Novo Nordisk Agrees to Pay $58 Million for Failure to Comply with FDA-Mandated Risk Program

Tuesday, September 5, 2017

Payments Resolve Allegations Highlighted in DOJ Civil Complaint and Recently Unsealed Whistleblower Actions

Pharmaceutical Manufacturer Novo Nordisk Inc. will pay $58.65 million to resolve allegations that the company failed to comply with the FDA-mandated Risk Evaluation and Mitigation Strategy (REMS) for its Type II diabetes medication Victoza, the Justice Department announced today. The resolution includes disgorgement of $12.15 million for alleged violations of the Federal Food, Drug, and Cosmetic Act (FDCA) from 2010 to 2012 and a payment of $46.5 million for alleged violations of the False Claims Act (FCA) from 2010 to 2014. Novo Nordisk is a subsidiary of Novo Nordisk U.S. Holdings Inc., which is a subsidiary of Novo Nordisk A/S of Denmark. Novo Nordisk’s U.S. headquarters is in Plainsboro, New Jersey.

“Today’s resolution demonstrates the Department of Justice’s continued commitment to ensuring that drug manufacturers comply with the law,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “When a drug manufacturer fails to share accurate risk information with doctors and patients, it deprives physicians of information vital to medical decision-making.”

In a civil complaint filed today in the U.S. District Court for the District of Columbia asserting claims under the FDCA, the government alleged that, at the time of Victoza’s approval in 2010, the Food and Drug Administration (FDA) required a REMS to mitigate the potential risk in humans of a rare form of cancer called Medullary Thyroid Carcinoma (MTC) associated with the drug. The REMS required Novo Nordisk to provide information regarding Victoza’s potential risk of MTC to physicians. A manufacturer that fails to comply with the requirements of the REMS, including requirements to communicate accurate risk information, renders the drug misbranded under the law.

As alleged in the complaint, some Novo Nordisk sales representatives gave information to physicians that created the false or misleading impression that the Victoza REMS-required message was erroneous, irrelevant, or unimportant. The complaint further alleges that Novo Nordisk failed to comply with the REMS by creating the false or misleading impression about the Victoza REMS-required risk message that violated provisions of the FDCA and led some physicians to be unaware of the potential risks when prescribing Victoza.

As alleged in the government’s complaint, after a survey in 2011 showed that half of primary care doctors polled were unaware of the potential risk of MTC associated with the drug, the FDA required a modification to the REMS to increase awareness of the potential risk. Rather than appropriately implementing the modification, the complaint alleges that Novo Nordisk instructed its sales force to provide statements to doctors that obscured the risk information and failed to comply with the REMS modification. Novo Nordisk has agreed to disgorge $12.15 million in profits derived from its unlawful conduct in violation of the FDCA.

“Novo Nordisk’s actions unnecessarily put vulnerable patients at risk,” said U.S. Attorney Channing D. Phillips for the District of Columbia. “We are committed to holding companies accountable for violating the integrity of the FDA’s efforts to ensure that doctors and patients have accurate information that allows them to make appropriate decisions about which drugs to use in their care. Working with the FDA and other law enforcement partners, we have sent a strong signal to the drug industry today.”

“Novo Nordisk Inc. sales representatives misled physicians by failing to accurately disclose a potential life threatening side effect of a prescription drug, and needlessly increased risks to patients being treated with this drug,” said Assistant Director in Charge Andrew W. Vale of the FBI’s Washington Field Office. “The FBI is committed to ensuring that the private industry provides honest and accurate risk information to the public and will continue to work closely with our law enforcement partners to investigate companies who do not comply with FDA-mandated policies.”

“We need to trust that pharmaceutical companies truthfully represent their products’ potential risks,” said Special Agent in Charge Nick DiGiulio for the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG). “We will continue to work with our partners to ensure federal health care dollars are spent only on drugs that are marketed honestly.”

Novo Nordisk will pay an additional $46.5 million to the federal government and the states to resolve claims under the FCA and state false claims acts. This portion of the settlement resolves allegations that Novo Nordisk caused the submission of false claims from 2010 to 2014 to federal health care programs for Victoza by arming its sales force with messages that could create a false or misleading impression with physicians that the Victoza REMS-required message about the potential risk of MTC associated with Victoza was erroneous, irrelevant, or unimportant and by encouraging the sale to and use of Victoza by adult patients who did not have Type II diabetes. The Food and Drug Administration (FDA) has not approved Victoza as safe and effective for use by adult patients who do not have Type II diabetes.

As a result of today’s FCA settlement, the federal government will receive $43,129,026 and state Medicaid programs will receive $3,320,963. The Medicaid program is funded jointly by the state and federal governments.

The FCA settlement resolves seven lawsuits filed under the whistleblower provision of the federal FCA, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The civil lawsuits are captioned as follows: United States, et al. ex rel. Kennedy, v. Novo A/S, et al., No. 13-cv-01529 (D.D.C.), United States, et al. ex rel. Dastous, et al. v. Novo Nordisk, No. 11-cv-01662 (D.D.C), United States, et al., ex rel. Ferrara and Kelling v Novo Nordisk, Inc., et al., No. 1:11-cv-00074 (D.D.C.), United States, et al., ex rel. Myers v. Novo Nordisk, Inc., No. 11-cv-1596 (D.D.C.), United States, et al. ex rel Stepe v. Novo Nordisk, Inc., No. 13-cv-221 (D.D.C.), United States et al. ex rel Doe, et al. v. Novo Nordisk, Inc., et al., No. 1:17-00791 (D.D.C.), and United States ex rel. Smith, et al. v. Novo Nordisk, Inc., Civ. Action No. 16-1605 (D.D.C.). The amount to be recovered by the private parties has not been determined.

The settlements were the result of a coordinated effort among the U.S. Attorney’s Office for the District of Columbia and the Civil Division’s Consumer Protection Branch and Commercial Litigation Branch, with assistance from the FDA’s Office of Chief Counsel. The investigation was conducted by the FDA’s Office of Criminal Investigations, the FBI, HHS-OIG, the Defense Criminal Investigative Service and the Office of Personnel Management, Office of the Inspector General.

For more information about the Consumer Protection Branch and its enforcement efforts, visit its website at http://www.justice.gov/civil/consumer-protection-branch. For more information on the Commercial Litigation Branch’s Fraud Section, visit https://www.justice.gov/civil/fraud-section. For more information about the U.S. Attorney’s Office for the District of Columbia, visit https://www.justice.gov/usao-dc.

Owner of Hudson County Medical Equipment Supply Store Pleads Guilty To $100,000 from Medicaid Fraud Scam

TRENTON –Attorney General Christopher S. Porrino and the Office of the Insurance Fraud Prosecutor (OIFP) announced today that the owner of a Hudson County medical equipment supply store has pleaded guilty to fraudulently billing the Medicaid program more than $100,000 for medical supplies never provided to patients.

Alfredo Valdes, Jr., who owns T-N-T medical supplies in West New York, pleaded guilty to second-degree charges of health care claims fraud and theft by deception in a hearing before Superior Court Judge Mitzy Galis-Menendez in Hudson County. Under the terms of the plea agreement, the State will recommend that the 42-year-old Clifton resident be sentenced to four years in state prison. Valdes will also pay $101,000 in restitution to Horizon New Jersey Health, and sign a consent order agreeing to lifetime disbarment from participation as a provider in the New Jersey Medicaid program.

“Stealing from a program that provides financial assistance to those who cannot afford health insurance or health care services is not only a crime, it’s a disgrace,” said Attorney General Porrino. “This guilty plea ensures that the defendant will be held accountable for his actions and will never again be in a position to divert resources from those who truly need it.”

“Every dollar lost to Medicaid fraud is one less dollar available to help some of the most vulnerable citizens of our state,” said Acting Insurance Fraud Prosecutor Christopher Iu. “Our Medicaid Fraud Control Unit will continue to aggressively investigate and punish those exploit the Medicaid system for their personal enrichment.”

In pleading guilty, Valdes admitted that between January 2008 and March 2016 he fraudulently submitted claims totaling more than $100,000 to Horizon NJ Health, a provider of Medicaid services in the state. The claims falsely stated that Valdes had distributed durable medical equipment – including compression stockings, diapers and other items – to patients who, in fact, had died prior to the dates of the purported distributions.

Valdes is scheduled to be sentenced on January 5, 2018.

Deputy Attorney General Melissa Simsen represented the State in the plea hearing. Detectives Anthony Iannice and Kylie Mattis coordinated the investigation with assistance from Det. Megan Brennan of the Special Investigation Unit at Horizon New Jersey Health, and Analysts Keira McRae-Wiggins and Kelly Celenza. Acting Insurance Fraud Prosecutor Iu thanked the SIU Unit at Horizon for referring the matter to the Office of the Insurance Fraud Prosecutor.

John Lynch, Esq. represented Valdes at the plea hearing.

Acting Insurance Fraud Prosecutor Iu noted that some important cases have started with anonymous tips. People who are concerned about insurance cheating and have information about a fraud can report it anonymously by calling the toll-free hotline at 1-877-55-FRAUD, or visiting the Web site at www.NJInsurancefraud.org. State regulations permit a reward to be paid to an eligible person who provides information that leads to an arrest, prosecution and conviction for insurance fraud.

Follow the New Jersey Attorney General’s Office online at TwitterFacebookInstagram & YouTube. The social media links provided are for reference only. The New Jersey Attorney General’s Office does not endorse any non-governmental websites, companies or applications.

Essex County Pediatrician Sentenced to Prison for Medicaid Fraud

TRENTON – Attorney General Christopher S. Porrino and the Office of Insurance Fraud Prosecutor announced today that an Essex County pediatrician has been sentenced to three years in state prison for submitting fraudulent claims to the Medicaid Program through which she falsely billed for working 24 hours or more a day.

Ibilola Ighama-Amegor, 55, whose Quality Pediatrix practice is located in Newark, must also pay $216,000 in restitution under a sentence handed down by Superior Court Judge Michael Petrolle in Newark on Friday.

Following a five-week jury trial in June, a jury found Amegor guilty of 48 counts of health care claims fraud and one count of Medicaid fraud, all in the third degree. Amegor was acquitted of second-degree theft by deception.

Deputy Attorneys General Crystal Callahan and Dennis Kwasnik tried the case for the Office of the Insurance Fraud Prosecutor’s Medicaid Fraud Control Unit.

“Dr. Amegor used her medical degree as a license to steal from a program that pays for medical care for the elderly and those who can’t afford health insurance,” said Attorney General Porrino. “She doesn’t belong in the medical profession, she belongs in prison, which is right where she’s going.”

“Doctors who file false insurance claims undermine the integrity of a system that depends on the trustworthiness of licensed professionals,” said Acting Insurance Fraud Prosecutor Christopher Iu. “Dr. Amegor’s sentence sends a powerful message that medical professionals who commit insurance fraud will be held accountable for their greed.”

At trial, the state presented testimony that Amegor submitted bills for 24 hours or more of work on 48 dates of service between April 30, 2008 and May 16, 2011. An investigation by the Office of the Insurance Fraud Prosecutor determined that Amegor’s practice was only open for approximately eight hours per day, three days a week.

Deputy Attorneys General Callahan and Kwasnik were assisted at trial by Detectives Janet Amberg and Janet Thai. Detective Kylie Mattis, analyst Elizabeth O’Brien, Detective Ron Allen, Detective Laura Parisi, and Senior Management Assistant B’leia Williams all testified at trial. The investigation was coordinated by Detectives Kylie Mattis and Laura Catizone, and analyst Elizabeth O’Brien. Acting Insurance Fraud Prosecutor Christopher Iu thanked the Medicaid Fraud Division within the State Comptroller’s Office and the Special Investigations Unit at Anthem (formerly Amerigroup) for referring the matter to the Office of the Insurance Fraud Prosecutor.

Acting Insurance Fraud Prosecutor Iu noted that some important cases have started with anonymous tips. People who are concerned about insurance cheating and have information about a fraud can report it anonymously by calling the toll-free hotline at 1-877-55-FRAUD, or visiting the Web site at www.NJInsurancefraud.org. State regulations permit a reward to be paid to an eligible person who provides information that leads to an arrest, prosecution and conviction for insurance fraud.

Follow the New Jersey Attorney General’s Office online at TwitterFacebookInstagram & YouTube. The social media links provided are for reference only. The New Jersey Attorney General’s Office does not endorse any non-governmental websites, companies or applications.

Hudson County, New Jersey, Man Sentenced To 63 Months In Prison For Masterminding Fake ID Website And Participating In ‘SIRF’ Scheme

Thursday, July 27, 2017

NEWARK, N.J. – A Jersey City, New Jersey, man was sentenced today to 63 months in prison for his role in two separate conspiracies: one to create and operate a website that sold high-quality, custom-made fake identification documents, some of which were later used to commit financial crimes, and a second to fraudulently obtain tax refund checks, Acting U.S. Attorney William E. Fitzpatrick announced.

Ricardo Rosario, 34, previously pleaded guilty before U.S. District Judge Jose L. Linares in Newark federal court to an information charging him with conspiracy to commit fraud in connection with authentication features and conspiracy to submit false claims to the U.S. Government. Judge Linares imposed the sentence today in Newark federal court.

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

From October 2012 through August 2014, Rosario, with the assistance of Abraham Corcino, 34, of Jersey City, and Alexis Scott Carthens, 38, of Newark, sold fake driver’s licenses over the Internet, running a website that was available at “fakeidstore.com” and “fakedlstore.com.” A number of the fake driver’s licenses sold by Rosario and other conspirators were used in connection with “cash out” schemes, where stolen credit card information, usually obtained through hacking or ATM skimming operations, was encoded on to counterfeit credit cards and used to steal cash from victims’ accounts.

Rosario created and ran the website. Corcino and Carthens assisted him by creating and mailing the fake driver’s licenses purchased through the website. Corcino also maintained an Instagram account to promote the website. The website sold fake New Jersey, Florida, Illinois, Pennsylvania, Rhode Island, and Wisconsin driver’s licenses, and the website boasted that the licenses had “scannable barcodes” and “real” holographic overlays. The price for each fake driver’s license was approximately $150, but the website offered bulk pricing for orders of 10 or more.

The website allowed its users to pay by bitcoin, a cryptographic-based digital currency, or MoneyPak, a type of prepaid payment card that could be purchased at retail stores. The “FAQ” section of the website indicated that orders would be received approximately one to two days after payment was received and described the website’s policy with respect to returns: “No Refunds. No snitching.”

In the Stolen Identity Refund Fraud (SIRF) conspiracy, Rosario assisted Carthens, who obtained stolen personally identifiable information (PII) primarily in the form of lab testing request forms that he purchased from another individual. Rosario provided Carthens with email accounts and drop addresses used in furtherance of the scheme. The email accounts were used to register accounts for online tax filing services and prepaid card accounts used to apply for and receive the tax refunds. The drop addresses were used to physically receive the refunds in the form of prepaid debit cards.

In addition to the prison term, Judge Linares sentenced Rosario to three years of supervised release and ordered forfeiture of $232,660 and restitution of $121,922.

Corcino was sentenced on April 17, 2017, to three years of probation. Carthens pleaded guilty to his role in the scheme on April 25, 2016, and is scheduled to be sentenced Sept. 28, 2017.

Acting U.S. Attorney Fitzpatrick credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge James V. Buthorn, and special agents of IRS – Criminal Investigation, under the direction of Special Agent in Charge Jonathan D. Larsen, with the investigation leading to today’s sentencing.

The government is represented by Assistant U.S. Attorney Zach Intrater of the Economic Crimes Unit and Barbara Ward, Acting Chief of the U.S. Attorney’s Office Asset Forfeiture and Money Laundering Unit in Newark.

Defense counsel: Brian Neary Esq., Hackensack, New Jersey

Short Hills, New Jersey, Investment Manager Sentenced To 33 Months In Prison For $675,000 Ponzi Scheme

Thursday, July 27, 2017

NEWARK, N.J. – An investment manager with an office in Short Hills, New Jersey, was sentenced today to 33 months in prison for that he fraudulently inducing investments, concealing investment losses, and diverting more than $675,000 in investor money for his own use, Acting U.S. Attorney William E. Fitzpatrick announced.

Mark Moskowitz, 48, of Short Hills, previously pleaded guilty before U.S. District Judge Katharine S. Hayden to an information charging him with one count of wire fraud. Judge Hayden imposed the sentence today in Newark federal court.

In a separate legal proceeding, the N.J. Bureau of Securities ordered Moskowitz and his trading company, Edge Trading LLC, to pay a $1 million civil penalty for selling unregistered fraudulent securities and misusing investors’ funds for personal expenses.

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

Moskowitz controlled an investment fund under the names Edge Trading Partners L.P. and Edge Trading LLC (Edge Trading). In addition to touting his investment skill and experience, Moskowitz concealed losses from investors and falsely told them that Edge Trading was growing year after year. Based on these misrepresentations, investors continued to entrust additional funds to Moskowitz and left previous investments under his control.

Edge Trading was an investment fund that Moskowitz created and operated, starting in or around 2012. Moskowitz told investors that Edge Trading was invested in U.S. and foreign equities, futures contracts, and option contracts and that the fund’s investments continued to show positive returns. In reality, Moskowitz redirected investor money to his personal use, which he concealed from the investors.

In addition to the prison term, Judge Hayden sentenced Moskowitz to three years of supervised release and ordered restitution and forfeiture of $694,577.

Acting U.S. Attorney Fitzpatrick credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher, with the investigation leading to today’s sentencing. He also thanked the N.J. Bureau of Securities in the State Attorney General’s Office, under the direction of Attorney General Christopher S. Porrino and Acting Bureau Chief Amy Kopleton, for its assistance in the investigation.

The government is represented by Assistant U.S. Attorney Jason S. Gould of the U.S. Attorney’s Office Criminal Division in Newark.

Defense counsel: David Holman Esq., Assistant Federal Public Defenders, Newark

New Jersey Man Sentenced To 39 Months In Prison For Defrauding Investors

Tuesday, July 25, 2017

NEWARK, N.J. – A North Caldwell, New Jersey, man was sentenced today to 39 months in prison for fraudulently using more than $550,000 in investment funds that he solicited to purchase and sell consumer products in bulk, Acting U.S. Attorney William E. Fitzpatrick announced.

Michael Esposito, 45, previously pleaded guilty before U.S. District Judge William J. Martini to an information charging him with one count of wire fraud. Judge Martini imposed the sentence today in Newark federal court.

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

From August 2013 through February 2017, Esposito was the president of numerous entities that purported to purchase consumer products in bulk from manufacturers for resale to wholesalers and retailers. Esposito told potential investors that he could purchase consumer goods – such as soda and bottled water – at substantial discounts, and that he had buyers ready to purchase the products at a significant profit.

In return for providing the funds necessary to purchase the products, Esposito promised the victim investors a large percentage of the profits. However, Esposito used the funds for his personal expenses and to pay other investors in order to make it appear the money was properly used. Esposito admitted that his actions resulted in losses of more than $550,000.

In addition to the prison term, Judge Martini sentenced Esposito to three years of supervised release. Restitution will be determined at a late date.

Acting U.S. Attorney Fitzpatrick credited special agents with the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, with the investigation. He also thanked investigators with the Florida Office of Financial Regulation for their assistance.

The government is represented by Assistant U.S. Attorneys Andrew Kogan of the U.S. Attorney’s Office Economic Crimes Unit and Sarah Devlin of the Asset Forfeiture Unit in Newark.

Defense counsel: Brooke M. Barnett Esq., Newark

Celgene Agrees to Pay $280 Million to Resolve Fraud Allegations Related to Promotion of Cancer Drugs For Uses Not Approved by FDA

Monday, July 24, 2017

LOS ANGELES – Celgene Corp., a manufacturer of pharmaceuticals headquartered in Summit, New Jersey, has agreed to pay $280 million to settle fraud allegations related to the promotion of two cancer treatment drugs for uses not approved by the Food and Drug Administration, the Justice Department announced today.

Celgene agreed to pay the settlement to resolve a “whistleblower” lawsuit that alleged it had violated the federal False Claims Act by submitting false claims to Medicare. The lawsuit also alleged that Celgene violated the laws of 28 states and the District of Columbia by submitting fraudulent claims to state health care programs, including California’s Medi-Cal program.

Pursuant to the settlement, which was finalized last week, Celgene will pay $259.3 million to the United States and $20.7 million to the 28 states and the District of Columbia. California will receive $4.7 million, more than any other state.

The settlement resolves allegations brought in a “whistleblower” lawsuit that Celgene promoted two cancer drugs – Thalomid and Revlimid – for uses that were not approved by the FDA and not covered by federal health care programs. The allegations included the use of false and misleading statements about the drugs, and paying kickbacks to physicians to induce them to prescribe the drugs.

“Patients deserve to know their doctors are prescribing drugs that are likely to provide effective treatment, rather than drugs marketed aggressively by pharmaceutical companies,” said Acting United States Attorney Sandra R. Brown.

The whistleblower lawsuit was filed in United States District Court by Beverly Brown, who was employed as a sales manager by Celgene, under the qui tam provisions of the False Claims Act and similar laws of the District of Columbia and the 28 states included in the lawsuit. Under the False Claims Act, private citizens can bring suit on behalf of the United States and share in any recovery. The United States may intervene in the lawsuit, or, as in this case, the whistleblower may pursue the action.

“Today’s recovery again spotlights the importance of the False Claims Act in preserving precious government health plan resources,” said Christian J. Schrank, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “This invaluable law enlists all in the battle against fraudulent health care schemes.

The case, United States ex rel. Brown v. Celgene Corp., CV10-3165, was monitored by the United States Attorney’s Office, the Civil Division’s Commercial Litigation Branch, and HHS-OIG.

The claims settled by this agreement are allegations only, and the defendant did not admit liability in settling the action.

Employee Of New Jersey-Based Trucking Company Gets 33 Months In Prison For Stealing More Than $3 Million From Her Employer

Monday, July 24, 2017

TRENTON, N.J. – A former employee of a New Jersey based-trucking company was sentenced today to 33 months in prison for stealing more than $3 million by issuing company checks for her own benefit, Acting U.S. Attorney William E. Fitzpatrick announced.

Tracey Perrigan, 55, of Sparta, Tennessee, previously pleaded guilty before U.S. District Judge Peter G. Sheridan to Count One of an indictment charging her with wire fraud. Judge Sheridan imposed the sentence today in Trenton federal court.

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

Perrigan was an employee of a company identified in the indictment as “Company A,” the corporate parent of several subsidiary trucking, rigging, and transportation companies. Company A was headquartered in Oceanside, New York, and had a Branchburg, New Jersey, facility where Perrigan worked.

Company A used the “Comchek” system, which enables clients to authorize and monitor fuel and repair expenditures by drivers in remote locations. As part of her duties, Perrigan was responsible for authorizing Comcheks drawn on Company A’s bank account. From March 2007 through August 2015, Perrigan diverted $3.25 million from her employer to an entity identified as “Company B,” a trucking and towing company based in Tennessee that she owned with another person. Company B never conducted any business with Company A.

In addition to the prison term, Judge Sheridan sentenced Perrigan to three years of supervised release. Perrigan must also pay restitution of $3,251,419.65.

Acting U.S. Attorney Fitzpatrick credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, with the investigation.

The government is represented by Assistant U.S. Attorney Jason S. Gould of the U.S. Attorney’s Office Criminal Division in Newark.

Defense counsel: Carol Gillen Esq., Assistant Federal Public Defender, Newark

Former Employee Of Commercial Supply Company Admits Fraud, False Testimony Before Grand Jury

Monday, July 24, 2017

TRENTON, N.J. – A former salesman at Bayway Lumber, a Linden, New Jersey, company that sold commercial and industrial products to numerous public and private entities, today admitted his role in a scheme to defraud customers and lying to a federal grand jury, Acting U.S. Attorney William E. Fitzpatrick announced.

Adam Martignetti, 43, of South River, New Jersey, pleaded guilty before U.S. District Judge Peter G. Sheridan in Trenton federal court to Counts 1 and 6 of an indictment charging him with conspiracy to commit wire fraud and making false declarations before a grand jury.

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

Martignetti admitted that from 2011 through 2013 he conspired with others to defraud certain Bayway Lumber customers by providing free items to customers’ employees and then recouping the cost of the items (plus additional revenue for Bayway Lumber) by overbilling and fraudulently billing the customers. Martignetti also admitted to supplying lower-quality, less expensive plywood to a customer, but charging for the more expensive, higher-quality plywood the customer had ordered.

Martignetti gave a variety of personal items to employees of some of Bayway Lumber’s customers, including Amtrak, the City of Elizabeth, and the Plainfield Board of Education.  These items included a laptop, several iPads, a camera and sound system, patio furniture, and other merchandise. Under the supervision of Robert Dattilo, president and partial owner of Bayway Lumber, Martignetti then overbilled and fraudulently billed those customers. Dattilo kept a running tally of how much Martignetti and others overbilled and fraudulently billed customers, which many at Bayway Lumber referred to as the “Bank,” to ensure that Bayway Lumber recovered the full cost of the free items. Dattilo previously pleaded guilty to conspiracy to commit mail and wire fraud and was sentenced in July 2016 to 48 months in prison and ordered to pay $708,386 in restitution.

Martignetti also conspired to provide one Bayway Lumber customer, Consolidated Edison Co. of New York Inc. (Con Edison), with lower-quality wood than it ordered and paid for. When Con Edison ordered graded plywood, a type of plywood graded by mills that had met a certain set of specifications, Martignetti, at Dattilo’s instruction, routinely sent plywood that was of a lower grade or not graded at all, including “reject” plywood, but charged Con Edison for the higher-quality plywood that it ordered.

Martignetti also pleaded guilty to falsely testifying before a federal grand jury while appearing as a witness under oath in March 2013 that he had never given Bayway Lumber items to City of Elizabeth employees for free, and that Elizabeth was never charged for items that were for Elizabeth employees’ personal use.

The conspiracy to commit wire fraud charge to which Martignetti pleaded guilty carries a maximum penalty of 20 years in prison. The charge of knowingly making false statements before a grand jury guilty carries a maximum penalty of five years in prison. Each count also carries a maximum fine of $250,000 or twice the gross gain or loss associated with the offense, whichever is greatest. Sentencing is scheduled for Sept. 28, 2017.

Acting U.S. Attorney Fitzpatrick credited special agents with the Office of Inspector General, U.S. Department of Housing and Urban Development, under the direction of Special Agent in Charge Christina Scaringi; the Office of Inspector General, Amtrak, under the direction of Special Agent in Charge Michael Waters; and the FBI, under the direction of Special Agent in Charge Timothy Gallagher, with the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney Cari Fais of the U.S. Attorney’s Office Special Prosecutions Division, and Assistant U.S. Attorney Barbara R. Llanes, Chief, General Crimes Unit, of the U.S. Attorney’s Criminal Division, in Newark.

Defense Counsel: Michael Armstrong Esq., Willingboro, New Jersey

Newark Police Officer Admits Conspiracy To Commit Fraud Against Housing Assistance Program

Monday, July 24, 2017

NEWARK, N.J. – A Newark police officer today admitted conspiring to fraudulently obtain payments under the federal public housing assistance program known as “Section 8,” Acting U.S. Attorney William E. Fitzpatrick announced.

Luis Cancel, 50, pleaded guilty before U.S. District Judge Jose L. Linares in Newark federal court to an information charging him with one count of agreeing with another individual to obtain Section 8 public housing benefits to which they were not entitled.

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

The Section 8 Program is a federal public housing assistance program administered by the U.S. Department of Housing and Urban Development (HUD). It provides rent subsidies to qualified low-income individuals. HUD provided federal grant money to the Newark Housing Authority (NHA) for the Section 8 Program. Under the NHA’s Section 8 Program, a tenant’s rental assistance was based upon the tenant’s anticipated family gross income. Tenants receiving Section 8 assistance from the NHA had to inform the NHA of all members of the household and the annual household income.

From January 2010 to May 2015, Cancel, then a Newark police officer, lived with another person (Individual 1) who was receiving Section 8 benefits. Cancel and the other individual agreed not to disclose to the NHA that they were living together or that Cancel was a Newark police officer, and, also, a security guard with the Robert Treat Hotel. Individual 1 submitted fraudulent documents to the NHA that failed to disclose these facts. Cancel also submitted letters to the NHA falsely indicating that he lived at a separate residence. Based upon their misrepresentations, Cancel and Individual 1 received approximately $74,000 in Section 8 subsidies to which they were not entitled.

The count to which Cancel pleaded guilty carries a maximum penalty of five years in prison and a $250,000 fine. Sentencing is scheduled for Nov. 6, 2017.

Acting U.S. Attorney Fitzpatrick credited special agents of the U.S. Department of Housing and Urban Development, Office of Inspector General, under the direction of Special Agent in Charge Christina Scaringi, with the investigation leading to today’s plea.

The government is represented by Assistant U.S. Attorney Rahul Agarwal of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

Defense counsel: Joseph D. Rotella Esq., Newark