Owner of Home Health Agency Sentenced to 75 Years in Prison for Involvement in $13 Million Medicare Fraud Conspiracy

Friday, August 11, 2017

The owner and director of nursing of a Houston home health agency was sentenced today to 75 years in prison for her role in a $13 million Medicare fraud scheme.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Abe Martinez of the Southern District of Texas, Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office, Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services-Office of Inspector General’s (HHS-OIG) Dallas Region and Special Agent in Charge D. Richard Goss of the Houston Field Office of IRS-Criminal Investigation Division (IRS-CI) made the announcement.

Marie Neba, 53, of Sugarland, Texas, was sentenced by U.S. District Judge Melinda Harmon of the Southern District of Texas.  In November 2016, Neba was convicted after a two-week jury trial of one count of conspiracy to commit health care fraud, three counts of health care fraud, one count of conspiracy to pay and receive health care kickbacks, one count of payment and receipt of health care kickbacks, one count of conspiracy to launder monetary instruments and one count of making health care false statements.

According to the evidence presented at trial, from February 2006 through June 2015, Neba and others conspired to defraud Medicare by submitting over $10 million in false and fraudulent claims for home health services to Medicare through Fiango Home Healthcare Inc., owned by Neba and her husband, Ebong Tilong, 53, also of Sugarland, Texas.  The trial evidence showed that using the money that Medicare paid for such fraudulent claims, Neba paid illegal kickbacks to patient recruiters for referring Medicare beneficiaries to Fiango for home health services.  Neba also paid illegal kickbacks to Medicare beneficiaries for allowing Fiango to bill Medicare using beneficiaries’ Medicare information for home health services that were not medically necessary or not provided, the evidence showed.  Neba falsified medical records to make it appear as though the Medicare beneficiaries qualified for and received home health services.  Neba also attempted to suborn perjury from a co-defendant in the federal courthouse, the evidence showed.

According to the evidence presented at trial, from February 2006 to June 2015, Neba received more than $13 million from Medicare for home health services that were not medically necessary or not provided to Medicare beneficiaries.

To date, four others have pleaded guilty based on their roles in the fraudulent scheme at Fiango.  Nirmal Mazumdar, M.D., the former medical director of Fiango, pleaded guilty to a scheme to commit health care fraud for his role at Fiango.  Daisy Carter and Connie Ray Island, two patient recruiters for Fiango, pleaded guilty to conspiracy to commit health care fraud for their roles at Fiango.  On August 11, Island was sentenced to 33 months in prison.  Mazumdar and Carter are awaiting sentencing.  After the first week of trial, Tilong pleaded guilty to one count of conspiracy to commit healthcare fraud, three counts of healthcare fraud, one count of conspiracy to pay and receive healthcare kickbacks, three counts of payment and receipt of healthcare kickbacks, and one count of conspiracy to launder monetary instruments.  Tilong is scheduled to be sentenced on October 13.

The case was investigated by the IRS-CI, FBI and HHS-OIG under the supervision of the Fraud Section of the Justice Department’s Criminal Division and the U.S. Attorney’s Office for the Southern District of Texas.  The case is being prosecuted by Trial Attorney William S.W. Chang and Senior Trial Attorney Jonathan T. Baum of the Fraud Section.

The Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.  The Medicare Fraud Strike Force operates in nine locations nationwide.  Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

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

Dallas Doctor Sentenced on Health Care Fraud Conviction

Wednesday, August 9, 2017

DALLAS — A 60-year-old doctor from Rockwall, Texas, Jacques Roy, who was convicted in April 2016 of various health care fraud charges following a six-week-long trial, was sentenced today by U.S. District Judge Sam A. Lindsay to 420 months in federal prison and ordered to pay $268,147,699.15 in restitution, joint and several with all codefendants to Medicare and Medicaid, announced U.S. Attorney John Parker of the Northern District of Texas.

Roy was convicted of one count of conspiracy to commit health care fraud, eight counts of health care fraud, two counts of making a false statement relating to healthcare matters and one count of obstruction of justice. Roy has been in custody since the time of his arrest in February 2012.

“The only thing more stunning than Jacques Roy and his co-conspirators’ shameless methods, said U.S. Attorney Parker, is the staggering dollar amounts involved in this fraud scheme. This takes brazen to a whole new level.”

The following defendants have also been sentence for their role in the health care fraud scheme:

  • Wilbert James Vesey, Jr., 210 months in federal prison and $23 million in restitution
  • Cyprian Akamnonu, 120 months in federal prison and $25 million in restitution
  • Patricia Akamnonu, 120 months in federal prison and $25 million in restitution
  • Charity Eleda, 48 months in federal prison and $397,294.51 in restitution
  • Teri Sivils, 3 years probation and $885,714.05 in restitution

Cynthia Stiger will be sentenced October 26, 2017.

The government presented evidence at trial that Dr. Roy, Stiger, Veasey and Eleda engaged in a large-scale, sophisticated health care fraud scheme in which they conspired together and with others to defraud Medicare and Medicaid through companies they owned/controlled: Medistat Group Associates, P.A., Apple of Your Eye Health Care Services, Inc., Ultimate Care Home Health Services and Charry Home Care Services.

As part of the conspiracy, Stiger, Veasey and Eleda, along with others, improperly recruited individuals with Medicare coverage to sign up for Medicare home health care services. Eleda recruited patients from The Bridge homeless shelter in Dallas, sometimes paying recruiters $50 per beneficiary they found and directed to her vehicle parked outside the shelter’s gates. Eleda and other nurses would falsify medical documents to make it appear as though those beneficiaries qualified for home health care services that were not medically necessary. Eleda and the nurses prepared Plans of Care (POC), also known as 485’s, which were not medically necessary, and these POCs were delivered to Dr. Roy’s office and not properly reviewed by any physician.

Dr. Roy instructed his staff to certify these POCs, which indicated to Medicare and Medicaid that a doctor, typically Dr. Roy, had reviewed the treatment plan and deemed it medically necessary. That certifying doctor, typically Dr. Roy, certified that the patient required home health services, which were only permitted to be provided to those individuals who were homebound and required, among other things, skilled nursing. This process was repeated for thousands of POCs, and, in fact, Medistat’s office included a “485 Department,” essentially a “boiler room” to affix fraudulent signatures and certifications.

Once an individual was certified for home health care services, Eleda, nurses who worked for Stiger and Veasey, and other nurses falsified visit notes to make it appear as though skilled nursing services were being provided and continued to be necessary. Dr. Roy would also visit the patients, perform unnecessary home visits, and then order unnecessary medical services for the recruited beneficiaries. Then, at Dr. Roy’s instruction, Medistat employees would submit fraudulent claims to Medicare for the certification and recertification of unnecessary home health care services and other unnecessary medical services.

The government presented further evidence at trial that the scope of Dr. Roy’s fraud was massive; Medistat processed and approved POCs for 11,000 unique Medicare beneficiaries from more than 500 different home health agencies. Dr. Roy entered into formal and informal fraudulent arrangements with Apple, Charry, Ultimate and other home health agencies to ensure his fraudulent business model worked and that he maintained a steady stream of Medicare beneficiaries.

Regarding Dr. Roy’s conviction for obstruction of justice, the government presented evidence that when the Centers for Medicare and Medicaid Services (CMS) suspended Dr. Roy and Medistat from receiving Medicare payments after June 2, 2011, because of suspected fraud, Dr. Roy sought an “end-run” around the suspension through the use of another company, Medcare House Calls. Dr. Roy directed the medical providers he employed to be re-credentialed and to bill Medicare under Medcare House Calls, instead of Medistat. Nonetheless, the money that Medicare paid was circumvented back to Medistat and Dr. Roy.

The case was investigated by the Federal Bureau of Investigation, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG), and the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU) and was brought as part of the Medicare Fraud Strike Force supervised by the Criminal Division Fraud Section and the U.S. Attorney’s Office for the Northern District of Texas.

Assistant U.S. Attorneys P.J. Meitl and Nicole Dana and First Assistant U.S. Attorney Chad Meacham prosecuted the case.

Registered Nurse Who Owned Two Houston Home Health Companies Convicted in $20 Million Medicare Fraud Scheme

Thursday, August 10, 2017

A federal jury today convicted a registered nurse who was the owner of two home health companies in Houston for her role in a $20 million Medicare fraud scheme involving fraudulent claims for home health services.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Abe Martinez of the Southern District of Texas, Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office and Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services-Office of Inspector General’s (HHS-OIG) Dallas Region made the announcement.

After a four-day trial, Evelyn Mokwuah, 52, of Pearland, Texas, was convicted of one count of conspiracy to commit health care fraud and four counts of health care fraud for her conduct at Beechwood Home Health (Beechwood) and Criseven Health Management Corporation (Criseven).  Sentencing has been scheduled for October 6, before U.S. District Judge Gray H. Miller of the Southern District of Texas, who presided over the trial.

According to evidence presented at trial, from 2008 to 2016, Mokwuah and others engaged in a scheme to defraud Medicare of approximately $20 million in fraudulent claims for home health services at Beechwood and Criseven that were not provided or not medically necessary.  According to the trial evidence, Mokwuah billed for patients who were not homebound or did not qualify for home health services; Mokwuah and others falsified patient records to show patients were homebound when they were not; Mokwuah paid patient recruiters to recruit Medicare beneficiaries to Beechwood and Criseven; and Mokwuah paid doctors to sign off on falsified plans of care for the recruited beneficiaries so that Beechwood and Criseven could bill Medicare for those services.

Co-defendant Amara Oparanozie, 47, of Richmond, Texas, pleaded guilty on May 24, to conspiring with Mokwuah and others to commit health care fraud and is awaiting sentencing.

The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas.  The case is being prosecuted by Trial Attorneys Scott Armstrong and Kevin Lowell of the Criminal Division’s Fraud Section.

The Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative between the department and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. The Medicare Fraud Strike Force operates in nine locations nationwide. Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

Woman Pleads Guilty to Medicaid Fraud and Identity Theft Charges

Wednesday, August 9, 2017

A Richmond woman pleaded guilty today healthcare fraud and aggravated identity theft.

According to court documents, Chermeca Harris, 36, was a Medicaid beneficiary and would misrepresent her health condition to health care providers, such as hospitals and ambulance services, in order to obtain health care benefits. Specifically, Harris would falsely represent that she was suffering from sickle cell anemia and was having a sickle cell crisis in order to obtain pain killing drugs, such as dilaudid, which she wanted to receive intravenously through the neck. In fact, doctors tested Harris in January 2016, and determined she did not have sickle cell anemia. The hospitals involved were Virginia Commonwealth University Medical Center, Chippenham, Bon Secours St. Mary’s, Memorial Regional, John Randolph Medical Center, and Henrico Doctor’s. According to court documents, it was a further part of the scheme that Harris also falsely represented her identity. On some occasions she used the name of M.M., and on other occasions she used the name of R.J.; both Medicaid recipients. She also falsely stated to investigating federal agents that her name was M.M. and that she had sickle cell anemia.

Harris was charged as part of the largest ever health care fraud enforcement action by the Medicare Fraud Strike Force, involving 412 charged defendants across 41 federal districts, including 115 doctors, nurses and other licensed medical professionals, for their alleged participation in health care fraud schemes involving approximately $1.3 billion in false billings. Of those charged, over 120 defendants, including doctors, were charged for their roles in prescribing and distributing opioids and other dangerous narcotics. Thirty state Medicaid Fraud Control Units also participated in today’s arrests. In addition, HHS has initiated suspension actions against 295 providers, including doctors, nurses and pharmacists.

Harris pleaded guilty to healthcare fraud on the Medicaid program and aggravated identity theft. She faces a mandatory minimum of two years in prison and a maximum penalty of 12 years in prison, when sentenced on October 26. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

Dana J. Boente, U.S. Attorney for the Eastern District of Virginia; Adam S. Lee, Special Agent in Charge of the FBI’s Richmond Field Office; and Nick DiGiulio, Special Agent in Charge, Philadelphia Regional Office of Inspector General of Department of Health and Human Services, made the announcement after the plea was accepted by Magistrate Judge David J. Novak. Assistant U.S. Attorney David T. Maguire is prosecuting the case.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information is located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 3:17-cr-77.

Pitt County Behavioral Health President Pleads Guilty to Medicaid Fraud Conspiracy and Perjury Charges

Friday, August 4, 2017

RALEIGH – The United States Attorney for the Eastern District of North Carolina John Stuart Bruce Office announced that yesterday in federal court, SHEPHARD LEE SPRUILL, II, 46of Winterville, North Carolinapleaded guilty to Conspiracy to Commit Health Care Fraud, and Perjury. Under the terms of a plea agreement, SPRUILL faces up to 15 years in prison, $500,000 in fines, and 3 years of supervised release. Under additional terms discussed in court, SPRUILLalso agreed to make restitution in the amount of $1,846,377 to the North Carolina Medicaid program, as well as additional restitution for any other fraud committed by or through Medicaid providers Pride in North Carolina, Carolina Support Services, Elite Care, Southern Support Services, One to One Youth, Vision of New Hope, Bridge Builders Youth Services, and Jameson Consultants.

According to the Criminal Information and evidence discussed in open court, SPRUILL entered into conspiracy with Terry Lamont Speller and Donnie Lee Phillips, II (both of whom are already imprisoned) to defraud Medicaid in connection with a clinic in Pitt County, known as “The Medical Office.” SPRUILL, who at that time was the president of a behavioral health practice named Carolina Support Services, had access to lists of patient names and Medicaid Identification Numbers. SPRUILL provided these to Speller and Phillips, who used them to fraudulently bill Medicaid for more than $2 Million in fictitious services. After Medicaid sent payment for the fake services to Speller, SPRUILL received his cut of the proceeds under the guise of loan repayments.

With respect to the charge of Perjury, the evidence showed that SPRUILL testified before a federal grand jury that he had no business relationship with Speller, and that he had no knowledge of why Medicaid payments were being split between Speller and SPRUILL. Under the plea agreement, SPRUILL admitted that he lied about these facts to the grand jury.

The investigation of this case was conducted by agents of the North Carolina State Bureau of Investigation assigned to the Medicaid Investigations Division of the North Carolina Attorney General’s Office; The Internal Revenue Service – Criminal Investigation; and the United States Department of Health and Human Services Office of the Inspector General. The investigation and prosecution of this matter is being handled in a partnership between the United States Attorney’s Office for the Eastern District of North Carolina and the Medicaid Investigations Division of the North Carolina Attorney General’s Office. Assistant United States Attorney William M. Gilmore of the Economic Crimes Division and Special Assistant United States Attorney Daniel Spillman of the Medicaid Investigations Division of the North Carolina Attorney General’s Office, represented the United States.

If you suspect Medicaid or Medicare fraud please visit the HHS OIG website at https://oig.hhs.gov/ and click on the Report Fraud button. To report Medicaid fraud in North Carolina, call the North Carolina Medicaid Investigations Division at 919-881-2320.

Operators of Bogus Medical Clinics Charged in Conspiracy to Divert Massive Amounts of Prescription Narcotics to the Black Market

Thursday, August 3, 2017

Glendale Defense Attorney and Others Involved in Scheme Allegedly Obstructed Justice by Creating Fake Medical Records to Justify Fraudulent Prescriptions

LOS ANGELES – The operators of seven sham medical clinics were among 12 defendants taken into custody this morning on federal drug trafficking charges that allege they diverted at least 2 million prescription pills – including oxycodone and other addictive and dangerous narcotics – to the black market.

Two indictments returned late last month by a federal grand jury alleges that members of the conspiracy profited from illicit prescriptions that were issued without any legitimate medical purpose through a series of clinics that periodically opened and closed in a “nomadic” style. The fraudulent prescriptions allegedly allowed the conspirators to obtain bulk quantities of prescription drugs that were sold on the street.

Those arrested this morning include Minas Matosyan, an Encino man also known as “Maserati Mike,” who is charged with leading the scheme and controlling six of the sham clinics. Matosyan allegedly hired corrupt doctors who allowed the conspirators to issue fraudulent prescriptions under their names in exchange for kickbacks.

“The two indictments charge 14 defendants who allegedly participated in an elaborate scheme they mistakenly hoped would conceal a high-volume drug trafficking operation,” said Acting United States Attorney Sandra R. Brown. “In addition to generating illicit profits, this scheme helped drive the prescription drug epidemic that is causing so much harm across our nation.”

“This investigation targeted a financially motivated racket that diverted deadly and addictive prescription painkillers to the black market,” said DEA Special Agent in Charge David Downing. “Today’s arrests underscore our resolve – DEA and its law enforcement partners will not tolerate criminal enterprises that fuel and exploit the opioid epidemic.”

The indictments unsealed today and search warrants executed this morning describe how Matosyan would “rent out recruited doctors to sham clinics.” Matosyan allegedly supplied corrupt doctors in exchange for kickbacks derived from proceeds generated when the other sham clinics created fraudulent prescriptions or submitted fraudulent bills to health care programs. In one example described in the court documents, Matosyan provided a corrupt doctor to a clinic owner in exchange for $120,000. When the clinic failed to pay the money and suggested instead that Matosyan “take back” the corrupt doctor, Matosyan demanded his money and said, “Doctors are like underwear to me. I don’t take back used things.”

In a recorded conversation described in court documents, Matosyan discussed how one doctor was paid “for sitting at home,” while thousands of narcotic pills were prescribed in that doctor’s name and Medicare was billed more than $500,000 for purported patient care.

The conspirators also allegedly stole the identities of doctors who refused to participate in the scheme. In an intercepted telephone conversation described in court documents, Matosyan offered a doctor a deal to “sit home making $20,000 a month doing nothing.” When the doctor refused the offer, the conspirators nevertheless created prescription pads in the doctor’s name and allegedly began selling fraudulent prescriptions for oxycodone without the doctor’s knowledge or consent.

According to court documents, the conspirators also issued prescriptions and submitted fraudulent billings in the name of a doctor who at the time was hospitalized and later died.

“The defendants in this scheme heartlessly lined their pockets with cash from the sale of thousands of addictive prescription drugs sold through the black market,” stated IRS Criminal Investigation’s Special Agent in Charge, R. Damon Rowe. “IRS Criminal Investigation, along with our law enforcement partners, will continue to aggressively pursue those who seek to profit from the sale and distribution of illegitimate prescription narcotics creating a drug crisis of epic portions in our country.”

“For the sake of mere profit, the operators of these medical clinics spewed deadly prescription drugs onto our streets. The opioid epidemic gripping this country is well documented and our communities in the Los Angeles area have been impacted,” said Christian J. Schrank, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “Too often those ill-gotten gains came at the expense of innocent Americans. It has been a pleasure working with our law enforcement colleagues to bring these people to justice.”

“Today’s enforcement actions, and the long-term multiagency investigation that preceded them, have dealt a major blow to a sophisticated healthcare fraud and identity theft scheme that posed a double threat. Not only did the defendants in this case use physicians’ names to write fraudulent prescriptions and fleece Medicare out of millions of dollars, but they’re also accused of funneling large quantities of dangerous prescription opiates, including oxycodone and hydrocodone, into the community,” said Joseph Macias, special agent in charge for Homeland Security Investigations in Los Angeles. “In collaboration with our law enforcement partners, HSI will continue to aggressively target those who compromise the integrity of our healthcare system and public safety to satisfy their own greed.”

The indictment also charges Matosyan and others – including Glendale-based criminal defense attorney Fred Minassian – with obstruction of justice for allegedly creating fraudulent medical records in an effort to deter the investigation.

After a load of Vicodin was seized from one of the conspiracy’s major customers, Matosyan allegedly oversaw the creation of fake medical paperwork in an effort to make it appear the drugs had been legitimately prescribed. The indictment describes intercepted conversations in which Minassian strategized on how to deceive law enforcement, which included a plan to bribe a doctor to lie to authorities.

The 12 defendants arrested this morning are:

  • Minas Matosyan, 36, of Encino, who is accused of leading the scheme by recruiting corrupt doctors, overseeing the theft of other doctors’ identities, and negotiating the sale of fraudulent prescriptions and narcotic pills;
  • Armen Simonyan, 52, of Burbank, who allegedly managed the operations at some of the fraudulent clinics;
  • Grisha Sayadyan, 66, of Burbank, who allegedly managed the operations at various clinics and sold oxycodone and Vicodin pills directly to black market customers;
  • Sabrina Guberman, 45, of Encino, who, while working at the sham clinics, allegedly lied to pharmacies seeking to verify the fraudulent narcotic prescriptions, which included creating and sending fake medical paperwork;
  • Frederick Manning Jr., 47, of Santa Ana, allegedly one of the major drug customers of the clinics, who is charged with agreeing to purchase as many as 1,000 pills per week of narcotics from Matosyan;
  • Fred Minassian, 50, of Glendale, the criminal defense attorney who allegedly spearheaded the scheme to lie to law enforcement by making it falsely appear that Vicodin seized from Freddie Manning Jr. had been legitimately prescribed by a doctor;
  • Ralph Manning, 49, of North Hills (no relation to Frederick Manning Jr.), who is charged with being one of the principal couriers Matosyan used to deliver fraudulent prescriptions and “bulk quantities” of narcotic pills;
  • Hayk Matosyan, 30, of Granada Hills, Matosyan’s brother, who allegedly filled fraudulent narcotic prescriptions at pharmacies and sold the resulting narcotics pills to black-market customers.
  • Marisa Montenegro, 54, of West Hills, who allegedly filled fraudulent prescriptions;
  • Elizabeth Gurumdzhyan, 25, of Hollywood, who allegedly filled fraudulent prescriptons;
  • Anait Guyumzhyan, 27, of Hollywood, who allegedly filled prescriptions for oxycodone and returned the drugs to Matosyan-operated clinics in exchange for cash payment; and
  • James Wilson, 54, of Venice, who alone is charged in the second indictment with illegally selling oxycodone prescriptions out of a Long Beach clinic that he controlled.

The 12 defendants arrested this morning are expected to be arraigned on the indictment this afternoon in United States District Court.

Authorities are continuing to seek two defendants named in the main indictment. Those fugitives are: Gary Henderson, 62, of Lancaster, who allegedly purchased fraudulent oxycodone prescriptions from Matosyan; and an unidentified conspirator known only by the name “Cindy.”

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.

All of the defendants face significant terms in federal prison if they are convicted. For example, if convicted of the nine counts in which he is charged, Matosyan would face a statutory maximum sentence of 165 years in prison.

The investigation in this case was conducted by the Drug Enforcement Administration; IRS Criminal Investigation; the U.S. Department of Health and Human Services – Office of Inspector General; the Ventura County Sheriff’s Office, Pharmaceutical Crimes Unit; and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

The primary investigative agencies received substantial assistance from the Los Angeles County Sheriff’s Department, the Los Angeles Police Department, the California Department of Justice, and the Orange Police Department.

The case is being prosecuted by Assistant United States Attorneys Benjamin Barron and Jamie Lang of the Organized Crime Drug Enforcement Task Force.

Naval Employee Pleads Guilty to Accepting More Than $250,000 in Cash Bribes From Unauthorized Liquor Buyers

Tuesday, August 1, 2017

An employee of the U.S. Department of the Navy pleaded guilty today to accepting more than $250,000 in cash bribes from three people making unauthorized liquor purchases from the Navy Exchange Service Command where he worked, announced Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division and Special Agent in Charge Leo Lamont of the Naval Criminal Investigative Service’s (NCIS) Northeast Field Office.

Eric Jex, 29, of Uniondale, New York, pleaded guilty to one count of bribery before U.S. District Judge Joanna Seybert of the Eastern District of New York. Sentencing is set for Feb. 2, 2018.

According to admissions made in connection with his guilty plea, as a supervisory sales associate at the NEX at Mitchel Field in Garden City, New York, Jex was responsible for preparing and processing retail transactions, and he had direct authority to make decisions concerning large liquor orders and shipments from the NEX’s warehouse. He was also subject to policies limiting access to the NEX’s goods to authorized personnel, such as Navy service members, and requiring NEX employees to check purchasers’ IDs. In connection with his guilty plea, Jex admitted that from approximately November 2015 through December 2016, he agreed with three unauthorized purchasers, one of whom had a New York State Liquor License, to arrange repeated large purchases of liquor from the NEX. He allowed the three unauthorized purchasers access to the NEX’s low prices and frequently provided additional price-matching discounts to which the purchasers were not entitled. In exchange, the three unauthorized purchasers paid cash bribes to Jex, typically $5 to $20 per case of liquor. According to plea documents, these bribes added up to more than $250,000 for the period of the scheme.

The NCIS; U.S. Treasury Department, Alcohol and Tobacco Tax and Trade Bureau; and the New York State Department of Taxation and Finance, Criminal Investigations Division investigated this case. Trial Attorneys Luke Cass and Andrew Laing of the Criminal Division’s Public Integrity Section are prosecuting the case with the assistance of the U.S. Attorney’s Office for the Eastern District of New York.

U.S. Files New Complaint Against City Of Los Angeles and a Former Redevelopment Agency to Recover Millions of Federal Grant Dollars Allegedly Obtained by Making False Promises to Provide Housing to Persons with Disabilities

Tuesday, August 1, 2017

The United States late yesterday filed a complaint in intervention against the City of Los Angeles and the CRA/LA (formerly the Community Redevelopment Agency of the City of Los Angeles) alleging that together they fraudulently obtained millions of dollars in housing grants from the U.S. Department of Housing and Urban Development (HUD) by falsely certifying that the money was being spent in compliance with federal accessibility laws.

The complaint in intervention – which replaces a complaint previously filed on behalf of the United States by a “whistleblower” – alleges the city and CRA/LA received federal money by falsely promising to create accessible housing for people with disabilities. Instead of creating accessible housing, they used the money to create inaccessible housing that deprived people with disabilities an equal opportunity to find housing of their choice.

The city repeatedly certified its compliance with federal accessibility laws to obtain the federal funds without taking the required steps to ensure it complied, according to the complaint, which further alleges that many of the HUD-assisted apartment buildings failed to meet minimal accessibility requirements. The city allegedly approved the design and construction of inaccessible buildings, with, among other things:

  • slopes and ramps that are too steep for safe passage by persons with mobility disabilities;
  • door thresholds that are too tall for wheelchairs to roll over;
  • steps that prohibit access to common areas;
  • kitchen cabinets, shelves and surfaces that are outside of the accessible reach ranges of persons who use wheelchairs;
  • sinks, grab bars, mailboxes and circuit breakers mounted beyond the reach of wheelchair users;
  • pipes below sinks and lavatories that are not insulated, thereby posing a physical threat of burns to people who use wheelchairs; and
  • insufficient numbers of accessible parking spaces in garages and lots.

“The complaint filed yesterday underscores the Department’s commitment to ensure that people with disabilities are provided equal access to federally-funded public housing, as required by law,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.

“Despite the federal government investing hundreds of millions of dollars in Los Angeles to create housing for everyone, the City of Los Angeles instead created housing only for some,” said Acting U.S. Attorney Sandra R. Brown for the Central District of California. “For 17 years, the city falsely certified that it had complied with federal law and covered up its repeated disregard of historic and important civil rights laws.”

The city and the CRA/LA allegedly violated Section 504 of the Rehabilitation Act, the Americans with Disabilities Act and the Fair Housing Act, as well as failed to fulfill their duty to affirmatively further fair housing. Congress passed these accessibility laws to ensure people with disabilities have an opportunity to live in an integrated society, achieve independent living, and have the same opportunities for economic and social self-sufficiency as other citizens.

By law, the city and the CRA/LA are required to comply with the federal accessibility laws. They could not – neither directly, nor through contractual or other arrangements – deny people with disabilities the opportunity to benefit from housing services or subject them to discrimination based on disability.

The accessibility laws require recipients of federal funds to operate their housing programs in a manner that is accessible to people with disabilities. Among other things, they must have a system in place to ensure compliance with the laws. They are required to develop non-discriminatory policies and practices, hire a coordinator knowledgeable about accessibility, and implement a grievance procedure that allows for just resolution of complaints. They also must maintain a publicly available list of accessible units and their accessibility features so that people who require those features are able to find housing.

The federal accessibility laws also require that recipients of federal monies have a method in place to avoid giving accessible units needed by people with disabilities to people who do not need accessibility features. The laws also require that recipients of federal monies monitor apartment buildings to ensure they are designed, constructed and altered in compliance with the law so that, among other things, five percent of all units in certain multifamily housing will be accessible to people with mobility impairments, and an additional two percent will be accessible to people with visual and auditory impairments.

The United States’ lawsuit alleges that the city and CRA/LA failed to meet these legal obligations.

The lawsuit, United States ex rel. Ling, et al. v. City of Los Angeles, et al., CV11-974-PG, was originally filed in U.S. District Court by whistleblowers Mei Ling, a resident of Los Angeles who uses a wheelchair, and the Fair Housing Council of San Fernando Valley, a nonprofit civil rights advocacy group. The United States elected to intervene in the lawsuit and take over the litigation, which prompted the unsealing of the whistleblowers’ complaint in June. The case is pending before U.S. District Judge Philip S. Gutierrez.

The lawsuit was filed under the qui tam – or whistleblower – provisions of the False Claims Act, which permit private parties to sue on behalf of the United States when they believe that a party has submitted false claims for government funds, and to receive a share of any recovery.

This matter was investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Central District of California and the HUD Office of Inspector General.

The claims asserted against the City of Los Angeles and the CRA/LA are allegations only; there has been no determination of liability.

California Man Arrested for Alleged Scheme to Smuggle Export-Controlled Rifle Scopes and Tactical Equipment to Syria

Tuesday, August 1, 2017

Rasheed Al Jijakli, 56, the chief executive officer of an Orange County, California check cashing business, was arrested this morning on federal charges that accuse him of procuring and illegally exporting rifle scopes, laser boresighters and other tactical equipment from the U.S. to Syria, in violation of the International Emergency Economic Powers Act (IEEPA).  Jijakli is expected to be arraigned this afternoon in the U.S. District Court for the Central District of California, on a three-count indictment that was returned by a federal grand jury on July 14.  The indictment was unsealed this morning after Jijakli was taken into custody without incident by law enforcement authorities.

Acting Assistant Attorney General for National Security Dana J. Boente and Acting U.S. Attorney Sandra R. Brown for the Central District of California made the announcement.

The indictment accuses Jijakli, a naturalized U.S. citizen, of violating IEEPA, which authorizes the President of the U.S. to impose economic sanctions on a foreign country in response to an unusual or extraordinary threat to the national security, foreign policy or economy of the U.S. In accordance with that authority, the President issued an executive order that included broad restrictions on exports to Syria.  The U.S. Department of Commerce subsequently issued corresponding regulations restricting exports to Syria of items subject to the Export Administration Regulations.  Jijakli also faces charges of conspiring to violate IEEPA and smuggling.

From January 2012 through March 2013, Jijakli and three other individuals purchased and smuggled export-controlled items to Syria without obtaining licenses from the Department of Commerce. Jijakli and others allegedly hand-carried the items through Istanbul, Turkey and provided them to fighters in Syria. Those items allegedly included day-and night-vision rifle scopes, laser boresighters (tools used to adjust sights on firearms for accuracy when firing), flashlights, radios, a bulletproof vest and other tactical equipment.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.  If convicted of all three charges in the indictment, Jijakli would face a statutory maximum penalty of 50 years in prison.  The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes.  If convicted of any offense, the defendant’s sentence will be determined by the court after considering the advisory Sentencing Guidelines and other statutory factors.

This case is the result of an ongoing investigation being conducted by the FBI, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the U.S. Department of Commerce’s Office of Export Enforcement and IRS Criminal Investigation.

This case is being prosecuted by Assistant U.S. Attorney Mark Takla of the Terrorism and Export Crimes Section of the Central District of California, and Trial Attorney Christian Ford of the Counterintelligence and Export Control Section of the Justice Department’s National Security Division.

Janet Labuda on: “Reasonable Care: What the Heck Is It?”

In a case decided July 17, 2017 (Slip op 17-85), the Court of International Trade (CIT) ruled that an importer was negligent by misclassifying their imports. The importer argued that reasonable care was exercised because the company relied on the broker’s recommended classification. The broker suggested three possible classifications and the importer ultimately used the one with the lowest duty rate.

The court ordered the importer to pay $8,228.20 in unpaid duties plus prejudgment interest but said more information was needed before a penalty could be assessed.

According to the CIT’s opinion, 

“given the three conflicting classifications recommended by the broker, the Defendant had a duty to undertake some further investigation regarding the proper classification, whether it meant consulting the CROSS database of customs rulings, obtaining a second opinion, or consulting a customs attorney or other customs expert. There were also publicly-available customs rulings that, had Defendant consulted, would have alerted him to a potential problem with his classification prompting further investigation. Defendant could not reasonably have relied upon the recommendation of its customs broker under these circumstances. Without even questioning the broker’s changing advice, seeking any form of guidance from CBP, consulting publicly available rulings that may have raised questions about the classification, Defendant cannot have exercised reasonable care in classifying the entries prior to importation.”

In addition, the CIT found that the importer’s classification of all the items being entered were erroneous and that the importer thus negligently submitted materially false entry information. 

The CIT ordered the importer to pay the unpaid duties because it failed to file a timely protest, rejecting the importer’s argument that a letter from its broker sent in response to CBP’s proposed notice of action constitutes a protest. However, the court declined to issue summary judgment on the penalty amount, citing the need for more details on the importer’s history of previous violations, ability to pay, and the effect of a penalty on the importer’s ability to continue doing business.

When I worked for CBP I regularly questioned what really constituted the exercise of reasonable care as required by the U.S. Customs Modernization Act, which went into effect in 1993. CBP subsequently wrote an informed compliance publication providing guidance. 

The basic concept is simple: importers are required to inform themselves of all laws and regulations pertaining to their own Customs business activities.  According to CBP, “the importer of record is responsible for using reasonable care to enter, classify and value imported merchandise, and provide any other information necessary to enable Customs to properly assess duties, collect accurate statistics and determine whether any other applicable legal requirement is met.” 

What does the term reasonable mean? CBP will not provide you with a fail-safe definition. Nor is it a numbers game, where if I take these 10 steps, or 9 steps, or 8 steps, etc., am I exercising reasonable care? Obviously, from the opinion expressed in this most recent case, merely consulting a broker is not enough. Selecting the lowest duty rate out of a number of possibilities is not enough. 

Importers must work closely with the members of their supply chain taking a hands-on approach to ensure accuracy. As with all legislation, the courts will inevitably provide the final interpretation. Best not to be on the losing side of the opinion.