LLC concluded that Citi satisfied the requirements of the settlement and related corrective action plans. The auditor also concluded that, as required by the settlement, Citi instituted policies and procedures for future filings that are reasonably calculated to prevent recurrence of the redaction error.

The auditor’s final report is filed in In re Matter of Citi Replacement Filings, No. 11-00405 (Bankr. S.D.N.Y.).

The USTP is the component of the Department of Justice that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws.

Jane Limprecht, Public Information Officer
Executive Office for U.S. Trustees
(202) 305-7411

FALLS CHURCH, Va. - The Executive Office for Immigration Review (EOIR) today announced the appointment of Stacy Stiffel Paddack as an administrative law judge (ALJ). ALJs at EOIR hear immigration-related employment cases in the Office of the Chief Administrative Hearing Officer (OCAHO), and do not hear removal cases in the immigration courts.

“We are excited to have Administrative Law Judge Paddack join our team and fill this critical position,” said Chief Administrative Hearing Officer Robin M. Stutman. “Her arrival will increase OCAHO's capacity to adjudicate employer sanctions and anti-discrimination cases, thereby expediting the recovery of worksite enforcement fines and remediation of illegal immigration-related employment discrimination.”

Biographical information follows.

Stacy Stiffel Paddack, Administrative Law Judge

Stacy Stiffel Paddack was appointed as an administrative law judge (ALJ) for the Office of the Chief Administrative Hearing Officer (OCAHO), Executive Office for Immigration Review (EOIR), in December 2014. Judge Paddack received her bachelor of arts degree in 1989 from the University of Texas at Austin, a master of arts degree in 1994 from the School of International Service at American University, and a juris doctorate in 1997 from American University's Washington College of Law. From 2010 to 2014, Judge Paddack served as an ALJ for the Office of Disability Adjudication and Review, Social Security Administration, in Tallahassee, Fla., where she became the acting chief ALJ. From 2003 to 2010, she served as a senior litigation counsel in the Office of Immigration Litigation, Civil Division, Department of Justice. From 1998 to 2003, Judge Paddack served as an attorney advisor for EOIR's Board of Immigration Appeals and OCAHO, entering on duty through the Attorney General's Honors Program. Prior to 2003, Judge Paddack also served as an adjunct instructor in the Legal Rhetoric Program at American University's Washington College of Law. Judge Paddack is a member of the Maryland State Bar.

- EOIR -

The Executive Office for Immigration Review (EOIR) is an agency within the Department of Justice. Under delegated authority from the Attorney General, immigration judges and the Board of Immigration Appeals interpret and adjudicate immigration cases according to United States immigration laws. EOIR’s immigration judges conduct administrative court proceedings in immigration courts located throughout the nation. They determine whether foreign-born individuals—whom the Department of Homeland Security charges with violating immigration law—should be ordered removed from the United States or should be granted relief from removal and be permitted to remain in this country. The Board of Immigration Appeals primarily reviews appeals of decisions by immigration judges. EOIR’s Office of the Chief Administrative Hearing Officer adjudicates immigration-related employment cases. EOIR is committed to ensuring fairness in all of the cases it adjudicates.

A Florida owner and operator of multiple physical therapy rehabilitation facilities was sentenced in federal court in Tampa today to serve 11 years in prison for his role in organizing a $28.3 million Medicare fraud scheme involving physical and occupational therapy services.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney A. Lee Bentley III of the Middle District of Florida, Special Agent in Charge Derrick Jackson of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Regional Office and Special Agent in Charge Paul Wysopal of the FBI’s Tampa Field Office made the announcement.

Luis Duluc, 54, of Tampa, pleaded guilty on Feb. 3, 2014, to conspiracy to commit health care fraud as well as making a false statement relating to health care matters.  In addition to the prison term, U.S. District Judge Susan C. Bucklew of the Middle District of Florida ordered Duluc to pay $14,424,856 in restitution.

According to Duluc’s admissions in connection with his guilty plea, he and his co-conspirators used various physical therapy clinics and other businesses throughout Florida to submit approximately $28,347,065 in fraudulent reimbursement claims to Medicare between 2005 and 2009.  Medicare paid approximately $14,424,865 on those claims. 

Duluc was chairman and president of a Delaware holding company known as Ulysses Acquisitions Inc., which was used to purchase comprehensive outpatient rehabilitation facilities and outpatient physical therapy providers, including West Coast Rehab Inc. in Fort Myers, Florida; Rehab Dynamics Inc. in Venice, Florida; Polk Rehabilitation Inc. in Lake Wales, Florida; and Renew Therapy Center of Port St. Lucie LLC in Port St. Lucie, Florida.  This gave Duluc and his co-conspirators control of those clinics’ Medicare provider numbers, which allowed them to bill Medicare for services. 

Duluc admitted that he and his co-conspirators paid kickbacks to obtain, and stole, the personal identifying information of Medicare beneficiaries, and that he and his co-conspirators also obtained unique identifying information of physicians.  They then used this information to create and submit false claims to Medicare through the clinics owned by Ulysses Acquisitions.  These claims sought reimbursement for therapy services that were not legitimately prescribed and not actually provided.  Duluc admitted that he and his co-conspirators created and used false and forged patient records in an effort to conceal the fact that services had not actually been provided.

Duluc also admitted that he developed and marketed the “80/20 deal.”  In these deals, Duluc and his co-conspirators submitted false reimbursement claims to Medicare on behalf of Miami-based therapy clinics, such as Hallandale Rehabilitation Inc., Tropical Physical Therapy Corporation, American Wellness Centers Inc. and West Regional Center Inc.  Duluc and co-conspirators retained approximately 20 percent of the money Medicare paid on these claims and paid the other 80 percent to the co-conspirator clinic owners. 

When Duluc and his co-conspirators were done using the clinics they acquired through Ulysses Acquisitions, they engaged in sham sales to nominee or straw owners, all of whom were recent immigrants to the United States with no background or experience in the health care industry.  Duluc admitted that he did this in an effort to disassociate from the fraudulent operations of the rehabilitation facilities.

This case is being investigated by HHS-OIG and the FBI and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and U.S. Attorney’s Office for the Middle District of Florida.  This case is being prosecuted by Senior Trial Attorney Christopher J. Hunter and Trial Attorney Andrew H. Warren of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Simon A. Gaugush of the Middle District of Florida.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 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 (HEAT), go to: www.stopmedicarefraud.gov.

A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

Felony charges were filed today in the U.S. District Court for the Northern District of California in Oakland against Garry Wan of Concord, California.  To date, 50 individuals have agreed to plead or have pleaded guilty, as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

According to court documents, beginning as early as May 2008 until January 2011, Wan 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.  Wan 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.  The department said that the 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.   

“While there has been a lengthy series of guilty pleas by the participants in this activity, the division’s work is not yet over,” said Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program.  “We will continue to work with our law enforcement partners to investigate and prosecute collusion at real estate foreclosure auctions, which allow the conspirators to profit from illegal payoffs at the expense of financial institutions and distressed homeowners.”

The department said that the primary purpose of the conspiracies was to suppress and eliminate competition and to conceal payoffs in order to obtain selected real estate offered at Alameda County public foreclosure auctions at non-competitive prices.  When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.  According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.

“These charges demonstrate our continued commitment to investigate and prosecute individuals and organizations responsible for the corruption of the public foreclosure auction process,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office.  “The FBI is committed to work these important cases and remains unwavering in our dedication to bring the members of these illegal conspiracies to justice.”

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 victim if either amount is greater than $1 million.  A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine.  The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.

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, California.  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.

Today’s 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.  Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud 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.**

The United States has filed a complaint against Orlando, Florida, based Air Ideal Inc. and its owner, Kim Amkraut, for allegedly making false statements to the Small Business Administration (SBA) to obtain certification as a Historically Underutilized Business Zone (HUBZone) company, the Justice Department announced today.

“The HUBZone program is intended to create jobs in areas that have historically had trouble attracting business,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “This suit demonstrates that the United States will hold accountable those who knowingly violate the requirements of this vital program.”

“The HUBZone procurement program imposes very clear requirements upon contractors that must be followed,” said U.S. Attorney A. Lee Bentley III for the Middle District of Florida.  “By intervening in this case, we reaffirm our commitment to maintaining the integrity of vital programs such as these, which undergird our economy.”

Under the HUBZone program, companies that maintain their principal office in a designated HUBZone and meet certain other requirements can apply to the SBA for certification as a HUBZone small business company.  HUBZone companies can then use this certification when bidding on government contracts.  In certain cases, government agencies will restrict competition for a contract to HUBZone-certified companies.

The complaint alleges that Air Ideal and Kim Amkraut originally applied to the HUBZone program in 2010 by claiming that Air Ideal’s principal office was located in a designated HUBZone.  The complaint further alleges that, in fact, this location was a “virtual office” where no Air Ideal employees worked and Air Ideal was actually located in a non-HUBZone location.  Allegedly, the defendants not only misrepresented the location of Air Ideal’s principal office to the SBA, but also submitted to the SBA a fabricated lease agreement for its purported HUBZone office. 

The complaint alleges that Air Ideal used its fraudulently-procured HUBZone certification to obtain contracts from the U.S. Coast Guard, U.S. Army, U.S. Army Corps of Engineers and the U.S. Department of Interior that were worth millions of dollars.  Each of those contracts had been set aside for qualified HUBZone companies.  The complaint asserts claims against Air Ideal and Kim Amkraut under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

“The HUBZone Program offers significant benefits to eligible small businesses and is an important tool for unlocking the potential of historically underutilized business zones,” said Inspector General Peggy E. Gustafson for the SBA.  “Preferences for federal contract awards must not be given to persons who lie in order to claim eligibility.  This type of fraud undermines confidence in the HUBZone Program and other small business set-aside contract programs.”

The United States filed its complaint in a lawsuit filed under the qui tam or whistleblower provisions of the False Claims Act.  Under the act, a private citizen can sue on behalf of the United States and share in any recovery.  The United States is entitled to intervene in the lawsuit, as it has done here.

This matter was handled by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Middle District of Florida, in conjunction with the SBA’s Office of Inspector General and Office of General Counsel, the U.S. Department of Homeland Security’s Office of Inspector General and the Defense Criminal Investigative Service.

The case is U.S. ex rel. Hopson v. Air Ideal, Inc. and Kim Amkraut, No. 6:13-cv-775-Orl-37GJK (M.D. Fla.).

The claims asserted against Air Ideal and Kim Amkraut are allegations only, and there has been no determination of liability.

An executive of Japan-based T.RAD Co. Ltd. has agreed to plead guilty and to serve one year and one day in a U.S. prison for participating in a conspiracy to fix prices of radiators installed in cars sold in the United States and elsewhere, the Department of Justice announced today.

A one-count felony charge was filed today in the U.S. District Court for the Eastern District of Michigan in Detroit against Kosei Tamura, a general manager for T.RAD.  According to the charge, Tamura, a Japanese national, conspired from as early as November 2002 until at least February 2010, by agreeing to allocate bids for, and prices of, radiators sold to Honda Motor Co. Ltd. and certain of its subsidiaries in the United States and elsewhere.  In addition to the prison sentence, Tamura has agreed to pay a $20,000 criminal fine and to cooperate with the department’s ongoing investigation.  The plea agreement is subject to court approval.

“Companies and their executives should do their part to ensure American consumers are guaranteed a fair marketplace within the automotive industry,” said Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program.  “The Antitrust Division will continue to hold accountable the companies and executives who ignore these laws in order to make this a reality.”

T.RAD is a manufacturer of radiators and was engaged in the sale of radiators in the United States and elsewhere.  Radiators are devices located in the engine compartment of a vehicle that cool the engine.  

In November 2013, T.RAD pleaded guilty and was sentenced to pay a $13.75 million criminal fine for its role in a conspiracy to fix the prices of radiators and automatic transmission fluid warmers.

Including today’s charges, 48 individuals have been charged in the department’s ongoing investigation into price fixing and bid rigging in the auto parts industry.  Additionally, 32 companies have pleaded guilty or agreed to plead guilty and have agreed to pay a total of more than $2.4 billion in fines.

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

The current prosecution arose from an ongoing federal antitrust investigation into price fixing, bid rigging, and other anticompetitive conduct in the automotive parts industry, which is being conducted by each of the Antitrust Division’s criminal sections and the FBI.  This case was brought by the Washington Criminal I Section of the Antitrust Division with the assistance of the Detroit Field Office of the FBI.  Anyone with information concerning the focus of this investigation should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, visit www.justice.gov/atr/contact/newcase.html or call the Detroit Field Office of the FBI at 313-965-2323.

Maricopa County Community College District (MCCCD) has agreed to pay $4.08 million to resolve allegations under the False Claims Act that it submitted false claims to the Corporation for National and Community Service (CNCS) concerning AmeriCorps state and national grants, the Justice Department announced today.  MCCCD is the entity responsible for operating community colleges in Maricopa County, Arizona, and is based in Phoenix. 

“Those who receive federal funds must deal with the government openly and honestly,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “The Department of Justice will ensure that financial assistance provided by the Corporation for National and Community Service is received only by eligible individuals who satisfy CNCS’s mission of promoting service and education.”   

CNCS is an independent federal agency that administers AmeriCorps, among other national service programs.  MCCCD obtained AmeriCorps funding for Project Ayuda, a program that proposed to engage students in national service.  In order to receive an AmeriCorps education award, a student had to meet certain service-hour requirements.  MCCCD allegedly improperly certified that students had completed the required number of service hours so that they would earn an education award.  This resulted in CNCS providing education awards to these students.  MCCCD also allegedly improperly received grant funds from CNCS to administer the project.

“Our internal process uncovered MCCCD’s mismanagement, and we worked with the Justice Department to ensure that taxpayer dollars were recovered,” said CNCS’s General Counsel Valerie Green.  “This is an example of how interagency collaboration works.”

“Taxpayers are justifiably outraged when a community fails to receive promised services because national service funds were misused,” said CNCS’s Inspector General Deborah J. Jeffrey.  “We hope that this settlement will deter other grantees from similar misconduct.”

The allegations resolved by this settlement arose from a whistleblower lawsuit filed under the False Claims Act by Christine Hunt, an MCCCD employee.  Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery.  Hunt’s share of the settlement is $775,827.   

This case was handled by the Commercial Litigation Branch of the Civil Division and CNCS’s Office of Inspector General and Office of General Counsel.

The lawsuit is captioned United States ex rel. Hunt v. Maricopa County Community College District; Paula and Richard Vaughn, No. 11-cv-2241 (D. Ariz.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.