Baton Rouge-Based Medicare Fraud Strike Force Announces Charges Against Four More Individuals For Health Care Fraud And Related Offenses

Thursday, July 13, 2017

BATON ROUGE, LA – Acting United States Attorney Corey R. Amundson announced today the unsealing of two federal grand jury indictments charging four individuals with health care fraud and related offenses. The cases were unsealed as part of the 2017 National Health Care Fraud Takedown, during which federal, state, and local law enforcement partners announced charges of more than 400 defendants across 41 different federal judicial districts.

The Medicare Fraud Strike Force is part of the joint initiative announced in May 2009 between the U.S. Department of Justice and the U.S. Department of Health and Human Services to reduce and prevent Medicare and Medicaid fraud through enhanced cooperation. In December 2009, a Medicare Fraud Strike Force team was deployed in the U.S. Attorney’s Office in Baton Rouge, Louisiana. Strike Force teams bring together the resources of the U.S. Department of Health and Human Services—Office of Inspector General, the Federal Bureau of Investigation, the U.S. Department of Justice’s Criminal Division—Fraud Section, the U.S. Attorneys’ Offices, and other law enforcement agencies, including, in Baton Rouge, the Louisiana Attorney General’s Medicaid Fraud Control Unit. Over the past seven years, the team has continued working in Baton Rouge and expanded across southern Louisiana.

Louisiana Spine & Sports

In the first case, a federal grand jury has returned an indictment charging John Eastham CLARK, M.D., age 65, of Baton Rouge, Louisiana, and Charlene Anita SEVERIO, age 54, of Walker, Louisiana, with conspiracy to commit wire fraud and health care fraud. The charges stem from Dr. CLARK and SEVERIO’s role in a $4.4 million fraud scheme in which Dr. CLARK and SEVERIO allegedly submitted false claims to Medicare and private insurance companies on behalf of Louisiana Spine & Sports LLC, a pain management clinic in Baton Rouge co-owned by Dr. CLARK. Namely, according to the indictment, Dr. CLARK, and SEVERIO, his billing supervisor, falsified claims to indicate that certain minor surgical procedures occurred on separate days as patient visits, and then instructed employees to create false records substantiating those claims. The indictment also alleges that the defendants submitted false claims seeking reimbursement for medically unnecessary quantitative urinalysis tests. The indictment charges both defendants with two counts of conspiracy to commit wire fraud and health care fraud, and charges Dr. CLARK with an additional two counts of health care fraud. This ongoing investigation is being handled by Dustin Davis, who serves as Assistant Chief of the Department of Justice’s Criminal Division—Fraud Section, Assistant U.S. Attorney Adam Ptashkin, and Jared Hasten of the Fraud Section.

Express ACA

In the second case, a federal grand jury has returned an indictment charging Keaton L. COPELAND, age 32, of Miramar, Florida, and Dorothy V. DELIMA, a/k/a Dorothy V. Copeland, age 45, of Davie, Florida, with a scheme to submit fraudulent health insurance applications to Blue Cross/Blue Shield of Louisiana and other private insurers. According to the indictment, the defendants owned and operated Express ACA, LLC, a health insurance brokerage company in Florida, and they devised a scheme to submit fraudulent health insurance applications to various insurers for health insurance plans that would satisfy the Affordable Care Act’s “minimum essential coverage” requirement. Specifically, according to the indictment, the defendants submitted numerous fraudulent applications for so-called “bronze plans,” the premiums for which were fully subsidized by the U.S. Government, without the named applicants’ knowledge, consent, or authorization. The indictment charges both COPELAND and DELIMA with conspiracy to commit wire fraud and five counts of wire fraud, and the indictment also charges COPELAND with additional counts of wire fraud and aggravated identity theft. This ongoing investigation is being handled by Assistant United States Attorneys J. Brady Casey and Ryan R. Crosswell.

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Since its inception, the Baton Rouge-based Medicare Fraud Strike Force has charged more than 80 defendants with health care fraud and related offenses, achieving a 95% conviction rate and sending nearly 50 of those defendants to federal prison.

Acting U.S. Attorney Corey Amundson stated, “Our medical providers spend countless hours caring for our everyday ailments, improving and extending our lives, and often fighting for us in our most desperate hours. They are rightly viewed as some of the most trusted and respected members of our society. Too often, the few dishonest providers hijack this well-earned respect and trust to line their own pockets through fraud. My office, which has sent nearly 50 healthcare fraud defendants to federal prison since the inception of the Medicare Fraud Strike Force, will continue to work tirelessly with our outstanding federal, state, and local partners to root out these bad actors. I greatly appreciate all those who have contributed to this important and successful law enforcement effort.”

“The indictments returned in both of these cases affirm our commitment to protecting the integrity of our nation’s health insurance programs,” said Special Agent-in-Charge C.J. Porter of the United States Department of Health and Human Services, Office of Inspector General’s (OIG) Dallas Regional Office. “These investigations are also indicative of our continuing efforts to work closely with our Federal and State law enforcement partners to identify and bring to justice those who deliberately manipulate health insurance systems to fraudulently obtain money from Medicare, Medicaid and other federally funded health care programs.”

Jeffrey S. Sallet, the Special Agent-in-Charge of the New Orleans Division of the Federal Bureau of Investigation, stated, “Countless Americans rely on the Medicare and Medicaid programs for essential health coverage. The New Orleans Division of the FBI, along with its local, state and federal partners, will continue to identify and pursue any individuals or entities who would seek to harm and diminish these programs through fraud.”

Louisiana Attorney General Jeff Landry stated, “The success of this initiative shows that collaboration between law enforcement agencies at all levels combats crime. Our investigators work around the clock to fight waste, fraud, and abuse in Medicaid. My office and I are committed to doing all we can to save taxpayer money and protect this program for the people in our State that need it the most. I am proud of the results our team achieved during this operation and what we do daily to reduce Medicaid fraud.”

NOTE: An indictment is an accusation by the Grand Jury. The defendants are presumed innocent until and unless adjudicated guilty at trial or through a guilty plea.

National Health Care Fraud Takedown Results in Charges Against Over 412 Individuals Responsible for $1.3 Billion in Fraud Losses

Thursday, July 13, 2017

Largest Health Care Fraud Enforcement Action in Department of Justice History

Attorney General Jeff Sessions and Department of Health and Human Services (HHS) Secretary Tom Price, M.D., announced today 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.

Attorney General Sessions and Secretary Price were joined in the announcement by Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting Director Andrew McCabe of the FBI, Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration (DEA), Inspector General Daniel Levinson of the HHS Office of Inspector General (OIG), Chief Don Fort of IRS Criminal Investigation, Administrator Seema Verma of the Centers for Medicare and Medicaid Services (CMS), and Deputy Director Kelly P. Mayo of the Defense Criminal Investigative Service (DCIS).

Today’s enforcement actions were led and coordinated by the Criminal Division, Fraud Section’s Health Care Fraud Unit in conjunction with its Medicare Fraud Strike Force (MFSF) partners, a partnership between the Criminal Division, U.S. Attorney’s Offices, the FBI and HHS-OIG.  In addition, the operation includes the participation of the DEA, DCIS, and State Medicaid Fraud Control Units.

The charges announced today aggressively target schemes billing Medicare, Medicaid, and TRICARE (a health insurance program for members and veterans of the armed forces and their families) for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries. The charges also involve individuals contributing to the opioid epidemic, with a particular focus on medical professionals involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department. According to the CDC, approximately 91 Americans die every day of an opioid related overdose.

“Too many trusted medical professionals like doctors, nurses, and pharmacists have chosen to violate their oaths and put greed ahead of their patients,” said Attorney General Sessions. “Amazingly, some have made their practices into multimillion dollar criminal enterprises. They seem oblivious to the disastrous consequences of their greed. Their actions not only enrich themselves often at the expense of taxpayers but also feed addictions and cause addictions to start. The consequences are real: emergency rooms, jail cells, futures lost, and graveyards.  While today is a historic day, the Department’s work is not finished. In fact, it is just beginning. We will continue to find, arrest, prosecute, convict, and incarcerate fraudsters and drug dealers wherever they are.”

“Healthcare fraud is not only a criminal act that costs billions of taxpayer dollars – it is an affront to all Americans who rely on our national healthcare programs for access to critical healthcare services and a violation of trust,” said Secretary Price. “The United States is home to the world’s best medical professionals, but their ability to provide affordable, high-quality care to their patients is jeopardized every time a criminal commits healthcare fraud. That is why this Administration is committed to bringing these criminals to justice, as President Trump demonstrated in his 2017 budget request calling for a new $70 million investment in the Health Care Fraud and Abuse Control Program. The historic results of this year’s national takedown represent significant progress toward protecting the integrity and sustainability of Medicare and Medicaid, which we will continue to build upon in the years to come.”

According to court documents, the defendants allegedly participated in schemes to submit claims to Medicare, Medicaid and TRICARE for treatments that were medically unnecessary and often never provided. In many cases, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed. The number of medical professionals charged is particularly significant, because virtually every health care fraud scheme requires a corrupt medical professional to be involved in order for Medicare or Medicaid to pay the fraudulent claims.  Aggressively pursuing corrupt medical professionals not only has a deterrent effect on other medical professionals, but also ensures that their licenses can no longer be used to bilk the system.

“This week, thanks to the work of dedicated investigators and analysts, we arrested once-trusted doctors, pharmacists and other medical professionals who were corrupted by greed,” said Acting Director McCabe. “The FBI is committed to working with our partners on the front lines of the fight against heath care fraud to stop those who steal from the government and deceive the American public.”

“Health care fraud is a reprehensible crime.  It not only represents a theft from taxpayers who fund these vital programs, but impacts the millions of Americans who rely on Medicare and Medicaid,” said Inspector General Levinson. “In the worst fraud cases, greed overpowers care, putting patients’ health at risk. OIG will continue to play a vital leadership role in the Medicare Fraud Strike Force to track down those who abuse important federal health care programs.”

“Our enforcement actions underscore the commitment of the Defense Criminal Investigative Service and our partners to vigorously investigate fraud perpetrated against the DoD’s TRICARE Program. We will continue to relentlessly investigate health care fraud, ensure the taxpayers’ health care dollars are properly spent, and endeavor to guarantee our service members, military retirees, and their dependents receive the high standard of care they deserve,” advised Deputy Director Mayo.

“Last year, an estimated 59,000 Americans died from a drug overdose, many linked to the misuse of prescription drugs. This is, quite simply, an epidemic,” said Acting Administrator Rosenberg. “There is a great responsibility that goes along with handling controlled prescription drugs, and DEA and its partners remain absolutely committed to fighting the opioid epidemic using all the tools at our disposal.”

“Every defendant in today’s announcement shares one common trait – greed,” said Chief Fort. “The desire for money and material items drove these individuals to perpetrate crimes against our healthcare system and prey upon many of the vulnerable in our society.  Thanks to the financial expertise and diligence of IRS-CI special agents, who worked side-by-side with other federal, state and local law enforcement officers to uncover these schemes, these criminals are off the street and will now face the consequences of their actions.”

The Medicare Fraud Strike Force operations are 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 3500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

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For the Strike Force locations, in the Southern District of Florida, a total of 77 defendants were charged with offenses relating to their participation in various fraud schemes involving over $141 million in false billings for services including home health care, mental health services and pharmacy fraud.  In one case, the owner and operator of a purported addiction treatment center and home for recovering addicts and one other individual were charged in a scheme involving the submission of over $58 million in fraudulent medical insurance claims for purported drug treatment services. The allegations include actively recruiting addicted patients to move to South Florida so that the co-conspirators could bill insurance companies for fraudulent treatment and testing, in return for which, the co-conspirators offered kickbacks to patients in the form of gift cards, free airline travel, trips to casinos and strip clubs, and drugs.

In the Eastern District of Michigan, 32 defendants face charges for their alleged roles in fraud, kickback, money laundering and drug diversion schemes involving approximately $218 million in false claims for services that were medically unnecessary or never rendered. In one case, nine defendants, including six physicians, were charged with prescribing medically unnecessary controlled substances, some of which were sold on the street, and billing Medicare for $164 million in facet joint injections, drug testing, and other procedures that were medically unnecessary and/or not provided.

In the Southern District of Texas, 26 individuals were charged in cases involving over $66 million in alleged fraud. Among these defendants are a physician and a clinic owner who were indicted on one count of conspiracy to distribute and dispense controlled substances and three substantive counts of distribution of controlled substances in connection with a purported pain management clinic that is alleged to have been the highest prescribing hydrocodone clinic in Houston, where approximately 60-70 people were seen daily, and were issued medically unnecessary prescriptions for hydrocodone in exchange for approximately $300 cash per visit.

In the Central District of California, 17 defendants were charged for their roles in schemes to defraud Medicare out of approximately $147 million. Two of these defendants were indicted for their alleged involvement in a $41.5 million scheme to defraud Medicare and a private insurer. This was purportedly done by submitting fraudulent claims, and receiving payments for, prescription drugs that were not filled by the pharmacy nor given to patients.

In the Northern District of Illinois, 15 individuals were charged in cases related to six different schemes concerning home health care services and physical therapy fraud, kickbacks, and mail and wire fraud.  These schemes involved allegedly over $12.7 million in fraudulent billing. One case allegedly involved $7 million in fraudulent billing to Medicare for home health services that were not necessary nor rendered.

In the Middle District of Florida, 10 individuals were charged with participating in a variety of schemes involving almost $14 million in fraudulent billing.  In one case, three defendants were charged in a $4 million scheme to defraud the TRICARE program.  In that case, it is alleged that a defendant falsely represented himself to be a retired Lieutenant Commander of the United States Navy Submarine Service. It is alleged that he did so in order to gain the trust and personal identifying information from TRICARE beneficiaries, many of whom were members and veterans of the armed forces, for use in the scheme.

In the Eastern District of New York, ten individuals were charged with participating in a variety of schemes including kickbacks, services not rendered, and money laundering involving over $151 million in fraudulent billings to Medicare and Medicaid. Approximately $100 million of those fraudulent billings were allegedly part of a scheme in which five health care professionals paid illegal kickbacks in exchange for patient referrals to their own clinics.

In the Southern Louisiana Strike Force, operating in the Middle and Eastern Districts of Louisiana as well as the Southern District of Mississippi, seven defendants were charged in connection with health care fraud, wire fraud, and kickback schemes involving more than $207 million in fraudulent billing. One case involved a pharmacist who was charged with submitting and causing the submission of $192 million in false and fraudulent claims to TRICARE and other health care benefit programs for dispensing compounded medications that were not medically necessary and often based on prescriptions induced by illegal kickback payments.

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In addition to the Strike Force locations, today’s enforcement actions include cases and investigations brought by an additional 31 U.S. Attorney’s Offices, including the execution of search warrants in investigations conducted by the Eastern District of California and the Northern District of Ohio.

In the Northern and Southern Districts of Alabama, three defendants were charged for their roles in two health care fraud schemes involving pharmacy fraud and drug diversion.

In the Eastern District of Arkansas, 24 defendants were charged for their roles in three drug diversion schemes that were all investigated by the DEA.

In the Northern and Southern Districts of California, four defendants, including a physician, were charged for their roles in a drug diversion scheme and a health care fraud scheme involving kickbacks.

In the District of Connecticut, three defendants were charged in two health care fraud schemes, including a scheme involving two physicians who fraudulently billed Medicaid for services that were not rendered and for the provision of oxycodone with knowledge that the prescriptions were not medically necessary.

In the Northern and Southern Districts of Georgia, three defendants were charged in two health care fraud schemes involving nearly $1.5 million in fraudulent billing.

In the Southern District of Illinois, five defendants were charged in five separate schemes to defraud the Medicaid program.

In the Northern and Southern Districts of Indiana, at least five defendants were charged in various health care fraud schemes related to the unlawful distribution and dispensing of controlled substances, kickbacks, and services not rendered.

In the Southern District of Iowa, five defendants were charged in two schemes involving the distribution of opioids.

In the Western District of Kentucky, 11 defendants were charged with defrauding the Medicaid program.  In one case, four defendants, including three medical professionals, were charged with distributing controlled substances and fraudulently billing the Medicaid program.

In the District of Maine, an office manager was charged with embezzling funds from a medical office.

In the Eastern and Western Districts of Missouri, 16 defendants were charged in schemes involving over $16 million in claims, including 10 defendants charged as part of a scheme involving fraudulent lab testing.

In the District of Nebraska, a dentist was charged with defrauding the Medicaid program.

In the District of Nevada, two defendants, including a physician, were charged in a scheme involving false hospice claims.

In the Northern, Southern, and Western Districts of New York, five defendants, including two physicians and two pharmacists, were charged in schemes involving drug diversion and pharmacy fraud.

In the Southern District of Ohio, five defendants, including four physicians, were charged in connection with schemes involving $12 million in claims to the Medicaid program.

In the District of Puerto Rico, 13 defendants, including three physicians and two pharmacists, were charged in four schemes involving drug diversion, Medicaid fraud, and the theft of funds from a health care program.

In the Eastern District of Tennessee, three defendants were charged in a scheme involving fraudulent billings and the distribution of opioids.

In the Eastern, Northern, and Western Districts of Texas, nine defendants were charged in schemes involving over $42 million in fraudulent billing, including a scheme involving false claims for compounded medications.

In the District of Utah, a nurse practitioner was charged in connection with fraudulently obtaining a controlled substance, tampering with a consumer product, and infecting over seven individuals with Hepatitis C.

In the Eastern District of Virginia, a defendant was charged in connection with a scheme involving identify theft and fraudulent billings to the Medicaid program.

In addition, in the states of Arizona, Arkansas, California, Delaware, Illinois, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, New York, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Vermont and Washington, 96 defendants have been charged in criminal and civil actions with defrauding the Medicaid program out of over $31 million. These cases were investigated by each state’s respective Medicaid Fraud Control Units. In addition, the Medicaid Fraud Control Units of the states of Alabama, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Nebraska, New York, North Carolina, Ohio, Texas, and Utah participated in the investigation of many of the federal cases discussed above.

The cases announced today are being prosecuted and investigated by U.S. Attorney’s Offices nationwide, along with Medicare Fraud Strike Force teams from the Criminal Division’s Fraud Section and from the U.S. Attorney’s Offices of the Southern District of Florida, Eastern District of Michigan, Eastern District of New York, Southern District of Texas, Central District of California, Eastern District of Louisiana, Northern District of Texas, Northern District of Illinois and the Middle District of Florida; and agents from the FBI, HHS-OIG, Drug Enforcement Administration, DCIS and state Medicaid Fraud Control Units.

A complaint, information, or indictment is merely an allegation, and all defendants are presumed innocent unless and until proven guilty.

Additional documents related to this announcement will shortly be available here: https://www.justice.gov/opa/documents-and-resources-july-13-2017.

This operation also highlights the great work being done by the Department of Justice’s Civil Division.  In the past fiscal year, the Department of Justice, including the Civil Division, has collectively won or negotiated over $2.5 billion in judgements and settlements related to matters alleging health care fraud.

CCC’s: What She [Sally Q. Yates] Said….

June 26, 2017 by Robert Connolly

I have written often about the need to reform the Sentencing Guideline for antitrust violations.  U.S.S.G. 2R1.1. (here)(here)(here).  My major beef is that the antitrust guideline measures culpability primarily by the volume of commerce subject to the agreement, to the exclusion of many other very relevant factors.  The cartel boss who engages the firm in the illegal conduct is tagged with the same volume of commerce as the employee who is assigned the task of going to cartel meetings to work out the details.

Sally Q. Yates served in the Justice Department from 1989 to 2017 as an assistant U.S. attorney, U.S. attorney, deputy attorney general and, briefly this year, as acting attorney general.  Ms. Yates described the problem with overweighting a quantifiable factor better than I ever have, though in a slightly different context:

“But there’s a big difference between a cartel boss and a low-level courier. As the Sentencing Commission found, part of the problem with harsh mandatory-minimum laws passed a generation ago is that they use the weight of the drugs involved in the offense as a proxy for seriousness of the crime — to the exclusion of virtually all other considerations, including the dangerousness of the offender.”

Sally Yates, Making America Scared Won’t Make us Safer.  Washington Post, June 23, 2017

For the record, the issue of mandatory minimums is a far more serious issue than the problem of sentencing individual criminal antitrust offenders.  While I hope for antitrust sentencing reform, it is not really a “need.” The antitrust sentencing guidelines are so divorced from actual culpability that virtually no individual–even a cartel boss–is sentenced to a guideline range term of imprisonment.

Thanks for reading.

Chicago Scrap Iron Refining Company and Its President Plead Guilty to Criminal Tax Violations for Concealing $11.6 Million from IRS

Department of Justice U.S. Attorney’s Office

Northern District of Illinois

shutterstock_73722895

FOR IMMEDIATE RELEASE

Wednesday, May 10, 2017

CHICAGO — A Chicago-based scrap iron refining business and its president admitted in federal court today that they concealed from the Internal Revenue Service more than $11.6 million in cash wages paid to employees.

ACME REFINING CO., which does business as Acme Refining Scrap Iron & Metal Co., and its president, LAURENCE C. BARON, each pleaded guilty to impairing and impeding the IRS. Acme and Baron admitted in plea agreements that from 2009 to 2013 they paid cash wages of more than $11.6 million to at least 50 employees, but failed to report the payments to the IRS. Acme and Baron also acknowledged that they willfully failed to withhold for the government the required amounts for FICA taxes and Medicare.

As part of their plea agreements, Baron and Acme agreed to pay restitution of $5,878,327 to the IRS and the state of Illinois, with Acme paying $4,545,243 and Baron paying $1,333,084.

The guilty pleas were announced by Joel R. Levin, Acting United States Attorney for the Northern District of Illinois; and Gabriel L. Grchan, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.

Impairing and impeding the IRS is punishable by up to three years in prison. Baron, 70, of Burr Ridge, also pleaded guilty to a separate count of willfully filing a false individual income tax return, which carries the same maximum penalty. U.S. District Judge Harry D. Leinenweber set sentencing for Sept. 14, 2017.

The cases against Acme and Baron are part an ongoing federal investigation of cash transactions in the Chicago-area scrap metal industry that has resulted in several previous convictions.

According to the plea agreements, Baron directed Acme employees to issue multiple vouchers for cash payments due to suppliers that exceeded $10,000, using nominee or fictitious payees as the purported seller. Between 2009 and 2013 the company and Baron obtained approximately $152 million in cash from two currency exchanges, then used the money to pay 85 separate scrap metal suppliers in order to assist those suppliers in underreporting their income and taxes.

Acme – at the direction of Baron – also spent at least $1.6 million to fund construction of a personal residence in Wisconsin that had no business-related purpose, the plea agreements state. The company falsely recorded this expenditure as “cost of goods sold,” in order to reduce Acme’s tax liability and conceal the payment on behalf of its corporate officers. The bogus records included phony invoices that fraudulently identified the payments as purchases of scrap steel.

Baron also admitted filing false individual income tax returns for tax years 2011 and 2012. The fraudulent returns resulted in a total federal and state tax loss of approximately $208,875, the plea agreement states.

The government is represented by Assistant U.S. Attorney Patrick King.

Department of Justice U.S. Attorney’s Office

Southern District of New York

FOR IMMEDIATE RELEASE

Friday, April 21, 2017

Chinese National Pleads Guilty To Attempting To Illegally Export High-Grade Carbon Fiber To China
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Mary B. McCord, the Acting Assistant Attorney General for the National Security Division of the Department of Justice (“NSD”), announced that FUYI SUN, a/k/a “Frank,” a citizen of the People’s Republic of China (“China”), pled guilty today before U.S. District Judge Alvin K. Hellerstein to violating the International Emergency Economic Powers Act (“IEEPA”) in connection with a scheme to illegally export to China, without a license, high-grade carbon fiber, which is used primarily in aerospace and military applications.

 

Acting Manhattan U.S. Attorney Joon H. Kim said: “As Fuyi Sun admitted today in court, he tried to skirt U.S. export laws by hiding his purchase of high-grade carbon fiber for the Chinese military. Sun used fraudulent documents and codewords in his efforts to obtain this highly protected material, which is used in aerospace and defense programs, and to avoid detection. Together with our law enforcement partners, we will continue to enforce the laws that protect our national security.”

 

NSD Acting Assistant Attorney General Mary McCord said: “Today, Fuyi Sun admitted to attempting to procure high-grade carbon fiber – which has sophisticated aerospace and defense applications – for the Chinese military. The defendant was willing to pay a premium to evade U.S. export laws and illegally transfer this highly protected material. The National Security Division will continue to identify those who violate IEEPA and other laws that protect our national assets from reaching the hands of potential adversaries.”

 

According to the allegations contained in the Complaint and the Indictment filed against SUN and statements made in court filings and proceedings, including today’s guilty plea:

 

Since approximately 2011, SUN has attempted to acquire extremely high-grade carbon fiber, including Toray type M60JB-3000-50B carbon fiber (“M60 Carbon Fiber”). M60 Carbon Fiber has applications in aerospace technologies, unmanned aerial vehicles (commonly known as “drones”) and other government defense applications. Accordingly, M60 Carbon Fiber is strictly controlled – and requires a license for export to China – for nuclear non-proliferation and anti-terrorism reasons.

 

In furtherance of his attempts to illegally export M60 Carbon Fiber from the United States to China without a license, SUN contacted what he believed was a distributor of carbon fiber – but was, in fact, an undercover entity created by HSI and “staffed” by HSI undercover special agents (the “UC Company”). SUN inquired about purchasing the M60 Carbon Fiber without the required license. In the course of his years’ long communications with the undercover agents and UC Company, SUN repeatedly suggested various security measures that he believed would protect them from “U.S. intelligence.” Among other such measures, at one point, SUN instructed the undercover agents to use the term “banana” instead of “carbon fiber” in their communications. Consequently, soon thereafter he inquired about purchasing 450 kilograms of “banana” for more than $62,000. In order to avoid detection, SUN also suggested removing the identifying barcodes for the M60 Carbon Fiber, prior to transshipment, and further suggested that they identify the M60 Carbon Fiber as “acrylic fiber” in customs documents.

 

On April 11, 2016, SUN traveled from China to New York for the purpose of purchasing M60 Carbon Fiber from the UC Company. During meetings with the undercover agents, on or about April 11 and 12, among other things, SUN repeatedly suggested that the Chinese military was the ultimate end-user for the M60 Carbon Fiber he sought to acquire from the UC Company, and claimed to have personally worked in the Chinese missile program. SUN further asserted that he maintained a close relationship with the Chinese military, had a sophisticated understanding of the Chinese military’s need for carbon fiber, and suggested that he would be supplying the M60 Carbon Fiber to the Chinese military or to institutions closely associated with it.

 

On April 12, 2016, SUN agreed to purchase two cases of M60 Carbon Fiber from the UC Company. On that date, SUN paid the undercover agents purporting to represent the UC Company $23,000 in cash for the carbon fiber, as well as an additional $2,000 as compensation for the risk he believed the UC Company was taking to illegally export the carbon fiber to China without a license. SUN was arrested the next day, April 13, 2016.

 

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SUN, 53, pled guilty today to attempting to violate IEEPA, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. SUN is scheduled to be sentenced by Judge Hellerstein on July 26, 2017 at 11:00 a.m.

 

Mr. Kim praised the extraordinary investigative work of the New York Field Office of the Department of Homeland Security, Homeland Security Investigations; the New York Field Office of the Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement; and the Northeast Field Office of the Department of Defense, Defense Criminal Investigative Service. Mr. Kim also thanked the Counterintelligence and Export Control Section of the Department of Justice’s National Security Division.

 

This prosecution is being handled by the Office’s Terrorism and International Narcotics and Complex Frauds and Cybercrime Units. Assistant United States Attorneys Matthew Podolsky, Patrick Egan, and Nick Lewin are in charge of the prosecution, with assistance from Trial Attorney David Recker of the Counterintelligence and Export Control Section.

Four Chinese Nationals Arrested and Charged in Connection with College Admissions Exam Scam

Department of Justice U.S. Attorney’s Office

District of Massachusetts

FOR IMMEDIATE RELEASE

Thursday, May 4, 2017
Students Arrested Today in Massachusetts, Arizona and New Jersey on Immigration-Related Charges
BOSTON – Yue Wang, 25, Shikun Zhang, 24, Leyi Huang, 21, and Xiaomeng Cheng, 21, all in the United States on F-1 non-immigrant student visas, were arrested today on charges of conspiracies to defraud the United States.

 

The conspiracies involved Wang, a current student at the Hult International Business School in Cambridge, Mass., agreeing to sit for the TOEFL exam in the place of Zhang, Huang, and Cheng. The TOEFL exam is an English language test recognized by more than 9,000 colleges, universities, and agencies in more than 130 countries. It is also used by the United States government in issuing, extending, or renewing F-1 student visas.

 

After Wang took the TOEFL exam in her co-conspirators places, her scores were allegedly used by the co-conspirators to apply for admission to various universities in the United States. Zhang used this fraudulently acquired TOEFL score to gain admission to Northeastern University in Boston, Mass.; Huang fraudulently used the TOEFL score to gain admission to Penn State University in Erie, Pa.; and Cheng used the fraudulently acquired TOEFL score to gain admission to Arizona State University. In each case, the United States Department of State issued the student an F-1 non-immigrant student visa based on their admittance to these educational institutions.

 

“Illegal schemes to circumvent the TOEFL exam jeopardize both academic integrity and our country’s student visa program,” said William B. Weinreb, Acting U.S Attorney. “The TOEFL exam ensures that international students have adequate English language skills to succeed in higher education programs in the United States. It also helps maintain the security of our borders and immigration system. By effectively purchasing passing scores, they violated the rules and regulations of the exam, taking spots at US colleges and universities that could have gone to others.”

 

“These schemes not only undermine the integrity of the academic institutions, they also undermine our nation’s immigration system,” said Matthew Etre, Special Agent in Charge of HSI in Boston. “HSI will continue to protect the nation’s immigration system by working with our federal law enforcement partners and our partners in academia to ensure that those involved in these scams are held accountable.”

 

The charge of conspiracy to defraud the United States provides for a sentence of no greater than 5 years in prison, up to three years of supervised release and a fine of $250,000. The defendants are subject to deportation after conviction and serving any sentence imposed. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

Fifa Audit And Compliance Committee Member Pleads Guilty To Corruption Charges

Department of Justice U.S. Attorney’s Office

Eastern District of New York

FOR IMMEDIATE RELEASE

Thursday, April 27, 2017

Fifa Audit And Compliance Committee Member Pleads Guilty To Corruption Charges
Defendant Accepted and Facilitated Bribes Within the Asian Football Confederation
Earlier today, Richard K. Lai, a United States citizen, pleaded guilty to a criminal information charging him with two counts of wire fraud conspiracy in connection with his participation in multiple schemes to accept and pay bribes to soccer officials. Lai also pleaded guilty to one count of failing to disclose foreign bank accounts and agreed to pay more than $1.1 million in forfeiture and penalties. The plea was entered before United States District Judge Pamela K. Chen at federal courthouse in Brooklyn, New York.

 

The guilty plea was announced by Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Special Agent-in-Charge R. Damon Rowe, Internal Revenue Service Criminal Investigation, Los Angeles Field Office (IRS).

 

“Today’s plea marks another important step in our ongoing effort to root out corruption in international soccer,” stated Acting United States Attorney Rohde. “The defendant abused the trust placed in him as a soccer official in order to line his own pockets, and now he will be held to account. The defendant’s breach of trust was particularly significant given his position as a member of the FIFA Audit and Compliance committee, which must play an important and independent role if corruption within FIFA is to be eliminated.”
“Years of this systemic culture of corruption and greed have tainted one of the world’s most popular sports,” stated Assistant Director-in-Charge Sweeney. “Kickbacks and bribes became the norm for doing business with FIFA, but not anymore. The plea deal today and all the other cases tied to this investigation prove our work isn’t done, and we will continue to pursue anyone who had their hands in illegal activity.”
“Today’s guilty plea by Guam Football Association president Richard K. Lai, reaffirms the dedication of IRS Criminal Investigation to use our financial investigative expertise to uncover corrupt schemes and illicit payments involving FIFA officials,” stated Special Agent-in-Charge Rowe. “Co-conspirators may try to hide and launder the proceeds of their corrupt self-enrichment, but as mentioned in the legal documents filed today, IRS-CI Special Agents will trace and uncover those funds both through the U.S. financial system and beyond, to offshore jurisdictions in locations such as Asia, the Middle East, and around the globe.”
As alleged in the criminal information to which he pleaded guilty, Lai, a resident of the U.S. territory of Guam, has served as the president of the Guam Football Association (GFA) since 2001. In that capacity, Lai had a vote in FIFA presidential elections. Lai has also served at various times as a member and chair of the Asian Football Confederation (AFC) Finance Committee and a member of the AFC Executive Committee, and is currently a member of the AFC Marketing Committee and the FIFA Audit and Compliance Committee.

 

As also set forth in the information, Lai pleaded guilty to a scheme in which he received $100,000 in bribes in 2011 from an official of the AFC who was then running for the FIFA presidency, in exchange for Lai’s vote and support in the then-upcoming FIFA presidential election.

 

As further described in the information, Lai also pleaded guilty to a scheme in which he received over $850,000 in bribes between 2009 and 2014 from a faction of soccer officials in the AFC region. Lai received those bribes in exchange for using his influence as a soccer official to advance the interests of the faction that bribed him, including by helping officials in that faction identify other officials in the AFC to whom they should offer bribes. The goal of this scheme was for the faction to gain control of the AFC and influence FIFA.

 

The guilty plea announced today is part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office for the Eastern District of New York, the FBI New York Field Office, and the IRS-CI Los Angeles Field Office. The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Money Laundering and Asset Recovery Section, and the Fraud Section, as well as from INTERPOL Washington.

 

Assistant U.S. Attorneys Paul Tuchmann, Nadia Shihata, and Brian D. Morris of the Eastern District of New York are in charge of today’s prosecution.

 

The government’s investigation is ongoing.

Philadelphia Area Restauranteur Indicted On Tax Offenses

Department of Justice U.S. Attorney’s Office

Eastern District of Pennsylvania

shutterstock_68248675

FOR IMMEDIATE RELEASE

Thursday, May 11, 2017
PHILADELPHIA – Giuseppe “Pino” DiMeo, 49 years old, and a resident of Eagleville, Pennsylvania was charged today by indictment[1]
with two counts of conspiring to defraud the Internal Revenue Service (“IRS”), and twelve counts of filing false tax returns announced Acting United States Attorney Louis D. Lappen. The indictment charges that from 2008 through 2012, DiMeo conspired with his business partners at restaurants in Wilmington, Delaware and Philadelphia, Pennsylvania to defraud the IRS of income taxes and payroll taxes. DiMeo skimmed cash from four of his restaurants and failed to report the cash income to the IRS. DiMeo also paid many of his employees in cash under the table and failed to inform his accountant or the IRS about his businesses’ cash payroll. In total, DiMeo had over three million dollars in unreported gross receipts and failed to pay to the IRS approximately one million dollars in income taxes and payroll taxes.

DiMeo has owned and operated numerous restaurants in the Philadelphia area, and presently owns DiMeo’s Pizzaiuoli Napulitani in Wilmington, Delaware; Pizzeria DiMeo’s (Andorra) in Philadelphia, Pennsylvania; and Arde Osteria in Wayne, Pennsylvania.

The defendant faces a maximum possible sentence of 46 years of imprisonment, three years of supervised release, a $3.5 million fine, and a $1,400 special assessment.

The case was investigated by the Internal Revenue Service, Criminal Investigations,

and is being prosecuted by Assistant United States Attorneys Maria M. Carrillo and Tiwana L. Wright.

Defense Contractor Sentenced to 5 Years in Federal Prison for $53 Million Procurement Fraud and Illegal Gratuities Scheme

Department of Justice U.S. Attorney’s Office

District of Maryland

FOR IMMEDIATE RELEASE

2015-05-29 11.34.57

Friday, April 28, 2017

Defense Contractor Sentenced to 5 Years in Federal Prison for $53 Million Procurement Fraud and Illegal Gratuities Scheme

Baltimore, Maryland – On April 27, 2017, U.S. District Judge Marvin J. Garbis sentenced John Wilkerson, age 51, of Moultrie, Georgia to five years in prison, followed by three years of supervised release, for a wire fraud conspiracy and for paying illegal gratuities to a government official, in connection with the award of more than $53 million in federal government contracts. Judge Garbis also ordered Wilkerson to pay forfeiture and restitution in the amount of $9,441,340.11.

 

The sentence was announced by Acting United States Attorney for the District of Maryland Stephen M. Schenning; Commander of the Air Force Office of Special Investigations (OSI); Special Agent in Charge Robert Craig, Defense Criminal Investigative Service (DCIS), Mid-Atlantic Field Office; and U.S. Small Business Administration Acting Inspector General Mike Ware.

 

According to his plea agreement, Wilkerson was a Department of Defense Account Manager for Iron Bow Technologies, LLC (Iron Bow), which provided IT consulting and other services to government and industry customers. Wilkerson was also part owner and operated an information technology company, Superior Communications Solutions, Inc. (SCSI).

 

Andrew Bennett, who was separately charged and has pled guilty, was a program manager for an information technology company, Advanced C4 Solutions, or AC4S, from 2005 until 2011. In 2011, Bennett left AC4S and went to work for Wilkerson at SCSI.

 

James T. Shank, who was separately charged and has pled guilty, was a Program Manager at the United States Navy’s Space and Naval Warfare (SPAWAR) Systems Center

 

From September 2009 through August 2012 Wilkerson, Bennett and Shank conspired to steer government contracts at Joint Base Andrews to companies affiliated with Wilkerson and Bennett. After the award of the contracts, Wilkerson offered, and Shank accepted, employment with SCSI while Shank was still a government employee and while he was taking official actions that benefited Wilkerson. In addition, Wilkerson paid Shank $86,000 in the year after Shank retired from government service, funneling the payment through two other companies in order to conceal the source of the funds. Wilkerson also hired Bennett and paid him a $500,000 bonus using proceeds from the fraud scheme.

 

For example, Shank, Wilkerson, and Bennett developed a request for proposal (RFP) for DO27, a contract to supply labor services for an Air Force technology project, including for overall project management services, so that AC4S would win the contract. On June 10, 2010, DO27 was awarded to AC4S in the amount of $18,332,738.10. Wilkerson provided Bennett with a quote for labor on behalf of SCSI that was less than the quote he had previously submitted on behalf of Iron Bow as their sales representative. After SCSI was selected as a subcontractor on DO27, it subcontracted with Iron Bow to provide most of the labor SCSI was supposed to provide under DO27. Wilkerson was able to earn income from the work Iron Bow employees were doing by having SCSI act as a middleman and charging a mark-up on Iron Bow’s work. Wilkerson and Bennett also directed an SCSI employee to create false invoices supposedly documenting the hours SCSI employees spent working on DO27, which were submitted to AC4S and paid by the United States government. SCSI received $6,794,432.98 on DO27 out of the $18 million AC4S received for providing labor for the project.

 

Shank also initiated the procurement process on more than 11 delivery orders that purchased telecommunications equipment and furniture as part of the Air Force project. Those delivery orders were issued to Iron Bow in 2010 and 2011. Wilkerson took multiple items of commercially available furniture, bundled them together and assigned them an SCSI specific number and a price that included a significant mark up over what SCSI paid the furniture manufacturer for the items. Shank then submitted to SPAWAR contracting officers a purchase order asking for authority to buy the bundle of furniture that bore the SCSI specific part number. SCSI received approximately $33 million of the $35 million paid to Iron Bow under the various furniture and equipment delivery orders. Wilkerson charged the United States a 25 percent markup on furniture purchased under these two purchase orders, resulting in a profit to him of more than $6 million.

 

In addition, from 2010 until his retirement in June 2011, Shank falsely certified that the United States government received more than $1 million worth of goods under the W91QUZ-07-D-0010 contract that the government did not in fact receive.

 

In late 2010 or early 2011, Wilkerson offered Shank employment. Shank did not disclose that fact to anyone at SPAWAR and did not recuse himself from any of the contracts that benefited Wilkerson. In February 2011, Bennett left AC4S and went to work for Wilkerson at SCSI. Bennett received a $500,000 bonus when he joined SCSI, which was paid for by profit Wilkerson had earned on the furniture contracts.

 

Shank accepted employment with SCSI in May 2011, but was still working for SPAWAR when he approved more than $1.1 million worth of invoices that benefitted SCSI and Wilkerson.

 

Between July 2011 until August 2012, Wilkerson paid Shank approximately $86,000. The funds that Wilkerson paid Shank were funneled through T&M Communications, LLC, a company owned by T.R., a senior executive at SCSI, who ultimately paid out the funds to Shank. Further, in some instances funds paid to Shank were also funneled through Decision Point Technologies, LLC, another company owned by Wilkerson. Shank did no work for Decision Point Technologies or T&M Communications in that time period.

 

The National Procurement Fraud Task Force was formed in October 2006 to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force includes the United States Attorneys’ Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. This case, as well as other cases brought by members of the Task Force, demonstrate the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.

 

Acting United States Attorney Stephen M. Schenning thanked Air Force OSI, DCIS, and the U.S. Small Business Administration Office of Inspector General for their work in the investigation. Mr. Schenning commended Assistant U.S. Attorneys Leo J. Wise and Philip A. Selden, who are prosecuting the case.

Former Hedge Fund Manager Pleads Guilty to $9 Million Investment Fraud

Department of Justice U.S. Attorney’s Office

Eastern District of Virginia

FOR IMMEDIATE RELEASE

Friday, May 12, 2017

ALEXANDRIA, Va. – A Leesburg man pleaded guilty today to wire fraud in connection with his misuse of clients funds, some of which were invested through a purported hedge fund called Crescent Ridge Capital Partners.

According to the statement of facts filed with the plea agreement, Tamer Moumen, 39, defrauded over 50 clients between 2012 and 2017. Moumen falsely told investors that he was a successful trader who consistently beat the S&P500 and was overseeing tens of millions of dollars through his company, Crescent Ridge Capital Partners. Moumen encouraged dozens of clients, including many who were nearing retirement age, to liquidate their other investments and retirement accounts, and invest with him. Moumen did not tell investors that he actually had no experience managing a hedge fund, had a history of losing money in the securities market, and was relying on investor money to support his lifestyle and pay personal expenses. For example, Moumen used investor money to help finance the purchase of a $1 million personal residence in Leesburg, Virginia, a new Tesla, and to repay old investors. In nearly all instances, Moumen lost or spent his clients’ money within a matter of weeks or months of their original investment, but would conceal those facts by providing statements that showed the investment as steadily growing.

According to the statement of facts filed with the plea agreement, beginning in 2015, Moumen was involved with two fundraising efforts that solicited donations to benefit refugees, including a GoFundMe campaign and the Northern Virginia Refugee Fund. Moumen had sole control of the donated funds, some of which he transferred into accounts in his name, where the money was commingled with investor funds. Moumen used money in these accounts to pay personal expenses.

Moumen faces a maximum penalty of 20 years in prison when sentenced on July 28. 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; and Andrew W. Vale, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement after U.S. District Judge Anthony J. Trenga accepted the plea. Assistant U.S. Attorney Katherine L. Wong is prosecuting the case.