District Not Recorded

Peter Picone, 41, of Methuen, Massachusetts, pleaded guilty today in U.S. District Court in Hartford, Connecticut to importing thousands of counterfeit integrated circuits (ICs) from China and Hong Kong and then reselling them to U.S. customers, including contractors supplying them to the U.S. Navy for use in nuclear submarines.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Deirdre M. Daly for the District of Connecticut made the announcement.

Picone pleaded guilty before U.S. Magistrate Judge Donna Martinez of the District of Connecticut to an indictment charging him with conspiracy to traffic in counterfeit military goods. As part of a plea agreement with the government, Picone agreed to a forfeiture money judgment of $70,050 and the forfeiture of 12,960 counterfeit ICs seized during the execution of a search warrant at his business and residence. Sentencing was set for Aug. 22, 2014.

According to court filings, from 2007 through 2012, Picone conspired with his suppliers in China and Hong Kong to sell millions of dollars’ worth of ICs bearing the counterfeit marks of approximately 35 major electronics manufacturers, including Motorola, Xilinx and National Semiconductor. Picone sold counterfeit ICs to contractors knowing that they would be supplied to the United States Navy for use in nuclear submarines.

Many of Picone’s customers specified in their orders that they would not accept anything but new ICs that were not from China, but Picone told them that the ICs were new and manufactured in Europe. Testing by the Navy and one of its contractors revealed that in fact the ICs purchased from Picone had been resurfaced to change the date code and to affix counterfeit marks, all in order to hide their true pedigree. Federal agents searched Picone’s business and residence on April 24, 2012, and recovered 12,960 counterfeit ICs.

This is the second conviction ever on a charge of trafficking in counterfeit military goods, a relatively new provision in the U.S. Criminal Code that was enacted as part of the National Defense Authorization Act of 2011.

The case was investigated by the Defense Criminal Investigative Service, the Naval Criminal Investigative Service and Homeland Security Investigations. The case is being prosecuted by Trial Attorney Kendra Ervin and Senior Counsel Evan Williams of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS), Special Assistant U.S. Attorney Carol Sipperly of the District of Connecticut, Trial Attorney Anna Kaminska of the Criminal Division’s Fraud Section, and Trial Attorney Kristen Warden of the Criminal Division’s Asset Forfeiture and Money Laundering Section.  Significant assistance was provided by the CCIPS Cybercrime Lab.

A Los Angeles physician was indicted today for a $33 million scheme to defraud Medicare, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney André Birotte Jr. of the Central District of California, Special Agent in Charge Glenn R. Ferry of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) for the Los Angeles Region and Assistant Director in Charge Bill L. Lewis of the FBI’s Los Angeles Field Office.

Robert A. Glazer, 67, of Los Angeles, California, was indicted in the Central District of California and charged with one count of conspiracy to commit health care fraud.

According to court documents, Glazer operated a medical clinic located in Los Angeles. From approximately January 2006 through May 2014, Glazer allegedly billed Medicare for services that were not medically necessary, and at times were not provided to the Medicare beneficiaries. In addition, Glazer allegedly signed prescriptions, certifications, and other medical documents for medically unnecessary home health services, hospice services, and power wheelchairs and other durable medical equipment (DME). Glazer’s co-conspirators then sold the prescriptions and certifications to DME supply companies, home health agencies, and other providers, knowing that the prescriptions and certifications were fraudulent. Based on these fraudulent prescriptions and certifications, the DME supply companies, home health agencies, and other providers then allegedly submitted false and fraudulent claims to Medicare.

As further alleged in court documents, from approximately January 2006 through May 2014, fraudulent prescriptions and certifications from Glazer were responsible for approximately $33,484,779 in false and fraudulent claims to Medicare, and Medicare paid approximately $22,056,332 on those claims.

The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California. This case is being prosecuted by Trial Attorneys Fred Medick and Blanca Quintero 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 1,900 defendants who have collectively billed the Medicare program for more than $6 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

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

The Justice Department announced today that it is opening a pattern or practice investigation of Hinds County Detention Center including both the Hinds County facility in Raymond, Mississippi, and the Jackson Detention Center, in Jackson, Mississippi.  The investigation will focus on whether Hinds County protects prisoners from harm at the hands of other prisoners and staff.  Attorneys for the County Board and the Sheriff were notified on June 2, 2014.  They pledged cooperation with the investigation

 
The department opened the investigation pursuant to the Civil Rights of Institutionalized Persons Act.  The investigation will include a comprehensive review of policies, procedures, and records, as well as interviews with county officials, jail administrators, staff, and current and former inmates.  The Justice Department will also  reach out to other stakeholders, including members of the community and groups with knowledge of conditions in the  two facilities.   

 
“Our investigation will focus on whether Hinds County protects prisoners from the harm that can result from prisoner on prisoner violence and the improper use of force,” said Jocelyn Samuels, Acting Assistant Attorney General for the Civil Rights Division.  “We have not prejudged this matter, and will seek cooperation from county officials and other stakeholders during the course of the investigation.”

 
“The Office of the United States Attorney for the Southern District of Mississippi will work diligently with the Civil Rights Division to ensure that the investigation into the detention center is one that will ultimately yield results that are helpful to the citizenry of the Southern District of Mississippi, and specifically, Hinds County,” said Gregory K. Davis, United States Attorney for the Southern District of Mississippi.

Individuals who have allegations about unlawful conditions in the Jail are encouraged to contact the Justice Department by phone at (202) 514-6255, by email at HCDC.community@usdoj.gov or by mail at:

U.S. Department of Justice

Civil Rights Division

Special Litigation Section
950 Pennsylvania Avenue N.W.
Washington, D.C. 20530
(202) 514-6255

For more information on the Justice Department’s Civil Rights Division, please visit www.justice.gov/crt.

John Charles McCluskey, 49, was sentenced this morning by U.S. District Judge Judith C. Herrera of the District of New Mexico to serve life in prison followed by a consecutive term of 2,820 months (235 years) in prison for carjacking and murdering a retired couple from Oklahoma in August 2010.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Damon P. Martinez of the District of New Mexico, Special Agent in Charge Carol K.O. Lee of the FBI’s Albuquerque Division and New Mexico State Police Chief Pete N. Kassetas made the announcement.

McCluskey and his co-defendants, Tracy Allen Province, 46, and Casslyn Mae Welch, 47, were charged with numerous capital offenses in an indictment arising out of the Aug. 2, 2010, carjacking and murders of Gary and Linda Haas, both 61, in Quay County, New Mexico.  On Jan. 20, 2012, Province and Welch entered guilty pleas to crimes arising out of the carjacking and murder of Mr. and Mrs. Haas, and agreed to testify during McCluskey’s capital trial.  Yesterday, Province was sentenced to five consecutive terms of life imprisonment without the possibility of release as required by his plea agreement and Welch was sentenced to 40 years in prison.

On Oct. 7, 2013, McCluskey was found guilty on all counts of the indictment after an eight-week trial, and later was found eligible for the death penalty on Nov. 5, 2013, following a three-week proceeding.  McCluskey’s capital trial concluded on Dec. 11, 2013, when the jury said it was unable to reach a unanimous verdict on the death penalty, thus requiring that McCluskey be sentenced to life in prison.

“With the help of his conspirators, John Charles McCluskey mercilessly killed two innocent victims and burned their bodies as he fled law enforcement after escaping from prison,” said Assistant Attorney General Caldwell.  “Our thoughts are with those whose lives were changed forever by these heinous crimes.”

“Today’s sentencing hearing brings to a close a case that focused on an exceptionally violent episode in the summer of 2010, during which John Charles McCluskey and Tracy Allen Province escaped from prison with help from Casslyn Mae Welch, committed multiple kidnappings during their interstate flight from justice, and mercilessly killed two innocent victims to eliminate them as witnesses,” said U.S. Attorney Martinez. “While the sentences imposed on McCluskey and his co-conspirators cannot restore the loss of Gary and Linda Haas, I hope that they bring some measure of comfort and closure to their families and friends and I commend the prosecutors and investigators who worked tirelessly to seek justice for Gary and Linda Haas.”

The evidence presented during McCluskey’s capital trial established that, on July 30, 2010, McCluskey and Province escaped from an Arizona state prison with Welch’s aid.  On Aug. 2, 2010, McCluskey, Province and Welch carjacked Mr. and Mrs. Haas and their pickup truck and camping trailer at a rest stop off Interstate 40 in Quay County.  McCluskey shot and killed Mr. and Mrs. Haas in the trailer in a remote location east of Tucumcari, New Mexico.  The three associates then drove the Haases’ truck and trailer to a remote area in Guadalupe County, New Mexico, where they unhitched, burned and abandoned the trailer with the Haases’ remains still inside.  On Aug. 4, 2010, the New Mexico State Police discovered the burned remains of Mr. and Mrs. Haas in the trailer.  Province was arrested in Wyoming on Aug. 9, 2010, and McCluskey and Welch were arrested in Arizona on Aug. 19, 2010, following a nationwide, multi-agency manhunt.

“The rationale behind violent crimes like the ones committed against the Haases may be hard to understand, but our message today is crystal clear: the FBI and its partners will vigorously investigate and prosecute those who show such a callous disregard for innocent lives,” said FBI Special Agent in Charge Lee. “I am proud of the hard work of the FBI investigators and support personnel who worked on this case, alongside the federal prosecutors, victim/witness specialists, the New Mexico State Police and U.S. Marshals Service.”

“The conviction of John McCluskey and subsequent sentence of life in prison, without the chance of parole, is one that will make the community safer not only for the citizens we serve but also for the law enforcement officers who are sworn to protect them,” said New Mexico Police Chief Kassetas.  “McCluskey was and is a criminal predator who has no respect for the basic rights and liberties that we as a society value so greatly.  I can only hope that he is kept in a maximum level incarceration facility that will eliminate his ability to cause harm to anyone while he serves out his life sentence. I again want to thank the FBI, U.S. Attorney's Office and all the other New Mexico and Arizona law enforcement agencies that assisted with the Haas murder investigation, and with the capture and prosecution of McCluskey.”

The case was investigated by Albuquerque and Phoenix Divisions of the FBI and the New Mexico State Police. It was prosecuted by Trial Attorney Michael S. Warbel of the Criminal Division’s Capital Case Section and Assistant U.S. Attorney Linda Mott and former Assistant U.S. Attorney Gregory J. Fouratt of the District of New Mexico, with assistance from Kristopher N. Houghton, a contract attorney employed by the U.S. Attorney’s Office.

Quality Egg LLC (Quality Egg), Austin “Jack” DeCoster and Peter DeCoster pleaded guilty today in federal court in Sioux City, Iowa, in connection with the distribution of adulterated eggs in interstate commerce. As part of their plea agreements, the company and the two individuals admitted the company’s shell eggs were adulterated in that they contained a poisonous and deleterious substance, Salmonella Enteriditis, that may have rendered the eggs injurious to health.

Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division and U.S. Attorney Kevin W. Techau of the Northern District of Iowa made the announcement.

Quality Egg, an egg production company with operations in Wright County, Iowa, pleaded guilty to one count of bribery of a public official, one count of introducing a misbranded food into interstate commerce with intent to defraud, and one count of introducing adulterated food into interstate commerce. Austin “Jack” DeCoster, 79, of Turner, Maine, and Peter DeCoster, 51, of Clarion, Iowa, each pled guilty to one count of introducing adulterated food into interstate commerce.

As part of its plea agreement, Quality Egg acknowledged that, on at least two occasions in 2010, its employees gave a cash bribe to an Inspector of the U.S. Department of Agriculture (USDA). The USDA Inspector’s job responsibilities included inspecting shell eggs at one or more of Quality Egg’s production facilities in Iowa. Quality Egg admitted its employees provided the bribe to the USDA Inspector (now deceased) in an attempt to corruptly influence the inspector to exercise his authority to release pallets of retained eggs for sale without re-processing the eggs as required by law and USDA standards. The eggs had been retained or “red tagged” for failing to meet minimum USDA quality grade standards.

On Sept. 12, 2012, former Quality Egg employee Tony Wasmund, 63, pleaded guilty to one count of conspiracy to bribe a public official, sell restricted eggs with intent to defraud, introduce misbranded food into interstate commerce with intent to defraud and mislead. Wasmund is scheduled to be sentenced before United States District Court Judge Mark W. Bennett of the Northern District of Iowa on Sept. 12, 2014.

Quality Egg also pleaded guilty to introducing misbranded eggs into interstate commerce with the intent to defraud. As part of its plea agreement, Quality Egg admitted that, beginning no later than January 2006 and continuing through Aug. 12, 2010, its employees affixed labels to egg shipments that indicated false expiration dates with the intent to mislead state regulators and retail egg customers regarding the true age of the eggs. Quality Egg acknowledged that there were a number of ways that the company mislabeled older eggs with newer processing and expiration dates prior to shipping the eggs to customers in California, Arizona and other states. Sometimes Quality Egg personnel did not put any processing or corresponding expiration dates on the eggs when they were processed. The eggs would be kept in storage for several days or up to several weeks. Then, just prior to shipping the eggs, Quality Egg personnel labeled the eggs with processing dates that were false.

As part of its plea agreement to the charge of introducing adulterated eggs into interstate commerce, Quality Egg admitted that, between about the beginning of 2010 and in or about August 2010, the company sold shell eggs that were adulterated in that they contained a poisonous and deleterious substance, Salmonella Enteriditis. The company acknowledged that it produced, processed, held, and packed the contaminated eggs in Iowa and sold and caused the distribution of the eggs to buyers in states other than Iowa.

Austin “Jack” DeCoster and Peter DeCoster each pleaded guilty to one count of introducing adulterated eggs into interstate commerce.

As part of his plea agreement, Austin “Jack” DeCoster admitted that he was the trustee of a trust that owned Quality Egg (also doing business as Wright County Egg, and Environ), and he exercised substantial control over the operations of Quality Egg and related entities and assets in Iowa. Austin “Jack” DeCoster acknowledged that he was the person ultimately responsible for the operations of Quality Egg and the various egg facilities in Iowa associated with Quality Egg.

Peter DeCoster, as part of his plea agreement, admitted that was the Chief Operating Officer of Quality Egg, and he exercised some control over the production and distribution of shell eggs by Quality Egg and related entities and assets in Iowa. Peter DeCoster acknowledged he was one of the persons responsible for running the operations of Quality Egg and the various egg facilities in Iowa associated with Quality Egg.

Both Austin “Jack” DeCoster and Peter DeCoster admitted that between about the beginning of 2010 and in or about August 2010, Quality Egg introduced and caused to be introduced into interstate commerce shell eggs that were adulterated, in that they contained a poisonous and deleterious substance, Salmonella Enteriditis.

Sentencing will be set before Judge Mark W. Bennett after presentence reports are prepared. Austin “Jack” DeCoster and Peter DeCoster remain free on bail pending sentencing.

On the bribery count, Quality Egg faces a sentence of probation for at least one and up to five years and a fine equal to the greater of three times the monetary equivalent of the thing of value given, offered, or promised as part of the offense, or $500,000. Quality Egg also agreed to forfeit a money judgment of $10,000 representing proceeds of the bribery offense.

On the introducing misbranded eggs into interstate commerce with the intent to defraud count, Quality Egg faces a maximum sentence of probation for at least one and up to five years and a fine equal to the greater of twice the gross gain resulting from the offense, twice the gross loss resulting from the offense, or $500,000.

On the introducing adulterated eggs in interstate commerce count, Quality Egg faces a sentence of probation for up to five years and a fine equal to the greater of twice the gross gain resulting from the offense, twice the gross loss resulting from the offense, or $100,000.

Austin “Jack” DeCoster and Peter DeCoster each face a maximum sentence of up to one year imprisonment or a term of probation of not more than five years; a fine equal to the greater of twice the gross gain or the gross loss resulting from the offense, or $100,000; and a term of supervised release after any imprisonment for up to one year.

The case is being prosecuted by Trial Attorneys Lisa Hsiao and Christopher Parisi of the Consumer Protection Branch of the Justice Department’s Civil Division and Assistant U.S. Attorney Peter Deegan of the Northern District of Iowa. They were assisted by Associate Chief Counsel Michael Varrone of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services. The case was investigated by the Food and Drug Administration’s Office of Criminal Investigations, the United States Department of Agriculture Office of Inspector General, and the FBI.

Court file information is available at https://ecf.iand.uscourts.gov/cgi-bin/login.pl. The case file number is 14-CR-3024.

Bryant Thompson was sentenced today to serve 120 months in prison and Quincy Walton was sentenced to serve 84 months in prison for their roles in a stolen identity refund fraud scheme, announced Assistant Attorney General Kathryn Keneally of the Justice Department’s Tax Division and U.S. Attorney George L. Beck Jr. for the Middle District of Alabama.  Thompson and Walton, both former Alabama corrections officers, were convicted of conspiracy to defraud the United States following a week-long jury trial in January 2014.  Thompson was also convicted of seven counts of wire fraud and seven counts of aggravated identity theft, and Walton was also convicted of one count of aggravated identity theft.  In addition to their prison sentences Thompson and Walton have been ordered to pay $176,114 in restitution. 

 
According to evidence introduced at trial, Thompson was assigned to the shift clerk position at an Alabama state prison, which gave him access to the personal identifying information of every inmate in the custody of the Alabama Department of Corrections, past and present.  Thompson and Walton, his former co-worker, used information stolen from the databases to file false federal income tax returns in the names and Social Security numbers of inmates. 

 
According to the evidence introduced at trial, the investigation revealed that several internet protocol (IP) addresses were used to file the fraudulent tax returns, including one IP address directly assigned to Thompson’s residence at the time certain tax returns were filed.  Circumstantial evidence tied both Thompson and Walton to the other IP addresses. 

 
Also according to the evidence introduced at trial, the two directed the stolen tax refunds onto prepaid debit cards and requested other refunds in the form of U.S. Treasury checks.  Evidence showed that the cards and checks were mailed to several addresses associated with Thompson and Walton in Montgomery and Prattville, Alabama, and that several of the checks were cashed at a local retail store by Walton’s uncle and by a local check casher.  During this time, Thompson purchased a new paint job and new rims for his SUV and later purchased a BMW. 

 
According to evidence from the sentencing, altogether Thompson and Walton filed over 180 false tax returns claiming over $750,000 in tax refunds.  The IRS was able to identify many of the returns as fraudulent when filed and did not pay the refunds claimed, but was defrauded into issuing a total of $176,114 in improper refunds. 

 
The case was investigated by IRS-Criminal Investigation and was prosecuted by Trial Attorneys Jason Poole and Alexander Effendi of the Tax Division, with the assistance of the U.S. Attorney’s Office for the Middle District of Alabama. 

 
More information about the Tax Division and its enforcement efforts against stolen identity/refund crimes may be found at www.justice.gov/tax.

The Justice Department today announced a multi-national effort to disrupt the Gameover Zeus Botnet – a global network of infected victim computers used by cyber criminals to steal millions of dollars from businesses and consumers – and unsealed criminal charges in Pittsburgh, Pennsylvania, and Omaha, Nebraska, against an administrator of the botnet. In a separate action, U.S. and foreign law enforcement officials worked together to seize computer servers central to the malicious software or “malware” known as Cryptolocker, a form of “ransomware” that encrypts the files on victims’ computers until they pay a ransom.

Deputy Attorney General James M. Cole, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, FBI Executive Assistant Director Robert Anderson Jr., U.S. Attorney David J. Hickton of the Western District of Pennsylvania, U.S. Attorney Deborah R. Gilg of the District of Nebraska, and Department of Homeland Security’s (DHS) Deputy Under Secretary Dr. Phyllis Schneck made the announcement.

Victims of Gameover Zeus may use the following website created by DHS’s Computer Emergency Readiness Team (US-CERT) for assistance in removing the malware: https://www.us-cert.gov/gameoverzeus .

“This operation disrupted a global botnet that had stolen millions from businesses and consumers as well as a complex ransomware scheme that secretly encrypted hard drives and then demanded payments for giving users access to their own files and data,” said Deputy Attorney General Cole. “We succeeded in disabling Gameover Zeus and Cryptolocker only because we blended innovative legal and technical tactics with traditional law enforcement tools and developed strong working relationships with private industry experts and law enforcement counterparts in more than 10 countries around the world.”

“These schemes were highly sophisticated and immensely lucrative, and the cyber criminals did not make them easy to reach or disrupt,” said Assistant Attorney General Caldwell. “But under the leadership of the Justice Department, U.S. law enforcement, foreign partners in more than 10 different countries and numerous private sector partners joined together to disrupt both these schemes. Through these court-authorized operations, we have started to repair the damage the cyber criminals have caused over the past few years, we are helping victims regain control of their own computers, and we are protecting future potential victims from attack.”

“Gameover Zeus is the most sophisticated botnet the FBI and our allies have ever attempted to disrupt,” said FBI Executive Assistant Director Anderson. “The efforts announced today are a direct result of the effective relationships we have with our partners in the private sector, international law enforcement, and within the U.S. government.”

“The borderless, insidious nature of computer hacking and cybertheft requires us to be bold and imaginative,” said U.S. Attorney Hickton.  “We take this action on behalf of hundreds of thousands of computer users who were unwittingly infected and victimized.”

“The sophisticated computer malware targeting of U.S. victims by a global criminal enterprise demonstrates the grave threat of cybercrime to our citizens,” said U.S. Attorney Gilg.  “We are grateful for the outstanding collaboration of our international and U.S. law enforcement partners in this successful investigation.”

“The FBI has demonstrated great leadership in continuing to help combat cyber crime, and our international and private sector partners have made enormous contributions as well,” said Deputy Under Secretary Schneck. “This collective effort reflects our ‘whole-of-government’ approach to cybersecurity.  DHS is proud to support our partners in helping to identify compromised computers, sharing that information rapidly, and developing useful information and mitigation strategies to help the owners of hacked systems.”

Gameover Zeus Administrator Charged

A federal grand jury in Pittsburgh unsealed a 14-count indictment against Evgeniy Mikhailovich Bogachev, 30, of Anapa, Russian Federation, charging him with conspiracy, computer hacking, wire fraud, bank fraud and money laundering in connection with his alleged role as an administrator of the Gameover Zeus botnet. Bogachev was also charged by criminal complaint in Omaha with conspiracy to commit bank fraud related to his alleged involvement in the operation of a prior variant of Zeus malware known as “Jabber Zeus.”

In a separate civil injunction application filed by the United States in federal court in Pittsburgh, Bogachev is identified as a leader of a tightly knit gang of cyber criminals based in Russia and Ukraine that is responsible for the development and operation of both the Gameover Zeus and Cryptolocker schemes. An investigation led in Washington, D.C., identified the Gameover Zeus network as a common distribution mechanism for Cryptolocker. Unsolicited emails containing an infected file purporting to be a voicemail or shipping confirmation are also widely used to distribute Cryptolocker. When opened, those attachments infect victims’ computers. Bogachev is alleged in the civil filing to be an administrator of both Gameover Zeus and Cryptolocker. The injunction filing further alleges that Bogachev is linked to the well-known online nicknames “Slavik” and “Pollingsoon,” among others. The criminal complaint filed in Omaha alleges that Bogachev also used “Lucky12345,” a well-known online moniker previously the subject of criminal charges in September 2012 that were unsealed in Omaha on April 11, 2014.

Disruption of Gameover Zeus Botnet

Gameover Zeus, also known as “Peer-to-Peer Zeus,” is an extremely sophisticated type of malware designed to steal banking and other credentials from the computers it infects. Unknown to their rightful owners, the infected computers also secretly become part of a global network of compromised computers known as a “botnet,” a powerful online tool that cyber criminals can use for numerous criminal purposes besides stealing confidential information from the infected machines themselves. Gameover Zeus, which first emerged around September 2011, is the latest version of Zeus malware that began appearing at least as early as 2007. Gameover Zeus’s decentralized, peer-to-peer structure differentiates it from earlier Zeus variants. Security researchers estimate that between 500,000 and 1 million computers worldwide are infected with Gameover Zeus, and that approximately 25 percent of the infected computers are located in the United States. The principal purpose of the botnet is to capture banking credentials from infected computers. Those credentials are then used to initiate or re-direct wire transfers to accounts overseas that are controlled by cyber criminals. The FBI estimates that Gameover Zeus is responsible for more than $100 million in losses.

The Gameover Zeus botnet operates silently on victim computers by directing those computers to reach out to receive commands from other computers in the botnet and to funnel stolen banking credentials back to the criminals who control the botnet. For this reason, in addition to the criminal charges announced today, the United States obtained civil and criminal court orders in federal court in Pittsburgh authorizing measures to redirect the automated requests by victim computers for additional instructions away from the criminal operators to substitute servers established pursuant to court order. The order authorizes the FBI to obtain the Internet Protocol addresses of the victim computers reaching out to the substitute servers and to provide that information to US-CERT to distribute to other countries’ CERTS and private industry to assist victims in removing the Gameover Zeus malware from their computers. At no point during the operation did the FBI or law enforcement access the content of any of the victims' computers or electronic communications.

Besides the United States, law enforcement from the Australian Federal Police; the National Police of the Netherlands National High Tech Crime Unit; European Cybercrime Centre (EC3); Germany’s Bundeskriminalamt; France’s Police Judiciare; Italy’s Polizia Postale e delle Comunicazioni; Japan’s National Police Agency; Luxembourg’s Police Grand Ducale; New Zealand Police; the Royal Canadian Mounted Police; Ukraine’s Ministry of Internal Affairs – Division for Combating Cyber Crime; and the United Kingdom’s National Crime Agency participated in the operation. The Defense Criminal Investigative Service of the U.S. Department of Defense also participated in the investigation.

Invaluable technical assistance was provided by Dell SecureWorks and CrowdStrike. Numerous other companies also provided assistance, including facilitating efforts by victims to remediate the damage to their computers inflicted by Gameover Zeus. These companies include Microsoft Corporation, Abuse.ch, Afilias, F-Secure, Level 3 Communications, McAfee, Neustar, Shadowserver, Anubis Networks, Symantec, Heimdal Security, Sophos and Trend Micro.

The DHS National Cybersecurity and Communications Integration Center (NCCIC), which houses the US-CERT, plays a key role in triaging and collaboratively responding to the threat by providing technical assistance to information system operators, disseminating timely mitigation strategies to known victims, and sharing actionable information to the broader community to help prevent further infections.

Disruption of Cryptolocker

In addition to the disruption operation against Gameover Zeus, the Justice Department led a separate multi-national action to disrupt the malware known as Cryptolocker (sometimes written as “CryptoLocker”), which began appearing about September 2013 and is also a highly sophisticated malware that uses cryptographic key pairs to encrypt the computer files of its victims. Victims are forced to pay hundreds of dollars and often as much as $700 or more to receive the key necessary to unlock their files. If the victim does not pay the ransom, it is impossible to recover their files.

Security researchers estimate that, as of April 2014, Cryptolocker had infected more than 234,000 computers, with approximately half of those in the United States. One estimate indicates that more than $27 million in ransom payments were made in just the first two months since Cryptolocker emerged.

The law enforcement actions against Cryptolocker are the result of an ongoing criminal investigation by the FBI’s Washington Field Office, in coordination with law enforcement counterparts from Canada, Germany, Luxembourg, the Netherlands, United Kingdom and Ukraine.

Companies such as Dell SecureWorks and Deloitte Cyber Risk Services also assisted in the operation against Cryptolocker, as did Carnegie Mellon University and the Georgia Institute of Technology (Georgia Tech). The joint effort aided the FBI in identifying and seizing computer servers acting as command and control hubs for the Cryptolocker malware.

The FBI’s Omaha and Pittsburgh Field Offices led both malware disruptions and conducted the investigation of Bogachev. The prosecution in Pittsburgh is being handled by Assistant U.S. Attorney Shardul Desai of the Western District of Pennsylvania, and the prosecution in Omaha by Trial Attorney William A. Hall of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorney Steven Russell of the District of Nebraska. The civil action to disrupt the Gameover Zeus botnet and Cryptolocker malware is led by Trial Attorneys Ethan Arenson and David Aaron of CCIPS and Assistant U.S. Attorney Michael A. Comber of the Western District of Pennsylvania.

The Criminal Division’s Office of International Affairs provided significant assistance throughout the criminal and civil investigations.

The details contained in the indictment, criminal complaint and related pleadings are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Anyone claiming an interest in any of the property seized or actions enjoined pursuant to the court orders described in this release is advised to visit the following website for notice of the full contents of the orders: http://www.justice.gov/opa/gameover-zeus.html .

A Massachusetts man was charged today with allegedly hacking into computer networks around the country – including networks belonging to law enforcement agencies, a local police department and a local college – to obtain highly sensitive law enforcement data and alter academic records. He also obtained stolen credit, debit and payment card numbers.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, United States Attorney Carmen M. Ortiz of the District of Massachusetts, Special Agent in Charge Vincent Lisi of the FBI’s Boston Division and Colonel Timothy P. Alben of the Massachusetts State Police made the announcement.

Cameron Lacroix, 25, of New Bedford, Massachusetts, was charged by a criminal information with two counts of computer intrusion and one count of access device fraud.

According to allegations in the information, b etween May 2011 and May 2013, Lacroix allegedly obtained and possessed payment card data for more than 14,000 unique account holders. For some of these account holders, Lacroix also obtained other personally identifiable information, including the account holders’ full names, addresses, dates of births, social security account numbers, email addresses, bank account and routing numbers, as well as listings of merchandise the account holders had ordered.

In September 2012, Lacroix allegedly hacked into a computer server operated by a local Massachusetts police department and accessed an e-mail account belonging to the chief of police. From August 2012 through November 2012, Lacroix is accused of repeatedly hacking into law enforcement computer servers containing sensitive information including police reports, intelligence reports, arrest warrants, and sex offender information. Lacroix is also accused of using stolen credentials to access and change information in the servers of Bristol Community College on multiple occasions between September 2012 and December 2013.

The case was investigated by the FBI Boston Division Cyber Task Force. The case is being prosecuted by Senior Trial Attorney Mona Sedky from the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Adam Bookbinder of the District of Massachusetts. The Department of Justice and the U.S. Attorney’s Office would like to thank Bristol Community College for its cooperation during this investigation.

The Justice Department announced today that it will monitor elections on June 3, 2014, in Alameda and Napa Counties, California, and Cibola County, N.M., to ensure compliance with the Voting Rights Act and other federal voting rights statutes.  The Voting Rights Act prohibits discrimination in the election process on the basis of race, color or membership in a minority language group.

In Alameda County, the department will assign federal observers from the U.S. Office of Personnel Management (OPM) to monitor polling place activities based on a court order.  The observers will watch and record activities during voting hours at polling locations in this jurisdiction, and Civil Rights Division attorneys will coordinate the federal activities and maintain contact with local election officials.

In addition, department personnel will monitor polling place activities in Napa and Cibola Counties.  Civil Rights Division attorneys will coordinate federal activities and maintain contact with local election officials.

Each year, the department deploys federal observers from OPM and departmental staff to monitor elections across the country.  To file complaints about discriminatory voting practices, including acts of harassment or intimidation, voters may call the Voting Section of the Civil Rights Division at 1-800-253-3931.

Visit this website for more information about the Voting Rights Act and other federal voting laws.

Dick Reid Jenkins, of Heber City, Utah, was convicted today, in U.S. District Court for the District of Utah,  of eighteen counts of filing false claims for income tax refunds and one count of presenting a fictitious financial instrument, the Justice Department and Internal Revenue Service (IRS) announced.  Jenkins was charged by a superseding indictment on June 26, 2013.  He is scheduled to be sentenced before U.S. District Judge Clark Waddoups on Sept. 9, 2014.

According to court documents and evidence presented at trial, Jenkins filed a false 2007 individual income tax return for himself in September 2008 which claimed an income tax refund of $402,920.  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 false IRS Form 1099-OID, Original Issue Discount.  The IRS listed this scheme as one of its “ Dirty Dozen ” worst tax scams each year from 2009 through 2014.

According to court documents and evidence presented at trial, in addition to his own false returns, Jenkins caused sixteen false federal individual income tax returns to be filed on behalf of other individuals from September 2008 through February 2009.  These false tax returns also used false IRS Forms 1099-OID and claimed federal income tax refunds totaling $8,407,623.  On June 30, 2008, Jenkins passed and presented a false and fictitious financial instrument to the U.S. Department of the Treasury in the amount of $300,000,000.  Jenkins was licensed by the state of Utah as a Certified Public Accountant at the time his criminal conduct occurred. 

Jenkins faces a statutory maximum penalty of 25 years in prison and a fine of up to $250,000 for passing and presenting a fictitious obligation to the United States.  Jenkins also faces a maximum penalty of five years in prison and a fine of up to $250,000 or twice the gross gain or loss caused by the defendant for each count of presenting false, fictitious, and fraudulent claims to the United States.

Kathryn Keneally, Assistant Attorney General of the Department of Justice Tax Division, commended the special agents of IRS - Criminal Investigation who investigated the case, and Trial Attorneys Stuart Wexler and Michael Romano of the Tax Division, who prosecuted the case.

A federal jury today convicted the former chief executive officer and the former chief financial officer of ArthroCare Corporation, a publicly traded medical device company based in Austin, Texas, for orchestrating a fraud scheme that resulted in shareholder losses of over $400 million.

Principal Deputy Assistant Attorney General Marshall L. Miller and Special Agent in Charge Christopher Combs of the FBI’s San Antonio Field Office made the announcement.

“These corporate executives cooked the books to prop up their stock, and when the truth came out investors lost more than $400 million,” said Principal Deputy Assistant Attorney General Miller. “Today’s convictions are the first step in holding them accountable for undermining our financial markets for their own personal gain.”

“This case demonstrates the FBI’s commitment to unraveling elaborate and complex fraud schemes leaving no financial stone unturned,” said FBI SAC Combs. “Those who abuse their position of trust to illegally enrich themselves, at the expense of shareholders and members of the investing public, will be held accountable for their actions.”

After a four-week trial, a jury in the Western District of Texas found the former CEO, Michael Baker, 55, guilty of conspiracy to commit wire and securities fraud, wire fraud, securities fraud and false statements. Michael Gluk, 56, the former CFO, was found guilty of conspiracy to commit wire and securities fraud, wire fraud and securities fraud. Baker and Gluk were charged in a superseding indictment returned on April 1, 2014.

Evidence at trial demonstrated that Baker and Gluk, along with their co-conspirators, masterminded and executed a scheme to artificially inflate sales and revenue through a series of end-of-quarter transactions involving several of ArthroCare’s distributors beginning in 2005 and continuing until 2009. Co-conspirators John Raffle and David Applegate, both former senior vice presidents of ArthroCare, pleaded guilty to multiple felonies in 2013 in connection with their participation in the scheme.

Baker, Gluk and other ArthroCare employees determined the type and amount of product to be shipped to distributors based on ArthroCare’s need to meet Wall Street analyst forecasts, rather than distributors’ actual orders. Baker, Gluk and others then caused ArthroCare to “park” millions of dollars’ worth of ArthroCare’s medical devices at its distributors at the end of each relevant quarter. ArthroCare then reported these shipments as sales in its quarterly and annual filings at the time of the shipment, enabling the company to meet or exceed internal and external earnings forecasts.

Evidence at trial further showed that ArthroCare’s distributors agreed to accept shipment of millions of dollars of products in exchange for special conditions, including substantial, upfront cash commissions, extended payment terms and the ability to return products, allowing ArthroCare to falsely inflate its revenue by tens of millions of dollars.

Baker, Gluk and others used DiscoCare, a privately owned Delaware corporation, as one of the distributors to cover shortfalls in ArthroCare’s revenue. Evidence at trial showed that, at Baker and Gluk’s direction, ArthroCare shipped product to DiscoCare that far exceeded DiscoCare’s needs.

Baker, Gluk and others lied to investors and analysts about ArthroCare's relationships with its distributors, including DiscoCare. Baker and Gluk caused ArthroCare to acquire DiscoCare specifically to conceal from the investing public the nature and financial significance of ArthroCare’s relationship with DiscoCare.

Evidence at trial also established that Baker lied when he was deposed by the U.S. Securities and Exchange Commission in November 2009 about the DiscoCare relationship.

Between December 2005 and February 2009, ArthroCare’s shareholders held more than 25 million shares of ArthroCare stock. On July 21, 2008, after ArthroCare announced publicly that it would be restating its previously reported financial results from the third quarter 2006 through the first quarter 2008 to reflect the results of an internal investigation, the price of ArthroCare shares dropped from $40.03 to $23.21 per share. The drop in ArthroCare’s share price caused an immediate loss in shareholder value of more than $400 million.

Following today’s verdict, U.S. District Judge Sam Sparks remanded Baker into custody. A sentencing date for Baker and Gluk has not yet been scheduled.

This case was investigated by the FBI’s San Antonio Field Office. The case is being prosecuted by Deputy Chief Benjamin D. Singer and Trial Attorneys Henry P. Van Dyck and William S.W. Chang of the Criminal Division’s Fraud Section. The Department appreciates the substantial assistance of the U.S. Securities and Exchange Commission.

Deputy Attorney General James M. Cole, Assistant Attorney General Leslie R. Caldwell of the Criminal Division, U.S. Attorney for Western District of Pennsylvania David Hickton, FBI Executive Associate Director Robert Anderson and Deputy Under Secretary Dr. Phyllis Schneck of the Department of Homeland Security will hold a news conference TODAY, MONDAY, JUNE 2, 2014, at 12:00 p.m. EDT, to announce criminal charges and two global cyber fraud disruptions.

WHO:             DeputyAttorney General James M. Cole

Assistant Attorney General Leslie R. Caldwell of the Criminal Division

U.S. Attorney for Western District of Pennsylvania David Hickton

FBI Executive Associate Director Robert Anderson

Deputy Under Secretary Dr. Phyllis Schneck

WHAT:          Press conference to announce cyber fraud charges and disruptions.

WHEN:          TODAY, 12:00 p.m. EDT, JUNE 2, 2014

WHERE:         Department of Justice

                        7th Floor Conference Room

                        950 Pennsylvania Ave., N.W.

                        Washington, D.C.

                        OPEN PRESS

NOTE:  All media must present government-issued photo I.D. (such as driver’s license) as well as valid media credentials.  Media must enter the department at the visitor’s entrance on Constitution Avenue between 9th and 10th Streets. Media may begin arriving at 11:00 a.m. EDT and cameras must be pre-set by 11:45 a.m. EDT. Press inquiries regarding logistics should be directed to the Office of Public Affairs at 202-514-2007 or email Daniel.Stratton@usdoj.gov .

Former Anderson, California, Police Officer Bryan Robert Benson pleaded guilty today in federal court to a civil rights offense for sexually assaulting a woman while transporting her to jail, announced the Justice Department and the U.S. Attorney’s Office for the Eastern District of California.

Benson, 29, pleaded guilty to one felony count of deprivation of rights under color of law.  According to the factual basis in a plea agreement filed with the court today, Benson transported the victim, to the Shasta County Jail after she was arrested for driving under the influence on May 29, 2010.   Before arriving at the jail, Benson pulled into a parking lot.  There, he falsely reported by police radio to dispatch that he had arrived at the jail when, in fact, he had not.  Benson got out of the car, opened the passenger side door of the car, removed the victim from the passenger seat, and led her to the back of the police car.  Benson pulled down the victim’s shorts and underwear and engaged in intercourse with her against the police car without her consent.  The offense resulted in bodily injury to the victim, including physical pain and bruising.

Sentencing is scheduled for Aug. 15, 2014.  Benson and the government agreed in the plea agreement that the Court should sentence Benson to five years in prison.  Benson also faces a fine of up to $250,000.

“In sexually assaulting a woman in his custody, the defendant betrayed his oath to uphold the law, violated the trust placed in him by society, and, most regrettably, caused untold harm to the victim,” said Acting Assistant Attorney General Jocelyn Samuels for the Civil Rights Division.  “The department will continue to hold such offenders accountable.”

 
“Members of the public have a right and an expectation that they can look to the police for help and safety,” said U.S. Attorney Benjamin B. Wagner for the Eastern District of California..  “When a police officer abuses that trust for his own criminal purposes, he violates his duty to protect the public, undermines the effectiveness of his fellow officers, and subverts the rule of law.”

 This case is being investigated by the Federal Bureau of Investigation.  The case is being prosecuted by Trial Attorney Chiraag Bains from the Justice Department’s Civil Rights Division and Assistant U.S. Attorney Matthew G. Morris for the Eastern District of California.

WASHINGTON – Federal inmate James Ninete Leon Guerrero, 48, of Guam, was sentenced today to serve life in prison for the murder of United States Correctional Officer Jose Rivera, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Benjamin Wagner of the Eastern District of California.  Guerrero was sentenced by U.S. District Judge Phillip Pro of the District of Nevada. 

According to court documents, Guerrero aided and abetted co-defendant Jose Cabrera Sablan in the stabbing death of Officer Rivera.  On June 20, 2008, as Officer Rivera was on duty and conducting his daily count in the United States Penitentiary in Atwater, California, Sablan attacked him with an eight-inch homemade shank.  Officer Rivera tried to flee, but was knocked backwards by Sablan and tackled by Guerrero.  Guerrero held Rivera down as Sablan stabbed him with the shank in excess of 20 times.  Officer Rivera was 22 years old at the time of his death and was a United States Navy veteran. 

Sablan and Guerrero were indicted for murder on Aug. 14, 2008.  Sablan’s case is set for trial on April 6, 2015, and the government will be seeking the death penalty if he is convicted. 

The charges against Sablan are merely accusations and he is presumed innocent unless and until proven guilty beyond a reasonable doubt.

The investigation was conducted by the Bureau of Prisons and the FBI.  The case is being prosecuted by Trial Attorney Bonnie Hannan of the Capital Case Section of the Criminal Division and Assistant U.S. Attorney Duce Rice of the Eastern District of California. 

Nydia L. Perez and John A. Soto, both 44, of Haymarket, Virginia, pleaded guilty to one count of making false statements to law enforcement officials in federal court on Friday, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Assistant Director for International Operations John Boles of the FBI.

According to the plea agreement, in December 2013, Perez, an employee of the Drug Enforcement Administration, and her husband Soto, a private contractor in the United States Embassy in Bogotá, Colombia, designed and executed a hoax with the intention of defrauding the United States Embassy in Bogotá. As part of the hoax, Perez and Soto fabricated a plot to kidnap minors who are United States citizens.

According to court filings, Perez and Soto sent, through electronic mail and courier services, information about a purported threat to the safety of minor United States citizens in Bogotá. Perez and Soto added detailed descriptions of the targeted United States citizens, including information about their whereabouts and daily routines. Perez and Soto included photographs of the citizens in order to enhance the seriousness of the threat, and attempted to implicate innocent individuals in the kidnapping plot. Perez and Soto made numerous false representations to law enforcement and security officials in furtherance of the fabricated kidnapping plot.

Sentencing before U.S. District Judge Amy Berman-Jackson is scheduled for Aug. 21, 2014.

The investigation was conducted by the FBI Legal Attaché in Bogotá and the Extra-Territorial Squad of the FBI Miami Field Office. Also participating in the investigation were the DEA, the U.S. Embassy Bogota Regional Security Office, and the U.S. Embassy Bogota Force Protection Detail. The Department is grateful for the assistance of the Colombia National Police Directorate of Anti-Kidnapping and Anti-Extortion.

The case is being prosecuted by Trial Attorney Justin Weitz of the Criminal Division’s Public Integrity Section.

James Webb Baker Jr., 58, of Seattle, pleaded guilty today to one count of voter intimidation and one count of identification fraud in the U.S. District Court for the Middle District of Florida.  Prior to the 2012 federal elections, Baker created and sent 200 fake voter eligibility letters to Republican Party donors across Florida that questioned the recipients’ citizenship status.  During the plea hearing, Baker admitted that he intended the letters to look as if they were written by county elections officials and that his purpose in sending the letters was to intimidate the recipients and interfere with their right to vote.

According to the evidence presented in court proceedings and documents, in October 2012, Baker read about the efforts of the Florida Governor and the Florida Secretary of State to remove the names of voters from the official Florida county lists of eligible voters.  Angered by what he believed to be an attempt to suppress voter turnout, specifically of Hispanic voters who would vote for candidates of the Democratic Party, Baker created “false” or “copycat” voter eligibility letters of the actual letters sent by county officials.  Baker sent his letters, which questioned the recipient’s eligibility to vote, to 200 Republican Party donors.  The letters required the recipients to complete a voter eligibility form within 15 days or else their name would be removed from the voter registration rolls.  Baker inserted a line of text in bold stating that a nonregistered voter who casts a vote may be subject to criminal sanctions.

The letters looked almost identical to official county Supervisor of Elections letters, and included the county official’s name, letterhead, address and contact information.  During the plea proceedings, Baker admitted to making several changes to the original official letters in order to stress the threats that the recipients would lose their right to vote and/or be imprisoned if they did not first document their citizenship and right to vote in person to the registrar.

“Protecting the right to vote is one of the department’s top priorities,” said Acting Assistant Attorney General Jocelyn Samuels for the Civil Rights Division.  “The Civil Rights Division is strongly committed to comprehensive and vigorous enforcement of laws that protect the rights of every American to vote free from intimidation, coercion, or threats.”

“My office is committed to aggressively protecting the integrity of the election process,” said U.S. Attorney A. Lee Bentley III for the Middle District of Florida.  “Each citizen must be able to vote without intimidation or discrimination and to have that vote counted.  It is imperative that those who have specific information about intimidation, discrimination or election fraud make that information available immediately to my office, the FBI or the Civil Rights Division.”

“This joint investigative effort is yet another example of the fortitude and commitment  of our collective agencies to protect our citizen’s individual and constitutional rights,” said FBI Special Agent in Charge Paul Wysopal for the FBI Tampa Field Office.

“This case was complex,”  said Florida Department of Law Enforcement Commissioner Gerald Bailey.  “It required the expertise and dedication of FDLE Executive Investigations, crime lab analysts and intelligence analysts.  Their efforts led to the identification and conviction of Baker.  My thanks to each of them.”

           
“Using the U.S. Mail to threaten or intimidate voters will not be tolerated,” said  Inspector in Charge Brad Kleinknecht with the Seattle Division of the U.S. Postal Inspection Service.  “The Postal Inspection Service, along with its law enforcement partners, will continue to investigate all cases of this nature to ensure the U.S. Mail continues to play a key role our nation's election process.”

This case was investigated by the FBI, U.S. Postal Inspection Service and the Florida Department of Law Enforcement.  It is being prosecuted by Special Litigation Counsel Mark Blumburg and Trial Attorney William E. Nolan of the Civil Rights Division, and Assistant U.S. Attorney Robert A. Mosakowski of the U.S. Attorney’s Office for the Middle District of Florida.

A current Puerto Rico Superior Court Judge and Puerto Rico businessman were charged with orchestrating a criminal scheme in which the businessman paid bribes to the judge presiding over the criminal case against the businessman according to an indictment unsealed today.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Rosa Emilia Rodríguez-Vélez of the District of Puerto Rico, and Special Agent in Charge Carlos Cases of the FBI’s San Juan Division made the announcement.

“The outcome of a criminal case should be determined by the evidence and the law, not by paid-for bias,” said Assistant Attorney General Caldwell.  “When citizens can’t have faith in the very people who are sworn to uphold the law, confidence in the entire system is shaken.  We are committed to restoring that faith by rooting out corruption wherever it may be found.”

“A fair and impartial criminal justice system is one of the cornerstones of our democracy,” said U.S. Attorney Rodríguez-Vélez.  “Judges, in particular, are expected to protect the public’s trust in the fairness of the judicial system.  Investigations such as the one leading to today’s indictment are crucial to deter corrupt officials influenced by greed from breaking their oath to uphold the rule of law. This case should serve as a strong warning to those who might consider similar behavior.  No one is above the law and everyone is accountable for their misdeeds.”

“Rogue justice as the one allegedly imparted by Judge Manuel Acevedo-Hernández will not be tolerated by the FBI,” said Special Agent in Charge Cases. “The FBI will continue vigorously to investigate allegations of corruption at all levels.”

The indictment, returned yesterday by a federal grand jury in the District of Puerto Rico and unsealed today, charges Manuel Acevedo-Hernandez, 62, and Lutgardo Acevedo-Lopez, 39, with conspiracy to commit federal programs bribery. Acevedo-Hernandez was also charged with receipt of a bribe by an agent of an organization receiving federal funds, and Acevedo-Lopez was charged with paying a bribe to an agent of an organization receiving federal funds.

According to the indictment,Acevedo-Hernandez, a Supervisory Superior Court Judge in the Aguadilla judicial region of Puerto Rico, allegedly accepted bribes from AcevedoLopez and others, knowing that the payments were made so that Acevedo-Hernandez would use his official position as a Superior Court judge for Acevedo-Lopez’s benefit. In particular, Acevedo-Hernandez presided over a criminal trial of Acevedo-Lopez and acquitted Acevedo-Lopez of all charges pending against him, including vehicular homicide. In exchange for the acquittal, Acevedo-Lopez, through an intermediary, bribed Acevedo-Hernandez by paying taxes owed by Acevedo-Hernandez, paying for construction of a garage, and providing him with a motorcycle, clothing and accessories, including cufflinks and a watch.

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

The case is being investigated by the FBI’s San Juan Division and is being prosecuted by Trial Attorney Peter Mason of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorneys Timothy Henwood and Jose Capo of the District of Puerto Rico.

Citizens of Puerto Rico who have allegations of public corruption are encouraged to contact the FBI’s San Juan Division at (787) 754-6000.

Assistant Attorney General Kathryn Keneally for the Tax Division and U.S. Attorney Daniel G. Bogden for the District of Nevada announced today that Damon Boswell of Las Vegas pleaded guilty to conspiracy to submit false federal income tax returns.  Boswell was indicted on May 21, 2013.

According to the court documents, from April 2009 to May 2009, Boswell and Cheryl Ramos conspired to defraud the United States by assisting in the filing of federal tax returns that falsely claimed refunds based on the First-Time Home Buyers Credit.  Ramos pleaded guilty on Jan. 24, 2013, and is awaiting sentencing.  Boswell obtained personal identifying information from individuals by falsely telling them that if they had not filed their 2008 federal income tax returns and did not owe back taxes, they were entitled to receive “Obama Stimulus” money.  Boswell used the personal information, including names, dates of birth and Social Security numbers, to file federal income tax returns for tax year 2008 claiming refunds to which the individuals were not entitled.  The individuals did not authorize Boswell or anyone else to file or cause the filing of these tax returns in their names.  Boswell retained up to 71 percent of the proceeds as a “fee” for arranging taxpayers’ receipt of the money.

 
Boswell faces a statutory potential maximum prison term of 10 years and a maximum fine of $250,000.  His sentencing is scheduled for Sept. 15, 2014.

 
Assistant Attorney General Keneally and U.S. Attorney Bogden thanked special agents of IRS-Criminal Investigation, who investigated the case, and Assistant U.S. Attorney Christina Brown and Trial Attorney Sonia M. Owens for the Tax Division, who prosecuted the case.

WASHINGTON – Assistant Attorney General Kathryn Keneally for the Tax Division and U.S. Attorney Daniel G. Bogden for the District of Nevada announced today that Damon Boswell of Las Vegas pleaded guilty to conspiracy to submit false federal income tax returns. Boswell was indicted on May 21, 2013.

According to the court documents, from April 2009 to May 2009, Boswell and Cheryl Ramos conspired to defraud the United States by assisting in the filing of federal tax returns that falsely claimed refunds based on the First-Time Home Buyers Credit. Ramos pleaded guilty on Jan. 24, 2013, and is awaiting sentencing. Boswell obtained personal identifying information from individuals by falsely telling them that if they had not filed their 2008 federal income tax returns and did not owe back taxes, they were entitled to receive "Obama Stimulus" money. Boswell used the personal information, including names, dates of birth and Social Security numbers, to file federal income tax returns for tax year 2008 claiming refunds to which the individuals were not entitled. The individuals did not authorize Boswell or anyone else to file or cause the filing of these tax returns in their names. Boswell retained up to 71 percent of the proceeds as a "fee" for arranging taxpayers' receipt of the money.

Boswell faces a statutory potential maximum prison term of 10 years and a maximum fine of $250,000. His sentencing is scheduled for Sept. 15, 2014.

Assistant Attorney General Keneally and U.S. Attorney Bogden thanked special agents of IRS-Criminal Investigation, who investigated the case, and Assistant U.S. Attorney Christina Brown and Trial Attorney Sonia M. Owens for the Tax Division, who prosecuted the case.

The government has filed a complaint against CA Inc. (CA) for violations of the False Claims Act in connection with a General Services Administration (GSA) contract, the Justice Department announced today.  CA manufactures and sells information technology products and is headquartered in Islandia, New York.

“We expect companies that do business with the government to comply with their contractual obligations,” said Assistant Attorney General of the Justice Department’s Civil Division Stuart F. Delery. “As this case demonstrates, we will take action against those who seek to abuse the government’s procurement process.”       

“Too many federal contractors think they can get away with overcharging the government,” said U.S. Attorney for the District of Columbia Ronald C. Machen Jr.  “Our complaint alleges that CA broke its promise to give the government the same prices it was giving commercial customers.  We look forward to vigorously pressing these claims in court and recovering every dollar that is owed to the American taxpayer.”

In September 2002, CA entered into a GSA contract to provide software licenses, software maintenance, training and consulting services to various government agencies.  The government’s complaint alleges that, since at least 2006, CA knowingly overcharged the government for software licenses and maintenance in various ways.  For example, the government alleges that CA provided incomplete and inaccurate information to GSA contracting officers during negotiation of contract extensions.  At the time CA negotiated these extensions, applicable regulations and contract provisions required CA to fully and accurately disclose how it conducted business in the commercial marketplace, so GSA could use that information to negotiate a fair price for government customers.  The government also alleges that CA failed to truthfully update its discounting practices during the life of the GSA contract.  CA repeatedly certified to GSA that its discounting policies and practices had not changed, when in fact its discounts to commercial customers had increased.

The government’s complaint also alleges that, since 2002, CA failed to apply properly the contract’s price reduction clause.  The contract required CA to monitor discounts to certain commercial customers, compare these discounts to the discounts given to the government and, if the commercial discounts were higher, pass on those higher discounts to the government.  The government alleges that CA failed to make those comparisons or, when it did make such comparisons, failed to do so correctly, resulting in the government overpaying for CA’s information technology. 

CA’s contract is a Multiple Award Schedule (MAS) contract.  Under the MAS program, GSA pre-negotiates prices and contract terms for subsequent orders by federal agencies.  Agencies that purchase under CA’s contract include the Department of Defense, the Department of Energy, the Department of Health and Human Services and the Department of Labor. 

“Companies doing business with the federal government on a GSA schedule must disclose current, accurate, and complete commercial discounts, so that GSA can get the best prices on behalf of American taxpayers,” said GSA Acting Inspector General Robert C. Erickson.  “We will continue to investigate all allegations indicating that the federal government may have been overcharged by a contractor.”

Some of the allegations that are the subject of the government’s complaint were filed in a lawsuit originally brought by Dani Shemesh, a former employee of CA Israel Ltd., under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government and to share in any recovery.  The Act also authorizes the government to intervene and assume primary responsibility for litigating the lawsuit, as the government has done in this case.  The government had previously notified the court that it intended to join in Shemesh’s lawsuit and file its own complaint. 

This investigation reflects a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Columbia and the GSA’s Office of Inspector General.

The qui tam case is captioned United States ex rel. Dani Shemesh v. CA Inc., No. 09-1600 (D.D.C.).  The complaint filed by the government contains allegations only; there has been no determination of liability.

# # #

Two individuals have pleaded guilty for their roles in a scheme to launder approximately $250,000 in bribes received from Afghan contractors in Afghanistan.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, United States Attorney for the Western District of Tennessee Edward L. Stanton III and United States Attorney for the Eastern District of Tennessee William C. Killian made the announcement.

Jimmy W. Dennis, 44, formerly of Clarksville, Tennessee, and a former First Sergeant with the U.S. Army, pleaded guilty before U.S. District Court Judge Samuel H. May Jr. of the Western District of Tennessee to conspiracy to launder approximately $250,000 in bribe payments he received from Afghan contractors in Afghanistan. Sentencing is scheduled for Sept. 4, 2014.

James C. Pittman, 45, of Rossville, Georgia, pleaded guilty last Thursday before U.S. Magistrate Judge William B. Carter of the Eastern District of Tennessee for his role in this conspiracy. Sentencing is scheduled for Sept. 8, 2014.

According to pleadings filed at the time of the guilty pleas, from March 2008 through March 2009, Dennis was an Army Sergeant assigned as a paying agent in the Humanitarian Aid Yard (HA Yard) at Bagram Air Field, Afghanistan. Dennis was a member of the team in the HA Yard that purchased supplies from local Afghan vendors for distribution as part of the Commander’s Emergency Response Program for urgent humanitarian relief requirements in Afghanistan. Dennis and a partner entered into an agreement to steer contracts to certain Afghan vendors in return for approximately $250,000 in cash bribes.

Further according to court pleadings, Dennis smuggled the bribe money back to the United States hidden in packages addressed to his wife, his father and a former Army friend, Pittman. Dennis sent $80,000 to $100,000 to his father from Afghanistan in packages that contained toy “jingle trucks,” colorfully decorated trucks or buses in Afghanistan and Pakistan. Dennis hid the money in the rear compartment of the toy trucks. Dennis also shipped a hope chest to his father containing approximately $100,000 in cash in a concealed compartment.

Also according to court documents, while on leave, Dennis met with Pittman, advised him that he had obtained money through kickbacks, and asked him for help laundering the funds. Pittman, owner of a landscaping business, agreed to “run through his company” these bribery proceeds. After returning to Afghanistan, Dennis sent approximately $60,000 to Pittman contained in toy jingle trucks. Dennis also arranged for his father to send approximately $20,000 to Pittman, who returned it in the form of purported salary checks from Pittman’s company.

These matters are being investigated by the Special Inspector General for Afghanistan Reconstruction, the FBI, the Army Criminal Investigative Division, the Defense Criminal Investigative Service, and the Air Force Office of Special Investigation. The prosecution is being handled by Trial Attorney Daniel Butler of the Criminal Division and Assistant U.S. Attorneys Frederick Godwin of the Western District of Tennessee and James Brooks of the Eastern District of Tennessee.

Attorney General Eric Holder today issued the following statement on the passing of Maya Angelou:

“I was deeply saddened to learn of the passing of Maya Angelou, a true national treasure whom I have admired greatly for many, many years.

“Dr. Angelou was much more than a literary genius, a chronicler of Jim Crow, and a witness to history.  Through her extraordinary work, she captured the tenacity of the human spirit and spoke of harsh realities in the most evocative, moving, and lyrical of ways.  Over the course of a career spanning some of the most tumultuous decades of the last century, she taught us how to rise above ‘a past that’s rooted in pain.’  She gave voice to a people too often shut out of America’s public discourse.  She displayed remarkable courage in the face of tremendous adversity.  And she inspired generations to overcome life’s greatest challenges – through her extensive writings, her performances, her advocacy, her educational work, and her principled activism.

“For my family and me, Maya Angelou will always be much more than a great American and an icon in world literature.  She is the namesake of one of my daughters, who met her as a young girl and celebrated her twenty-first birthday just one day before the elder Maya was lost to us.  Although our hearts are filled with grief at the news of her passing – a sorrow made all the more acute by the knowledge that we shall not see her like again – she will continue to be a source of strength and inspiration.  She will endure in the singular body of work she leaves behind.  And she will live on in the shining example that guides our steps forward and fuels the work that remains.

“We have lost a legend, a trailblazer in the truest sense, and one of the guiding lights of the 20th century.  Yet despite our heartache and our pain, Maya Angelou will always be with us.  Her voice will continue to console, to challenge, and to inspire us.  We bid her farewell today.  But we know that, even now, ‘into a daybreak that’s wondrously clear,’ still she rises.”

Zhifei Li, the owner of an antique business in China, was sentenced today to serve 70 months in prison for heading an illegal wildlife smuggling conspiracy in which 30 rhinoceros horns and numerous objects made from rhino horn and elephant ivory worth more than $4.5 million were smuggled from the United States to China.

The sentence – one of the longest sentences to be imposed in the United States for a wildlife smuggling offense – was announced by Sam Hirsch, the Acting Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice; Paul J. Fishman, U.S. Attorney for the District of New Jersey; Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida; and Dan Ashe, Director of the U.S. Fish and Wildlife Service (USFWS).

Li, 30, of Shandong, China, the owner of Overseas Treasure Finding in Shandong, previously pleaded guilty before U.S. District Judge Esther Salas to a total of 11 counts: one count of conspiracy to smuggle and violate the Lacey Act; seven counts of smuggling; one count of illegal wildlife trafficking in violation of the Lacey Act; and two counts of making false wildlife documents. Judge Salas also imposed the sentence today in Newark federal court.

“Li was the ringleader of a criminal enterprise that spanned the globe and profited from an illegal trade that is pushing endangered animals toward extinction,” said Sam Hirsch, Acting Assistant Attorney General for the Environment and Natural Resources Division.  “As this case clearly demonstrates, rhino trafficking is increasingly organized, well financed, and a threat to the rule of law.  The United States is resolved to bring wildlife traffickers to justice.”

“The multibillion-dollar illegal wildlife market is supplied by animal poaching of unthinkable brutality and fed by those willing to profit from such cruelty,” said U.S. Attorney Fishman. “Zhifei Li appropriately faces 70 months in prison for orchestrating schemes worth millions of dollars and for violating laws meant to protect the most vulnerable species.”

“Wild populations of rhinos are being slaughtered at appalling rates due to the greed and indifference of criminals like Li and his accomplices,” said U.S. Fish and Wildlife Service Director Dan Ashe. “The sentence handed down today serves notice to other organized trafficking and poaching rings that their crimes will not go unpunished. We will relentlessly work across the U.S. government and with the international law enforcement community to destroy these networks, while strengthening protections for rhinos in the wild and reducing demand for horn in consumer countries.”

Li was arrested in Florida in January 2013, shortly after arriving in the country, on federal charges brought under seal in New Jersey. Before he was arrested, he purchased two endangered black rhinoceros horns from an undercover USFWS agent in a Miami Beach hotel room for $59,000 while attending an antique show. Li was arrested as part of “Operation Crash” – a nationwide effort led by the USFWS and the Justice Department to investigate and prosecute those involved in the black market trade of rhinoceros horns and other protected species.

In papers filed in Newark federal court, Li admitted that he was the “boss” of three antique dealers in the United States whom he paid to help obtain wildlife items and smuggle them to him via Hong Kong. One of those individuals was Qiang Wang, aka “Jeffrey Wang,” who was sentenced to 37 months in prison on Dec. 5, 2013, in the Southern District of New York . Li played a leadership and organizational role in the smuggling conspiracy by arranging for financing to pay for the wildlife, purchasing and negotiating prices, directing how to smuggle the items out of the United States, and getting the assistance of additional collaborators in Hong Kong to receive the goods and smuggle them to him in mainland China.

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

In pleading guilty, Li admitted that he sold 30 smuggled, raw rhinoceros horns worth approximately $3 million – approximately $17,500 per pound – to factories in China where raw rhinoceros horns are carved into fake antiques known as Zuo Jiu (which means “to make it as old” in Mandarin). In China, there is a centuries old tradition of drinking from an intricately carved “libation cup” made from a rhinoceros horn. Owning or drinking from such a cup is believed by some to bring good health, and true antiques are highly prized by collectors.  The escalating value of such items has resulted in an increased demand for rhinoceros horn that has helped fuel a thriving black market, including recently carved fake antiques.

In addition to the prison term, Judge Salas ordered Li to serve two years of supervised release and to forfeit $3.5 million in proceeds of his criminal activity as well as several Asian artifacts. Various ivory objects seized by the USFWS as part of the investigation have also been surrendered.

The investigation is continuing and is being handled by the U.S. Fish & Wildlife Service’s Office of Law Enforcement, the U.S. Attorney’s Office for the District of New Jersey, the U.S. Attorney’s Office for the Southern District of Florida and the Justice Department’s Environmental Crimes Section.

The government is represented by Assistant U.S. Attorneys Kathleen P. O’Leary and Barbara Ward of the New Jersey U.S. Attorney’s Office Criminal Division and Asset Forfeiture and Money Laundering Unit, Assistant U.S. Attorney Thomas Watts-FitzGerald of the U.S. Attorney’s Office for the Southern District of Florida and Senior Counsel Richard A. Udell of the Justice Department’s Environmental Crimes Section of the Environment and Natural Resources Division.

Additional information, including a detailed joint factual statement and photo exhibits can be found here: http://go.usa.gov/8nYY

Eric Esposito was sentenced today to serve 27 months in prison for conducting an illegal gambling business on behalf of the Philadelphia La Cosa Nostra Family, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania and Edward J. Hanko, Special Agent in Charge of the FBI’s Philadelphia Division .

Esposito, 43, of Philadelphia, was sentenced by U.S. District Judge Eduardo C. Robreno in the Eastern District of Pennsylvania. In addition to his prison term, Esposito was sentenced to serve three years of supervised release and ordered to pay a fine of $4,000.

On Feb. 21, 2014, after a week-long trial, a jury convicted Esposito of conducting an illegal gambling business involving the use of video poker machines at a private social club known as the “First Ward Republican Club” in South Philadelphia. According to evidence presented at trial, as a fully initiated mob soldier, Esposito worked in concert with other mob members to carry out this illegal gambling business on behalf of the Philadelphia La Cosa Nostra Family.

A total of 13 leaders, members and associates of the Philadelphia La Cosa Nostra Family have pleaded guilty or been convicted by a jury as part of this case. To date, 12 defendants, including Esposito, have been sentenced, and one is awaiting sentencing.

The case is being prosecuted by Trial Attorney John S. Han of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorneys Frank A. Labor III and Suzanne B. Ercole of the Eastern District of Pennsylvania. Valuable prosecutorial assistance was provided by the Pennsylvania Office of the Attorney General.

The case was investigated by the FBI, the Internal Revenue Service-Criminal Investigations, the Pennsylvania State Police, the New Jersey State Police, the Philadelphia Police Department, U.S. Department of Labor’s Office of Inspector General Office of Labor Racketeering and Fraud Investigations and the U.S. Department of Labor’s Employee Benefits Security Administration.  Additional assistance was provided by the New Jersey Department of Corrections.

Medtronic Inc., of Fridley, Minnesota, has agreed to pay the United States $9.9 million to resolve allegations under the False Claims Act that the company used various types of payments to induce physicians to implant pacemakers and defibrillators manufactured and sold by Medtronic, the Justice Department announced today.

“Improper financial incentives have the potential to compromise physician medical judgment,” said Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division. “This case demonstrates the Department of Justice’s commitment to pursue medical device manufacturers that use improper financial relationships to influence physician decision-making.”

The United States alleged that Medtronic caused false claims to be submitted to Medicare and Medicaid by using multiple types of illegal kickbacks to induce physicians to implant Medtronic pacemakers and defibrillators. Specifically, Medtronic allegedly induced physicians to use its products by: 1) paying implanting physicians to speak at events intended to increase the flow of referral business; 2) developing marketing/business development plans for physicians at no cost; and 3) providing tickets to sporting events. The United States alleged that Medtronic paid the remuneration to persuade the physicians to continue using Medtronic products or to convert their business from a competitor’s products.

“Decisions about devices used to treat cardiac rhythmic disease should be based on the best interests of the patient, not on whether the manufacturer is going to pay a kickback,” said U.S. Attorney Benjamin Wagner of the Eastern District of California.  “These sorts of improper financial incentives not only undermine the integrity of medical decisions, they also waste taxpayer funds and are unfair to competitors who are trying to play by the rules.”

“As this settlement indicates, health care executives who try to boost profits by paying kickbacks to doctors will instead pay the government for their improper conduct,” said Special Agent in Charge Ivan Negroni of the U.S. Department of Health and Human Services Office of Inspector General’s San Francisco Office.  “We will continue to work with the Department of Justice to root out illegal, wasteful business arrangements.”

The settlement announced today stems from a whistleblower complaint filed by a former employee of Medtronic, Adolfo Schroeder, pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the United States and to share in the proceeds of the suit. Schroeder will receive approximately $1.73 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius.  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 $19.2 billion through False Claims Act cases, with more than $13.7 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with Medtronic Inc. was the result of a coordinated effort among the Department of Justice’s Civil Division; the U.S. Attorney’s Office for the Eastern District of California; and the Office of Inspector General of the U.S. Department of Health and Human Services.

The lawsuit is captioned United States ex rel. Schroeder v. Medtronic, Inc., No. 2:09-cv-0279 WBS EJB (E.D. Cal.). The claims settled by this agreement are allegations only, and there has been no determination of liability.

Ashland Hospital Corp. d/b/a King’s Daughters Medical Center (KDMC) has agreed to pay $40.9 million to resolve allegations that it submitted false claims to the Medicare and Kentucky Medicaid programs for medically unnecessary coronary stents and diagnostic catheterizations and had prohibited financial relationships with physicians referring patients to the hospital, the Justice Department announced today.

Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division, U.S. Attorney Kerry Harvey for the Eastern District of Kentucky and Special Agent in Charge Derrick L. Jackson at the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Kentucky region made the announcement.

“Hospitals that place their financial interests above the well-being of their patients will be held accountable,” said Assistant Attorney General Delery. “ The Department of Justice will not tolerate those who abuse federal health care programs and put the beneficiaries of these programs at risk by providing medically unnecessary care.”

The government alleged that, between 2006 and 2011, KDMC billed for numerous unnecessary coronary stents and diagnostic catheterizations performed by KDMC physicians on Medicare and Medicaid patients who did not need them. The government also alleged that the physicians falsified medical records in order to justify these unnecessary procedures, which allegedly generated millions of dollars in Medicare and Kentucky Medicaid reimbursements for KDMC.

“The conduct alleged in this matter is unacceptable, victimizing both taxpayers and patients,” said U.S. Attorney Harvey. “Treatment decisions motivated by financial gain undermine public confidence in our health care system and threaten vital federal programs upon which so many of our citizens rely. We will not relent in our efforts to protect the public from the sort of systematic misconduct alleged in this case.”

The settlement also resolves allegations that KDMC violated the Stark Law by paying certain cardiologists salaries that were unreasonably high and in excess of fair market value. The Stark Law is designed to limit the influence of money on physicians’ medical decision-making by prohibiting financial relationships between hospitals and referring physicians, unless these relationships meet certain designated exceptions.

In connection with this settlement, KDMC has agreed to enter into a Corporate Integrity Agreement with HHS-OIG, which obligates the hospital to undertake substantial internal compliance reforms and to commit to a third-party review of its claims to federal health care programs for the next five years.

“Medically unnecessary procedures can cause serious health issues, cost the taxpayers millions of dollars each year and drain the Medicare Trust Fund,” said Special Agent in Charge Jackson. “The OIG will continue to protect beneficiaries and hold health care providers accountable for improper claims.”

“This type of alleged conduct deceives individuals when they are seeking medical treatment and are vulnerable,” said Special Agent in Charge Perrye K. Turner of the FBI’s Louisville Field Division.  “The level of funds involved in this matter is staggering. This money has been stolen from the patients and the taxpayers.”

The Commonwealth of Kentucky will receive approximately $1,018,380, which represents the state’s share of the recovered Medicaid funds. The Medicaid program is funded jointly by the federal and state governments.

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 Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius.  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 $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.

The investigation was conducted by the FBI, the HHS-OIG, the Kentucky Office of Attorney General, Medicaid Fraud and Abuse Control Unit, the Commercial Litigation Branch of the Department of Justice’s Civil Division and the U.S. Attorney’s Office for the Eastern District of Kentucky. The claims settled by this agreement are allegations only, and there has been no determination of liability.

A Las Vegas jury returned guilty verdicts yesterday against Alan Rodrigues, a former casino owner from Henderson, Nevada, Weston Coolidge, a former businessman from Las Vegas, and Joseph Prokop, a former National Football League punter from Upland, California, for conspiracy and fraud related to their promotion of a fraudulent tax product through the now-defunct National Audit Defense Network (NADN), the Justice Department and Internal Revenue Service (IRS) announced today.  The guilty verdicts came after a six week trial before U.S. District Court Judge Miranda Du in the District of Nevada.

All defendants were convicted of one count of conspiracy to defraud the IRS and four counts of mail fraud.  Rodrigues and Coolidge were additionally convicted of 15 counts of aiding in the preparation of false tax returns, while Prokop was convicted of 13 counts of aiding in the preparation of false tax returns.  During the conspiracy, Rodrigues was NADN’s general manager, Coolidge was NADN’s owner and president and Prokop was the national marketing director of Oryan Management and Financial Services.  Oryan, which was operated out of Upland, created the fraudulent tax product, called Tax Break 2000, and paid NADN a commission to sell Tax Break 2000.

“This jury verdict sends a message to those who promote fraudulent tax products like Tax Break 2000 – you do so at the risk of prosecution, prison time and substantial penalties,” said Assistant Attorney General Kathryn Keneally for the Justice Department’s Tax Division.  “Prosecuting individuals who market fraudulent tax schemes has been and always will be our priority.”

According to court documents and evidence presented at trial, NADN began selling Tax Break 2000 in early 2001.  Tax Break 2000 purported to be a shopping website that the defendants fraudulently said would allow customers to claim legitimate income tax credits and deductions by making the website accessible to the disabled.  The defendants chose the sale price for the modifications, $10,475, solely to maximize the fraudulent income tax credits and deductions.  To further the scheme, the defendants produced false IRS forms creating the appearance of fictitious commission income and prepared false tax returns on their customers’ behalf that improperly claimed the tax credits and deductions.  According to evidence presented at trial, the intended tax loss based on the purported tax benefits was approximately $100 million due to the scheme.

On April 13, 2004, the department’s Tax Division filed a complaint seeking to enjoin, among others, NADN, Rodrigues, Coolidge and Prokop from selling fraudulent tax schemes, including Tax Break 2000.  NADN ceased operations in May 2004, and in June 2004, a federal bankruptcy court in Las Vegas entered a permanent injunction against NADN.  Prokop was also enjoined in June 2004, after consenting to entry of a permanent injunction.  In April 2005, Rodrigues and Coolidge both consented to permanent injunctions.

The case was investigated by IRS - Criminal Investigation.  Trial Attorneys Timothy J. Stockwell and Katherine L. Wong of the Tax Division are prosecuting the case, with litigation assistance from Larry Garland and the U.S. Attorney’s Office for the District of Nevada. 

Deputy Attorney General James M. Cole and Principal Deputy Assistant Attorney General for Justice Programs Mary Lou Leary announced today that the vast majority of U.S. states and territories have informed the Department of Justice that they intend to take steps to reduce sexual assaults in prisons, in accordance with federal law.

Under the Prison Rape Elimination Act (PREA), which was passed in 2003 with unanimous support from both parties of Congress, Fiscal Year 2014 is the first year that states and territories may have certain federal grant funds withheld unless they demonstrate an intention to comply with the law.  Of the 56 jurisdictions that are subject to PREA – the 50 states, the 5 territories and the District of Columbia –  48 are in compliance or have submitted assurances to the department committing to spending five percent of certain federal grant funds to come into compliance. This translates to a compliance rate of 85 percent.  

“No one should be subjected to sexual abuse while in the custody of our justice system,” said Deputy Attorney General Cole.  “It serves as a violation of fundamental rights, an attack on human dignity and runs contrary to everything we stand for as a nation. Based on these certifications and assurances, and other correspondence submitted by the governors, it is clear that addressing the issue of sexual abuse in confinement facilities is a high nationwide priority.”

“We are witnessing a major change in the culture of our nation's criminal justice systems. The discussion is no longer whether sexual victimization in correctional facilities is a problem, or even where the problem might be most serious,” said Principal Deputy Assistant Attorney General Leary.  “An overwhelming majority of states and territories has committed to preventing, identifying and addressing this serious travesty against human dignity anywhere it occurs.”  

An estimated four percent of state and federal prison inmates and just over three percent of jail inmates reported experiencing one or more incidents of sexual victimization by another inmate or a facility staff member within the previous 12 months.  Among youth in state juvenile facilities and state contract facilities that rate increases to an estimated nine and a half percent in the previous 12 months.  The National PREA Standards create policies and practices to ensure a zero tolerance for sexual assault in prisons and corrections facilities by preventing, detecting and responding to sexual abuse.  

Two states, New Hampshire and New Jersey, have certified that they are in full compliance with PREA.  Understanding that the standards could take a number of years to fully implement, the statute allows a governor whose state or territory is not yet in full compliance to submit an assurance to the department that not less than five percent of certain department grant funds will be used solely for the purpose of enabling the state or territory to achieve and certify full compliance with the standards in future years.  This year 46 jurisdictions submitted an assurance.  The eight states or territories that are unwilling to commit the five percent of federal grant funds to implementation of the National PREA Standards are subject to the loss of five percent of certain department grant funds that they would otherwise receive. 

The submitted assurances by governors or heads of territories is required by the PREA statute. The PREA standards took effect on Aug. 20, 2012.  The standards apply to Justice Department, state, and local confinement facilities, including adult prisons and jails, juvenile facilities, police lockups, and community corrections facilities.  The standards reflect careful consideration of all public input, including over 2,000 public comments, as well as detailed analysis of anticipated benefits and costs, in light of PREA’s requirement that the standards not “impose substantial additional costs compared to the costs presently expended by federal, state and local prison authorities.”

To assist states and localities with the implementation of the National PREA Standards, the department, through the Bureau of Justice Assistance, funded the National PREA Resource Center which provides training and technical assistance, as well as serving as a single-stop resource for leading research and tools for all those in the field working to implement the National PREA Standards.  The department has also funded over $23 million in grants to support state and local jurisdictions in creating zero-tolerance cultures for sexual abuse in confinement facilities.  For more information on the National PREA Standards as well and what assistance is available to states visit www.prearesourcecenter.org. 

John Cote, formerly of Danielson, Connecticut, was sentenced today to serve 46 months in prison by U.S. District Judge Vanessa Bryant, the Justice Department and the Internal Revenue Service (IRS) announced.  Cote was convicted in January 2014 of four counts of tax evasion along with conspiracy to defraud the IRS following a jury trial in the U.S. District Court for the District of Connecticut sitting in Hartford.  Cote was also ordered to pay restitution of $222,691 and to serve three years of supervised release following his release from prison.

According to court documents and evidence produced at trial, Cote did not file a timely or valid tax return for the years 1995 through 2009, despite earning income from his work as a consultant in the high-technology welding industry.  The evidence introduced at trial showed that Cote and his wife responded to IRS efforts to assess and collect taxes by concealing income and assets from the government, and by submitting obstructive letters and other documents, including false criminal complaints against IRS employees.  Starting in 1998, Cote caused the companies for which he worked to pay his compensation to nominee entities, sometimes through accounts in Costa Rica and Sweden.  Cote also used a nominee entity in his wife’s name to conceal income and assets from the IRS and in 2003, Cote's wife conveyed their personal residence to this entity.

The case was investigated by special agents of IRS – Criminal Investigation.  Trial Attorneys Jennifer Laraia, Melissa Siskind and Jeffrey McLellan of the Tax Division prosecuted the case.  Assistant Attorney General Kathryn Keneally of the Tax Division commended the special agents and the prosecutors, and thanked U.S. Attorney Deirdre M. Daly for the District of Connecticut and her office for their assistance.

WASHINGTON – Bradley Bowman, a resident of Lighthouse Point, Florida, pleaded guilty to one count of filing a false claim for a tax refund with the Internal Revenue Service (IRS), Assistant Attorney General Kathryn Keneally of the Justice Department's Tax Division and U.S. Attorney Wifredo Ferrer for the Southern District of Florida announced today. Bowman was indicted on March 25, 2014.

According to court documents, in 2009, Bowman submitted to the IRS a false individual income false tax return for tax year 2005 that fraudulently claimed a refund of $299,024. Bowman engaged Penny Jones, who is currently serving a 12 year sentence in a related case, to create this false return. Bowman attached false Forms 1099-OID to the return which fraudulently claimed that he had income of $447,036, and he also falsely claimed that all of this income was withheld to satisfy his income tax liabilities. Sentencing is set for Aug. 7, 2014, where Bowman faces a statutory maximum sentence of five years in prison, followed by up to three years of supervised release.

The case was investigated by Special Agents of the IRS-Criminal Investigation. The case is being prosecuted by Trial Attorney Greg Bailey of the Tax Division and Assistant U.S. Attorney Bertha Mitrani for the Southern District of Florida.

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

Kathryn Keneally, Assistant Attorney General for the Tax Division, will leave her post at the Department of Justice effective June 5, 2014, she announced today.

“Over the past two years, Kathryn Keneally has provided exemplary leadership to the Justice Department's Tax Division, setting a standard of excellence, integrity and professionalism that will guide and challenge those who carry the division’s important work into the future,” said Attorney General Eric Holder.  “As a result of her determined efforts, her exceptional judgment, and the tireless work of her colleagues across the division -- and their partners nationwide -- the Tax Division has secured historic gains in our fight to protect the American people from tax fraud and financial misconduct and to hold accountable any individual, bank or other institution that violates our tax laws.  Although I wish her the best as she seeks new challenges and opportunities, I will miss her wise counsel and her tireless commitment to the mission we share.  I thank her for her service to the American people.”

“I have been very fortunate to work every day with the talented and extraordinary women and men of the Tax Division, who are dedicated to ensuring that our nation’s tax laws are enforced fairly and consistently,” said Assistant Attorney General Keneally.  “I have benefited from the strong relationship between the division and the Internal Revenue Service, which shares our commitment to tax enforcement and voluntary tax compliance.  I am grateful for the leadership and support of the Attorney General, the Deputy Attorney General and the Associate Attorney General.  I will always be grateful to the President for giving me this opportunity to serve.”

During Keneally’s tenure as Assistant Attorney General, the division has obtained significant results in all areas of tax enforcement.

Under Keneally’s leadership, the division broadened its enforcement against the use of foreign bank accounts to evade U.S. taxes.  In August 2013, as a result of Keneally’s efforts, the department announced a unique program to allow Swiss banks to cooperate and to resolve past wrongdoing.  Through this program, which has the support of the government of Switzerland, over 100 banks that were not previously under investigation have come forward to provide valuable law enforcement information.  In January 2013, Wegelin, the oldest bank in Switzerland, pleaded guilty to felony tax charges.  In May 2014, the department announced a guilty plea by Credit Suisse, the second-largest bank in Switzerland.  The plea included the highest ever payment in a criminal tax case.  Keneally worked directly with the bank’s regulators to facilitate simultaneous enforcement action against Credit Suisse.  The division’s enforcement efforts have expanded to include investigations and charges against banks, bankers, professional advisors and accountholders for using secret bank accounts in countries around the globe.

During Keneally’s tenure, the division has also focused on forcefully combating stolen identity refund fraud.  In September 2012, the division announced new procedures to respond to this increasing criminal threat, and to strengthen coordination among the division, the U.S. Attorneys’ Offices and federal and local law enforcement.  Prosecutions led by division attorneys have resulted in significant convictions and lengthy sentences, and have helped turn the tide in this law enforcement challenge. 

The division has also continued to enjoy favorable outcomes in over 95 percent of all civil and criminal cases litigated by the division.  These efforts have included a robust injunction program to stop fraudulent return preparers and scheme promoters, continued successful litigation against abusive tax shelters, civil and criminal actions to enforce employment tax laws and core mission litigation to enforce tax law, collect taxes and prosecute those who would cheat on their obligations.  Under Keneally’s leadership, the division has undertaken a more comprehensive approach to civil and criminal tax enforcement.

Keneally was sworn in as the Assistant Attorney General for the Tax Division on April 6, 2012.  Before joining the department, she practiced law in New York City, representing individuals and businesses before the Internal Revenue Service and the Department of Justice in criminal and civil tax cases.  She also appeared and tried cases in the federal district and appellate courts, and in the U.S. Tax Court.  Keneally also served as the chair of the ABA Section of Taxation's Committees on Civil and Criminal Tax Penalties and Standards of Tax Practice, and was a vice chair of the Section of Taxation.  She will be returning to her home in New York.

Scott B. Miserendino, Sr., 55, a former government contractor who performed work for the United States Navy Military Sealift Command , and Timothy S. Miller, 57, a businessman whose company sought contracting business from the Military Sealift Command, were indicted today on charges including conspiracy and bribery.

Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, Acting U.S. Attorney Dana J. Boente of the Eastern District of Virginia, Special Agent in Charge Robert Craig of the Defense Criminal Investigative Service Mid-Atlantic Field Office (DCIS), Acting Executive Assistant Director Charles T. May Jr. of the Naval Criminal Investigative Service (NCIS) Atlantic Operations and Special Agent in Charge Royce E. Curtin of the FBI’s Norfolk Field Office made the announcement.

A federal grand jury in the Eastern District of Virginia returned a six-count indictment today that charges Miserendino with one count of conspiracy to commit bribery, one count of bribery, one count of conspiracy to commit obstruction of criminal investigations and to commit tampering with a witness, and one count of obstruction of criminal investigations. The indictment charges Miller with one count of conspiracy to commit bribery and two counts of bribery of a public official.

According to the indictment, Miserendino was a government contractor at the Military Sealift Command, the leading provider of transportation for the United States Navy. The indictment alleges that Miserendino worked closely with another Military Sealift Command official, Kenny E. Toy, in managing telecommunications projects and in influencing the award of United States government contracts, subcontracts, and task orders.

The indictment alleges that Miserendino solicited and accepted bribes, in the form of cash, a flat screen plasma television, a wine refrigerator, and other items, in exchange for providing favorable treatment to two companies in connection with United States government contracts.

Between March 2005 and 2007, Miserendino allegedly accepted cash payments of approximately $3,000 per month from agents of Company A, a corporation that sought contracting business from the Military Sealift Command. In total, Miserendino accepted approximately $100,000 in bribes from Company A’s agents.

In addition, the indictment alleges that, in February 2009, Miller and his business partner Dwayne A. Hardman established Company B, a government contracting corporation located in Chesapeake, Virginia, to provide support to the Military Sealift Command on various telecommunications projects. Shortly thereafter, in May 2009, Miller and Hardman allegedly paid cash bribes totaling $50,000 to Miserendino and Toy in exchange for favorable treatment in connection with U.S. government contracts, subcontracts, and task orders.

In addition, as alleged in the indictment, Miserendino obstructed justice and tampered with a witness by causing $85,000 to be paid to Hardman in an attempt to prevent or delay him from reporting the bribery scheme to law enforcement authorities.

Prior to this indictment, five other individuals pleaded guilty in connection with the bribery scheme. On Feb. 12, 2014, Kenny E. Toy, former Afloat Programs Manager for the Military Sealift Command N6 Command, Control, Communication and Computer Systems Directorate, pleaded guilty to bribery and admitted to receiving more than $100,000 in cash bribes in exchange for providing favorable treatment to two companies in connection with U.S. government contracts. On Feb. 18, 2014, Dwayne A. Hardman, Miller’s business partner, pleaded guilty to bribery and admitted to providing more than $140,000 in cash bribes to Toy and Miserendino. On Feb. 19, 2014, Michael P. McPhail pleaded guilty to conspiracy to commit bribery and agreed to forfeit $57,000. On March 5, 2014, Roderic J. Smith pleaded guilty to conspiracy to commit bribery and agreed to forfeit $175,000. On April 4, 2014, Adam C. White pleaded guilty to conspiracy to commit bribery and agreed to forfeit $57,000.

The case was investigated by the DCIS, NCIS and the FBI. The case is being prosecuted by Trial Attorney Emily Rae Woods of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Stephen W. Haynie of the Eastern District of Virginia.

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

The Justice Department filed a lawsuit today against Mississippi-based developer Dawn Properties Inc. (Dawn) and its affiliated companies for violating the Fair Housing Act (FHA) and the Americans with Disabilities Act (ADA).  The lawsuit alleges that the defendants violated these laws when they designed and constructed five or more residential properties with barriers that make them inaccessible to persons with disabilities.

“For over two decades, the Fair Housing Act and ADA have required those who design and build multifamily housing complexes to make them accessible to persons with disabilities,” said Acting Assistant Attorney General Jocelyn Samuels for the Justice Department’s Civil Rights Division.  “When residential complexes are built with steps but without ramps or other means of access for wheelchair users, Americans with disabilities are denied the basic right to equal housing opportunities.”

“When a developer fails to comply with the Fair Housing Act and the Americans with Disabilities Act, it deprives those with disabilities of their fundamental right to live and raise families in the environment of their choosing,” said U.S. Attorney Gregory K. Davis for the Southern District of Mississippi. 

The suit, filed in the U.S. District Court in Gulfport, Mississippi, alleges that The Lexington (Ridgeland, Mississippi), The Beach Club (Long Beach, Mississippi), The Belmont (Hattiesburg, Mississippi), Grand Biscayne (Biloxi, Mississippi) and Inn by the Sea (Pass Christian, Mississippi) have significant barriers, including steps leading to building entrances, non-existent or excessively sloped pedestrian routes from apartment units to site amenities (such as playgrounds, picnic areas and clubhouses or leasing offices), insufficient maneuvering space for wheelchairs in bathrooms and kitchens, excessively high light switches and environmental controls, and inaccessible parking. 

The suit seeks a court order requiring the defendants to bring properties they have designed and constructed since 1991 into compliance with the FHA and the ADA, as well as monetary damages for persons harmed by the lack of accessibility and civil penalties to the United States.  The suit also names Dawn’s affiliates Southern Cross Construction Company Inc., Ridgeland Construction One LLC, The Beach Club LLC, The Beach Club II LLC, The Belmont of Lamar LLC, Grand Biscayne Apts. LLC and Seainn LLC, as well as the current owners of the complexes who are necessary parties to the litigation.  Anyone with information about the inaccessible conditions at these properties should call the Justice Department at 1-800-896-7743, and follow the prompts to enter mailbox 997.

The federal FHA prohibits discrimination in housing based on race, color, religion, national origin, sex, familial status, and disability.  Among other things, the FHA requires all multifamily housing constructed after March 13, 1991, to have basic accessibility features, including accessible routes without steps to all ground floor units, and units accessible to wheelchair users and others with disabilities.  More information about the Civil Rights Division and the laws it enforces is available at the division website .

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

A former employee of a U.S. contractor pleaded guilty today to conspiracy to defraud the United States in connection with a contract to provide reconstruction-related services in Afghanistan.

Acting Assistant Attorney General David O’Neil of the Justice Department’s Criminal Division and United States Attorney for the Middle District of Florida A. Lee Bentley made the announcement.

Alan D. Simmons pleaded guilty today before U.S. Magistrate Judge Patricia D. Barksdale in the Middle District of Florida.

According to court documents, Simmons worked in Afghanistan as a training program coordinator for PAE Inc. PAE had a contract with the United States Department of State to train and supply uniforms to Afghan correctional officers. Simmons was responsible for providing information to others at PAE as to the number and types of uniforms that were to be ordered and provided to the Afghan correctional officers upon their completion of the training program.

As alleged in court documents, Simmons and others created a company, Aminzian Logistics Services (Aminzian), ostensibly to provide uniforms to PAE as a subcontractor. In fact, Aminzian would submit false and fraudulent invoices to PAE seeking payment for goods that were not in fact provided. After Aminzian was paid, Simmons and his co-conspirators split the proceeds. The United States reimbursed PAE for its payments to Aminzian and incurred a loss of over $120,000.

The case was investigated by the Department of State Office of Inspector General and the Special Inspector General for Afghanistan Reconstruction (SIGAR). This case was prosecuted by Special Trial Attorney Mark H. Dubester, on detail from SIGAR, and Assistant U.S. Attorney Kevin C. Frein of the Middle District of Florida.

Kenneth Gaddie, aka K.G., 24, of Nashville, Tennessee, pleaded guilty to one count of racketeering conspiracy in federal court in Nashville, announced Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, U.S. Attorney David Rivera for the Middle District of Tennessee and Special Agent in Charge Jeffrey L. Fulton for the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Nashville Field Division.

According to the plea agreement, from 2006 through December 2011, Gaddie was a member and associate of the Bloods gang. He and other known Bloods gang members committed multiple acts of murder, robbery, and narcotics trafficking on behalf of the gang.

Gaddie and numerous Bloods gang members met at various locations in the Nashville area, including Shelby Park, Cedar Hill Park and the Galaxy Star Drug Awareness and Gang Prevention Center, on a regular basis to, among other things, report on gang-related business, collect dues, commit disciplinary actions against fellow gang members, discuss acts of violence against rival gang members and initiate or “jump in” new members by beating them.

Further according to the plea agreement, on June 25, 2008, Gaddie shot and wounded an individual in furtherance of the Bloods gang’s criminal enterprise. Less than one month after this incident, on July 17, 2008, Gaddie and others shot at another individual.

Thirty-seven individuals have pleaded guilty or have been convicted at trial in the Middle District of Tennessee to various crimes related to their involvement in the Bloods gang. Gaddie is the final defendant to be convicted of racketeering offenses in connection with this investigation. He is scheduled to be sentenced on Aug. 21, 2014.

The investigation was a joint operation conducted by the ATF; the Metropolitan Nashville Police Department; U.S. Marshals Service; the LaVergne, Tennessee, Police Department; and the Davidson County, Tennessee Sheriff’s Office. The case was prosecuted by Trial Attorney Kevin L. Rosenberg of the Criminal Division’s Organized Crime and Gang Section, Assistant U.S. Attorney Scarlett S. Nokes of the Middle District of Tennessee, and former Trial Attorney Cody Skipper of the Organized Crime and Gang Section.

The Justice Department and Internal Revenue Service (IRS) announced today that a federal grand jury in Anchorage, Alaska, returned a superseding indictment yesterday charging Michael D. Brandner, an Anchorage physician specializing in plastic surgery, on three counts of tax evasion.  Brandner has also been charged with seven counts of wire fraud in an indictment returned in September 2013.

According to the superseding indictment, Brandner engaged in various activities to evade his taxes for 2008, 2009 and 2010, including making false and misleading statement to IRS special agents and filing false tax returns for each of the three years.  In the three false returns, Brandner failed to report the existence of financial accounts in Panama and Costa Rica over which he had signature authority, and also failed to report foreign interest income of more than $9,000 for 2008, more than $150,000 for 2009, and more than $150,000 for 2010.  The indictment also alleges that Brandner attempted to evade more than $600,000 in federal income taxes over the three years. 

According to court documents, Brandner engaged in a scheme to hide and conceal millions of dollars of assets from the Alaska courts and from his wife of 28 years who was divorcing him.  Shortly after the divorce was filed, Brandner left Alaska and drove to Central America after converting assets into five cashier’s checks worth over $3,000,000.

An indictment is merely an allegation and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.  If convicted, Brandner faces a statutory maximum sentence of five years in prison for each of the three tax evasion charges and a statutory maximum sentence of 20 years in prison for each of the seven wire fraud charges.

The case was investigated by IRS-Criminal Investigation and by Homeland Security Investigations and is being prosecuted by Trial Attorney Ignacio Perez de la Cruz of the Justice Department’s Tax Division and Assistant U.S. Attorney Bryan Schroder for the District of Alaska.

A federal grand jury in Nashville, Tennessee, returned a three count indictment yesterday against Timothy Flanagan, 33, formerly of Giles County, Tennessee, currently residing in Hudson, Florida, charging him with federal offenses for his role in a cross-burning in front of an interracial family’s home in Minor Hill, Tennessee, the Department of Justice and U.S. Attorney’s Office for the Middle District of Tennessee announced.

The indictment charges Flanagan with one count of conspiracy to violate housing rights, one count of criminal interference with the right to fair housing and one count of using fire to commit a federal felony. 

The indictment alleges that on April 30, 2012, Flanagan conspired with others to threaten, intimidate and interfere with an interracial couple’s enjoyment of their housing rights in Minor Hill, Tennessee.  According to the indictment, Flanagan and two other individuals devised a plan to burn a cross in the yard of an interracial couple who had recently had a baby.  The conspirators constructed a wooden cross, purchased diesel fuel and then covered the cross in a diesel-fuel-soaked cloth.  The conspirators then drove the cross to the victims’ residence, placed the cross in the driveway and ignited it.  Flanagan and his co-conspirators allegedly chose to burn the cross at the victims’ house because of their race, as well as the race of their infant child.

This case was investigated by the Columbia, Tennessee, Resident Agency of the FBI and the Giles County Sheriff’s Office, and is being prosecuted by Assistant U.S. Attorney Blanche Cook of the Middle District of Tennessee and Trial Attorney Jared Fishman of the Justice Department’s Civil Rights Division.

An indictment is merely an accusation and the defendant is presumed innocent unless and until proven guilty.  

Sixteen current and former Puerto Rico police officers have been indicted for their alleged participation in a criminal organization, run out of the police department, that used their affiliation with law enforcement to make money through robbery, extortion, manipulating court records and selling illegal narcotics.

Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, U.S. Attorney Rosa Emilia Rodríguez-Vélez of the District of Puerto Rico and Special Agent in Charge Carlos Cases of the FBI’s San Juan Division made the announcement.

“ The criminal action today dismantles an entire network of officers who, we allege, used their badges and their guns not to uphold the law, but to break it,” said Acting Assistant Attorney General O’Neil. “The indictment portrays a classic criminal shakedown, an organized crime spree of which the most experienced mafia family would have been proud.   But the people wielding the guns and stealing the drugs here weren’t mob goodfellas or mafia soldiers – these were police officers violating their oaths to enforce the law, making a mockery of the police’s sacred responsibility to protect the public. ”

“This is a troubling day for law enforcement in Puerto Rico. Officers who use their badges as an excuse to commit egregious acts of violence and drug trafficking are an affront to the rule of law,” said US Attorney Rosa Emilia Rodríguez-Vélez.  “According to these allegations, the law enforcement officers charged today sold their badges by taking payoffs from drug dealers that they should have been arresting, extorting money, planting evidence and stealing from them, to mention a few of their crimes.  They not only betrayed the citizens they were sworn to protect, they also betrayed the thousands of honest, hard-working law enforcement officers who risk their lives every day to keep us safe.  We will continue to work with our local law enforcement partners to end this cycle of corruption and renew Puerto Rico’s trust in its police officers.”

“Today is a sad day for Puerto Rico, where a group of police officers allegedly disgraced their uniform and are a shame to the Police of Puerto Rico,” said FBI Special Agent in Charge Cases. “They not only let their colleagues and family down, they let the citizens of Puerto Rico down.”

The indictment, returned yesterday by a federal grand jury in the District of Puerto Rico, includes 36 charges against the following individuals: Osvaldo Vazquez-Ruiz, 38; Orlando Sierra-Pereira, 37; Danny Nieves-Rivera, 34; Roberto Ortiz-Cintron, 34; Yovanny Crespo-Candelaria, 33; Jose Sanchez-Santiago, 31; Miguel Perez-Rivera, 34; Nadab Arroyo-Rosa, 33; Jose Flores-Villalongo, 52; Luis Suarez-Sanchez, 36; Eduardo Montañez-Perez, 29; Carlos Laureano-Cruz, 40; Carlos Candelario-Santiago, 46; Ruben Casiano-Pietri, 36; Ricardo Rivera-Rodriguez, 39; and Christian Valles-Collazo, 28. At the time of the crimes charged, Flores-Villalongo and Candelario-Santiago were sergeants with the Police of Puerto Rico (POPR); the others were police officers.

The first 13 defendants listed are charged with conspiring to violate the Racketeer Influenced and Corrupt Organizations (RICO) Act. Other charges against certain defendants include extortion and attempted extortion under color of official right, conspiracy to commit robbery and attempted robbery, illegal use and sale of firearms, narcotics trafficking, civil rights violations, theft of government property, and false statements to federal agents.

According to the indictment, the officers charged with RICO conspiracy were members of a criminal organization who sought to enrich themselves through a pattern of illegal conduct. The officers worked together to conduct traffic stops and enter homes or buildings used by persons suspected of being engaged in criminal activity to steal money, property and narcotics. The officers planted evidence to make false arrests, then extorted money in exchange for their victims’ release from custody. In exchange for bribe payments, the defendants gave false testimony, manipulated court records and failed to appear in court when required so that cases would be dismissed. The officers also sold and distributed wholesale quantities of narcotics.

For example, in April 2012, defendants Vazquez-Ruiz and Sierra-Pereira allegedly conducted a traffic stop in their capacity as police officers and stole approximately $22,000 they believed to be illegal drug proceeds. Vazquez-Ruiz later attempted to extort approximately $8,000 from an individual they believed to be a drug dealer’s accomplice in exchange for promising to release an alleged prisoner.

In another example, the indictment alleges that in November 2012, defendants Sierra-Pereira, Nieves-Rivera, Ortiz-Cintron and Valles-Collazo illegally entered an apartment and stole approximately $30,000, which they believed were illegal lottery proceeds.

The indictment charges that the defendants frequently shared the proceeds they illegally obtained and that they used their power, authority and official positions as police officers to promote and protect their illegal activity. Among other things, the indictment charges that they used POPR firearms, badges, patrol cars, tools, uniforms and other equipment to commit the crimes and concealed their illegal activity with fraudulently obtained court documents and falsified POPR paperwork to make it appear that they were engaged in legitimate police work.

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

The case is being investigated by the FBI’s San Juan Division. The case is being prosecuted by Trial Attorneys Brian K. Kidd, Emily Rae Woods and Menaka Kalaskar of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Mariana Bauza of the District of Puerto Rico.

Citizens of Puerto Rico with allegations of law enforcement corruption are encouraged to contact the FBI’s San Juan Division at (787) 754-6000.

Related Materials:

Indictment

An owner and operator of community mental health centers in Baton Rouge, Louisiana, as well as a patient recruiter for a related facility in Houston, Texas, were convicted on Wednesday, May 21, 2014, for their roles in a $258 million Medicare fraud scheme involving three facilities that filed fraudulent claims for psychiatric services that were unnecessary or never actually provided.

Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, U.S. Attorney Walt Green for the Middle District of Louisiana, Special Agent in Charge Michael J. Anderson for the FBI’s New Orleans Field Office, Special Agent in Charge Mike Fields for the Dallas Region of the Department of Health and Human Services (HHS) Office of Inspector General and Louisiana State Attorney General James Buddy Caldwell made the announcement.

“These convictions resulted from a massive fraud involving thousands of false billings for mental health services that were either not needed or not given," said Acting Assistant Attorney General O'Neil.  "It was a sophisticated scheme involving kickbacks, falsified medical records and false billings.  We will use all tools at our disposal – from data to traditional law enforcement techniques – to root out these schemes and bring the appropriate people to justice.”

“These significant convictions are the latest example of our ongoing commitment to rooting out health care fraud throughout our community,” said U.S. Attorney Green. “We will use all of the tools and resources at our disposal to prosecute those who submit false information and false claims to Medicare - especially where, as in this case, those claims cost the United States tens of millions of dollars and were filed using the names and identities of Medicare beneficiaries who are particularly vulnerable. I appreciate the tremendous assistance we received in this case, and in our other anti-health care fraud efforts, from the Department's Criminal Division and our federal and state law enforcement partners.”

“The success of this broad sweeping, complex healthcare fraud investigation could not have been possible without the tremendous collaboration between all agencies involved,” said Special Agent in Charge Anderson. “It clearly demonstrates how law enforcement can make such a significant community impact as a result of such strong partnerships.”

“Whenever Medicare providers are motivated by greed, our most vulnerable citizens, the elderly, are put at risk," said Special Agent in Charge Fields. "Our HHS-OIG agents will continue to work closely with our law enforcement partners to investigate providers who will stop at nothing to loot the Medicare Trust Fund.”

Roslyn F. Dogan, 53, of Baton Rouge, Louisiana, and James R. Hunter, 49, of Houston, Texas, were found guilty after a six-day jury trial before Chief U.S. District Judge Brian A. Jackson of the Middle District of Louisiana. Dogan was convicted of conspiracy to commit health care fraud and two counts of health care fraud. Hunter was convicted of conspiracy to commit health care fraud and conspiracy to pay and receive health care kickbacks.

The investigation into these three community mental health centers - Shifa Community Mental Health Center of Baton Rouge (Shifa Baton Rouge), Serenity Center of Baton Rouge (Serenity Center), and Shifa Community Mental Health Center of Texas (Shifa Texas) - has resulted in the convictions of 17 individuals employed by the facilities, including therapists, marketers, administrators, owners and the medical director. The investigation is ongoing.

According to court documents, the companies billed Medicare more than $258 million over a period of seven years for partial hospitalization program services for the mentally ill that were unnecessary or never provided.

Further according to court documents, Dogan was part owner of Serenity Center as well as the marketer for Serenity Center and Shifa Baton Rouge. As part of the scheme, Dogan would arrange for Medicare-eligible patients to be sent to Shifa Baton Rouge and Serenity Center and admitted to those facilities, regardless of whether the patients needed partial hospitalization program services. In order to increase billings to Medicare, Dogan, along with others in management, instructed administrators and therapists to falsify patient treatment records for services that had not been provided. Dogan also concealed the fraud at Shifa Baton Rouge and Serenity Center by directing that patient billing statements be intercepted from patients’ mail in order to prevent the patients from seeing the services that had been billed in their names, and by stealing incriminating documents seized pursuant to a search warrant from federal custody.

According to court documents, Hunter, a resident of Houston, was paid $1,500 per week in cash to direct patients to attend the partial hospitalization program at Shifa Texas. Hunter, in turn, paid each patient $75 per week to attend the program. In an effort to get patients admitted to Shifa Texas, Hunter instructed patients as to the types of symptoms and diagnoses to describe to physicians in order to be admitted to the program.

The individuals who have pleaded guilty in this case include:

·          Dr. Zahid Imran - Imran, a Baton Rouge area psychiatrist, served as Shifa’s medical director and co-owner of Serenity Center and Shifa Texas. As part of the scheme, Imran would admit mentally ill patients to the facilities, some of whom were inappropriate for partial hospitalization. Imran would then re-certify these patients’ appropriateness for the program, in an effort to continue to bill Medicare for services. In order to support their fraudulent Medicare billing, Imran and others would falsify patient treatment records to reflect services on dates where no such services were provided.

·          Hoor Naz Jafri – Jafri was an owner of all three facilities in Baton Rouge and Houston and a marketer for Shifa Baton Rouge and Serenity Center. Jafri was also part owner of two affiliated residential facilities; patients who lived at these apartments were required to attend the programs at Shifa Baton Rouge and Serenity Center, regardless of whether these patients actually needed or desired the services. As a marketer for Shifa Baton Rouge and Serenity Center, Jafri caused patients to be admitted to the facilities who were inappropriate for the services. As management at all three facilities, Jafri directed administrators and therapists at these facilities to falsify records for treatment that patients did not in fact receive.

·          Sedra Signater and Arthur Smith – Signater and Smith were the administrators of Shifa and Serenity Center, respectively. At the direction of management, Signater and Smith fabricated and instructed other therapists at the facilities to fabricate patient treatment records to indicate therapy had been provided to patients, when in fact, no such therapy had been provided. These fabricated records formed the basis of the fraudulent billings to Medicare.

·          Erica Williams and Kyeiana Murray – Williams and Murray were office managers of Shifa Texas and Shifa Baton Rouge, respectively. Williams also served as the admissions coordinator of Shifa Texas. As the office managers at these facilities, Murray and Williams facilitated and coordinated the collection of the falsified patient treatment records and submitted these records for billing to Medicare. Williams also directed therapists at Shifa Texas to falsify patient treatment records and coordinated the payment of kickbacks to patient recruiter James Hunter in Houston.

·          Robert Booker, Teryl Vincent, Todd Ulmer, June Durio, Nancy Reed, Jason Myer, Anna Ngang and Patrick Wallace – Booker, Vincent, Ulmer, Durio, Reed and Myer, therapists at Shifa Baton Rouge and Serenity Center, and Anna Ngang and Patrick Wallace, therapists at Shifa Texas, were directed by Signater, Smith, and Williams to falsify patient treatment records for group therapy sessions they had not conducted.

The case was investigated by HHS-OIG, the FBI, and the Medicaid Fraud Control Unit of the Louisiana State Attorney General’s Office, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section. This case is being prosecuted by Trial Attorneys Abigail Taylor and Dustin Davis of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Shubhra Shivpuri of the Middle District of Louisiana.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 1,900 defendants who have collectively billed the Medicare program for almost $6 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

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

 
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A Detroit federal grand jury returned a two-count indictment against an executive of a Japanese manufacturer of automotive parts for his participation in a conspiracy to fix prices of heater control panels and for obstruction of justice for ordering the destruction of evidence related to the conspiracy, the Department of Justice announced today.

The indictment, filed today in the U.S. District Court for the Eastern District of Michigan, charges Hitoshi Hirano with participating in a conspiracy to suppress and eliminate competition in the automotive parts industry by agreeing to rig bids for, and to fix, stabilize and maintain the prices of heater control panels sold to Toyota Motor Corp. and Toyota Motor Engineering & Manufacturing North America Inc. (collectively, Toyota) for installation in vehicles manufactured and sold in the United States and elsewhere. Hirano, who served as an executive managing director at Tokai Rika Co. Ltd., was also charged with knowingly and corruptly persuading, and attempting to persuade, executives of Tokai Rika to destroy documents and delete electronic data that may contain evidence of antitrust crimes in the United States and elsewhere.

“The Antitrust Division will not tolerate executives directing their subordinates to engage in illegal cartels and conspiracies,” said Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “Attempts to then obstruct justice and destroy evidence will give rise to additional charges.”

The indictment alleges, among other things, that from at least as early as October 2003 and continuing until at least February 2010, Hirano and others attended conspiratorial meetings with co-conspirators and reached collusive agreements to rig bids, allocate the supply and fix the prices for heater control panels sold to Toyota. According to the indictment, Hirano participated directly in the conspiratorial conduct, and directed, authorized and consented to his subordinates’ participation. In addition, the indictment charges that in February 2010, after Hirano learned that the FBI had searched Tokai Rika’s U.S. subsidiary, he knowingly and corruptly persuaded employees at Tokai Rika to destroy paper documents and delete electronic data intending to prevent the grand jury from obtaining evidence of antitrust crimes.

Tokai Rika is a manufacturer of automotive parts, including heater control panels, based in Nagoya, Japan. Tokai Rika pleaded guilty on Dec. 12, 2012, for its role in the conspiracy and to obstruction of justice, and was sentenced to pay a $17.7 million criminal fine.

Heater control panels are located in the center console of an automobile and control the temperature of the passenger compartment of a vehicle. Heater control panels differ by function and design for a particular vehicle model. Examples include automatic heater control panels, which maintain the temperature within the vehicle to a designated temperature point, and manual heater control panels, which regulate the temperature through manual controls operated by vehicle occupants.

Including Hirano, 34 individuals have been charged in the government’s ongoing investigation into price fixing and bid rigging in the auto parts industry, 24 of whom have pleaded guilty or agreed to plead guilty. Of those, 22 have been sentenced to serve prison terms ranging from a year and one day to two years. Additionally, 27 companies have pleaded guilty or agreed to plead guilty and have agreed to pay a total of more than $2.3 billion in fines.

Hirano is charged with price fixing in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine. The maximum penalty for obstruction of justice is 20 years in prison and a $250,000 criminal fine for individuals.

Today’s indictment is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by four of the Antitrust Division’s criminal enforcement sections and the FBI. Today’s charges were brought by the Antitrust Division’s Washington Criminal I Section and the FBI’s Detroit Field Office, with the assistance of the FBI headquarters’ International Corruption Unit. Anyone with information on price fixing, bid rigging and other anticompetitive conduct related to other products in the automotive parts industry should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Detroit Field Office at 313-965-2323.

Dr. Michael N. Mangold pleaded guilty to tax evasion and making false statements today in the U.S. District Court for the Eastern District of Wisconsin, announced the Justice Department and Internal Revenue Service (IRS).  Mangold was indicted in October 2012. 

According to court documents, Mangold was a medical doctor specializing in emergency medicine and urgent care who, since 1993, had worked as a physician for various hospitals, emergency rooms and urgent care facilities.  At times, he also worked as a physician in state and county correctional facilities.  Mangold primarily earned income through a combination of employee wages and independent contractor payments. 

In his plea agreement, Mangold admitted that from 1997 through 2007, he willfully concealed his income by filing false tax returns and making frivolous legal arguments to the IRS with regard to his overall tax liabilities.  Mangold further admitted that he made false statements to the civil and criminal-side of the IRS during the investigation.  In total, Mangold owed the IRS approximately $191,577 in taxes based on his income and wages during the relevant calendar years, plus interest.

Mangold also admitted that he made materially false statements in the course of a civil lawsuit concerning his failure to repay federal loan obligations by submitting a false financial affidavit to government officials, which contained false statements about the amount of income he earned as a doctor.

As a result of his plea, Mangold faces a maximum sentence of 10 years in prison and a $350,000 fine.

This case was investigated by special agents of IRS - Criminal Investigation.  Trial Attorneys Charles M. Edgar Jr. and Rebecca Perlmutter of the Justice Department’s Tax Division are prosecuting the case.

The owner of a home health agency involved in a $13.8 million Medicare fraud scheme was sentenced today to serve 72 months in prison.

Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade, Special Agent in Charge Paul M. Abbate of the FBI Detroit Field Office and Special Agent in Charge Lamont Pugh III of the Detroit Office of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Office of Investigations made the announcement.

Zahir Yousafzai, 44, was sentenced by U.S. District Judge Gerald E. Rosen in the Eastern District of Michigan. In addition to his prison term, Yousafzai was sentenced to three years of supervised release and was ordered to pay $4,131,135 in restitution, jointly and severally with his co-defendants.

According to court records, in 2009, Yousafzai and his co-conspirators acquired beneficial ownership and control over two home health companies, First Care Home Health Care LLC and Moonlite Home Care Inc. Yousafzai also assisted in the operation of two additional home health care agencies, Physicians Choice Home Health Care LLC and Quantum Home Care Inc., owned by co-conspirators.

Also according to court records, Yousafzai, a physical therapist assistant, paid and directed the payment of various medical professionals, including doctors, nurses, physical therapists and physical therapist assistants, to create fictitious patient files to document purported home health services that were never provided.

In addition, according to court records, Yousafzai paid and directed the payment of kickbacks to recruiters who obtained beneficiaries’ Medicare information that he used to submit claims for home health care that was never provided. The beneficiaries sometimes pre-signed forms that were later falsified to indicate they received home health services, when they did not. In other instances, the beneficiaries’ signatures were forged. Yousafzai signed patient files falsely stating that physical therapy services were provided.

Additionally, according to court records, Yousafzai incorporated a shell company known as A-1 Nursing and Rehab Inc., through which he laundered the proceeds of the health care fraud.

Between July 2008 and September 2011, Medicare paid approximately $13.8 million in fraudulent home health claims submitted by the four home health agencies associated with Yousafzai. Of this amount, Medicare paid more than $4 million to First Care and Moonlite, the companies that Yousafzai owned in whole or in part.

This case was investigated by the FBI and HHS-OIG and was brought by the Medicare Fraud Strike Force, a joint effort of the U.S. Attorney’s Office for the Eastern District of Michigan and the Criminal Division’s Fraud Section. The case was prosecuted by Assistant Chief Catherine K. Dick and Trial Attorney Matthew C. Thuesen 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 almost 1,900 defendants who have collectively billed the Medicare program for more than $6 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

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

Two Florida men were sentenced today in the Middle District of Florida for their roles in a fraud scheme involving the submission of more than $10 million in fraudulent claims to Medicare for physical therapy.

Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, U.S. Attorney for the Middle District of Florida A. Lee Bentley III, Acting Special Agent in Charge Brian P. Martens of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Florida region, and Special Agent in Charge Paul Wysopal of the FBI’s Tampa Field Office made the announcement.

Rafael Roche, 43, and Alain Remy, 36, previously pleaded guilty to an indictment charging them with conspiracy to commit money laundering involving financial proceeds from a health care fraud scheme. Today, they were sentenced to serve 46 months and 37 months respectively in prison to be followed by three years of supervised release. In addition, they will be required to pay $1,847,222 in restitution, jointly and severally with co-conspirators.

According to documents filed in the case, Roche, Remy and others were part of a Medicare fraud conspiracy involving Renew Therapy Center of Port St. Lucie LLC (Renew Therapy), an outpatient rehabilitation facility. From November 2007 through August 2009, Renew Therapy submitted approximately $10,549,361 in fraudulent claims for reimbursement to Medicare for therapy services that were not legitimately prescribed by physicians and not provided to Medicare beneficiaries. As a result, Medicare deposited approximately $6,248,056 into a Renew Therapy bank account. The fraud proceeds in that account were subsequently disbursed to various individuals and entities, including a combined total of $1,847,222 to Ariguanabo Investment Group Inc. and IRE Diagnostic Center Inc., which are shell companies that Roche and Remy controlled, and was then moved to additional shell companies that Roche and Remy established and controlled.

This case was 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 the U.S. Attorney’s Office for the Middle District of Florida. This case was prosecuted by Trial Attorney Christopher J. Hunter of the Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 1,900 defendants who have collectively billed the Medicare program for more than $6 billion. In addition, the HHS Centers for Medicare and 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 .

WASHINGTON—Following a collaborative and thorough review, Attorney General Eric Holder on Thursday announced a new policy for the Department of Justice that creates a presumption that statements made by individuals in federal custody, following arrest but prior to their first appearance in court, will be electronically recorded. Attorney General Holder said that the new policy will help to ensure accountability and promote public confidence in the institutions and processes that guide the nation’s law enforcement efforts.
 
“Creating an electronic record will ensure that we have an objective account of key investigations and interactions with people who are held in federal custody,” Attorney General Holder said. “It will allow us to document that detained individuals are afforded their constitutionally-protected rights.  And it will also provide federal law enforcement officials with a backstop, so that they have clear and indisputable records of important statements and confessions made by individuals who have been detained.”

The new policy was formally spelled out in a memorandum to U.S. Attorneys signed by Deputy Attorney General James M. Cole.

Beginning on July 11, 2014, the new policy establishes a presumption that the FBI, the Drug Enforcement Administration (DEA), the Bureau of Alcohol, Tobacco, Firearms, and Explosive (ATF), and the United States Marshals Service (USMS) will electronically record interviews occurring in a place of detention with suitable recording equipment.

According to the policy, prosecutors and agents are directed to use video recording to satisfy the presumption whenever possible. If video recording equipment considered suitable under agency policy is not available, audio equipment may be substituted. The policy applies broadly to all statements of persons in federal custody of the FBI, DEA, ATF or USMS after arrest, but prior to initial appearance.

The policy applies to all places of detention where persons are held in connection with federal criminal charges and can be interviewed. Importantly, any electronic recording equipment used for these purposes must capture the entirety of the interview.

The Attorney General, in an effort to expeditiously implement the sweeping new policy, has directed U.S. Attorney’s and field offices across the country to perform district-wide joint training for agents and prosecutors. These trainings will instruct agents and prosecutors on best practices associated with the electronic recording of interviews. Additionally, investigative agencies are expected to utilize recording equipment in sufficient numbers to meet anticipated needs for recording of such interviews.

The complete text of the Attorney General’s video message is below:

“Every day, in big cities and small towns across the country, hardworking prosecutors, agents, and investigators perform exceptional work in order to combat violent crime and other threats to the public.  They approach this high-stakes work with the utmost integrity and dedication.

“The professionalism of our personnel gives us the confidence to be as transparent as possible about how we perform our work.  We at the Department of Justice are committed to ensuring accountability and promoting public confidence in the institutions and processes that guide our law enforcement efforts.  Doing so not only strengthens the rule of law; it also enhances public safety – by building trust and fostering community engagement.

            “That’s why we are announcing a new step to raise our already high standards of accountability.  The Department of Justice is instituting a sweeping new policy pertaining to interviews of individuals in law enforcement custody.  This new policy, which will take effect on July 11th, creates a presumption that statements made by individuals in federal custody, after they have been arrested but before their initial appearance, will be electronically recorded.  The policy applies in a place of detention that has suitable recording equipment, and it encourages video recording whenever possible and audio recording when video is unavailable.  The policy also encourages agents and prosecutors to consider electronic recording in investigative or other circumstances not covered by the presumption.

            “This presumption in favor of recording applies to statements made by individuals in the custody of the FBI, the DEA, the ATF, and the United States Marshals Service.  It allows for certain exceptions—such as when the interviewee requests that the recording not occur or when recording is not practicable.      

“Creating an electronic record will ensure that we have an objective account of key investigations and interactions with people who are held in federal custody.  It will allow us to document that detained individuals are afforded their constitutionally-protected rights.  And it will also provide federal law enforcement officials with a backstop, so that they have clear and indisputable records of important statements and confessions made by individuals who have been detained.

“This policy will not – in any way – compromise our ability to hold accountable those who break the law.  Nor will it impair our national security efforts.  On the contrary: it will reduce uncertainty in even the most sensitive cases, prevent unnecessary disputes, and improve our ability to see that justice can be served.

“Federal agents and prosecutors throughout the nation are firmly committed to due process in their rigorous and evenhanded enforcement of the law.  This new recording policy not only reaffirms our steadfast commitment to these ideals – it will provide verifiable evidence that our words are matched by our deeds.  And it will help to strengthen the robust and fair system of justice upon which all Americans depend – and which every American deserves.”

The full video message is available at http://www.justice.gov/agwa.php. 

WASHINGTON - Thanks for that kind introduction.   I’m grateful to be here at Brookings today discussing emerging national security threats.

On Monday, the Department of Justice announced charges against five members of the Chinese military for computer hacking, economic espionage, and other offenses directed at six American victims in the U.S. nuclear power, metals, and solar products industries.

Today, I’ll focus on this growing threat: state-sponsored cyber intrusions targeting, for profit, sensitive and proprietary information of U.S. companies.

These charges against uniformed members of the Chinese military were the first of their kind.   Some said they could not be brought.

At the Department, we follow the facts and evidence where they lead.   Sometimes, the facts and evidence lead us to a lone hacker in a basement in the U.S., or an organized crime syndicate in Russia.

And sometimes, they lead us to a uniformed member of the Chinese military.   But, no matter where they lead, there can be no free passes.

We should not stand idly by, tacitly giving permission to anyone to steal from us.   We will hold accountable those who steal – no matter who they are, where they are, or whether they steal in person or through the Internet.   Because cybercrime has real victims.

While cases like the one brought in Pittsburgh are extremely challenging, this week we proved that they are possible.   The criminal justice system must be a critical component of our nation’s cybersecurity strategy.   As long as criminals continue stealing from American businesses, we will continue pursuing those criminals.

The charges announced on Monday were groundbreaking.   They represent a significant step forward in our cyber approach.

And they were many years in the making.    

The National Security Division

Within the Justice Department, the National Security Division – or NSD – focuses on cyber threats to the national security – those posed by terrorists and nation states.

Our approach to these threats is deeply rooted in our Division’s history, and our success in the cyber arena builds upon a solid foundation.

NSD was created in response to the grave threat of terrorism.   After the devastating attacks of September 11, it became clear that the Justice Department needed to reorganize to tackle terrorism and national security threats more effectively.

We needed a single Division to integrate the work of prosecutors and law enforcement officials with intelligence attorneys and the Intelligence Community.

So, in 2006, Congress created the Department’s first new litigating division in almost half a century: NSD.

NSD works closely with partners throughout the government to ensure we leverage all available tools to combat the terrorism threat.   And we’ve proven, in that context, that the criminal justice system is a vital part of our nation’s counterterrorism strategy.

Just this week, Abu Hamza al-Masri was convicted by a jury in New York on eleven counts.   He was involved in an attack in Yemen in December 1998 that resulted in the deaths of four hostages and provided material support to terrorists, including al Qaeda and the Taliban.

In March, Sulaiman Abu Ghaith was convicted of conspiring to kill Americans and other terrorism charges.   Abu Ghaith was the son-in-law of Usama bin Laden and a senior member of al Qaeda.   He was the face and voice of al Qaeda in the days and weeks after the 9/11 attacks.

In both of these cases, it took more than a decade, but as a result of our integrated approach to combating terrorism, these men were brought to justice.   These cases are the two most recent in a long line of successful terrorism prosecutions.

Recently, we took the lessons we learned from counterterrorism and applied them to our work on national security cyber threats.   In the face of escalating threats, we recognized the need to reorganize.   To integrate.

When I was chief of staff for Director Bob Mueller, the FBI undertook a transformation to meet the growing cyber threat.   In 2011, NSD did the same.

In late fall of 2011, ten years after 9/11, we established a review group to evaluate NSD’s existing work on national security threats and chart out a plan for the future.   Six months later, that team issued recommendations that shaped what NSD’s national security cyber program looks like today.

Most significantly, in 2012, we created and trained the National Security Cyber Specialists’ Network to focus on combating cyber threats to the national security.   This Network – known as NSCS – includes prosecutors from every U.S. Attorney’s Office around the country, along with experts from the Department’s Computer Crime and Intellectual Property Section and attorneys from across all parts of NSD.

Adopting the successful counterterrorism model, we now have prosecutors nationwide routinely meeting with the FBI to review intelligence and investigative files.

The creation of the NSCS Network was motivated by a desire to make a tangible impact on U.S. cybersecurity efforts through criminal investigation and prosecution.   By December 2012, we made public predictions that with the establishment of the NSCS – by empowering more than a hundred prosecutors in the field working with the FBI on these cases – one would be brought. 

The Pittsburgh Case

And this week, we made good on that promise.   It is this new, integrated approach that made the Pittsburgh case possible.   As part of the creation of the NSCS, we brought prosecutors from around the country – Wisconsin, New York, and Georgia – to help NSD build this case.

We partnered with the Western District of Pennsylvania, where victims were repeatedly hit.   And we worked with offices across the FBI – from California, to Oregon, to Oklahoma, and back here in D.C.

Our team thought creatively.   They worked collaboratively.   They explored all available options for stopping this activity.

That’s how we were able to indict five members of the Third Department of the People’s Liberation Army, or “3PLA,” and its “Unit 61398.”   These men stand accused of cyber intrusions targeting a range of U.S. industries.

The indictment alleges, with particularity, specific actions on specific days by specific actors to use their computers to steal information from across our economy.

It alleges that while the men and women of our American businesses spent their business days innovating, creating, and developing strategies to compete in the global marketplace, these members of Unit 61398 spent their business days in Shanghai stealing the fruits of Americans’ labor.

It alleges that they stole information particularly beneficial to Chinese companies, and took communications that would provide competitors with key insight into the strategy and vulnerabilities of the victims.

Answering Critics

Now, some question this law enforcement action.   Generally speaking, these questions fall into three categories:

• First , whether there is a clear line between what these individuals have been accused of, and what the U.S. or other nations do;
• Second, whether charges like these can truly impact cybersecurity, particularly when there may be significant challenges to arresting and ultimately trying these individuals in criminal court;
• And third, whether the government should instead focus on hardening defenses rather than pursuing charges.

Stealing Is Stealing

As to the first question:   while some commentators may ask whether this is a new line to draw, in fact we are aware of no nation that publicly states that theft of information for commercial gain is acceptable.

Even in this case, China has not attempted to justify the allegations.   Instead, they deny them.

And this has been a consistent response.  A little over a year ago, the Chinese Government flatly denied reports that Unit 61398 was hacking U.S. companies.   A spokesman for China’s Ministry of National Defense said, “Chinese military forces have never supported any hacking activities.”

China also challenged the United States to present “hard evidence, evidence that could stand up in court,” that cyber attacks against American targets are connected to the Chinese military.   Well, we did.

The response?   Hours after Monday’s announcement, the Chinese Foreign Ministry called the accusations “purely fictitious, extremely absurd.”

Now, we are confident that we have the evidence to back up these accusations in a court of law.   Read the indictment.   For the first time, we have exposed the real faces and names behind the keyboards in Shanghai used to steal from American businesses.

This is not conduct that responsible nations within the global economic community should tolerate.

In the United States, we believe that individuals and companies are entitled to the results of our creativity, including our property—and intellectual property.   And we believe their work should not simply be taken from them and given to others.

This is not a uniquely American value.   Individuals around the world believe that people shouldn’t take what others make.

Responsible nations do conduct intelligence activities.   And nations openly acknowledge that they have intelligence services.   Like others, our intelligence activities are focused on the national security needs of our country.

That is why the President, earlier this year, reaffirmed in PPD-28 that “[i]t is not an authorized foreign intelligence . . . purpose to collect such information to afford a competitive advantage to U.S. companies and U.S. business sectors commercially.”

U.S. foreign intelligence collection occurs under the framework of the rule of law, involving oversight by all three branches of Government.   As the Church Committee Report recognized back in 1976, “the Constitution provides for a system of checks and balances and interdependent power as between the Congress and the executive branch with respect to foreign intelligence activity.”

The very protections built into that legal framework subject that information to rigorous oversight, and prevent sharing it with private companies for their private gain.

But let’s be clear: those same protections do not exist in certain other countries that are targeting, every day, American trade secrets, sensitive business information, and intellectual property in order to steal specific information and pass it along to their domestic companies in order to give them a competitive edge.   To pretend otherwise is to promote a narrative of false equivalency.

Even though we know of no nation that stands up publicly to defend corporate theft for the profit of state-owned enterprises, in the shadows, some appear to encourage and support it.

In short, we allege the members of Unit 61398 committed theft, pure and simple.

So although this case is the first of a kind, it is also, in some respects, just business as usual.   As they have for decades, prosecutors in the field and at CCIPS use criminal investigation and prosecution to disrupt cyber crime.   CCIPS is one of our most important partners in the fight against cyber threats.

Law enforcement has long been used to combat cyber threats and, as recently as this week, has made a tremendous impact on our nation’s cybersecurity.

As you have likely seen, on Monday, the Department of Justice announced charges in connection with Blackshades malicious software.   These charges were part of the largest-ever global cyber law enforcement operation, involving more than 90 arrests and other law enforcement actions in 19 countries.

Likewise, in the national security arena, when criminal law enforcement is the most effective tool we have to disrupt a terrorist threat, we employ it no matter how far away or shielded from prosecution the defendants may seem today.

When criminal enterprises steal our intellectual property and personal information, or threaten our security, we investigate and prosecute them.

These are not the first charges that we have lodged against individuals who steal from Americans to benefit state-owned enterprises.

As just one example, in March, we successfully obtained a significant conviction for economic espionage.

Walter Liew, an electrical engineer, obtained one of DuPont’s secrets – a process, honed over many decades, for making a multi-purpose white pigment – and passed it to a large Chinese state-owned company.

What Liew stole was something Americans see and use daily.   Something that does not have a national security implication.   Something that simply brings a profit.

Liew stole the formula for the color white.   He was brought to justice in the U.S. criminal justice system.

Like Liew, we allege that the members of Unit 61398 stole to benefit Chinese state-owned enterprises.   The thefts are similar.   They both took place here.   The difference is that Unit 61398 operated remotely, from the previously safe spaces in Shanghai.

We will no longer permit safe havens.   Individuals cannot avoid the consequences of their actions simply by capitalizing on 21st century tools and operating from the comfort of their desks half a world away.  

Meeting the Threat of Cyber Economic Espionage

These crimes are the same as many crimes that we have investigated and prosecuted before.   Only the method or means is different.

But the threat we face is increasingly moving out of the physical world and into cyberspace, and thus, prosecutions of those who steal from us remotely must and will become the new normal.   We will continue to pursue this option, along with others available to us.

The threat of economic espionage is serious, and the threat of cyber economic espionage is mounting.   Some estimate that, every year, the U.S. loses more than $300 billion from theft of our intellectual property.   That figure is about equivalent to the current annual level of U.S. exports to Asia.

Losses of that magnitude cost the American economy untold numbers of jobs.   They reduce the profit that American firms make from research and development, which in turn reduces the incentives and resources for innovation.   As U.S. Attorney David Hickton said on Monday, “When these cyber-intrusions occur, production slows, plants close, workers get laid off and lose their homes.”

Such activity also undermines the trust between countries and companies that is necessary to do business in a globalized economy.

And our companies cannot face it alone.   Companies cannot depend solely on their antivirus software to defend against attackers linked to deep state military budgets.   It’s not a fair fight.

To defend against those empowered by a government, we need our government on our side.   We must support our entrepreneurs by using every tool we have, to prevent, deter, and disrupt this conduct in any way we can.

And likewise, we need you.   Just as the local police can’t control crime without victims calling in those crimes, our law enforcement officials, too, need cooperation from victims.   It’s our hope that the more cases we bring and the more perpetrators we bring to justice, the higher the level of cooperation we’re likely to receive.

We cannot let this conduct go undeterred.   Doing so would threaten our nation’s security.

Deterring Cyber-Enabled Economic Espionage   

Cases like the Pittsburgh case will have a deterrent effect.

To those critics who raise questions about whether these charges will have any impact in light of the challenges associated with arresting and trying these individuals – the deterrent effect of charges can be significant.

General Keith Alexander, former NSA Director, explained that “the only way to deter cyber attack is to work to catch perpetrators and take strong and public action when we do.”

FBI Director Mueller called for figuring out who is targeting us and going after them, saying: “We must remember that behind every intrusion is a person responsible for that intrusion—a warm body behind the keyboard, whether he or she sits in Tehran or Tucson; Shanghai or Seattle; Bucharest or the Bronx.   Our ultimate goal must be to identify and deter the persons behind the keyboards.”   The government and private sector alike are increasing the call for prosecuting cyber theft of trade secrets.

We need to prevent attacks.   And deterrence helps.   Prosecutions can simultaneously punish those who have already committed bad acts and deter those who might otherwise commit bad acts in the future.   In other words, by going after these crimes, we can help to stop the next group of criminals.

It is, of course, possible that we will never obtain custody.   But even if these five defendants evade arrest, laying bare this criminal activity takes it out of the shadows.

Law Enforcement: One Piece of the Puzzle

Law enforcement investigations can also support other valuable tools.   Criminal charges can justify economic sanctions from our colleagues in the Treasury Department, sanctions that prevent criminals from engaging in financial transactions with U.S. entities and deny access to the U.S. financial system.

They can facilitate diplomacy by the State Department, as our nation’s diplomats lay out evidence of state-sponsored cyber theft to foreign government officials and force them to answer for those actions, or coordinate with other victimized countries.   Furthermore, the investigations themselves can lead other governments to take action, even when the United States doesn’t end up doing so.

So, we will continue to bring these kinds of cases.   However, it is not easy.   Prosecutions like this present unique challenges.

Cases can take years to investigate, and it can sometimes be tough to attribute the unlawful activity to particular individuals.

They involve difficult decisions regarding how to protect sensitive sources and methods.   And even after charging, it can be challenging to obtain custody of the defendants and bring them to justice.

But difficult does not mean impossible, and the status quo simply will not do.   As the Attorney General said earlier this week in announcing these charges, “enough is enough.”

We would not stand idly by as people hauled away our wealth in trucks.   Likewise, we cannot allow it to be sucked out through the Internet.

The indictment I’ve been discussing is an important first step.   But it must be just that – the first.   Prosecutions will not do it alone.

We need to build on this success and keep responding—with prosecutions where possible and with all of the other tools in our toolkit.

We need to keep at it, and we appreciate the bipartisan support we’ve received from Congress, including particularly supportive words from Senators King and Whitehouse as well as from the House Intelligence and Homeland Security Committees.

Many of these individuals provided resources and encouragement as we undertook transformation.   We must continue until our adversaries realize that the costs of stealing from our companies outweigh the benefits.

Cyber Defense – Empowering victims

So far, we talked primarily about criminal prosecution and other tools.   But we recognize that stopping attacks before they ever take place is the ultimate goal.   We will have succeeded when there are no more criminal charges to bring.

To that end, we also worked hard to improve cyber defenses, both in Government and with the private sector.

The FBI works closely with companies that have been the victims of hackers through, among other things, its InfraGard program.   That program, which has more than 25,000 active members, brings together individuals in law enforcement, government, the private sector, and academia to talk about how to protect our critical infrastructure.

Likewise, the Department of Homeland Security, the Department of Energy, and other departments and agencies routinely work closely with companies to protect critical infrastructure.

The Department heard from you and is taking steps to respond to the concerns of the private sector.   Just last month, we teamed up with the Federal Trade Commission to issue a policy statement making it clear that antitrust law is not and should not be a bar to legitimate cyber security information sharing.

And earlier this month, the Justice Department offered a white paper clarifying that the Stored Communications Act doesn’t ordinarily restrict network operators from sharing certain data with the Government to guard information.  This guidance will help the private sector collaborate more freely to protect itself.   All of this is just a start.   Going forward, we need legislation to facilitate greater information sharing between the private sector and the government.

Educating the Public

The charges announced earlier this week benefit not only victims but also the broader American people, and others worldwide.

Chief Justice Burger once noted that criminal prosecutions, as a general matter, have an “educative effect” on the public.

While we may appreciate, on a theoretical level, that hacking to steal corporate secrets poses a major national security threat, there’s no substitute for the educative effect that an indictment has.

Putting a face at the keyboard, and quantifying the damage done, may help to galvanize all of us to improve our cyber security.   It may also make us more vigilant to the economic, military, and geopolitical dangers associated with cyber space.   For example, it might lead companies and other entities to examine their connection logs a little bit more closely to see what activities those reveal, and from where.

Conclusion

To wrap up, I want to applaud the dedicated investigators and prosecutors whose hard work produced this week’s important indictment.   It’s only a first step but it’s a big step, and it’s part of our growing effort to hold accountable those who steal American innovation.

At the same time, we must acknowledge that prosecution alone is, ultimately, just one tool in the broader toolset for addressing the cyber threat.   Prosecutions alone will not solve the problem.

Trust in government depends, in part, on our ability to defend, protect, and obtain justice for our citizens.   Indictments and prosecutions are one clear and powerful way in which we the people, governed by the rule of law, legitimize and prove our allegations.

And those actions have real consequences for the criminals they target, and deter those who might otherwise become criminals in the future.

We continue to protect Americans from being victimized through cyberspace, and we need your support.

Thank you for your attention.   I look forward to questions.

# # #

United States Army soldier Albert Kelly III of Fort Knox, Kentucky, was sentenced to serve 18 months in prison for his role in stealing fuel at Forward Operating Base (FOB) Salerno in Afghanistan. In addition to his prison term, Kelly was sentenced to three years of supervised release and ordered to pay $100,000 in restitution.

Acting Assistant Attorney General David O’Neil of the Justice Department’s Criminal Division and U.S. Attorney David J. Hale of the Western District of Kentucky made the announcement after the sentence was imposed by Senior U.S. District Court Judge Charles R. Simpson III in the Western District of Kentucky.

According to court documents, from January 2011 to January 2012, Kelly was assigned to FOB Salerno, and for most of that time he served as a specialist. Kelly’s duties included overseeing the delivery of fuel into FOB Salerno. Typically, the fuel was brought into the base by Afghan trucking companies driven by Afghan nationals. Kelly’s duties included verifying the amounts of the fuel that were delivered at FOB Salerno and preparing and certifying documents that accounted for the fuel that was delivered.

From in or about November 2011 through January 2012, Kelly diverted and permitted the diversion of fuel delivery trucks from FOB Salerno to other locations, where the diverted fuel would then be removed from the trucks and stolen. To conceal this diversion, he falsely certified that the diverted fuel was in fact delivered at FOB Salerno.

Also according to court documents, in exchange for assisting in the theft of fuel as described, Kelly received approximately $57,000 from the Afghan trucking company. He admitted the amount of fuel he permitted to be diverted amounted to approximately 25,000 gallons. The United States Army paid approximately $4.00 per gallon for that fuel, and the loss to the government was approximately $100,000.

The case was investigated by the Special Inspector General for Afghanistan Reconstruction. This case was handled by Special Trial Attorney Mark H. Dubester, on detail from the Special Inspector General for Afghanistan Reconstruction, and Assistant U.S. Attorney Michael Bennett of the Western District of Kentucky.

Tracy Mitchell, Dameisha Mitchell, Latasha Mitchell, Keisha Lanier, Tameka Hoskins, Sharondra Johnson, Cynthia Johnson, Mequetta Snell-Quick, Talarious Paige and Patrice Taylor were indicted for their roles in a $20 million stolen identity refund fraud (SIRF) conspiracy, Assistant Attorney General Kathryn Keneally of the Justice Department's Tax Division and U.S. Attorney George L. Beck Jr. for the Middle District of Alabama announced today following the unsealing of the superseding indictment yesterday.

According to the superseding indictment, between January 2011 and December 2013, the defendants ran a large-scale identity theft ring in which they filed over 7,000 false tax returns that claimed in excess of $20 million in fraudulent claims.  The defendants obtained stolen identities from various sources to be used in filing false returns.  Tracy Mitchell worked at the hospital on Fort Benning in Columbus, Georgia, where she had access to the identification data of military personnel, including soldiers who were deployed to Afghanistan.  Tracy Mitchell and her daughter, Latasha Mitchell, also obtained stolen identities from an Alabama state agency.  Keisha Lanier obtained stolen identities from the Alabama Department of Corrections.  Talarious Paige and Patrice Taylor worked in a call center for a Columbus company and stole identities.

According to the superseding indictment, in order to file tax returns, the defendants obtained Electronic Filing Numbers in the names of several tax preparation businesses.  On behalf of those tax preparation businesses, the defendants applied for bank products from various financial institutions, which mailed blank check stock to the defendants’ homes.  The defendants directed anticipated tax refunds to prepaid debit cards, to U.S. Treasury checks and to financial institutions, which in turn issued the refunds via checks or prepaid debit cards.  The defendants directed U.S. Treasury checks to be mailed to several addresses in Alabama and then obtained those checks from the mail.  The defendants coordinated the cashing of the refund checks by sending various text messages among themselves.  The defendants cashed the fraudulent checks at several businesses located in Alabama, Georgia and Kentucky.  In addition to the conspiracy charge, the defendants are also charged with mail and wire fraud, access device fraud and aggravated identity theft.

An indictment merely alleges that crimes have been committed and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, each defendant faces a statutory maximum potential sentence of 10 years in prison for the conspiracy charge, a statutory maximum potential sentence of 20 years in prison for each wire and mail fraud count, a statutory maximum potential sentence of 15 years in prison for each access device fraud count, and a mandatory two year sentence in prison for each aggravated identity theft count.  The defendants are also subject to fines, forfeiture and mandatory restitution if convicted.

The case was investigated by special agents of the Internal Revenue Service - Criminal Investigation and the U.S. Army – Criminal Investigation Division.  Trial Attorney Michael Boteler of the Tax Division and Assistant U.S. Attorney Todd Brown for the Middle District of Alabama are prosecuting the case.  The U.S. Attorney’s Office for the Middle District of Georgia provided assistance in this matter.

USDOJ: INTERPOL Washington: Updates

Department of Justice

U.S. Marshals, INTERPOL Nab Fugitive from Hungary in Florida

WASHINGTON - An intensive investigation spearheaded by the U.S. Marshals Service International Investigations Branch and the Fugitive Division of INTERPOL Washington, U.S. National Central Bureau, resulted in the arrest of Maria Luca Zavoczki, one of Hungary's most sought after criminals, in Miami Tuesday afternoon.

In February 2014, Hungary issued an INTERPOL Red Notice indicating that Zavoczki had fled her native Hungary to avoid criminal prosecution related to narcotics distribution. Additionally, authorities there wanted Zavoczki for her role and participation in a European criminal enterprise that specialized in the manufacturing of bogus credit cards and committing bank fraud in Hungary, Austria, and Italy.

A former Hungarian competitive bodybuilder, Zavoczki travelled frequently to the United States for internationally-sanctioned bodybuilding competitions in Florida and California. Between 2003 and 2012, Zavoczki formulated and set in motion an elaborate scheme to change her identity and citizenship to avoid prosecution in Hungary and remain in the United States illegally.

At the request of Hungarian law enforcement, investigators from the Marshals Service and INTERPOL moved to locate Zavoczki as she attempted to evade arrest by moving through California, Colorado, Maryland, Florida and Mexico. She assumed multiple identities and aliases along the way.

The fugitive investigation gained significant momentum when a criminal investigator from the Department of State Diplomatic Security Service assigned to INTERPOL Washington determined that Zavoczki had more than likely obtained a U.S. passport by fraudulent means, while using a stolen identity. Zavoczki allegedly used the passport for international travel and as an official identity document.

Investigators sent information confirming Zavoczki's location to the Marshals Service office in the Southern District of Florida. Tuesday, members of the Marshals Service South Florida Warrant Squad, Department of Homeland Security Homeland Security Investigations, and the Boynton Beach, Florida Police Department took Zavoczki into custody without incident. She is being detained pending removal from the United States on immigration violations, and document and identity fraud. Zavoczki faces a 10-year prison term in Hungary.

“The capture of fugitive Maria Zavoczki, one of Hungary's most wanted, is an excellent example of what can be accomplished when law enforcement officials work together,” said Amos Rojas Jr., U.S. Marshal for the Southern District of Florida.

“Criminals who steal identities and use false passports are a genuine threat to national security,” said Shawn A. Bray, Director of INTERPOL Washington. “Thanks to the outstanding cooperation of multiple law enforcement agencies, Maria Zavoczki poses a threat no more.”

The efforts of U.S. Citizenship and Immigration Services, U.S. Customs and Border Protection, and the U.S. Department of Justice Office of International Affairs contributed to Zavoczki's arrest.

Paul F. Wrubleski, a resident of Weston, Florida, was sentenced to serve 55 months in prison on tax fraud charges, the Justice Department and the Internal Revenue Service (IRS) announced today.  Wrubleski was convicted earlier this year of one count of corruptly impeding the due administration of the internal revenue laws and four counts of filing false claims for tax refunds following a jury trial in in the U.S. District Court in the Southern District of Florida.

According to court documents and the evidence presented at trial, Wrubleski had a decade-long pattern of filing false documents with the IRS.  Wrubleski impeded the IRS by filing false IRS forms that claimed he was exempt from income tax withholding and by filing false tax returns, including four tax returns that requested over $1.5 million in federal refunds.  Wrubleski also sent obstructive letters, tax returns and other false documents to the IRS between 1999 and 2010.  In addition, the indictment alleged and the evidence proved that Wrubleski filed for bankruptcy in 2006 in order to impede IRS collection actions.

In addition to the term of imprisonment, Wrubleski was ordered to pay $79,963 in restitution and to serve three years of supervise release following his release from jail.

The case was investigated by special agents of IRS-Criminal Investigation.  Trial Attorney Charles M. Edgar Jr. of the Justice Department’s Tax Division and Assistant U.S. Attorney Bertha R. Mitrani for the Southern District of Florida prosecuted the case.

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

WASHINGTON – Paul F. Wrubleski, a resident of Weston, Florida, was sentenced to serve 55 months in prison on tax fraud charges, the Justice Department and the Internal Revenue Service (IRS) announced today. Wrubleski was convicted earlier this year of one count of corruptly impeding the due administration of the internal revenue laws and four counts of filing false claims for tax refunds following a jury trial in in the U.S. District Court in the Southern District of Florida.

According to court documents and the evidence presented at trial, Wrubleski had a decade-long pattern of filing false documents with the IRS. Wrubleski impeded the IRS by filing false IRS forms that claimed he was exempt from income tax withholding and by filing false tax returns, including four tax returns that requested over $1.5 million in federal refunds. Wrubleski also sent obstructive letters, tax returns and other false documents to the IRS between 1999 and 2010. In addition, the indictment alleged and the evidence proved that Wrubleski filed for bankruptcy in 2006 in order to impede IRS collection actions.

In addition to the term of imprisonment, Wrubleski was ordered to pay $79,963 in restitution and to serve three years of supervise release following his release from jail.

The case was investigated by special agents of IRS-Criminal Investigation. Trial Attorney Charles M. Edgar Jr. of the Justice Department's Tax Division and Assistant U.S. Attorney Bertha R. Mitrani for the Southern District of Florida prosecuted the case.

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