Western District of Virginia

WASHINGTON – The Department of Justice today announced an agreement with SunTrust Mortgage Inc. that resolves a criminal investigation of SunTrust’s administration of the Home Affordable Modification Program (HAMP).

As detailed in documents filed today, SunTrust misled numerous mortgage servicing customers who sought mortgage relief through HAMP.  Specifically, SunTrust made material misrepresentations and omissions to borrowers in HAMP solicitations, and failed to process HAMP applications in a timely fashion.  As a result of SunTrust’s mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harms.

SunTrust has agreed to pay $320 million to resolve the criminal investigation into SunTrust’s HAMP Program.  The money is divided as follows:

• Restitution – SunTrust will pay $179 million in restitution to compensate borrowers for damage caused by its mismanagement of HAMP.  That money will be distributed to borrowers in eight pre-determined categories of harm.  If more than $179 million is needed, the bank will also guarantee an additional $95 million for additional restitution.  SunTrust will also pay $10 million in restitution directly to Fannie Mae and Freddie Mac.

• Forfeiture – SunTrust will pay $16 million in forfeiture.  This money will be available to law enforcement agencies working on mortgage fraud and other matters related to the misuse of TARP funds.

• Prevention – SunTrust will pay $20 million to establish a fund for distribution to organizations providing counseling and other services to distressed homeowners. Specifically, SunTrust will pay this amount to a grant administrator selected by the government, which funds will in turn be awarded to housing counseling agencies and other non-profits devoted to consumer counseling and advocacy. 

In addition to the significant payment, SunTrust has agreed to implement certain remedial measures aimed at preventing future problems like those that led to this investigation.  Specifically, it will increase loss mitigation staff, monitor their mortgage modification process, and provide semi-annual reports regarding compliance with the agreement.

This settlement makes clear the Department’s commitment to supplementing its enforcement work with support for prevention programs.  The grant fund established by this settlement will help distressed homeowners avoid the harms that befell SunTrust customers.  This is real relief for housing agencies, which will compete for grants to increase their counseling and other services to homeowners across the country.

“Instead of helping distressed homeowners, SunTrust’s mismanagement drove up foreclosures, disseminated individual credit and increased costs for hardworking men and women across our nation,” said Attorney General Eric Holder.  “This resolution will provide much-needed restitution for victims. It will make available substantial funds to help other homeowners avoid foreclosure. And it will result in the kinds of systemic changes needed to ensure that this will not happen again.  This outcome demonstrates yet again that the Justice Department will never waver in its ongoing pursuit of those whose reckless and willful actions harm the American people and undermine our financial markets.”

“The $320 million resolution of this long-running investigation requires SunTrust Mortgage to compensate its customers for the harm caused by the company’s false promises in administration of the Home Affordable Modification Program in 2009 and 2010 – conduct thoroughly described in the Statement of Facts that accompanies the settlement documents,”  U.S. Attorney Timothy J. Heaphy said today.  “Up to $284 million will be paid in restitution directly to the victims of SunTrust’s conduct.  SunTrust will also establish a $20 million grant fund which will be distributed to agencies working with distressed homeowners and provide $16 million in asset forfeiture funds that will be used by law enforcement for future mortgage fraud investigations.  The company has also agreed to make specific changes in its operations designed to prevent similar problems in the future.

“SunTrust has done the right thing by agreeing to this novel package of restitution, remediation, and prevention, which represents a significant victory not only for SunTrust customers, but also for Americans who will receive counseling and other assistance when faced with financial challenges,” U.S. Attorney Heaphy said.  “This settlement demonstrates the commitment of the Department of Justice and the Special Inspector General for the Troubled Asset Relief Program to hold financial institutions accountable and provide restitution to those harmed by their conduct.”

“Today’s agreement with SunTrust underlines the importance of holding accountable those individuals and companies who pledge to ensure that homeowners are protected at all times; especially during times when the homeowner is seeking to save their home through a loan modification.  SunTrust has conceded that their HAMP program had numerous deficiencies and has harmed a significant amount of homeowners.  This behavior will not be tolerated.  We are proud to have worked with our law enforcement partners on this case,” said Michael P. Stephens, Acting Inspector General of the Federal Housing Finance Agency Office of Inspector General.

“HAMP was designed to be a beacon of hope and opportunity for homeowners in dire straits, but TARP recipient SunTrust, rather than assist homeowners in need, financially ruined many through an utter dereliction of its HAMP program,” said Christy Romero, Special Inspector General for TARP (SIGTARP).  “This criminal investigation uncovered that SunTrust so bungled its administration of the program, that many homeowners would have been exponentially better off having never applied through the bank in the first place.  Unwilling to put resources into HAMP despite holding billions in TARP funds, SunTrust put piles of unopened homeowners’ HAMP applications in a room.  SunTrust’s floor actually buckled under the sheer weight of unopened document packages.  Documents and paperwork were lost.  Homeowners were improperly foreclosed upon.  Treasury was lied to.  The negligence with which SunTrust administered its HAMP program is appalling, miserable, inexcusable, and repulsive.  Real people lost their homes, and many others faced financial ruin.  Ending this behavior and, where necessary, forcing institutions to change their culture through law enforcement by SIGTARP and our partners will help begin the process of restoring faith in financial institutions and healing public trust.”

The investigation of the case was conducted by the United States Attorney’s Office for the Western District of Virginia, the Office of the Special Inspector General for the Troubled Asset Relief Program, and the Office of the Inspector General for the Federal Housing Finance Agency (FHFA) and the United States Postal Inspection Service.

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ROANOKE, VIRGINIA – Three Roanoke residents who were arrested June 10 for conspiring to obtain a fraudulent passport have been indicted by a Federal grand jury sitting in the United States District Court for the Western District of Virginia in Roanoke.

The grand jury has charged George Anyuon, 35, Joseph Albino, 33 and Abuk Kuac, 29, each with one count of conspiring to commit passport fraud by willfully furnishing and attempting to furnish to another a fraudulent passport.

According to the indictment, the purpose of the conspiracy was to obtain a false passport for “Witness One,” which passport would have a false name, and to use that false passport to assist Witness One in fleeing the United States to avoid unrelated criminal charges.  It was part of the conspiracy for Witness One to pay between $1,000 and $2,000 for this service. It is also alleged that Witness One would transfer ownership of his small Roanoke business and his car to the conspirators as additional payment.

The indictment alleges that conspirators would use their connections in embassies in Washington D.C. to obtain the false passport for Witness One, who would then travel to a Washington D.C. airport and use the false passport to leave the United States.

If convicted, each defendant faces a maximum possible penalty of up to five years in prison and/or a fine of up to $250,000.

The investigation of the case was conducted by U.S. Immigrations and Customs Enforcement (ICE), Homeland Security Investigations (H.S.I.), the Federal Bureau of Investigation, the Virginia State Police, the United States Marshals Service and United States Department of State Diplomatic Security Service.  Assistant United States Attorneys Daniel Bubar and Laura Day Rottenborn are prosecuting the case for the United States.

A Grand Jury Indictment is only a charge and not evidence of guilt.  The defendants are entitled to a fair trial with the burden on the government to prove guilt beyond a reasonable doubt.

ROANOKE, VIRGINIA – A Federal Grand Jury in the Western District of Virginia in Roanoke has charged four individuals with a variety of Federal crimes, including racketeering [RICO], relating to the operation of a Weber City, Va., skilled nursing facility.

In an indictment returned Tuesday, June 24, 2014, the Grand Jury has charged Avi Klein, 45, of Miami Beach, Fla., Alicia Dietrich, 52, of Lancaster, Ohio, Charles R. Menten, 62, of Wilton Manors, Fla., and Vicki Cox, 46, of Kingsport, Tenn. with various crimes relating to the operation of the nursing facility formerly known as the Brian Center Health and Rehabilitation Center in Weber City, Va.

Klein has been charged with one count of racketeering conspiracy, one count of conspiracy to commit wire, mail and healthcare fraud, ten counts of wire fraud, one count of healthcare fraud, fifty-five counts of mail fraud, one count of obstruction of justice and one count of conspiracy to commit money laundering.

Dietrich has been charged with one count of racketeering conspiracy, one count of conspiracy to commit wire, mail and healthcare fraud, eight counts of wire fraud, one count of healthcare fraud, fifty-four counts of mail fraud, one count of obstruction of justice and one count of conspiracy to make false statements.

Menten has been charged with one count of racketeering conspiracy, one count of conspiracy to commit wire, mail and healthcare fraud, two counts of wire fraud, fifty-five counts of mail fraud and one count of conspiracy to commit money laundering.

Cox has been charged with one count of racketeering conspiracy, one count of conspiracy to commit wire, mail and healthcare fraud, eight counts of wire fraud, one count of healthcare fraud and one count of conspiracy to make false statements.

According to the indictment, the defendants, and their associates, operated the Brian Center, a 90 bed skilled nursing facility in Weber City, Va., to commit a multi-component fraud scheme that included defrauding Medicare and Virginia Medicaid by, among things, causing the facility to operate without sufficient certified nursing assistants and supplies, and in violation of Federal nursing facility requirements.  The other components of the fraud scheme included defrauding vendors who supplied goods and services to the facility and defrauding the facility’s employees of money withheld from their paychecks for benefits that were not provided.

The indictment alleges that the defendants caused residents to live in unsanitary and unclean conditions, to be without good nutrition and personal and oral hygiene, including but not limited to a lack of bathing, toileting, grooming, cleaning, turning, feeding and meaningful restorative services, and to have neglected and untreated pressure sores.

In convicted the defendants face up to 20 years in federal prison and/or fines of up to $250,000 for each of the racketeering and fraud counts.  The money laundering conspiracy charge carries a maximum of 10 years in prison and/or fines of up to $250,000, and the conspiracy to make false statements charge has a maximum penalty of 5 years in prison and/or fines of up to $250,000.  Each defendant also faces significant forfeitures for the racketeering, fraud, and money laundering charges.

This case is the result of a cooperative investigation by the Department of Health and Human Services Office of Inspector General, Internal Revenue Service Criminal Investigation, the Virginia Attorney General’s Medicaid Fraud Control Unit, and the Department of Labor’s Employee Benefits Security Administration.  Assistant United States Attorney’s Rick Mountcastle and Daniel Bubar and Virginia Assistant Attorney General and Special Assistant United States Attorney Eric Atkinson are prosecuting the case for the United States.

A Grand Jury Indictment is only a charge and not evidence of guilt.  These defendants are entitled to a fair trial with the burden on the government to prove guilt beyond a reasonable doubt.

ROANOKE, VIRGINIA – A Tampa, Fla. man previously convicted of a scheme to profit from fraudulent United States Treasury checks was sentenced in absentia yesterday in the United States District Court for the Western District of Virginia in Roanoke.

Osama “Sam” Mustafa, 51, of Tampa, Fla., was previously convicted of one count of conspiracy to defraud the United States for the purpose of impairing the lawful functions of the Internal Revenue Service, to receive fraudulent Treasury Checks, to commit wire fraud and to structure currency transaction, one count of conspiracy to commit bank fraud and one count of conspiracy to commit money laundering.

Yesterday in U. S. District Court, Mustafa was sentenced in absentia to 240 months of federal incarceration. In addition, $17.7 million in assets were ordered forfeited from the defendant.  Mustafa removed his monitoring bracelet and fled law enforcement following his conviction and while awaiting sentencing, and his bail bond has been forfeited.

“Mr. Mustafa stole millions of dollars by obtaining fraudulent income tax refunds,” United States Attorney Timothy J. Heaphy said today. “Working with our investigative partners, we will do all we can to prosecute tax fraud and hold tax cheats accountable.”

“Using the U.S. Treasury as a personal piggy bank to obtain millions of dollars in fraudulent refunds, Mustafa not only showed his blatant disregard of the law, but also for those taxpayers victimized,” said Thomas J Kelly, Special Agent in Charge, IRS Criminal Investigation, Washington D.C. Field
Office. “This sentencing is a reminder that identity thieves who use the personal information of unsuspecting victims to file bogus tax returns and steal millions of dollars from the U.S. Treasury, will be prosecuted to the fullest extent of the law.”

Mustafa was convicted of purchasing fraudulent income tax return refund checks and checks issued for Refund Anticipation Loans, and then presenting those fraudulent checks for payment at financial institutions in the Western District of Virginia, Middle District of Florida, and elsewhere.

The investigation of the case was conducted by the Internal Revenue Service-Criminal Investigations, the Federal Bureau of Investigation, the United States Secret Service, the United States Marshals Service Asset Forfeiture Program, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the United States Attorney’s Office for the Middle District of Florida. Assistant United States Attorney Joseph Mott prosecuted the case for the United States.

LYNCHBURG, VIRGINIA – The former majority owner of Genesis Mansions has been charged by a Federal Grand Jury sitting in the United States District Court for the Western District of Virginia in Roanoke on a variety of fraud charges associated with an alleged mortgage fraud scheme centered around properties on Smith Mountain Lake.

The grand jury has charged Susanne Helbig, 49, a former resident of Roanoke, Va., currently residing in Georgia, with one count of conspiracy to commit bank fraud, seven counts of bank fraud, six counts of making false statements in connection with a loan and one count of making a false statement on a tax return.

According to the indictment, between March 2006 and December 2007, Helbig, and others, conspired to defraud financial institutions through the submission of false and fraudulent mortgage loan applications and settlement statements in the name of strawbuyers, inducing the financial institutions to finance the purchase and construction of approximately 30 properties located near Smith Mountain Lake. These actions caused losses of approximately $11 million.

It is alleged that Helbig, and others, who were supposed to use the proceeds of the loans for the construction of residential properties, instead kept this money as “profits” or used the money to pay other debts. In order to further the scheme, Helbig, and others, allegedly failed to disclose to lending institutions the true sales price of the properties, misrepresented the strawbuyer’s income or assets, misrepresented the strawbuyer’s employment, misrepresented that the home would be the strawbuyer’s primary residence when in fact the strawbuyer had no intention of living there, misrepresented the true source of “gift funds” provided to the strawbuyer for closing and/or provided false or forged documents.

If convicted, Helbig faces a maximum possible penalty of up to 30 years in prison and/or a fine of up to $1 million for the conspiracy count and each of the bank fraud and false statements in connection with a loan counts. On the making a false statement on a tax return count, the defendant faces a maximum possible penalty of up to three years in prison and/or a fine of up to $100,000.

The investigation of the case was conducted by Federal Bureau of Investigation, the Internal Revenue Service-Criminal Investigations and the United States Postal Inspection Service.  Assistant United States Attorney Laura Day Rottenborn will prosecute the case for the United States.

A Grand Jury Indictment is only a charge and not evidence of guilt.  The defendant is entitled to a fair trial with the burden on the government to prove guilt beyond a reasonable doubt.

CHARLOTTESVILLE, VIRGINIA – A former accountant and restaurateur pled guilty yesterday in the United States District Court for the Western District of Virginia in Charlottesville.

James Kirk Baldi, 50, of Charlottesville, Va., waived his right to be indicted and pled guilty yesterday to a one-count Information charging him with willful failure to collect or pay over tax owing to the United States. At sentencing, Baldi faces a maximum possible penalty of up to five years in prison and/or a fine of up to $10,000.

“Mr. Baldi violated the trust of his clients when he stole their money and used it to pursue his failed business ventures,” United States Attorney Timothy J. Heaphy said today. “He admitted to this scheme and agreed to repay the United States the taxes he failed to pay during the course of his fraud.  This case demonstrates our commitment to pursue restitution for all victims of financial fraud.”

"There is no mistaking the egregiousness of James Baldi’s conduct and the selfishness of his actions.  As the owner of an accounting firm, he was entrusted with the responsibility of providing employment tax services and remitting employment tax funds to the Internal Revenue Service.  Instead he chose to use the employment tax funds for his own personal use, not only violating the trust placed with him and potentially jeopardizing the businesses of his clients, but also violating the law,” said Thomas J Kelly, Special Agent in Charge, IRS Criminal Investigation, Washington D.C. Field Office.  “IRS Criminal Investigation will continue to vigorously pursue anyone who collects taxes and fails to timely remit those taxes."

According to evidence presented at yesterday’s guilty plea hearing by Assistant United States Attorney Ronald M. Huber, Baldi’s accounting firm, which operated under a variety of names including CSGI, LLC and/or Virginia Payroll Tax, LLC, provided payroll services and conducted banking transactions from clients’ accounts in order to meet payroll obligations. Those bank transactions included making electronic transfers between the clients’ bank accounts and bank accounts controlled by Baldi. During this time, mid-2009, Baldi opened the Bel Rio restaurant and soon thereafter began experiencing financial difficulties.

In late 2009, a number of Baldi’s clients received notices from the Internal Revenue Service relative to payroll tax forms that had not be filled and/or the full amount of the employer’s quarterly federal tax return had not been paid. When confronted with this information, Baldi attempted to explain away the notices as IRS mistakes.

Baldi admitted yesterday that as his financial problems continued to increase, he began diverting clients’ funds to cover the costs of the Bel Rio and Cantina restaurants.  He began a type of “kiting” scheme where he would use various clients’ payroll trust fund monies to cover other client’s tax obligations, all the while trying to balance or cover diverted clients’ funds to continue his restaurant ventures and pay his personal expenses.

Knowing the scheme would collapse, Baldi fled Charlottesville on July 10, 2010 and was a fugitive until his arrest in California on January 4, 2013.

In all, Baldi willfully failed to account for and pay over tax in the amount of $202,985 for the period/quarters ending in September 2009, December 2009, March 2010 and June 2010.

The investigation of the case was conducted by Internal Revenue Service, Criminal Investigations and the Federal Bureau of Investigation.  Assistant United States Attorney Ronald Huber and Joe Giannullo with the Tax Division of the Department of Justice are prosecuting the case for the United States.

LYNCHBURG, VIRGINIA – A federal grand jury sitting in the United States District Court for the Western District of Virginia in Roanoke has charged the former manager of the Lynrocten Federal Credit Union in Lynchburg [LFCU] with embezzlement, bank fraud and aggravated identity theft charges.

In and indictment returned under seal on June 5, 2014 and unsealed today following the defendant’s initial court appearance, the grand jury has charged Linda Sue Newcomb, 62, of Madison Heights, Va., with one count of embezzlement of funds from a federal credit union, four counts of bank fraud and three counts of aggravated identity theft.

In January 2014, the former head teller of LFCU, Teresa Wieringo Humphries, 58, of Madison Heights, Va., waived her right to be indicted and pled guilty to an Information charging her with one count of embezzlement by an employee of a federal credit union.

The indictment alleges that in or about 2000, Ms. Newcomb, who was hired by the LFCU in the mid-1980s, and the former head teller at the bank, Teresa Humphries, carried out a scheme to defraud, embezzle and steal funds from LFCU’s deposits and accounts.

It was part of the scheme that Newcomb and Humphries originated loans in the names of LFCU members without those members’ knowledge or consent. Newcomb and Humphries drafted fictitious loan documentation and approved the fictitious loans in order to make false loans look legitimate.

In addition, the indictment alleges that from on or about October 22, 2009 and continuing to on or about October 6, 2011, Newcomb entered into Loan Participation Agreements with another federal credit union. In furtherance of the Loan Participation scheme, Newcomb, on behalf of LFCU, sold various fraudulent loans. In order to persuade the partner credit union to enter into the Loan Participation Agreement, Newcomb made various false statements to make the loans involved appear to be authentic and legitimate. The value of the fraudulent loans involved in the loan participation scheme was in excess of $1 million.

The indictment also alleges that Newcomb and Humphries transferred funds and wrote checks on certain LFCU members’ accounts without their knowledge or consent. At least three different accounts are alleged to have been used by the two defendants. Certain proceeds from the schemes were deposited to the LFCU bank accounts of Newcomb, Humphries, and their family members or were used by the two defendants to make “payments” to other fraudulent loans.

In order to conceal the unauthorized use of LFCU member accounts, and in furtherance of the scheme, Newcomb and Humphries altered and withheld LFCU member statements.

The investigation of the case was conducted by the United States Secret Service, the Federal Bureau of Investigation, the Lynchburg City Police Department and the Amherst County Sheriff’s Office.  Assistant United States Attorneys Anthony Giorno and Daniel Bubar are prosecuting the case for the United States.

A Grand Jury Indictment is only a charge and not evidence of guilt.  The defendant is entitled to a fair trial with the burden on the government to prove guilt beyond a reasonable doubt.

HARRISONBURG, VIRGINIA – A pair of individuals who have admitted to traveling up and down the East Coast, breaking into cars and stealing property were sentenced yesterday in the United States District Court for the Western District of Virginia in Harrisonburg.

Stephanie Jordan Kantz, 21, and Hataria Whitehead, 39, neither of whom have permanent addresses on file, previously pled guilty to one count of conspiracy to possess five or more identification documents that were not issued for the use by the defendant, one count of conspiracy to use access devices that the defendant was not authorized to use and one count of possessing without lawful authority, a means of identification of another person in relation to another crime.

Yesterday in District Court Kantz was sentenced to 24 months in federal prison for her role in the scheme. Whitehead was sentenced to 94 months in federal prison.

“These two defendants repeatedly stole checks, credit cards, and other items of value during their weeks-long crime spree,” United States Attorney Timothy J. Heaphy said today. “While we will continue to hold those who commit these crimes accountable, I want to remind everyone to take steps to secure valuables and protect themselves from this kind of rudimentary but damaging fraud.”

According to evidence presented at previous hearings by Special Assistant United States Attorney Drew Smith, Kantz and Whitehead were involved in a “Felony Lane” scam, a scheme in which individuals steal identification documents and checkbooks or credit cards and then use the IDs to cash checks while posing as the victim of the theft. The scheme was named for the “Felony Lane Gang” in South Florida, who are believed to have originated scheme.

Kantz and Whitehead have admitted that between October 2, 2014 and October 22, 2014, they traveled from Florida to Virginia, with stops in Georgia, South Carolina and North Carolina. Along the way, the defendants made a variety of stops, each time they stopped they made, or attempted to make, purchases using credit cards and identification documents that had been stolen. To further the scheme, Kantz would wear wigs and make-up to alter her appearance to look more like the victims in the stolen photo IDs.

The defendants had obtained the stolen credit cards and identification documents by breaking into dozens of vehicles in multiple states. Typically, the defendants would target vehicles parked in places where people were more likely to leave their purses and other belongings in their vehicles, such as funeral homes, churches, day care centers, gyms and parks. Upon finding a target vehicle, Whitehead would break into the vehicles, sometimes using a window punch to break a window. The two routinely broke into several vehicles in the same location. The defendants targeted purses and electronics but credit cards, checkbooks and ID documents were the most coveted items.

The two were ultimately arrested while attempting to break into vehicles inside Shenandoah National Park. In all, the defendants caused at least $104,371 in financial losses to their victims.         

The investigation of the case was conducted by the United States Secret Service and the National Park Service.  Special Assistant United States Attorney Drew Smith prosecuted the case for the United States.

HARRISONBURG, VIRGINIA – A citizen of Honduras, residing in Harrisonburg, pled guilty yesterday in the United States District Court for the Western District of Virginia in Harrisonburg to offenses related to human trafficking.

Elin Coello-Ordonez, 32, pled guilty yesterday to one count of conspiring to recruit, entice, harbor, transport, provide, obtain and maintain a person in an interstate venture that used force, threats of force, fraud or coercion to cause a person to engage in a commercial sex act. According to the terms of the plea agreement entered into yesterday, Coello-Ordonez will be sentenced to 10 years in federal prison for the human trafficking charge. The defendant is currently serving a five year sentence in federal prison on a related immigration charge which arose out of the same investigation. In total, the defendant will serve 15 years in federal prison. The plea agreement is subject to final approval by the U.S. District Judge.

“Mr. Coello-Ordonez forced the young victim in this case to engage in prostitution, then physically abused her when she resisted,” United States Attorney Timothy J. Heaphy said today. “His despicable conduct has earned him a lengthy stay in federal prison.  We must do all we can to identify and aggressively pursue similar patterns of human trafficking, which is sadly on the rise in our communities.  We must also connect the victims of these awful crimes with services and relief, as the scars of trafficking are extremely difficult to erase.”

“The exploitation of vulnerable young women and children in our nation is a problem that demands a strong response from law enforcement,” said HSI DC Special Agent in Charge Clark Settles. “HSI special agents are on the front lines of this battle every day, seeking out victims and bringing their tormentors to justice.”

“The Albemarle County Police Department is committed to working with our federal, state & local partners on addressing this very real threat in our community.  This case is only an example of what we believe to be a growing public safety threat in our region,” said Col. Steve Sellers, Chief of Police of the Albemarle County Police Department.

According to evidence presented in court yesterday by Assistant United States Attorney Craig “Jake” Jacobsen, Coello-Ordonez arrived in Honduras in February 2010 and soon thereafter met Jane Doe #1 (the victim), a 17-year-old Honduras citizen, and the two soon became boyfriend and girlfriend. The defendant promised the victim that he could get her a waitressing job in Harrisonburg, Virginia. Consequently, in August 2010, days before the victim’s eighteenth birthday, the defendant smuggled her across the border and into the United States.

Upon arrival in Harrisonburg, Virginia, it soon became clear to the victim that the defendant was involved in the operation of a prostitution ring, which consisted of brothels located in a trailer in Harrisonburg and an apartment in Charlottesville, Virginia. It became equally clear that there was no waitressing job for the victim. After several months, the defendant told the victim she was going to have to work as a prostitute and have sex with men to earn money. The victim refused. As a result, the defendant verbally and physically abused her. The defendant slapped, kicked and punched the victim until she agreed.

From January 2011 to July 2011, the defendant forced the victim to work as a prostitute at his brothels in Virginia, as well as brothels operated by others in Pennsylvania and Maryland. The victim was forced to have sex with as many as 30 men a day.

On July 16, 2011, the victim called 9-1-1 several times because the defendant was beating her.  When the police arrived, the victim began to shake uncontrollably and told police the defendant had physically assaulted her. The victim had sustained multiple bruises and her right eye was swollen shut. The defendant was arrested and the victim placed in a rescue shelter.

The investigation of the case was conducted by the Western District of Virginia’s Human Trafficking Task Force, headed by the United States Attorney’s Office for the Western District of Virginia. Agencies who assisted in the investigation include: U.S. Immigrations and Customs Enforcement (ICE), Homeland Security Investigations (H.S.I.), the Albemarle County Police Department, the United States Secret Service, the Department of State Diplomatic Security, the Hyattsville, Maryland Police Department, the Virginia Fusion Center, the Computer Crimes Division of the Virginia Attorney General’s Office, the Virginia State Police, the Harrisonburg Police Department and the University of Virginia’s Women’s Center. Assistant United States Attorney Craig “Jake” Jacobsen is prosecuting the case for the United States.

ABINGDON, VIRGINIA – GM-Southwest Inc., and the company’s CEO and former owner, have been sentenced in the United States District Court for the Western District of Virginia in Abingdon after previously pleading guilty to charges of racketeering and money laundering.

Last year, John Paul Gutschlag, 73, of Aubrey, Texas pled guilty to one count of conspiracy to violate the Racketeering Act and two counts of money laundering by engaging in monetary transactions involving property derived from wire and mail fraud. In addition, GM-Southwest, through its corporate counsel, pled guilty to the same three charges. Yesterday in District Court, Gutschlag was sentenced to 18 months of federal incarceration.  The defendant was also ordered to pay $1.2 million in restitution.

“The students and parents of thousands of Virginia Tech students were bilked out of more than $1 million due to the criminal actions of Mr. Gutschlag and GM-Southwest,” United States Attorney Timothy J. Heaphy said today. “This conspiracy caused significant harm to its victims. In a time where health care costs are rising for every American, the United States Attorney’s Office will continue to do everything possible to identify and prosecute waste, fraud and abuse in the health care delivery system.”

“John Paul Gutschlag and GM-Southwest’s conspiracy treated the Virginia Tech community as a pawn in a scheme motivated by pure greed. Through false and fraudulent business practices, Gutschlag not only personally enriched himself, but victimized the Virginia Tech community and cheated them out of more than $1 million in the process, ” said Thomas J. Kelly, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation, Washington, D.C. Field Office.  “IRS-CI is committed  to working closely with the US Attorney’s Office to investigate corporate fraud and to hold corporations and executives accountable for complying with the law.”

According to evidence presented at previous hearings by First Assistant United States Attorney Anthony Giorno, GM-Southwest was in the business of collecting health insurance premiums from students and universities, paying claims and providing reports related to the premium collection and claims payment both to the university and the carriers. The carriers, in turn, paid GM-Southwest a set commission or fee, typically a percentage of the gross premium collected. From August 2003 through the end of the 2010-2011 school year, GM-Southwest, under the direction of Gutschlag, provided student health insurance for Virginia Tech’s undergraduate and graduate students.

Previously, the defendants admitted that beginning in 2005, Gutschlag, and others, devised a scheme to defraud colleges and universities by providing false and fraudulent claims reports and other misrepresentations designed to increase the income of GM-Southwest and to personally enrich Gutschlag. They did this by devising and utilizing a “claims modifier” to alter the claims numbers to produce an inflated dollar amount which overstated the claims paid and loss ratios, causing students andVirginia Tech to pay significantly higher premium costs.

Gutschlag and GM-Southwest admitted to overstating the amount of claims paid on behalf of Virginia Tech by over $1 million from 2003-2004 through the 2009-2010 academic years. The plea agreement provides for restitution to Virginia Tech and the students in the amount of $1.2 million and forfeiture of an additional $1.2 million to the government.    The defendants agreed that the restitution figure agreed to by the government would not prevent Virginia Tech or the students from seeking additional restitution through the civil courts.

In a related matter, in July 2013, James Lane, of Botetourt, Va., reached an agreement with the United States for his role in the fraud. He has paid $250,000 to Virginia Tech as restitution for his conduct.  This is in addition to the restitution to be paid the Gutschlag and GMS.   Lane also pled guilty to one-count of filing a false tax return for tax year 2008 and one count of filing a false tax return for tax year 2009.

In addition, Carolyn Beck, Gutschlag Sr.’s administrative assistant, has previously pled guilty to one count of conspiracy to commit wire fraud, mail fraud and money laundering. Beck had access to the false premiums and claims data on the GM-Southwest computer system at the company’s office in Texas. At Gutschlag’s direction, she provided false claims reports to Lane, who in turn provided the false reports to Virginia Tech

The investigation of the case was conducted by the Bristol Virginia Office of the Internal Revenue Service Criminal Investigation  Assistant United States Attorneys Anthony Giorno and Randy Ramseyer prosecuted the case for the United States.

ABINGDON, VIRGINIA – United States Attorney Timothy J. Heaphy announced today that Carlos Perry, 58, Knoxville, Tenn. was sentenced last week in the United States District Court for the Western District of Virginia in Abingdon to twelve years in federal prison.

Perry was also ordered to pay restitution in the amount of $324,914.70. Perry had previously pleaded guilty to one count of mail fraud.

According to evidence presented at the sentencing and guilty plea hearings by Assistant United States Attorney Zachary T. Lee, between January 2011 and February 2014, Perry developed a scheme in which he defrauded six different insurance companies of workers’ compensation benefits using false business and fictitious employees.  An investigation by the United States Secret Service determined that Perry’s scheme entailed Perry impersonating an owner of six fictitious businesses located in Wise, Va., Johnson City, Tenn., Bristol, Va., and Abingdon, Va., in order to obtain workers’ compensation insurance.  Perry then filed false injury claims on behalf of the fictitious employees.

Perry received the checks sent by the insurance companies and impersonated the fictitious employees at doctor’s visits and in communications with the insurance companies.  The United States Secret Service discovered that Perry utilized nineteen fictitious identities in the course of his scheme and used the social security numbers of numerous real persons to execute his fraud.  On January 29, 2014, Perry was arrested by the United States Secret Service and the United States Marshals Service at a doctor’s office in Kingsport, Tenn., where he was impersonating one of the fictitious employees.  As a result of Perry’s scheme, six separate insurance companies sustained a combined loss of $401,649.66.

The investigation of this case was conducted by United States Secret Service, United States Marshals Service, and the Virginia State Police.  Assistant United States Attorney Zachary T. Lee is prosecuting the case for the United States.

CHARLOTTESVILLE, VIRGINIA – A Federal Grand Jury sitting in the United States District Court for the Western District of Virginia in Charlottesville has returned an indictment charging eight individuals with federal racketeering, narcotics, robbery, kidnapping and murder charges related to a string of violent episodes across Central Virginia that included the alleged kidnapping and murder of Waynesboro Reserve Police Captain Kevin Quick. A ninth defendant has been charged federally with obstruction of justice.

In an indictment returned under seal on Wednesday, May 14, 2014 and unsealed this morning following the defendants’ initial court appearances, the grand jury has charged the following:

Daniel Lamont Mathis, 18, of Charlottesville, Va., Shantai Monique Shelton, 24, of Charlottesville, Va., Mersadies Lachelle Shelton, 20, of Charlottesville, Va., Travis Leon Bell, 23, of Front Royal, Va., Anthony Leon White, 22, of Louisa, Va., Gert Arthur Lee Wright, III, 23, of Manassas, Va., Anthony Darnell Stokes, 32, of Manassas, Va., Devante O’Brian Bell, 20, of Louisa, Va., and Leslie Hope Casterlow, 50, of Manassas, Va.

According to the indictment, those charged today are either members or associates of the “99 Goonz Syndikate” set of the Bloods criminal street gang. The indictment alleges that members of this gang participated in a pattern of racketeering from December 2012-April 2014 that included violent armed robberies, the kidnapping and murder of Kevin Quick, the sale of narcotics and the obstruction of justice after that incident.

Mathis, Shantai Shelton, Mersadies Shelton, Travis Bell, Anthony White and Devante Bell are charged with conducting several armed robberies of both commercial businesses and individuals in Louisa, Charlottesville, Albemarle County, Fluvanna County and Gordonsville.  It is alleged that this series of robberies were conducted using firearms and were conducted to financially benefit the collective group.

Anthony Stokes, Gert Wright and Leslie Casterlow are charged with obstructing justice by assisting other members of the conspiracy destroy evidence and elude apprehension following the kidnapping and murder of Kevin Quick.

The investigation of the case was conducted by the Virginia State Police, the Federal Bureau of Investigation, the Albemarle County Police Department, the Charlottesville City Police Department, the Louisa County Commonwealth’s Attorney’s Office, the Waynesboro Police Department, the Henrico County Police Department, the Gordonsville Police Department, the Goochland County Commonwealth’s Attorney’s Office, the Fluvanna County Commonwealth’s Attorney’s Office and the Prince William County Police Department.

United States Attorney Timothy J. Heaphy, Assistant United States Attorney Ronald M. Huber and Special Assistant United States Attorney and Louisa County Commonwealth’s Attorney Russell E. McGuire   will prosecute the case for the United States.

An indictment is only a charge and all defendants are entitled to a fair and speedy trial and are considered innocent until and if they are proven guilty.

LYNCHBURG, VIRGINIA – An Altavista, Va. man, who previously pled guilty to charges related to trafficking in counterfeit sports apparel, was sentenced today in the United States District Court for the Western District of Virginia in Lynchburg.

George E. Hall, 46, of Altavista., Va., previously pled guilty to one count of trafficking in goods bearing counterfeit marks and one count of copyright infringement. Today in U.S. District Court, Hall was sentenced to five months incarceration and five months of home confinement. In addition, Hall was ordered to pay approximately $64,000 in restitution.

“The jerseys Mr. Hall sold to consumers were labeled as authentic,” United States Attorney Timothy J. Heaphy said today. “In reality, they were counterfeit. Mr. Hall’s fraud misled customers and deprived the authentic manufacturers of sales. This case demonstrates our commitment to protecting the integrity of the marketplace and holding counterfeiters accountable.”

“Trafficking in counterfeit merchandise is a multi-billion dollar global enterprise," said Katrina W. Berger, acting special agent in charge of HSI Washington. "HSI is committed to dismantling these schemes to prevent trans-national criminal organizations from profiting by conducting this type of illicit business."

Hall previously admitted to trafficking in counterfeit sports jerseys and DVDs from his Altavista home. The defendant admitted to importing counterfeit sports jerseys, hats, necklaces, bracelets and sunglasses, from China and Hong Kong and then selling those items to other vendors who sold the items at trade shows and at a local store.

During several undercover buys by agents of the U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), Hall admitted to receiving several letters from U.S. Customs and Border Protection Services advising him that items he was importing from China and Hong Kong were being seized because they were counterfeit. Even after receiving these letters, Hall continued the practice of importing counterfeit goods and simply changed the shipping address information.

The defendant also admitted to downloading and reproducing copyright infringed movies and selling these movies to others. Hall has admitted that he was aware that both the importation and sale of counterfeit clothing items and the downloading and sale of pirated movies were illegal. In all, agents recovered approximately 3,500 movies, 480 sports jerseys and 135 hats.

The investigation of the case was conducted by U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HIS) and the Campbell County Sheriff’s Office. Assistant United States Attorney Daniel Bubar prosecuted the case for the United States.

ABINGDON, VIRGINIA – United States Attorney Timothy J. Heaphy announced today that Phillip Reece, 47, of Dryden, Va., was sentenced to six months imprisonment in the United States District Court for the Western District of Virginia in Abingdon. Phillip Reece previously pled guilty to one count of converting the social security benefits payments of another to his own use.

According to evidence presented at the sentencing and guilty plea hearings by Assistant United States Attorney Zachary T. Lee, between 1999 and 2011, Phillip Reece was the third party payee for his three children’s Social Security Survivor Benefits and was required to use those benefit payments for the care and support of his three children. An investigation by the Social Security Administration’s Department of Inspector General discovered that Phillip Reece falsified multiple Social Security Administration documents claiming his three children resided with him during this timeframe, when in actuality they resided with their grandparents. Additionally, Phillip Reece did not use any of the Social Security Benefits for the support and care of his three children and unlawfully used $91,336 of his children’s Social Security Survivor Benefits for his own personal expenses.

The investigation of this case was conducted by Social Security Administration’s Department of Inspector General. Assistant United States Attorney Zachary T. Lee is prosecuting the case for the United States.

ABINGDON, VIRGINIA – United States Attorney Timothy J. Heaphy and Virginia Attorney General Mark R. Herring announced that five individuals appeared in federal court today who had been arrested on warrants executed during a joint federal/state multi-agency operation in Virginia and Kentucky on Saturday morning. The following individuals appeared in federal court today:

• Walter Dale Stumbo, 51, of Floyd County, Kentucky
• Sonya Stumbo, 51, of Floyd County, Kentucky
• Joshua Stumbo, 25, of Floyd County, Kentucky
• Wesley Dean Robinson, 57, of Wise County, Virginia
• Jonathan Robinson, 33, of Wise County, Virginia

The defendants are charged with conspiring to (a) operate an illegal gambling enterprise and (b) illegally conduct cock fights.

The following defendants were charged in state court:

• Phillip Albert Meade, 54 of Pound, Virginia: nine felony counts of unlawful manufacturing, transporting, or selling of an alcoholic beverage while being armed; one count of knowingly or intentionally possessing marijuana not obtained from, or pursuant to valid prescription; four counts of possessing, keeping, shipping, or transporting untaxed alcoholic beverages.
• Tammy Carol Meade, 47, of Pound, Virginia: two felony counts of unlawful manufacturing, transporting, or selling of an alcoholic beverage while being armed; two counts of possessing, keeping, shipping, or transporting untaxed alcoholic beverages.
• Jeffery A. Meade, 40, of Pound, Virginia: five felony counts of unlawful manufacturing, transporting, or selling of an alcoholic beverage while being armed; seven counts of possessing, keeping, shipping, or transporting untaxed alcoholic beverages; one count of selling alcoholic beverages without a license.
• Russell Peaks, 38, of Pound, Virginia: one felony count of selling, giving, or distributing a controlled substance classified as a Schedule III.

A federal criminal complaint unsealed today in United States District Court in Abingdon alleges the Stumbos, Robinsons and others conspired to have cock fights at the Big Blue Sportsmen’s Club (“Big Blue”) in McDowell, Kentucky. The complaint further alleges the defendants, and others, organized a comprehensive cock fighting derby at Big Blue, which included collecting “parking” fees from spectators, entrance fees from handlers and offering for sale such services as antibiotics for fighting birds, a full-service restaurant for spectators, slot machines and fighting gaffes for fighting cocks.

It is alleged that on fight weekends at Big Blue, spectators and handlers traveled from Virginia, North Carolina, South Carolina, Michigan, Ohio, West Virginia, Maryland and Georgia. The complaint further alleges that entrance fees at Big Blue were $250 per entry with approximately 100 total entries per derby.

The defendants were incarcerated after their arrests. The Robinsons appeared in federal district court in Abingdon, today, and were released on bond. The Stumbos appeared in federal district court in Pikeville, Kentucky, today, and were released on bond. The Stumbos were directed to appear in federal district court in Abingdon tomorrow (Tuesday, May 6). These are only charges and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.

Assistant United States Attorney Randy Ramseyer and Special Assistant United States Attorney Virginia and Assistant Attorney General Michelle Welch are prosecuting the federal case on behalf of the United States. Ms. Welch will be prosecuting the state charges on behalf of the Wise Commonwealth’s Attorney. The case is being investigated by the United States Department of Agriculture – Office of Inspector General, the Virginia Alcohol Beverage Control Bureau of Law Enforcement, and the Spotsylvania County Sheriff’s Office. In addition, the following agencies assisted in the arrests or related proceedings: Virginia Animal Fighting Task Force; Virginia State Police Tactical Team; Southwest Virginia Regional Task Force; Botetourt County Commonwealth’s Attorney’s Office; Wise County, Virginia, Sheriff’s Office and Commonwealth’s Attorney’s Office; Virginia State Veterinarian’s Office; United States Homeland Security Investigations; Kentucky State Police; the United States Attorney’s Office for the Eastern District of Kentucky; and the American Society for the Prevention of Cruelty to Animals.

ABINGDON, VIRGINIA – Elmer Fuller, of Bristol, Virginia, was sentenced in United States District Court in Abingdon, Virginia, for obstructing a Mine Safety and Health Administration investigation.

United States District Judge James P. Jones sentenced Fuller, 58, of Bristol, Virginia, to imprisonment for a term of three months.  In addition, Fuller was ordered to pay a fine of $3,000 and serve a two year term of supervised release upon his release from prison.  His company, A B & J Coal, was placed on probation for a term of one year and ordered to pay a fine of $25,000.

On June 8, 2009, MSHA inspectors determined that someone at A B & J Coal had illegally wired the electrical connections to a belt feeder without any ground fault protection. This situation created a risk of serious injury or death to any minor who came in contact with the feeder. During the investigation, Fuller, one of the owners of A B & J Coal, lied to the investigators about who had illegally wired the feeder.  His false statements substantially interfered with the investigation.

“The safety of coal miners is of the utmost importance,” United States Attorney Timothy J. Heaphy said today. “Interfering with an MSHA investigation is a serious matter.  We will continue to aggressively pursue those whose actions create unnecessary dangers to the lives of coal miners.”

Fuller also was sentenced to imprisonment for three months, to be served concurrently, for tax evasion.  As part of the plea agreement, he paid all back taxes owed prior to the sentencing hearing.  Fuller received a lower sentence than he would otherwise have received because he provided substantial assistance in the investigation of other criminal activity. 

Assistant United States Attorney Randy Ramseyer prosecuted the case on behalf of the United States.  The case was investigated by the Norton, Virginia, Office of the Mine Safety and Health Administration and the Bristol, Virginia, Office of the Internal Revenue Service – Criminal Investigation.

ROANOKE, VIRGINIA – The former fire chief in Buchanan, Va., and his wife, were sentenced today in the United States District Court for the Western District of Virginia in Roanoke to charges stemming from Fraud.

Billy Joe Carter, 35, and Shana Carter, both of Buchanan, Va., previously waived their rights to be indicted and each pled guilty to one count of conspiracy to commit theft of government funds; conspiracy to commit healthcare fraud; conspiracy to willfully make and subscribe a tax return.

Today in District Court Billy Joe Carter was sentenced to 42 months of federal incarceration. Shana Carter was sentenced to three years of probation. The defendants were also ordered to pay restitution in the amount of $130,665 to the Social Security Administration and $91,828 to Medicare.

Evidence presented at previous hearings by Assistant United States Attorney Charlene R. Day showed that Billy Joe Carter began receiving Social Security Administration (SSA) disability benefits in February 2004 for a personality disorder and affective mood swings. Subsequently, Billy Joe Carter also began receiving Medicare in connection with his SSA benefits. Shana Carter, his wife, was the representative payee for her husband’s social security disability benefits and Medicare benefits. Both Billy Joe and Shana Carter are responsible for reporting any changes income, medical condition or employment status to SSA and Medicare.

However, evidence presented shows that from 2005-2012, Billy Joe Carter was employed by the owner of Oak Hill Farm in Botetourt County, first as a farm hand and later as a farm manager. Neither Billy Joe Carter nor Shana Carter reported this change in income and employment to SSA or Medicare. As a result, Billy Joe Carter received between $200,000-$400,000 in undeserved benefits from SSA and Medicare.

The investigation of the case was conducted by the Social Security Administration, the Department of Health and Human Services, the Internal Revenue Service, the Botetourt county Sheriff’s Office and the Botetourt County Commonwealth’s Attorney’s Office. Assistant United States Attorneys Charlene R. Day and C. Patrick Hogeboom III prosecuted the case for the United States.

ROANOKE, VIRGINIA – A Radford, Va., man who bilked investors out of more than $620,000 with promises of high interest returns on investments in his company, was sentenced today in the United States District Court for the Western District of Virginia in Roanoke to federal fraud charges.

Charles G. Shomo, 63, of Radford, Va., previously pled guilty to three counts of mail fraud, two counts of securities fraud and one count of money laundering. The defendant entered his guilty pleas today without the benefit of a plea agreement.  Today in District Court, Shomo was sentenced to 42 months in federal prison.

“Mr. Shomo stole the life savings of dozens of his customers, many of them elderly,” United States Attorney Timothy J. Heaphy said today. “While he is required to provide restitution, Mr. Shomo cannot restore the lost sense of trust that he stole from his victims.” 

This case is the result of a thorough and cooperative investigation by the United States Postal Inspection Service, the Virginia State Corporation Commission, and the Commonwealth’s Attorneys’ Offices for Giles, Smyth, Floyd and Wythe counties, along with the Sheriff’s Offices for Giles, Smyth, Floyd, Wythe, Rockbridge counties, the City of Pulaski and the Pearisburg Police Department.

All total, Shomo obtained approximately $620,000 from over thirty victims, most of who were over the age of 65 and residing in the Western district of Virginia.

According to the indictment,  in 1999 Shomo founded P&G Enterprises LLC, a business originally established to purchase and set-up retail ATM and credit card processing systems throughout Virginia, West Virginia and North Carolina. P&G purportedly developed revenue from fees charged to users who obtained cash from P&G ATMs and from retailers that used P&G’s credit card processing service.

It is alleged that between December 2006 and June 2013 Shomo solicited investors under the representation that investor funds would be used to load ATM units and generally fund the operation of the ATM business. In return, Shomo offered investors promissory notes that typically matured over a one-year time period and paid an annualized interest rate of at least 5.95 percent. Unbeknownst to investors, Shomo was using investor funds for his personal expenses and to help fund an unrelated scooter business.

Additionally, Shomo is accused of using new investors’ funds to pay existing P&G note holders. The indictment claims that between March 2010 and June 2013, Shomo received in excess of $620,000 in proceeds from the sale of P&G promissory notes to investors.

Assistant United States Attorney C. Patrick Hogeboom III and Gauhar R. Naseem, Associate General Counsel-Financial Services, Office of General Counsel for the Virginia State Corporation Commission will prosecute the case for the United States.

CHARLOTTESVILLE, VIRGINIA – A Crozet, Va., man who was previously indicted on child pornography charges, pled guilty today in the United States District Court for the Western District of Virginia in Harrisonburg to three charges related to the trafficking of images depicting the sexual exploitation of minors.

Michael G. Morris, 50, of Crozet, Va., who used the screen name  “Funshooter2006,” on a file-sharing program, was indicted in 2013, and pled guilty today, to two counts of distributing or receiving child pornography and one count of possessing child pornography.  During the offenses charged, Morris was employed as an associate dean at the University of Virginia’s McIntyre School of Commerce.

“Mr. Morris traded explicit images of children engaged in sexual conduct in the dark corners of the internet,” United States Attorney Timothy J. Heaphy said today. “We must continue to fight child exploitation through a comprehensive approach  of vigorous enforcement, community education and parent involvement. In a time of ever-expanding technological advances, we must all be vigilant in keep children safe online.”

“Morris’ plea today is a small consolation for what these children endure while being victimized.  I am proud of the work that our agents along with the task force officer from the Charlottesville Police Department did in this case.  The Richmond-based Child Exploitation Task Force will continue to marshal their resources and bring to justice those that would harm our children,” said Adam Lee, Special Agent in Charge of the FBI’s Richmond Division.

According to evidence presented during the plea hearing, a law enforcement officer, acting in an undercover capacity, successfully downloaded videos depicting minors engaged in sexually explicit conduct that Morris had made available to him on a publicly available file-sharing site on January 6, 2012, and March 19, 2013.  Investigators recovered computers and other items that contained child pornography during a search of his home on November 6, 2013. While Morris’ preference was apparently adolescent females and older minors, his collection included pornographic images of prepubescent minors and images depicting bondage.

At sentencing, Morris faces a sentence of between five and twenty years in prison on the distribution and receipt charges and a sentence of up to 10 years in prison on count three.

The investigation of the case was conducted by the Federal Bureau of Investigation, Charlottesville Police Department, and the Department of Justice’s High Technology Investigative Unit.  Assistant United States Attorney Nancy Healey and Herbrina Sanders, a Trial Attorney with the Department of Justice’s Child Exploitation and Obscenity Section, are prosecuting the case for the United States.

HARRISONBURG, VIRGINIA – A Harrisonburg man, who was found guilty by a jury in May 2013, was sentenced today in the United States District Court for the Western District of Virginia in Harrisonburg on heroin distribution charges.

Jean Paul Alvarado, 31, of Harrisonburg, Va., was indicted in July 2012 one a single charge of distributing heroin and that serious bodily injury and death resulted from the use of such substance. Following a jury trial earlier this year, Alvarado was found guilty of that charge. Today in District Court, he was sentenced to 240 months in federal prison.

“The abuse of heroin is a public health crisis, most emphatically illustrated by the staggering increase in overdose deaths in our district,” United States Attorney Timothy J. Heaphy said today. “We are focusing our investigative resources to meet this threat, as evidenced by cases like this one. We are also working with schools, non-profit organizations and other community groups on prevention, education and treatment solutions.  A comprehensive approach is essential if we are going to successfully repel this large and growing threat.”

During trial, the United States introduced evidence that one of Alvarado’s heroin customers overdosed and died after using heroin Alvarado had sold to him on March 29, 2011. After Alvarado was arrested, he told police that he had sold heroin to the customer who died. The jury found Alvarado guilty of distributing heroin that resulted in death.

In its ongoing battle against heroin abuse, the United States Attorney’s Office, along with the Virginia State Police and the Northwest Virginia Regional Drug and Gang Task Force, is cosponsoring a heroin summit on Friday, April 18, 2014 at Shenandoah University. This summit will bring together community leaders, law enforcement, school officials, treatment service providers, and others, to work toward comprehensive solutions to the escalating heroin problem in the region.

The investigation of the case was conducted by the Drug Enforcement Administration, the RUSH Drug Task Force and the Harrisonburg Police Department.  Assistant United States Attorney Grayson Hoffman prosecuted the case for the United States.

HARRISONBURG, VIRGINIA – A Harrisonburg man, who admitted today to bilking nearly 20 investors out of more than $1 million dollars through a fraudulent investment scheme, pled guilty yesterday in the United States District Court for the Western District of Virginia in Harrisonburg to related fraud charges.

Paul Souder, 60, of Harrisonburg, Va., waived his right to be indicted and pled guilty this morning to one count of mail fraud and one count of wire fraud.

“Mr. Souder abused the trust of his clients when he stole their hard-earned assets,” United States Attorney Timothy J. Heaphy said today. “Instead of investing their money, he paid his own bills and bought new vehicles. He has now been held accountable for his despicable acts of greed. We hope that today’s conviction helps Souder’s victims heal and receive restitution.”

According to a statement of facts entered into evidence at yesterday’s hearing, between June 2007 and October 2013, Souder obtained money from at least 18 investors through the issuance of promissory notes. The defendant represented to his clients that he would invite the borrowed money online using his personal trading strategy. He promised to pay a return to these investors ranging up to 10 percent per quarter.

Souder admitted yesterday that he pooled most of the investors’ money into an account under his exclusive control and opened an online trading account operated out of his home. The defendant generated and sent quarterly statements via U.S. mail and emails to investors, informing them of the alleged status of their accounts, however, he never reported any losses to any of his investors. In all, Souder stole approximately $1.2 million from investors.

The defendant admitted yesterday in Federal Court that at no time did he generate any actual financial returns or profits for investors through online trading. The entire promissory note program was fraudulent and Souder only used approximately half of the funds he obtained from investors to trade online and incurred losses as a result of his online trading. Souder converted the remainder of the investor funds for his personal use, using the money to pay his mortgage and buy new vehicles. In addition, Souder used funds obtained from new investors to pay profit distributions to earlier investors.

In the fall of 2012, the Virginia State Corporation Commission (SCC) approached Souder and informed him that his actions violated the Virginia Securities Act and that he should cease his online trading activity immediately. However, Souder continued to trade and failed to return investors funds, as previously agreed.

The investigation of the case was conducted by the United States Postal Inspection Service and State Corporation Commission. Assistant United States Attorney C. Patrick Hogeboom III and Gauhar R. Naseem, Associate General Counsel-Financial Services, Office of General Counsel for the Virginia State Corporation Commission, will prosecute the case for the United States.

ROANOKE, VIRGINIA – United States Attorney Timothy J. Heaphy announced today that the United States Attorney’s Office for the Western District of Virginia has entered into a civil settlement agreement with PharMerica Corporation regarding the unlawful dispensation of schedule II controlled substances.

PharMerica, a non-public pharmacy in Vinton, Va., fills prescriptions for patients in long term care facilities and operates pursuant to a certificate of registration issued by the Drug Enforcement Administration [DEA].

In accordance with the DEA’s regulatory authority over registered pharmacies, a DEA Diversion Task Force investigator examined the schedule II prescriptions filled by PharMerica’s Vinton pharmacy between May 8, 2008 and July 22, 2009. This investigation revealed 228 occasions whereas PharMerica’s Vinton pharmacy violated the Controlled Substance Act [CSA].

“The problem of prescription drug abuse and addiction continues to plague communities across Virginia,” United States Attorney Timothy J. Heaphy said today. “To minimize the risk of abuse, we must do all we can to ensure that everyone in the chain of distribution of prescription drugs follows proper procedures.  Our newly-formed DEA Diversion Task Force is doing this important work and will continue to enforce the laws governing prescription drugs in the Western District of Virginia.”

The United States Attorney’s Office for the Western District of Virginia and PharMerica agreed that PharMerica would pay the United States $213,283 or $935.45 for each violation of the CSA. PharMerica also agreed to maintain a program to ensure future compliance with the CSA, including that schedule II controlled substances only be dispensed pursuant to valid prescriptions. In investigating this matter, the United States Attorney’s Office found that PharMerica’s 228 CSA violations represented only three percent of its total schedule II prescriptions filled between May 8, 2008 and July 22, 2009.

Had this matter not been settled through a civil settlement, the United States was prepared to prove in a civil suit that PharMerica’s Vinton pharmacy violated the CSA on 228 occasions when it:

• 25 times dispensed Schedule II controlled substances where the practitioners’ signatures were never obtained on prescriptions.
• 38 times dispensed schedule II controlled substances from emergency boxes in long-term care facilities with no valid prescription within seven days.
• 20 times emergency dispensed schedule II controlled substances with no valid prescription within seven days.
• 14 times dispensed schedule II controlled substances without practitioners’ signatures when dispensed or in non-emergency situations dispensed schedule II drugs after the prescription had expired.
• 27 times dispensed schedule II controlled substances without the patients’ correct addresses on the prescription.
• 104 dispensed schedule II controlled substances without the practitioners’ correct names, correct DEA registration numbers and correct prescribing dates on the prescriptions.

This matter was investigated by the Drug Enforcement Administration and prosecution by Assistant United States Attorney Thomas Eckert.

CHARLOTTESVILLE, VIRGINIA – The Jefferson Area Victim Assistance Coalition will commemorate National Crime Victims’ Rights Week (April 6-12) with an event in Charlottesville honoring local officials who have displayed excellence in their work with crime victims.

The theme for National Victims’ Rights Week 2014, “30 Years: Restoring the Balance of Justice,” celebrates the enduring work of those leaders who have dedicated their professional lives to providing services to victims of crime. Through decades of advocacy and hard work, victims of crime have gained access to crime victim’s compensation or services to help rebuild their lives, among other benefits once denied to victims.

Locally, the Jefferson Area Victim Assistance Coalition will commemorate National Crime Victims’ Rights Week with a local event on Wednesday, April 9, 2014 at 9 a.m. inside Charlottesville City Hall, 605 E. Main Street. At this event, the coalition will present awards to five individuals and one agency that have devoted innumerable hours, months and years to the cause of restoring the balance of justice in the care of crime victims.

The Jefferson Area Victim Assistance Coalition consists of members from the Albemarle County Victim/Witness Program, the Albemarle/Charlottesville Domestic Violence Services Coordinator, the Charlottesville Victim/Witness Program, the FBI Victim Assistance Program-Richmond Division, the Fluvanna County Victim/Witness Program, the Greene County Victim/Witness Program, Homeland Security Investigations Victim Assistance Program, the Louisa County Victim/Witness Program, the Shelter for Help in Emergency, the United States Attorney’s Office-Victims/Witness Program and the University of Virginia Victim/Witness Program.

This event is free and open to the public.

HARRISONBURG, VIRGINIA – A Florida man who pled guilty last year to charges related to his illicit sexual conduct with a minor, was sentenced yesterday in the United States District Court for the Western District of Virginia in Harrisonburg.

James Christopher Clement, 33, of St. Petersburg, Fla., previously pled guilty to one count of traveling in interstate commerce for the purpose of engaging in illicit sexual conduct with a person under the age of 18. Yesterday in District Court, Clement was sentenced to spend 96 months in federal prison to be followed by a lifetime of supervised release.

“Mr. Clement and others who travel across state lines to exploit children cause severe and lasting harm to their victims," United States Attorney Timothy J. Heaphy said today. “The punishment imposed in this case reflects the significance of that harm and demonstrates our commitment to holding child predators accountable.”

“Mr. Clement’s sentence sends a strong message to those who victimize children; the FBI and our law enforcement partners will find these predators and deliver them to justice. Cases involving child victims are a high priority for the FBI. The outcome of this case demonstrates our commitment to the fight against child exploitation,” said Adam S. Lee, Special Agent in Charge of the FBI’s Richmond Division.

According to evidence presented at a previous hearing by Assistant United States Attorney Ronald Huber, Clement was a carnival worker who began dating the victim’s mother in 2010. Soon after the two began dating, Clement moved into the family’s Rockingham County home. Shortly thereafter, Clement established an inappropriate relationship with the victim. In November 2010, Clement convinced the victim to take a trip with Clement to West Virginia and Kentucky. Clement has admitted that his purpose in taking the victim out of state was to have illicit sexual contact with her. Clement was arrested in Kentucky and returned to Virginia for prosecution.

The investigation of the case was conducted by the Federal Bureau of Investigation and the Rockingham County Sheriff’s Office. Assistant United States Attorney Ronald Huber prosecuted the case for the United States.

ABINGDON, VIRGINIA – Four defendants, who were part of a cash selling scheme designed to defraud the Internal Revenue Service, were sentenced today in the United States District Court for the Western District of Virginia in Abingdon.

United States District Judge James P. Jones sentenced J.D. “Dot” McReynolds, 77, of Tazewell, Va., to home confinement for a term of six months, based on McReynolds’ terminal cancer and substantial assistance to the government. In addition, McReynolds forfeited $500,000 to the government. Charles Edward “C.E.” McReynolds II, 44, of Vallscreek, W.Va., was sentenced to imprisonment for a term of three months. Timothy Gregory Allen, 43, of Hurley, Va., and Kermit Clayton Wiley, 64, of Princeton, W.Va., were each sentenced to imprisonment for a term of six months. Wiley forfeited $50,000 to the government.

The defendants were cash providers in a check cashing scheme that was designed to hide the withdrawal of cash from various coal and coal related companies by the companies’ operators. Each of the defendants who were sentenced today had pled guilty and cooperated in the investigation.

“Every United States citizen must fulfill his or her federal tax obligation," United States Attorney Timothy J. Heaphy said today. "When people like these defendants seek to evade that responsibility, we will aggressively pursue them with a coordinated effort. I congratulate all of the dedicated investigators and prosecutors who produced this result, which has recovered tax revenue for our communities.”

“No matter how the income is received, cash, check, etc., the obligations of the federal tax laws apply,” said Thomas J. Kelly, Special Agent in Charge, IRS Criminal Investigation, Washington DC Field Office. “Conspiring to defraud the government with a scheme to structure financial transactions in order to evade the payment of taxes is unlawful. The sentencing of those involved with this scheme are important reminders that IRS-CI is committed to bringing to justice those who shirk their federal income tax responsibilities.”

J.D. “Dot” McReynolds, Eddie McReynolds (deceased) and Eddie’s son, C.E. McReynolds provided cash and fraudulent invoices to the coal operators. In return, the coal operators paid the McReynoldses a ten percent fee, which they included in the check they made payable to the McReynoldses or one of their businesses. Many of the ten percent transactions involved fraudulent invoices. The transactions were designed to appear to be legitimate purchases of mine supplies. More than $10 million in cash was distributed as part of the scheme. To obtain the necessary cash to provide to the coal operators, the McReynoldses structured over $10 million in cash out of financial institutions in Virginia and West Virginia to evade currency transaction reporting requirements by making multiple withdrawals of $10,000 in cash or less. By federal law, all transactions with financial institutions involving more than $10,000 in cash are required to be reported to the government. Kermit Wiley and Timothy Gregory Allen also sold cash and disguised the transactions as sales of mine supplies, but on a smaller scale.

The investigation and prosecution resulted in the conviction of 25 defendants on felony charges in the Western District of Virginia. Twenty-three of those defendants pled guilty pursuant to plea agreements and two were convicted at trial.

The following defendants pled guilty to one felony count of conspiracy and agreed to cooperate in the prosecution. They received sentences ranging from probation to imprisonment for a term of 18 months and forfeited amounts as set forth below:

Name City Age Forfeiture Paid Sandra Marahlee Addair War, W.Va. 45 $ 50,000.00 Henry Lee Barnett Tazewell, Va. 63 $ 200,000.00 Carl Demas Blevins Tazewell, Va. 60 $ 10,000.00 David Lee Cordill Doran, Va. 57 $ 45,000.00 Billy Ray Dotson Meadowview, Va. 59 $ 45,000.00 Michael Wayne Dunlap Sumerco, W.Va. 64 $ 50,000.00 Jeffrey Kennis Justus Pounding Mill, Va. 62 $ 300,000.00 Truong “Hoppy” Van Nguyen Tazewell, Va. 56 $ 200,000.00 Hung “Sang” Quoc Nguyen Iaeger, W.Va. 39 $ 200,000.00 Angela Denise Payne War, W.Va. 42 $ 1,000.00 Michael Dwaine Poskas III North Tazewell, Va. 62 $ 30,000.00 David Raber Tazewell, Va. 53 $ 200,000.00 Clinton Lester Ramey Abingdon, Va. 57 $ 10,000.00

The following defendants, who pled guilty to one felony count of conspiracy, have yet to be sentenced. They have already forfeited a total of $1,282,850 to the government.

Name City Age Sentencing Date Darrell Wayne Felts Ballard, W.Va. 64 May 6, 2014 Elmer Fuller Bristol, Va. 58 To Be Scheduled Melvin Parsley Williamson, W.Va. 47 May 5, 2014 Rosie Diane Ritchie War, W.Va. 39 April 7, 2014 John Duane Tolliver Iaeger, W.Va. 57 April 7, 2014 Allen Henry Workman Huddy, Ky. 56 May 5, 2014

Sentencing dates have not yet been scheduled for the following defendants who were convicted after a two week jury trial:

Name City Age William "Bill" F. Adams, Jr. Yukon, W.Va. 55 John B. Ward War, W.Va. 42

Adams was convicted of thirteen counts of structuring monetary transactions and one count of conspiracy. Ward was convicted of 24 counts of structuring monetary transactions and one count of conspiracy. At sentencing, they each face imprisonment of up to five years on the conspiracy count and up to 10 years on each structuring count. Also, they each face forfeitures of more than one million dollars.

So far, the defendants involved in the conspiracy have paid $3,476,682 in evaded taxes, $3,173,850 in forfeitures and $100,000 in delinquent Mine Safety and Health Administration penalties. In addition, information obtained during the investigation has led to several federal convictions in U.S. District Court in Beckley, WV.

Assistant United States Attorney Randy Ramseyer is prosecuting the case on behalf of the United States. The case was investigated by the Bristol, Virginia, Office of the Internal Revenue Service – Criminal Investigation. The Charleston, West Virginia, offices of the United States Attorney’s Office and the Internal Revenue Service – Criminal Investigation assisted in the investigation and prosecutions.

CHARLOTTESVILLE, VIRGINIA -- A local businessman and former commercial real estate agent, who pled guilty last year to a variety of federal fraud charges, was sentenced today in the United States District Court for the Western District of Virginia in Charlottesville.

Michael Wayne Harding, 59, of Keswick, Va., previously waived his right to be indicted and entered a plea of guilty to one count of wire fraud and one count of bankruptcy fraud. Today in District Court, Harding was sentenced to 30 months of federal incarceration. In addition, the defendant was ordered to pay more than $2,019,403 million in restitution.

According to a statement of facts agreed to by the defendant and admitted to the Court at a previous hearing, Harding was the president and sole employee of a company called HMC Holdings. On numerous occasions, Harding attempted to secure mortgages for properties HMC Holdings owned based on improvements that had been made to those properties. However, in order to secure the mortgages, Harding was required to provide the mortgage companies with proof that work had been done to the properties. Harding is alleged to have created fake invoices in order to secure the mortgages.

Harding also admitted that after being issued checks by the mortgage companies intended for the contractors, Harding took those checks to local businesses and had the funds converted for his own personal use.

In April 2011, Harding filed bankruptcy. The defendant admitted today that during his bankruptcy proceedings he filed false Monthly Operating Reports, failed to deposit all income into his Debtor-in-Possession account, which is required by the Court, and lied about forging signatures on releases, liens and deeds of trust. The defendant also admitted to lying about his relationship with a business partner in connection with a proposed sale of property during his corporate bankruptcy.

The investigation of the case was conducted by the Albemarle County Commonwealth Attorney's Office, the Virginia State Police, the Federal Bureau of Investigation, IRS Criminal Investigation and the Office of the United States Trustee. Special Assistant United States Attorneys Matt Quatrara, Elliott Casey and Assistant United States Attorney Ronald Huber are prosecuted the case for the United States.

CHARLOTTESVILLE, VIRGINIA – A New Jersey man, and the fourth member of a Charlottesville-based fake identification ring, pled guilty this morning in the United States District Court for the Western District of Virginia in Charlottesville.

Michael A. DelRio, a.k.a. “Copernicus Lionheart” age 19, of Edison, New Jersey, pled guilty today in U.S. District Court to one count of conspiracy to commit identification document fraud. Previously, Alan McNeil Jones, Kelly Erin McPhee and Mark Gil Bernardo all pled guilty to one count of conspiracy to commit identification fraud and one count of aggravated identity theft for their roles in the conspiracy.

“Mr. DelRio played a significant role in perpetuating a high-tech and sophisticated scheme to produce and sell high-quality false identification documents all across the nation,” United States Attorney Timothy J. Heaphy said today. “He worked to develop a web-based interface for potential customers that, if deployed, would have made the criminal enterprise even more lucrative than it was. Because false identification documents present very real threat to our security, we will continue to prioritize cases like that against Mr. DelRio and his co-conspirators.”

"Counterfeit identity documents, like the ones produced by this ring, can be used by criminals, enabling them to mask their identities and operate with ease in the United States," said Scot Rittenberg, acting special agent in charge of ICE Homeland Security Investigations, Washington. "HSI is committed to stopping this threat that undermines our nation's security."

Previously, Jones, McPhee and Bernardo admitted to conspiring to create high-quality, fraudulent driver’s licenses out of the home they shared on Rugby Road in Charlottesville. The conspiracy, which began in 2010 and operated under the name Novel Design, produced and sold more than 25,000 fraudulent driver’s licenses, primarily to college students, throughout the nation.

As part of the scheme, Jones paid commissions to students at the University of Virginia, and elsewhere, to refer his service to other students interested in obtaining fraudulent driver’s licenses. He also outsourced some of the manufacturing work to companies in Bangladesh and China.

Jones and Bernardo recruited DelRio to streamline the website for their fraudulent identification business. Jones paid DelRio $15,000 to build a website that would allow customers to input biographical information directly onto the site, which would then be printed on the fraudulent identification document each customer had ordered. Allowing customers to enter information via a secure, off-shore website would have saved the conspirators the time it previously took to input that information by hand. Both Jones and Bernardo indicated that DelRio had been informed of the nature and use of the program he was being asked to produce.

At sentencing, DelRio faces a maximum possible penalty of up to 15 years in prison and/or a fine of up to $250,000.

The investigation of the case was conducted by U.S. Immigration and Custom Enforcement’s (ICE) Homeland Security Investigations (HIS) Washington, the United States Postal Inspection Service, the Virginia State Police and the Virginia Attorney General’s Computer Forensics Unit. United States Attorney Timothy J. Heaphy, Assistant United States Attorney Ronald Huber and third-year University of Virginia Law Student Maggie Sullivan prosecuted the case for the United States.

ROANOKE, VIRGINIA – A Radford, Va., man who bilked investors out of more than $620,000 with promises of high interest returns on investments in his company, pled guilty today in the United States District Court for the Western District of Virginia in Roanoke to federal fraud charges.

Charles G. Shomo, 63, of Radford, Va., pled guilty today to three counts of mail fraud, two counts of securities fraud and one count of money laundering. The defendant entered his guilty pleas today without the benefit of a plea agreement.

“Mr. Shomo stole the life savings of dozens of his customers, many of them elderly,” United States Attorney Timothy J. Heaphy said today. “While he is required to provide restitution, Mr. Shomo cannot restore the lost sense of trust that he stole from his victims.”

This case is the result of a thorough and cooperative investigation by the United States Postal Inspection Service, the Virginia State Corporation Commission, and the Commonwealth’s Attorneys’ Offices for Giles, Smyth, Floyd and Wythe counties, along with the Sheriff’s Offices for Giles, Smyth, Floyd, Wythe, Rockbridge counties, the City of Pulaski and the Pearisburg Police Department.

All total, Shomo obtained approximately $620,000 from over thirty victims, most of who were over the age of 65, residing in the Western district of Virginia.

According to the indictment,  in 1999 Shomo founded P&G Enterprises LLC, a business originally established to purchase and set-up retail ATM and credit card processing systems throughout Virginia, West Virginia and North Carolina. P&G purportedly developed revenue from fees charged to users who obtained cash from P&G ATMs and from retailers that used P&G’s credit card processing service.

            It is alleged that between December 2006 and June 2013 Shomo solicited investors under the representation that investor funds would be used to load ATM units and generally fund the operation of the ATM business. In return, Shomo offered investors promissory notes that typically matured over a one-year time period and paid an annualized interest rate of at least 5.95 percent. Unbeknownst to investors, Shomo was using investor funds for his personal expenses and to help fund an unrelated scooter business.

            Additionally, Shomo is accused of using new investors’ funds to pay existing P&G note holders. The indictment claims that between March 2010 and June 2013, Shomo received in excess of $620,000 in proceeds from the sale of P&G promissory notes to investors.

Assistant United States Attorney C. Patrick Hogeboom III and Gauhar R. Naseem, Associate General Counsel-Financial Services, Office of General Counsel for the Virginia State Corporation Commission will prosecute the case for the United States.

ABINGDON, VIRGINIA – A former correctional officer at United States Penitentiary Lee County pled guilty today in the United States District Court for the Western District of Virginia in Abingdon to charges that she smuggled tobacco and other products into the federal correctional facility in exchange for cash.

Kimberlee Crabtree, 43, of Jonesville, Va., waived her right to be indicted and pled guilty today to a one-count Information charging her with accepting a bribe as a public official. Crabtree faces a potential maximum sentence of up to fifteen years imprisonment and a potential fine of up to $250,000.

“Ms. Crabtree accepted bribes from a federal prisoner and provided him with contraband including tobacco products and a cellular telephone,” United States Attorney Timothy J. Heaphy said today. “Her actions threatened institutional security and put staff and inmates at risk. We will do all we can to ensure that our federal prisons are safe and secure and aggressively pursue both inmates and correctional officers who violate the rules.”

According to evidence presented at the guilty plea hearing by Assistant United States Attorney Zachary T. Lee, between August 2013 and November 2013, Crabtree was employed as a correctional officer and nurse for the United States Bureau of Prisons at United States Penitentiary Lee County, Virginia, in Jonesville, Virginia. During this time, Crabtree received multiple monetary payments, totaling at least $2,500, from an inmate at the penitentiary in return for Crabtree smuggling tobacco products and a cellular telephone into the penitentiary. These items were then provided to the inmate in violation of Bureau of Prisons regulations.

Sentencing has been set for May 27, 2013 in the United States District Court for the Western District of Virginia in Abingdon.

The investigation of this case was conducted by the Federal Bureau of Investigation, United States Bureau of Prisons Special Investigative Service at United States Penitentiary Lee County, and the United States Department of Justice Office of the Inspector General. Assistant United States Attorney Zachary T. Lee is prosecuting the case for the United States.

LYNCHBURG, VIRGINIA – A former AAU coach and mentor to a local college basketball star, who pled guilty in December, was sentenced this morning in the United States District Court for the Western District of Virginia in Lynchburg on a wire fraud charges.

Thomas Patric Boggs, 60, of Brookneal, Va., previously pled guilty to one count of wire fraud.  This morning in U.S. District court, Boggs was sentenced to 57 months in federal prison and three years of supervised release. In addition, Boggs was ordered to pay over $380,000 to the victims of his fraud.

“Mr. Boggs exploited the trust placed in him by Travis Watson and turned it into a vehicle for fraud,” United States Attorney Timothy J. Heaphy said today. “He stole hundreds of thousands of dollars from Mr. Watson and caused harm that extends well beyond financial loss.”

Boggs has admitted that he met Travis Watson when Watson was a freshman in high school in Texas. During a trip to Lynchburg, Va. to play in an AAU tournament, Watson met the defendant, who welcomed Watson into his home. The two soon became close and through Boggs’ efforts, Watson was able to attend Oak Hill Academy where he continued to develop his basketball skills. Watson considered Boggs a mentor, coach and father figure.

Following high school, Watson attended and played basketball at the University of Virginia before playing professionally in Greece, Italy, Lithuania and other places in Europe.

The Government’s evidence established, and Boggs admitted, that during Watson’s time overseas, Boggs approached him and offered to invest a portion of Watson’s earnings to ensure financial security post-basketball. Boggs knew that due to the close personal nature of their relationship, Watson would trust him to invest his money wisely. Boggs instructed Watson how to wire money into a pair of accounts, and that Watson expected Boggs to invest that money for Watson’s benefit.

Between 2009 and 2011, Watson wired $357,965 to the accounts controlled by Boggs, who admitted that he used nearly all of the money sent by Watson to pay the personal expenses of Boggs and to pay family members. In addition, throughout the process, Boggs assured Watson that he was making sound investments and that he was going to make Watson a “millionaire.”

The investigation of the case was conducted by the Federal Bureau of Investigation.  Assistant United States Attorneys Anthony Giorno and Laura Rottenborn prosecuted the case for the United States.

HARRISONBURG, VIRGINIA – A Winchester man who previously admitted to enticing 19 minors into engaging in sexually explicit conduct via web cams, was sentenced yesterday in the United States District Court for the Western District of Virginia in Harrisonburg.

Brian Patrick Aronhalt, 33, of Winchester, Va., previously pled guilty to one count of conspiracy to produce child pornography, one count of enticing minors to engage in sexually explicit conduct, four counts of producing child pornography, one count of possession of child pornography and one count of distributing child pornography.

Yesterday in District Court, he was sentenced to 20 years in federal prison and a lifetime of supervised release following his prison term. Restitution in this matter will be determined during a separate hearing to be scheduled in the next 90 days.

“Mr. Aronhalt used deception to repeatedly abuse children,” United States Attorney Timothy J. Heaphy said today. “His case serves as a grim reminder for parents to monitor what their children are doing online. Those of us who work in law enforcement will continue to pursue and prosecute predators like Mr. Aronhalt. We won’t be successful, however, unless parents acknowledge the threat and take steps to help their children stay safe online.”

Evidence presented at yesterday’s hearing showed that Aronhalt posed as a minor female online and enticed numerous minor boys to masturbate for him via webcam, which he recorded. Evidence also showed that the defendant’s collection of self-produced webcam videos depicted at least 100 separate minors.

The defendant learned from others online how to use a sexually explicit video of a female to appear as a live webcast to the minor boys. Using the pre-recorded video, Aronhalt enticed the boys to masturbate for him via webcam and recorded the sexually explicit conduct.

In addition, during the execution of a search warrant, agents from the Federal Bureau of Investigation and the DC Internet Crimes Against Children Task Force found thousands of images depicting child pornography on Aronhalt’s computers.

The investigation of the case was conducted by the Federal Bureau of Investigation, the Northern Virginia DC Internet Crimes against Children Task Force and the Child Exploitation and Obscenity Section of the Department of Justice. Assistant United States Attorney Nancy Healey will prosecute the case for the United States along with Trial Attorney Sarah Chang, U.S. Department of Justice, Child Exploitation and Obscenity Section (CEOS). CEOS’s High Technology Investigative Unit (HTIU) conducted computer forensic analysis for the case.

BIG STONE GAP, VIRGINIA – United States Attorney Timothy J. Heaphy announced today that Richard Wayne Parsons, 35,of Jonesville, Va., has been arrested in Lee County, Virginia on a federal criminal complaint charging him with impersonation of a Deputy United States Marshal. The United States Marshals Service and the Lee County Sheriff’s Department took Parsons into custody on February 5, 2014.

The investigation of the case was conducted by United States Marshals Service and the Lee County Sheriff’s Department. Assistant United States Attorney Zachary T. Lee will prosecute the case for the United States.

The criminal complaint for impersonation of a federal officer is only a charge and not evidence of guilt. The defendant is entitled to a fair trial with the burden on the government to prove guilt beyond a reasonable doubt.

Anyone with additional information regarding similar incidents should contact the United States Marshals Service at 276-628-7940.

ROANOKE, VIRGINIA – A local endodontist, with a practice on Starkey Road, pled guilty this afternoon in the United States District Court for the Western District of Virginia in Roanoke to an obstruction charge.

Robert Stanley Kidder, 66, of Roanoke, Va., waived his right to be indicted on January 24, 2014, and pled guilty this afternoon to a one-count Information charging him with obstruction of a criminal investigation of health care offenses.

“Dr. Kidder devised a scheme through which he obtained portions of payment for his services from both patients and their insurance carriers,” United States Attorney Timothy J. Heaphy said today. “’When an employee discovered his fraud, he tried to keep her silent, then modified and destroyed records documenting his crimes. For his brazen acts of obstruction of justice, Dr. Kidder has been held accountable.”

“Attempting to destroy evidence and encourage deceit during a federal investigation is a serious crime in and of itself,” said Acting Special Agent in Charge D.J. Hathaway, “and as witnessed in today’s plea is not a crime that will be overlooked nor tolerated by law enforcement during any of their investigations.”

According to evidence presented at today’s guilty plea hearing by Assistant United States Attorney Jennie Waering, Kidder’s endodontic practice accepted cash and private dental insurance for procedures. However, Kidder required all patients to pre-pay for a portion of their service. Often times, after insurance payment was received, Kidder was overpaid for his services. When an overpayment occurred, Dr. Kidder was responsible for refunding his patients, which, in several cases, he chose not to do.

In April 2012, a new employee discovered that Kidder was not issuing some of these refunds. When confronted with this information, Kidder fired the new employee and began manipulating his practice’s accounting information to “zero-out” patients’ account balances without issuing refunds. In November 2012, the recently fired employee took legal action against Kidder regarding her termination. Within days of that disclosure, Kidder began issuing refunds to those patients whose accounts had not already been zeroed out.

In December 2012, Kidder began a course of action with one of his employees to obstruct a potential employment civil law suit and potential criminal investigation into healthcare fraud offense. As part of his obstructive conduct, Kidder staged a break-in at his office where all the computers containing accounting information were stolen. In addition, Kidder repeatedly advised and instructed his employee in what she should say to attorneys and the Federal Bureau of Investigation. The employee reported this information to the FBI.

During recorded conversations, the transcripts of which were entered into the record during today’s hearing, Kidder told the employee “just say no, nothing was zeroed out because the accounts are gone, there’s no way that can be proven anyway.”

Furthermore, after an employee received a subpoena to appear before a Federal Grand Jury, Kidder instructed the employee what lies to tell the Federal Grand Jury and what would happen to them both if she told the truth.

At sentencing, Kidder faces a maximum possible penalty of up to five years in prison and/or a fine of up to $250,000.

The investigation of the case was conducted by the Federal Bureau of Investigation. Assistant United States Attorney Jennie L.M. Waering is prosecuting the case for the United States.

Roanoke, Va.

AG
(202) 514-2007
TTY (866) 544-5309
January 23, 2014

Thank you, Tim [Heaphy] – and good morning, everyone.  It is a pleasure to be in Roanoke today.  And it’s a privilege to hear directly from so many criminal justice leaders about the critical work you’re doing to build stronger, safer communities.

I want to thank Judges [Robert] Ballou and [Michael] Urbanski – and their colleagues here in the Western District – for their leadership from the bench.  As we’ve just heard, your shared commitment to innovation, and your fidelity to the highest ideals of our justice system, are helping to transform the lives of veterans who have been charged with nonviolent misdemeanors.

I also want to acknowledge the outstanding work of U.S. Attorney [Tim] Heaphy and every one of his Assistant U.S. Attorneys and support staff members – along with their counterparts from the Federal Public Defender’s Office and the United States Probation Office.  By coming together in a non-adversarial manner – and working together to protect public safety, to advocate for the interests of the community, and to evaluate the needs of individual participants in this Veterans Treatment Court – you’re demonstrating the unique power of collaboration when it comes to addressing the root causes of criminal conduct.  And alongside dedicated Veterans Justice Outreach Specialists and others from the Salem Veterans Affairs Medical Center, you’re connecting those who have served our nation with the resources and support they need to overcome substance abuse disorders and to receive treatment for mental health concerns.

Since its inception just over two years ago, this Veterans Treatment Court has shown tremendous promise in helping eligible men and women to break the destructive cycle of criminality and incarceration that traps too many people and weakens too many communities across America.  By offering alternatives to incarceration – and linking participants with vital rehabilitation and treatment resources – this program provides a model for preventing recidivism, reducing relapse, and empowering veterans convicted of certain nonviolent crimes to rejoin their communities as productive, law-abiding members of society.  It’s also saving resources at a time when they could not be more scarce.

For President Obama – and for me – strengthening programs like this one, and building on work that’s underway in similar diversion and reentry programs throughout the nation, has always been a top priority.  As we’ve said many times before: we will never be able to arrest and incarcerate our way to becoming a safer nation.

That’s why – this past August – I unveiled a new “Smart on Crime” initiative that will drive the Justice Department’s efforts to reform America’s criminal justice system as a whole.  As a central part of this initiative, we’ve enhanced our focus on diversion programs.  And I have directed every U.S. Attorney to designate a Prevention and Reentry Coordinator in his or her office.

I’ve also instituted highly-targeted reforms – including a significant modification of the Justice Department’s charging policies – to ensure that individuals accused of certain low-level federal drug crimes will no longer face excessive mandatory minimum sentences that are out of proportion with their alleged conduct, and serve no deterrent purpose.  These changes, coupled with programs like this one, will improve criminal justice outcomes while reducing the burden on our overcrowded prison system.  They will make our expenditures both more efficient and more effective.  And they can pave the way for additional improvements and legislative changes that can take this work to a new level – provided that leaders in Washington seize the opportunity to come together and do even more.

That’s why – today – I am urging Congress to pass common-sense reforms like the bipartisan Smarter Sentencing Act – introduced by Senators Dick Durbin and Mike Lee – which would give judges more discretion in determining appropriate sentences for people convicted of certain federal drug crimes.  This bill would also provide a new mechanism for some individuals – who were sentenced under outdated laws and guidelines – to petition judges for sentencing reductions that are consistent with the Fair Sentencing Act passed by Congress in 2010.

These reforms would advance the goals of the “Smart on Crime” initiative – and efforts like this Veterans Treatment Court – by fundamentally improving policies that exacerbate, rather than alleviate, key criminal justice challenges.  Such legislation could ultimately save our country billions of dollars while keeping us safe.  And it’s becoming clear – thanks to Senators Durbin and Lee, along with Senators Patrick Leahy and Rand Paul – that this type of approach enjoys broad, bipartisan support on Capitol Hill.

I look forward to working with members of both parties to refine and advance these proposals in the days ahead.  And I pledge my own best efforts – and those of my colleagues throughout the Justice Department – to continue to strengthen America’s criminal justice system and working with leaders like you to keep building the more just society that everyone in this country deserves.

I understand, as you do, that significant challenges lie ahead, and the journey before us will be anything but easy.  But that’s exactly why I wanted to be here today: to call attention to the great work you’re leading.  To encourage you to keep moving our system forward.  And to join you in striving not only to transform lives, but to improve your communities, strengthen your country – and support those who have served in uniform.

I commend you for your dedication to these efforts.  I wish you all the best as you continue this important and innovative program.  And I thank you, once again, for inviting me to be here today.

DO NOT REPLY TO THIS MESSAGE.  IF YOU HAVE QUESTIONS, PLEASE USE THE CONTACTS IN THE MESSAGE OR CALL THE OFFICE OF PUBLIC AFFAIRS AT 202-514-2007.

ROANOKE, VIRGINIA – United States Attorney Timothy J. Heaphy announced today that the United States Attorney’s Office for the Western District of Virginia collected $501,452,563 in criminal and civil penalties in fiscal year 2013.  Additionally, the Western District of Virginia worked with other U.S. Attorney’s Offices and components of the Department of Justice to collect an additional $1,155,045,898 in civil cases pursued jointly with these offices.

Attorney General Eric Holder announced on Thursday that the Justice Department collected approximately $8.1 billion in civil and criminal actions in the fiscal year ending Sept. 30, 2013. The more than $8 billion in collections in FY 2013 represents nearly three times the appropriated $2.76 billion budget for the 94 U.S. Attorney’s offices and the main litigating divisions in that same period.

“The department’s enforcement actions help to not only ensure justice is served, but also deliver a valuable return to the American people,” said Attorney General Holder. “It is critical that Congress provide the resources necessary to match the department’s mounting caseload. As these figures show, supporting our federal prosecutors is a sound investment.”

“In 2013, our office collected more than 75 times our annual budget in criminal and civil penalties and asset forfeitures,” United States Attorney Timothy J. Heaphy said today. “I am proud of the AUSAs and staff in our district, who continue to achieve unprecedented success in recovering assets from those who commit fraud and other crimes.  This money helps provide restitution and other victim services, and supports law enforcement activities around the district.” 

For Fiscal Year 2013, the United States Attorney’s Office for the Western District of Virginia, collected more criminal, district-only, money than any other United States Attorney’s Office in the country. The $501,333,280, collected in 2013 is the highest total collection money collected to date in the Western District of Virginia.   A large portion of this FY13’s collections stem from the criminal fine levied against Abbott Labs, announced in 2012.

Our office was again near the top of the list in terms of shared collections in civil cases. The $1.155 billion collected civilly includes $818 million from the Abbott Labs case brought in the Western District of Virginia, as well as $335 million in shared collections in nationwide cases brought by other United States Attorney’s Offices.  In these “shared collections” cases, employees of the USAO-WDVA personally contacted local victims to make them aware of prosecutions in other districts and gave them the information they needed to enforce their rights and obtain relief.  Our work on these shared collection matters helped ensure that local victims received the restitution they deserve.

“Our participation in these shared collection actions reinforces the notion that we must work with the Department, and other districts, to successfully prosecute some of these large, complex fraud cases,” U.S. Attorney Heaphy said today.

In terms of asset forfeiture, the USAO-WDVA collected assets totaling $6,345,519, more than any other similarly-sized United States Attorney’s Office in the nation. In addition, the USAO-WDVA has more assets under seizure than 91 other districts, with a value of seizures higher than 80 other districts.

“Our asset forfeiture unit does an unbelievable job in identifying and seizing those assets derived from the ill-gotten gains of the convicted,” said Assistant United States Attorney Sharon Burnham, Chief of the Asset Forfeiture Unit. “These forfeited assets help compensate victims and provide a needed supplement to the local law enforcement community.  It’s gratifying to use a criminal’s assets to fight crime.”

            The U.S. Attorneys’ Offices, along with the department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the U.S. and criminal debts owed to federal crime victims.  The law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss.  While restitution is paid to the victim, criminal fines and felony assessments are paid to the department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.

            The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct or collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights or environmental laws.  In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, Small Business Administration and Department of Education.

ABINGDON, VIRGINIA – The former administrator of the Bluefield Virginia Rescue Squad in Bluefield, Va., was sentenced this morning on charges that he stole money from the squad and obtained a fraudulent loan without the squad’s authority.

Thomas Franklin Carroll, 48, of Bluefield, W.Va., previously pled guilty to one count of bank fraud and one count of identity theft. This morning in District Court, he was sentenced to 45 months of federal incarceration, 4 years of supervised release, and ordered to pay $204,490 in restitution.

“Mr. Carroll stole money from an organization tasked with providing needed assistance in medical emergencies,” United States Attorney Timothy J. Heaphy said today. “He abused the trust placed in him by the Rescue Squad, and used their scarce resources for his personal gain. The sentence imposed today appropriately recognizes the seriousness of Mr. Carroll’s crime.”

According to evidence presented in court today, Carroll was employed as the administrator of the Bluefield Virginia Rescue Squad in Tazewell County from 2005 to June 2011. Between October 11, 2008 and October 23, 2011, Carroll incurred personal credit card charges on at least 4 of the Squad’s credit cards, without authorization to do so from the Squad’s Board of Directors.

In addition, in May 2011, in an effort to hide his crime, Carroll obtained a loan from a bank without authorization to do so from the Squad’s Board of Directors and deposited some of the proceeds of the loan into the Squad’s account.

The investigation of the case was conducted by the United States Secret Service and the Virginia State Police. Assistant United States Attorney Randy Ramseyer prosecuted the case for the United States.

ABINGDON, VIRGINIA – A West Virginia woman, who was part of a Nigerian wire fraud scheme, pled guilty yesterday in the United States District Court for the Western District of Virginia in Abingdon.

Audrey Elaine Elrod, 45, of Bluefield, W.Va., waived her right to be indicted yesterday and pled guilty to a two-count Information charging her with one count of structuring transactions to avoid reporting requirements and one count of conspiracy to commit wire fraud.

“Ms. Elrod and her co-conspirators stole hundreds of thousands of dollars in an elaborate fraud scheme,” United States Attorney Timothy J. Heaphy said today. “This United States Attorney’s Office will continue to prioritize the investigation and prosecution of financial fraud and bring those who commit such fraud to justice.”

According to evidence presented in court by Assistant United States Attorney Randy Ramseyer, Elrod was a participant in a Nigerian wire fraud scheme in which money was sent to Elrod from victims. Elrod then structured the transactions and forwarded most of the proceeds to Nigeria, via wire transfer. Between March 2012 and July 2013, Elrod received $446,927 in wire transfers into bank accounts she controlled. Between July 2012 and July 2013, Elrod structured $411,411 in cash transactions in an effort to hide her activity from the government.

At sentencing, Elrod faces a maximum possible penalty of up to 20 years in prison on the wire fraud charge and a maximum possible penalty of up to 10 years in prison on the structuring charge. In addition, the defendant faces a possible additional10-year prison term, per count, for committing these crimes while on pretrial release.

The investigation of the case was conducted by the Internal Revenue Service, Criminal Investigations, the United States Marshal Service, the Russell County Sheriff’s Office, the Bluefield Virginia Police Department, and the Bluefield West Virginia Police Department. Assistant United States Attorney Randy Ramseyer is prosecuting the case for the United States.

LYNCHBURG, VIRGINIA – The former head teller of the Lynrocten Credit Union in Lynchburg pled guilty today in the United States District Court for the Western District of Virginia in Lynchburg to federal embezzlement charges.

Teresa Wieringo Humphries, 58, of Madison Heights, Va., waived her right to be indicted and pled guilty today to a one-count Information charging her with embezzlement from a Federal Credit Union.

“Ms. Humphries participated in a massive fraud scheme in which she stole over a million dollars from her employer by falsifying loan documents,” United States Attorney Timothy J. Heaphy said today.  “Her brazen and persistent acts of fraud violated the trust placed in her by the Lynrocten Credit Union and its customers.  This office will continue to vigorously investigate and prosecute instances of financial fraud and do our best to provide restitution to the victims of these crimes.”

According to evidence presented at today’s hearing by Assistant United States Attorney Daniel Bubar, Humphries had been the head teller at the Lynrocten Credit Union since the mid-1980s. Beginning in 2000, and continuing until the credit union’s liquidation, Humphries, and the manager of the credit union, carried out several schemes to embezzle and steal funds from the credit union’s deposits through the unauthorized and fraudulent origination of loans in the names of credit union members. She and the manager also used a check kiting scheme to obtain additional monies of the credit union and conceal and facilitate the fraudulent loan scheme.

The funds created through both the loan and check writing schemes were eventually funneled to the Lynrocten Credit Union accounts of Humphries and the manager and their family members. Between 2007 and the liquidation of the Lynrocten Federal Credit Union in 2013, Humphries personally stole approximately $3,000-$4,000 per month that she deposited into the accounts belonging to her family members. In total, Humphries stole in excess of $1 million from the Lynrocten Federal Credit Union.  The overall loss to the credit union, however, was in excess of $7 million, and contributed to the ultimate collapse of that financial institution.

At sentencing, Humphries faces a maximum possible penalty of up to 30 years in prison and/or a fine of up to $1 million.

The investigation of the case was conducted by the Federal Bureau of Investigation, the United States Secret Service and the Lynchburg Police Department. Assistant United States Attorneys Anthony Giorno and Daniel Bubar are prosecuting the case for the United States.

ABINGDON, VIRGINIA – A local woman who previously pleaded guilty to food stamp fraud and bank fraud, was sentenced last week in the United States District Court for the Western District of Virginia in Abingdon.

April Darlene Avery, 41, of Glade Spring, Va., previously waived her right to be indicted and pled guilty to one count of food stamp fraud and one count of bank fraud. On January 3, 2014 in U.S. District Court in Abingdon, she was sentenced to 30 months of Federal incarceration. She was also ordered to pay $153,759 in restitution to the victim of her bank fraud and $3,936 in restitution for overpayment of public assistance benefits.

“This defendant repeatedly stole from her elderly client,” United States Attorney Timothy J. Heaphy said today. “Rather than perform her important duty as a caregiver, Ms. Avery took advantage of a senior citizen by taking money from her accounts. For that despicable conduct, she has justly been held accountable.”

According to evidence presented in court by Assistant United States Attorney Jennifer Bockhorst, Avery was employed full-time as a caregiver for an elderly woman. While employed as a caregiver, Avery forged the signature of the elderly woman in her care and negotiated checks, as a means of obtaining funds from accounts of the victim to which she was not entitled. In total, Avery stole more than $153,000 from the victim.

In addition, between April 2012 and March 2013, while being employed, Avery knowing used and acquired food stamp coupons worth approximately $3,936 to which she was not entitled.

The investigation of the case was conducted by the United States Secret Service, the Washington County Sheriff’s Office and the Virginia Department of Social Service. Assistant United States Attorney Jennifer Bockhorst will prosecute the case for the United States.

ROANOKE, VIRGINIA – A mother and son who falsely billed Medicaid for services that were not performed were sentenced yesterday morning in the United States District Court for the Western District of Virginia in Roanoke. In a related case earlier this week, a registered nurse who also billed Medicaid for services that were not performed in relation to the same situation, pleaded guilty.

Travis Bugg, 25, of Blacksburg, Va., and his mother, Sandra Bugg, 47, of Roanoke, Va., previously pled guilty to one count each of making a materially false statement in writing involving a healthcare benefit program. Yesterday in District Court, both Travis and Sandra Bugg were sentenced to 36 months of probation and ordered to pay restitution in the amount of $5,472. Travis Bugg will also be excluded from receiving earnings from Medicaid and Medicare for 5 years.

On Monday, December 16, in a related matter, Tammy Allen, 45, of Chesterfield, Va., pled guilty to one count of making a materially false statement in writing involving a healthcare benefit program and one count of health care fraud. Allen faces up to 10 years in prison when she is sentenced.

“These defendants abused a program designed to provide a safety net for those truly in need,” United States Attorney Timothy J. Heaphy said today. “When fraudsters bill the Medicaid program for health care services not actually performed, they undercut the solvency and effectiveness of the health care system. We will continue to hold responsible those who commit health care fraud and do what we can to prevent waste, fraud and abuse in the system.”

According to evidence presented at various court proceedings by Assistant United States Attorney Jennie Waering and Virginia Assistant Attorney General and Special Assistant United States Attorney Vaso Doubles, Sandra Bugg received eligibility to receive Medicaid services through the Medicaid Consumer Directed Program for the elderly and disabled, which allows the person who receives the care to hire their own personal care assistant, regardless of their qualification. As a result, Sandra Bugg hired her son,

Travis Bugg, to serve as her personal care assistant. During this time, Tammy Allen, a registered nurse, was hired to act as a service facilitator to determine the number of hours of care a recipient is entitled to receive and to provide home visits for Sandra and Travis Bugg. Travis Bugg has admitted that between September 2011 and January 2012, he billed Medicaid for 88 days of work as his mother’s personal care assistant for which he did not work. Sandra Bugg has admitted to signing the time sheets showing her son working those 88 days when, in fact, she knew he had not been at her home those 88 days. Tammy Allen has also admitted that she billed Medicaid for three in-home visits that she never made.

In all, Travis Bugg falsely billed Medicaid for $5,472 of services that were never provided. Tammy Allen falsely billed Medicaid $550 for the three home visits she never made.

The investigation of the case was conducted by the Virginia Medicaid Fraud Control Unit of the Virginia Attorney General’s Office and the Federal Bureau of Investigation. Assistant United States Attorney Jennie Waering and Virginia Assistant Attorney General and Special Assistant United States Attorney Vaso Doubles are prosecuting the case for the United States.

ABINGDON, VIRGINIA – United States Attorney Timothy J. Heaphy announced today that a Georgia man and member of the Ku Klux Klan has been sentenced to imprisonment in the United States District Court for the Western District of Virginia in Abingdon.

On December 19, 2013, Michael Lee Fullmore, 30, of Claxton, Ga., was sentenced to 52 months imprisonment after pleading guilty to two counts of providing a firearm to a convicted felon.

“Those of us who work in law enforcement will do all we can to keep firearms away from prohibited persons,” United States Attorney Timothy J. Heaphy said today. “Mr. Fullmore ignored that important restriction and has now been held accountable. The fact that his fraudulent gun sales were motivated by a desire to finance hate crimes makes his conduct more despicable. ”

According to evidence presented at the guilty plea hearing and sentencing by Assistant United States Attorney Zachary T. Lee, Fullmore, a member of the Georgia Knight Riders of the Ku Klux Klan, came to the attention of the Federal Bureau of Investigation when he began to take steps to establish a more violent and radical sub-group of the Ku Klux Klan, which he intended would commit violent crimes against minorities.

Fullmore believed that this organization could be supported by selling firearms to convicted felons and militia groups. On numerous occasions, Fullmore sold firearms, including an AR-15 assault rifle and an AK-47 assault rifle with an obliterated serial number, to a convicted felon in Georgia and Virginia who was working with the FBI as a confidential informant. On one occasion, Fullmore also sold marijuana and firearms to an undercover law enforcement officer. Fullmore was arrested by the FBI in June 2013 after he stated to the confidential informant that he wanted to fire-bomb a Catholic church in the Claxton, Ga. area based upon its ties to the Hispanic community.

The investigation of this case was conducted by the Federal Bureau of Investigation Atlanta and Richmond Divisions and the Bureau of Alcohol, Tobacco, Firearms, and Explosives. Assistant United States Attorney Zachary T. Lee of the United States Attorney’s Office in Abingdon is prosecuting the case.

CHARLOTTESVILLE, VIRGINIA – The three Charlottesville residents convicted of producing tens of thousands of fraudulent driver’s licenses and shipping them across the country were sentenced this morning in the United States District Court for the Western District of Virginia in Charlottesville.

Alan McNeil Jones, 32, Kelly Erin McPhee, 31, and Mark Gil Bernardo, 28, all of Charlottesville, Va., previously waived their rights to be indicted and pled guilty to a two-count Information. The three defendants each pled guilty to one count of conspiracy to commit identification document fraud and one count of aggravated identity theft.

This morning in District Court, they three were sentenced to the following: Jones was sentenced to 60 months of federal incarceration; Bernardo was sentenced to 40 months of federal incarceration and McPhee was sentenced to 25 months of federal incarceration. In addition, each defendant will serve three years of supervised release after their respective prison terms.

“These three defendants developed a sophisticated scheme to produce and sell high-quality false identification documents throughout the nation,” United States Attorney Timothy J. Heaphy said today. “Their criminal enterprise was tremendously lucrative, generating profits of more than $3 million over several years. The sentences handed down today reflect how serious these crimes were. Law enforcement personnel will continue to take every available step to recover these counterfeit driver’s licenses and ensure that they cannot be used to facilitate additional criminal activity.”

“Regardless of the reasons for seeking fraudulent documents we focus to detect, deter and dismantle individuals and organizations that present an active threat to national security or public safety, and who seek to undermine the integrity of the laws and regulations of the United States,” said Scot Rittenberg, Acting Special Agent in Charge, ICE Homeland Security Investigations, Washington.

Previously, Jones, McPhee and Bernardo admitted to conspiring to create high-quality, fraudulent driver’s licenses out of the home they shared on Rugby Road in Charlottesville. The conspiracy, which began in 2010 and operated under the name Novel Design, produced and sold more than 25,000 fraudulent driver’s licenses, primarily to college students, throughout the nation.

As part of the scheme, Jones paid commissions to students at the University of Virginia, and elsewhere, to refer his service to other students interested in obtaining fraudulent driver’s licenses. He also outsourced some of the manufacturing work to companies in Bangladesh and China.

During the entire period of time in which Novel Design was in operation, Jones, McPhee and Bernardo produced approximately 25,000 fraudulent driver’s licenses for customers. They charged customers anywhere from $75 to $125 per fake license and the three obtained more than $3 million from customers. To date, over $2.7 million in assets have been seized by law enforcement.

At the height of the conspiracy, Jones, McPhee and Bernardo, were able to create fraudulent driver’s licenses for the states of Arizona, Connecticut, Florida, Georgia, Illinois, Louisiana, Maryland, Maine, Mississippi, Montana, New Jersey, Pennsylvania, Ohio, Rhode Island, South Carolina, Tennessee and Virginia.

The investigation of the case was conducted by U.S. Immigration and Custom Enforcement’s (ICE) Homeland Security Investigations (HIS) Washington, the United States Postal Inspection Service, the Virginia State Police and the Virginia Attorney General’s Computer Forensics Unit. United States Attorney Timothy J. Heaphy and Assistant United States Attorney Ronald Huber are prosecuting the case for the United States.

CHARLOTTESVILLE, VIRGINIA – A former contractor for the Department of Defense pled guilty today in the United States District Court for the Western District of Virginia in Charlottesville to charges related to the removal of classified materials.

Bruce Schliemann, 50, of Austin, Texas, waived his right to be indicted and pled guilty today to a one-count Information charging him with the unauthorized removal and retention of classified documents. At sentencing, he faces a maximum possible penalty of up to one-year in prison and/or a fine of up to $100,000.

“Protecting the integrity of classified documents is crucial to our national security,” United States Attorney Timothy J. Heaphy said today. “Defendant Schliemann was a decorated Navy Seal who knew the importance of protecting classified information. Nonetheless, he misused classified information, and then tried to cover up his crime. We will do all we can to identify breaches of national security like this one and hold the offenders responsible. ”

According to a statement of facts filed today in court, in 2010, Schliemann, a retired Navy Seal, was working as an employee for a Department of Defense contractor in the Southern District of California in San Diego.

In April 2010, Schliemann knowingly downloaded classified information from a classified computer in a secure facility to a personal thumb drive. The defendant then removed the thumb drive from the secure facility and transferred those classified files to the laptop computer that had been issued to him by his employer. After removing the classified markings, Schliemann then emailed the classified material to employees of another defense contractor located in the Western District of Virginia. The employees of this second defense contractor subsequently then transmitted the classified information to a number of unauthorized and un-cleared persons in several locations.

During September 2010, Schliemann found out he was being investigated for his actions and consulted with a computer-savvy friend for assistance in “wiping” the hard drive of his laptop computer. After wiping the hard drive, Schliemann physically destroyed the hard drive and thumb drive that held the classified information.

In addition, when approached by agents in September 2010, Schliemann lied about a number of facts, including telling the agents he obtained the classified information by “digging around on the internet.” The defendant also specifically denied removing the classified information from the secure facility in San Diego.

The investigation of the case was conducted by the Department of Homeland Security Investigations [HIS] and the Defense Criminal Investigative Service. Assistant United States Attorney Stephen Pfleger is prosecuting the case for the United States.

ROANOKE, VIRGINIA – A Roanoke man who admitted to building and detonating a pipe bomb was sentenced this morning in the United States District Court for the Western District of Virginia in Roanoke.

Derick G. Wilson, 24, of Roanoke, Va., who previously pled guilty to knowingly possessing a destructive device, was sentenced today in Federal District Court to 36 months in federal prison, along with a two-year period of supervised release.

“The defendant put the lives of innocent bystanders and first responders at risk when he detonated this very dangerous device,” United States Attorney Timothy J. Heaphy said today. “Due to the prompt response and careful investigation of law enforcement, he has now been held accountable for his reckless acts.”

“The criminal use of explosives or improvised explosive devices poses an extreme threat to public safety.  ATF will aggressively investigate any use of these weapons that are designed for only one reason - to inflict serious injury or death to anyone nearby,” stated Carl Vasilko, Special Agent in Charge, ATF Washington Field Division.

The evidence in the case showed that on August 1, 2012, the defendant got into a physical altercation with an individual at Virginia Tech over a former girlfriend. Following the altercation, the defendant drove to his home in Roanoke, where he constructed a pipe bomb, using a piece of galvanized pipe, two end-caps, powder, and a fuse.  After constructing the pipe bomb, the defendant drove back to Virginia Tech and placed the pipe bomb under the left front fender of a vehicle belonging to the person with whom he had got into an altercation. The defendant lit the fuse and the pipe bomb exploded, causing significant damage to the vehicle. There were no injuries.

The investigation of the case was conducted by the Bureau of Alcohol, Tobacco, Firearms and
Explosives, the Virginia State Police Bomb Squad, the Blacksburg Police Department and the Virginia Tech Police Department.  Assistant United States Attorney Craig “Jake” Jacobsen prosecuted the case.

LYNCHBURG, VIRGINIA – A former AAU coach and mentor to a local college basketball star pled guilty earlier this week in the United States District Court for the Western District of Virginia in Lynchburg to a wire fraud charges.

Thomas Patric Boggs, 60, of Brookneal, Va., pled guilty on Tuesday to one count of wire fraud. At sentencing, he faces a maximum possible penalty of up to 20 years in prison and/or a fine of up to $250,000.

“Mr. Boggs exploited the trust placed in him by Travis Watson and turned it into a vehicle for fraud,” United States Attorney Timothy J. Heaphy said today. “This defendant stole hundreds of thousands of dollars from a man who considered him a father figure and caused harm that extends well beyond the victim’s financial loss.”

Boggs admitted Tuesday in U.S. District Court that he met Travis Watson when Watson was a freshman in high school in Texas. During a trip to Lynchburg, Va. to play in an AAU tournament, Watson met the defendant, who welcomed Watson into his home. The two soon became close and through Boggs’ efforts, Watson was able to attend Oak Hill Academy where he continued to develop his basketball skills. Watson considered Boggs a mentor, coach and father figure.

Following high school, Watson attended and played basketball at the University of Virginia before playing professionally in Greece, Italy, Lithuania and other places in Europe.

The Government’s evidence established, and Boggs admitted, that during Watson’s time overseas, Boggs approached him and offered to invest a portion of Watson’s earnings to ensure financial security post-basketball. Boggs knew that due to the close personal nature of their relationship, Watson would trust him to invest his money wisely. Boggs instructed Watson how to wire money into a pair of accounts, and that Watson expected Boggs to invest that money for Watson’s benefit.

Between 2009 and 2011, Watson wired $357,965 to the accounts controlled by Boggs, who admitted that he used nearly all of the money sent by Watson to pay the personal expenses of Boggs and to pay family members. In addition, throughout the process, Boggs assured Watson that he was making sound investments and that he was going to make Watson a “millionaire.”

The investigation of the case was conducted by the Federal Bureau of Investigation.  Assistant United States Attorneys Anthony Giorno and Laura Rottenborn prosecuted the case for the United States.

ABINGDON, VIRGINIA – An attorney from Wise, Va., was sentenced this morning in the United States District Court for the Western District of Virginia in Abingdon on four felony drug charges.

Stuart Collins, 42, of Wise, Va., previously pleaded guilty to four counts of obtaining controlled substances by fraud.

“This case is yet another example of the ways in which the scourge of prescription drug abuse affects people at all levels of society,” United States Attorney Timothy J. Heaphy said today. “Mr. Collins’ addiction led him to illegally obtain prescription medication, and to obstruct justice when his crimes were discovered.  The 20-month sentence handed down this morning reflects this office’s priority on the pill problem, and on punishing obstruction wherever it occurs.”

Collins had previously admitted that on multiple occasions he received pharmaceutical drugs from a local doctor.  Collins deliberately did not inform that doctor that he was receiving pharmaceutical drugs from another doctor.  The United States asserted that Collins’ tampering with witnesses was a basis for the sentence imposed today.

The investigation of the case was conducted by the Bristol Office of the Federal Bureau of Investigation with the assistance of the Virginia State Police, Southwest Regional Drug Task Force, Wise County Sheriff’s Office and Wise Police Department. Assistant United States Attorneys Jennifer Bockhorst, Donald Wolthuis and Randy Ramseyer prosecuted the case for the United States.

CHARLOTTESVILLE, VIRGINIA – A federal grand jury sitting in the United States District Court for the Western District of Virginia in Harrisonburg has indicted a local man on a series of charges related to the distribution and possession of child pornography.

Michael G. Morris, a.k.a. “funshooter2006,” was charged today by a federal grand jury in an indictment returned this afternoon. The grand jury has charged Morris, age 50, of Crozet, Va., with two counts of distributing or receiving images of child pornography and one count of possession of child pornography.

The indictment alleges that Morris distributed or received images of child pornography on January 6, 2012 and March 19, 2013. The possession charges alleges that on November 6, 2013, Morris possessed images or videos of a minor whom the defendant knew was a prepubescent teen who had not attained 12 years of age.

If convicted, Morris faces a sentence of between five and 20 years in prison on counts one and two and up to 20 years in prison on count three.

The investigation of the case was conducted by the Federal Bureau of Investigation. Assistant United States Attorney Nancy Healey and Herbrina Sanders, a Trial Attorney with the Department of Justice’s Child Exploitation and Obscenity Section, will prosecute the case for the United States.

A Grand Jury Indictment is only a charge and not evidence of guilt. The defendant is entitled to a fair trial with the burden on the government to prove guilt beyond a reasonable doubt.

ROANOKE, VIRGINIA – A former project manager at Breakell Inc., who pled guilty early this year to mail fraud charges, was sentenced today in the United States District Court for the Western District of Virginia in Roanoke.

Jamie Carl Graham, 34, of Roanoke, Va., previously pled guilty to one count of mail fraud. Today he was sentenced to 41 months of federal incarceration and was ordered to pay $1,290,624 in restitution.

“Mr. Graham stole materials and labor from his employer for his own benefit, and the benefit of his friends and other area business owners,” United States Attorney Timothy J. Heaphy said today. “This United States Attorney’s Office will continue to investigate and prosecute incidents of white collar fraud and bring those responsible to justice.“

Graham, while working as a project manager for Breakell, previously admitted to diverting labor and materials from his employer’s projects to other projects or for his own personal benefit. In order to divert the resources and hide the costs from Breakell, Graham forged change orders and miscoded expenses to and from various projects. As a result of Graham’s actions, Breakell used the US Postal Service and other commercial carriers to place orders with suppliers for the delivery of materials and sent payment to subcontractors for labor that Graham had wrongfully diverted.

The investigation of the case was conducted by Federal Bureau of Investigation. Assistant United States Attorneys Anthony Giorno and Daniel Bubar prosecuted the case for the United States.

CHARLOTTESVILLE, VIRGINIA – A 61-year-old former employee of the Library of Congress, who pled guilty in August to charges involving stalking and identification fraud, was sentenced today in the United States District Court for the Western District of Virginia in Charlottesville.

Kenneth Edward Kuban, 61, of Reva, Va., was sentenced today to 66 months in federal prison.  Kuban previously pled guilty to one count of stalking in violation of a protective order, one count of identification fraud and one count of violating a protective order within the special maritime and territorial jurisdiction of the United States.

“Mr. Kuban used his government computer and the internet to harass and intimidate the victim in this case,” United States Attorney Timothy J. Heaphy said today. “While the actions of Mr. Kuban caused the victim months of emotional trauma, they could have resulted in much more serious harm. Fortunately, law enforcement acted swiftly and put an end to Mr. Kuban’s horrific behavior before it resulted in violence. This case shows both the dangerous potential of web portals like the one Mr. Kuban used to stalk his victim, and our commitment to vigorously pursue actual or threatened violence against women in whatever form it takes.”

Kuban has admitted to posing online as the victim, an ex-girlfriend, and using the website Craigslist to post advertisements and lure third parties to the victim’s home in anticipation of having direct contact with the victim for the purpose of having sexual encounters. The defendant admitted to posting more than 165 advertisements on the website between January and March of 2013. Many of the advertisements contained the victim’s address and/or a photograph. Fifty-four of those advertisements were posted from Kuban’s personal computer. One-hundred and eleven of the ads were placed from Kuban’s government-issued computer at the Library of Congress.

As a result of the advertisements, more than 100 men appeared at or around the victim’s home between January and March 2013 seeking sexual encounters with her. In one instance, a man arrived at the victim’s home with a crowbar in order to pry open an electronic gate the victim had installed to protect herself. The man brought the crowbar at the urging of Kuban, who communicated with him while posing as the victim.

The threat to the victim’s safety became so great that local law enforcement felt it necessary to post deputies at her home in order to deter trespassing and harassment.

The investigation of the case was conducted by the Library of Congress-Office of the Inspector General.  United States Attorney Timothy J. Heaphy, Assistant United States Attorney Ronald Huber and Special Assistant United States Attorney Jason Beaton are prosecuting the case for the United States.

ABINGDON, VIRGINIA -- - United States Attorney Timothy J. Heaphy announced today that David Lee Huggard, 48, of Bristol, Va., was sentenced last week to 210 in prison at a sentencing hearing in the United States District Court for the Western District of Virginia in Abingdon.

Huggard had earlier entered a plea of guilty to one count of traveling in interstate commerce with the intent to engage in illicit sexual conduct.

According to evidence presented at his guilty plea and sentencing hearings by Assistant United States Attorney Zachary T. Lee, Huggard, a long-haul interstate truck driver, made a cross-country trip with a four-year old minor child during the month of December 2012.  Following the child’s return to Bristol, the child was interviewed at the Bristol-Washington County Children’s Advocacy Center and disclosed that sexual contact had occurred with Huggard during the course of the cross-country trip.

Huggard was arrested on January 26, 2013, by agents with the Federal Bureau of Investigation and a detective with the Bristol Virginia Police Department. Upon his arrest, Huggard admitted to engaging in oral sex with the four-year old child.

The investigation of this case was conducted bythe Bristol Virginia Police Department Criminal Investigation Division and the Federal Bureau of Investigation.  Assistant United States Attorney Zachary T. Lee is prosecuting the case for the United States.