Las Vegas Attorney Pleads Guilty for Role in Multimillion-Dollar Fraud

A Las Vegas attorney pleaded guilty today for his role in multiple schemes to defraud his clients, to defraud the IRS and to fraudulently gain control of condominium homeowners’ associations (HOAs) in the Las Vegas area to ensure that the HOAs would steer business to a certain law firm and a certain construction company.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, Special Agent in Charge Laura Bucheit of the FBI’s Las Vegas Field Office, Sheriff Doug Gillespie of the Las Vegas Metropolitan Police Department and Acting Special Agent in Charge Shea Jones of the Internal Revenue Service-Criminal Investigation (IRS-CI) made the announcement.
Barry Levinson, 47, pleaded guilty before U.S. District Judge James C. Mahan in the District of Nevada to one count of conspiracy to commit mail and wire fraud.   Levinson is the 30th person to plead guilty in connection with the scheme to defraud HOAs in the Las Vegas area.   Levinson simultaneously pleaded guilty to one count of tax evasion and one count of wire fraud, with the latter charge relating to his embezzlement of his legal clients’ funds.
Levinson admitted that from approximately August 2003 through February 2009, he participated in a scheme to control various HOA boards of directors so that the HOA boards would award the handling of construction-related lawsuits and remedial construction contracts to his law firm and construction company designated by Levinson’s co-conspirators.   This scheme was carried out in part by straw buyers who purchased properties in their names that were in reality paid for and controlled by other co-conspirators.   According to plea documents, Levinson’s co-conspirators managed and operated the payments associated with maintaining straw properties by running a so-called “Bill Pay Program,” by which co-conspirators funded the properties through several limited liability companies at the direction of a co-conspirator.   Many of the payments were wired from California to Nevada.
Levinson admitted that he was hired to represent the Park Avenue condominium complex, but he treated a co-conspirator as his client rather than the HOA itself.   Levinson also admitted that several of his co-conspirators rigged an HOA board election at Park Avenue.   Levinson admitted that, after a lawsuit was filed by the homeowners and a special election master was designated for the make-up election, he attempted to bribe the special election master.
Similarly, Levinson admitted that after a rigged election at the Pebble Creek HOA, the homeowners filed a recall petition.   Levinson was hired as the HOA general counsel at the direction of a co-conspirator and took several steps to deter the recall election, including firing the property management company and filing a lawsuit to stop the recall election.
Related to the tax evasion charge, Levinson admitted that he failed to file taxes for the 2005 to 2010 tax years and filed a false 2011 tax return.   Levinson also admitted that he took affirmative steps to evade taxes for the tax years 2009, 2010 and 2011, including concealing cash earnings from the IRS and telling the IRS that his business was no longer operating.
Finally, related to the wire fraud charge, Levinson admitted that between March 2010 and September 2011, he embezzled nearly $180,000 from at least nine different minor personal injury clients. Levinson also admitted that he stole another $65,000 from an individual for whom he was serving as an escrow agent.
As part of the plea agreement, Levinson has agreed to be disbarred by the State Bar of Nevada.
Levinson’s sentencing is scheduled for May 5, 2014.   The maximum sentence for conspiracy to commit mail fraud and wire fraud is 30 years in prison.   The maximum sentence for attempting to evade or defeat federal taxes is five years in prison.   The maximum penalty for wire fraud is 20 years in prison.
The case is being investigated by the FBI, IRS-CI and the Las Vegas Metropolitan Police Department, Criminal Intelligence Section.
The case is being prosecuted by Deputy Chief Charles La Bella, Senior Deputy Chief for Litigation Kathleen McGovern and Trial Attorneys Thomas B.W. Hall and Alison Anderson of the Criminal Division’s Fraud Section.   The Department also thanks former Trial Attorneys Mary Ann McCarthy and Nicole Sprinzen for their efforts in prosecuting the case.

 

ICAP Brokers Face Felony Charges for Alleged Long-Running Manipulation of LIBOR Interest Rates

Two former derivatives brokers and a former cash broker employed by London-based brokerage firm ICAP were charged as part of the ongoing criminal investigation into the manipulation of the London Interbank Offered Rate (LIBOR), the Justice Department announced today.

Darrell Read, who resides in New Zealand, and Daniel Wilkinson and Colin Goodman, both of England, were charged with conspiracy to commit wire fraud and two counts of wire fraud in a criminal complaint unsealed in Manhattan federal court earlier today.  They each face a maximum penalty of 30 years in prison for each count upon conviction.

“By allegedly participating in a scheme to manipulate benchmark interest rates for financial gain, these defendants undermined the integrity of the global markets,” said Attorney General Eric Holder. “They were supposed to be honest brokers, but instead, they put their own financial interests ahead of that larger responsibility.  And as a result, transactions and financial products around the world were compromised, because they were tied to a rate that was distorted due to the brokers’ dishonesty.  These charges underscore the Justice Department’s determination to hold accountable all those whose conduct threatens the integrity of our financial markets.”

“These three men are accused of repeatedly and deliberately spreading false information to banks and investors around the world in order to fraudulently move the market and help their client fleece his counterparties,” said Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.  “Our criminal investigation of the manipulation of LIBOR by some of the largest banks in the world has led us from New York to London, to Tokyo, and other financial hubs around the globe.  These important charges are just the latest law-enforcement action in the Criminal Division and Antitrust Division’s global LIBOR investigation, and reflect the Department’s continued dedication to detecting, and prosecuting, financial fraudsters who affect U.S. markets, whether they work at a bank, or a brokerage, and whether they carry out their fraud from a desk in the United States, or abroad.”

“The complaint unsealed today charges Colin Goodman, Daniel Wilkinson and Darrell Read for conspiring to manipulate benchmark interest rates that determined the profitability of their client’s trades,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program.  “In exchange for bigger bonus checks, the three defendants undermined financial markets around the world by compromising the integrity of globally used interest rate benchmarks.  The Department continues to demonstrate its commitment to protecting the interest of American citizens in free and fair financial markets.”

“Corporate and securities fraud involving the manipulation of these rates causes a worldwide impact on trading positions and erodes the integrity of the market and confidence in Wall Street,” said Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office.  “Unraveling such complex financial schemes is difficult and time consuming.  Today’s charges are the result of the hard work of the FBI special agents and forensic accountants who dedicated significant time and resources to investigating this case.”

According to the criminal complaint, LIBOR is an average interest rate, calculated based on submissions from leading banks around the world, reflecting the rates those banks believe they would be charged if borrowing from other banks.  LIBOR is published by the British Bankers’ Association (BBA), a trade association based in London.  At the time relevant to the criminal complaint, LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.  The published LIBOR “fix” for a given currency at a specific maturity is the result of a calculation based upon submissions from a panel of banks for that currency (the contributor panel) selected by the BBA.

LIBOR serves as the primary benchmark for short-term interest rates globally and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.  The Bank of International Settlements estimated that as of the second half of 2009, outstanding interest rate contracts were estimated at approximately $450 trillion.

According to allegations in the criminal complaint filed in this case, between July 2006 and September 2010, Wilkinson was a desk director employed in the London office of ICAP, where he supervised a group of derivatives brokers – including Read – specializing in Yen-based financial products.  Generally, the desk’s clients were derivatives traders at large financial institutions, and the transactions brokered by Wilkinson, Read and others on the desk essentially consisted of bets between traders on the direction in which Yen LIBOR would move.  Between July 2006 and September 2009, the desk’s largest client was a senior trader at UBS (UBS Trader) in Tokyo, to whom Read spoke almost daily.  Because of the large size of the client’s trading positions, even slight moves of a fraction of a percent in Yen LIBOR could generate large profits.  For example, UBS Trader once told Read that a 0.01 percent – or one basis point – movement in the final Yen LIBOR fixing on a specific date could result in $3 million profit for his trading positions.  A significant part of both Read’s and Wilkinson’s compensation was tied to the brokerage fees generated by UBS Trader and paid to ICAP.

Goodman was a cash broker at ICAP’s London office during the relevant time period.  In addition to brokering cash transactions, Goodman distributed a daily email to individuals outside of ICAP, including derivatives traders at several large banks as well as those responsible for providing the BBA with LIBOR submissions at certain banks.  Goodman’s email contained what was termed his “SUGGESTED LIBORS,” purported predictions of where Yen LIBOR ultimately would fix each day across eight specified borrowing periods.  Read and Wilkinson, along with Goodman himself, often referred to Goodman as “lord libor.”

The complaint alleges that Read, Wilkinson and Goodman, together with UBS Trader, executed a sustained and systematic scheme to move Yen LIBOR in a direction favorable to UBS Trader’s trading positions.

According to the criminal complaint, the primary strategy employed by Read, Wilkinson and Goodman to execute the scheme was to use Goodman’s “SUGGESTED LIBORS” email to disseminate misinformation to Yen LIBOR panel banks in hopes that the banks would rely on the misinformation when making their own respective Yen LIBOR submissions to the BBA for inclusion in the published fix.  Rather than providing good faith predictions as to where Yen LIBOR would fix, Goodman instead often used his daily email to set forth predictions which benefitted UBS Trader’s trading positions.

Beginning in or about June 2007, Goodman was paid a bonus through the desk Wilkinson supervised, allegedly intended, at least in part, to reward Goodman for his role in their effort to influence and manipulate the published Yen LIBOR fix.

As a second strategy, Read and Wilkinson allegedly further agreed to contact interest rate derivatives traders and submitters employed at Yen LIBOR panel banks in an effort to cause them to make false and misleading submissions to the BBA at UBS Trader’s behest.

As alleged in the charging document, Read, Wilkinson, Goodman, UBS Trader, and other co-conspirators often executed their scheme through electronic chats and email exchanges.  For example, on June 28, 2007, in an email message, Read told Wilkinson: “DAN THIS IS GETTING SERIOUS [UBS TRADER] IS NOT HAPPY WITH THE WAY THINGS ARE PROGRESSING . . . CAN YOU PLEASE GET HOLD OF COLIN AND GET HIM TO SEND OUT 6 MOS LIBOR AT 0.865 AND TO GET HIS BANKS SETTING IT HIGH. THIS IS VERY IMPORTANT BECAUSE [UBS TRADER] IS QUESTIONING MY (AND OUR) WORTH.”

The complaint alleges that the defendants were aware of the effects that Goodman’s false and fraudulent “SUGGESTED LIBORS” had on submissions by Yen LIBOR panel banks.  For example, on Nov. 20, 2008, Read asked UBS Trader, “you have a really big fix tonight I believe? if Colin sends out 6m at a more realistic level than 1.10 [%] i reckon [the two panel banks] will parrot him, it might mean 6m coming down a bit.” On the following day, Nov. 21, 2008, Goodman moved his suggestion for 6-month Yen LIBOR down by nine basis points.  The two other banks mirrored Goodman’s suggestion, moving their 6-month Yen LIBOR submissions down by nine basis points.

According to allegations in the complaint, Read counseled UBS Trader how to most effectively manipulate Yen LIBOR.  For example, UBS Trader told Read in a July 22, 2009, electronic chat that “11th aug is the big date…i still have lots of 6m fixings till the 10th.”   Read responded to UBS Trader, “if you drop [UBS’s] 6m dramatically on the 11th mate, it will look v fishy… .  I’d be v careful how you play it, there might be cause for a drop as you cross into a new month but a couple of weeks in might get people questioning you.”  UBS Trader replied, “don’t worry will stagger the drops…ie 5bp then 5bp,” and Read told UBS Trader, “ok mate, don’t want you getting into [expletive].”  UBS Trader again assured Read that UBS and two additional panel banks would stagger their drops in coordination, and Read concluded, “great the plan is hatched and sounds sensible.”

A criminal complaint is a formal accusation of criminal conduct, not evidence.  A defendant is presumed innocent unless and until convicted.

The investigation is being conducted by special agents, forensic accountants, and intelligence analysts of the FBI’s Washington Field Office.  The prosecution is being handled by Deputy Chief William Stellmach and Trial Attorney Sandra L. Moser of the Criminal Division’s Fraud Section and Trial Attorneys Eric Schleef and Kristina Srica of the Antitrust Division.  Trial Attorneys Alexander Berlin and Thomas B.W. Hall, Law Clerk Andrew Tyler, and Paralegal Specialist Kevin Sitarski of the Criminal Division’s Fraud Section, along with Assistant Chief Elizabeth Prewitt and Trial Attorney Richard Powers of the Antitrust Division, and former Trial Attorney Luke Marsh have also provided valuable assistance.  The Criminal Division’s Office of International Affairs has provided assistance in this matter as well.

The broader investigation relating to LIBOR and other benchmark rates has required, and has greatly benefited from, a diligent and wide-ranging cooperative effort among various enforcement agencies both in the United States and abroad.  The Justice Department acknowledges and expresses its deep appreciation for this assistance.  In particular, the Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the Department and, along with the U.K. Financial Conduct Authority, has played a major role in the investigation.  The Securities and Exchange Commission has also provided valuable assistance for which the Department is grateful.  The Department also expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.  Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation, and the Department is grateful for their cooperation and assistance as well.

Finally, the Department acknowledges ICAP’s continuing cooperation in the Department’s ongoing investigation.

This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.

UBS Securities Japan Co. Ltd Sentenced for Long-running Manipulation of Libor

UBS Securities Japan Co. Ltd. (UBS Securities Japan), an investment bank, financial advisory securities firm and wholly-owned subsidiary of UBS AG, was sentenced today for its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark used in financial products and transactions around the world, the Justice Department announced.

UBS Securities Japan was sentenced by U.S. District Judge Robert N. Chatigny in the District of Connecticut.  UBS Securities Japan pleaded guilty on Dec. 19, 2012, to one count of engaging in a scheme to defraud counterparties to interest rate derivative trades by secretly manipulating LIBOR benchmark interest rates.  UBS Securities Japan signed a plea agreement with the government in which it admitted its criminal conduct and agreed to pay a $100 million fine, which the court accepted in imposing sentence.  In addition, UBS AG, the Zurich-based parent company of UBS Securities Japan, entered into a non-prosecution agreement (NPA) with the government requiring UBS AG to pay an additional $400 million penalty, to admit and accept responsibility for its misconduct as set forth in an extensive statement of facts and to continue cooperating with the Justice Department in its ongoing investigation.  The NPA reflects UBS AG’s substantial cooperation in discovering and disclosing LIBOR misconduct within the financial institution and recognizes the significant remedial measures undertaken by new management to enhance internal controls.

Together with approximately $1 billion in regulatory penalties and disgorgement – $700 million as a result of a Commodity Futures Trading Commission (CFTC) action; $259.2 million as a result of a U.K. Financial Conduct Authority (FCA) action; and $64.3 million as a result of a Swiss Financial Market Supervisory Authority (FINMA) action – the Justice Department’s criminal penalties bring the total amount of the resolution to more than $1.5 billion.

“This action, and the resulting sentence, prove that no individual or firm is above the law – no matter what,” said Attorney General Eric Holder.  “The Department of Justice will continue to stand vigilant against corporations or individuals who threaten the integrity of our financial markets, undermine the stability of our economy, or jeopardize the well-being of our citizens.  And, when supported by the facts and the law, we will never hesitate to use every tool and authority available to us to hold accountable those who illegally take advantage of others for their own financial gain.”

“Through its guilty plea and sentence, UBS has been held to account for deliberately manipulating LIBOR, one of the cornerstone interest rates in our global financial system,” said Acting Assistant Attorney General Mythili Raman of the Criminal Division.  “The $1.5 billion global resolution against UBS – of which this guilty plea and sentence are a critical element – is just one of several actions we have taken against financial firms throughout the world that sought to illegally influence LIBOR.  As we continue our active and ongoing investigation of the manipulation of LIBOR, our prosecutors and agents will continue to tenaciously follow the evidence wherever it leads.  Neither UBS, nor the individual UBS defendants we have charged in connection with this sophisticated scheme, nor any other bank or individual, is above the law.”

According to documents filed in these cases, LIBOR is an average interest rate, calculated based on submissions from leading banks around the world, reflecting the rates those banks believe they would be charged if borrowing from other banks.  LIBOR serves as the primary benchmark for short-term interest rates globally, and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.  The Bank of International Settlements estimated that as of the second half of 2009, outstanding interest rate contracts were estimated at approximately $450 trillion.

LIBOR, published by the British Bankers’ Association (BBA), a trade association based in London, is calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.  The LIBOR for a given currency at a specific maturity is the result of a calculation based upon submissions from a panel of banks.

Beginning in September 2006, UBS Securities Japan and a senior trader employed in the Tokyo office of UBS Securities Japan orchestrated a sustained, wide-ranging and systematic scheme to move Yen LIBOR in a direction favorable to the trader’s trading positions, defrauding UBS’s counterparties and harming others with financial products referencing Yen LIBOR who were unaware of the manipulation.  Between November 2006 and August 2009, the senior trader or a colleague of the senior trader endeavored to manipulate Yen LIBOR on at least 335 of the 738 trading days in that period, and during some periods on almost a daily basis.  Because of the large size of the senior trader’s positions, even slight moves of a fraction of a percent in Yen LIBOR could generate large profits.  For example, the senior trader once estimated that a 0.01 percent movement in the final Yen LIBOR fixing on a specific date could result in a $2 million profit for UBS.

According to the charging documents, UBS Securities Japan and the senior trader employed three strategies to execute the scheme: causing UBS to make false and misleading Yen LIBOR submissions to the BBA; causing cash brokerage firms, which purported to provide market information regarding LIBOR to panel banks, to disseminate false and misleading information about short-term interest rates for Yen, which those banks could and did rely upon in formulating their own LIBOR submissions to the BBA; and communicating with interest rate derivatives traders employed at three other Yen LIBOR panel banks in an effort to cause them to make false and misleading Yen LIBOR submissions to the BBA.

In entering into the NPA with UBS AG, the Justice Department considered information from UBS and from regulatory agencies in Switzerland and Japan demonstrating that in the last two years UBS has made important and positive changes in its management, compliance and training to ensure adherence to the law.  The Department received favorable reports from the FINMA and the Japan Financial Services Authority (JFSA) describing, respectively, progress that UBS has made in its approach to compliance and enforcement and UBS Securities Japan’s effective implementation of the remedial measures the JFSA imposed based on findings relating to the attempted manipulation of Yen benchmarks.

The investigation was conducted by the FBI’s Washington Field Office.  The prosecution is being handled by Deputy Chiefs Daniel Braun and William Stellmach and Trial Attorneys Thomas B.W. Hall and Sandra L. Moser, along with former Trial Attorney Luke Marsh, of the Criminal Division’s Fraud Section.  Assistant U.S. Attorneys Eric Glover and Liam Brennan of the U.S. Attorney’s Office for the District of Connecticut have provided valuable assistance.  The Criminal Division’s Office of International Affairs also provided assistance in this matter.

The investigation leading to these cases has required, and has greatly benefited from, a diligent and wide-ranging cooperative effort among various enforcement agencies both in the United States and abroad.  The Justice Department acknowledges and expresses its deep appreciation for this assistance.  In particular, the CFTC’s Division of Enforcement referred this matter to the Department and, along with the FCA, has played a major role in the investigation.  The SEC has also played a significant role in the LIBOR series of investigations and, among other efforts, has made an invaluable contribution to the investigation relating to UBS.  The Department of Justice also wishes to acknowledge and thank FINMA, the Japanese Ministry of Justice, and the JFSA.  Various agencies and enforcement authorities from other nations also have participated in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the Department is grateful for their cooperation and assistance.

Las Vegas Mortgage Agent Sentenced to 15 Months in Prison for Role in Mortgage Fraud Scheme

A Las Vegas mortgage agent was sentenced late yesterday to serve 15 months in prison for her participation in a mortgage fraud scheme that netted more than $1.2 million in fraudulent mortgage loans, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Acting Special Agent in Charge William C. Woerner of the FBI’s Las Vegas Field Office announced today.

Heidi Haischer, 44, was sentenced by U.S. District Judge Miranda M. Du in the District of Nevada.  In addition to her prison term, Haischer was sentenced to serve three years of supervised release.

In November 2012, after a four-day trial, a federal jury in Las Vegas found Haischer guilty of one count of wire fraud and one count of conspiracy to commit wire fraud for submitting fraudulent loan documents to purchase two homes.

According to court documents and evidence presented at trial, Haischer participated in a mortgage fraud scheme while employed as a mortgage broker in Nevada.  From December 2006 to January 2007, Haischer and her co-conspirators fraudulently secured loans totaling over $1 million to obtain properties with the intent to flip and sell them for profit.  Evidence at trial showed that Haischer and her co-conspirators subsequently enriched themselves by collecting brokerage commissions generated by the sales of the properties.

The court documents and trial evidence demonstrated that Haischer submitted multiple loan applications in which she overstated her income, submitted false verification of employment and misrepresented her intent to reside in one of the properties as her primary residence.  Additionally, Haischer presented inflated bank account balances supported by forged bank statements to make it appear that she had assets she did not have, in order to help qualify for mortgage loans for which she otherwise would not have been eligible.

Co-conspirator Kelly Nunes was convicted in a related case in Las Vegas on Feb. 2, 2012, of one count of bank fraud and one count of conspiracy to commit wire and bank fraud.  On July 11, 2012, Nunes was sentenced to 51 months in prison.

This case was investigated by the FBI.  Trial Attorneys Thomas B.W. Hall and Brian R. Young of the Criminal Division’s Fraud Section prosecuted the case, with assistance from the U.S. Attorney’s Office for the District of Nevada.

This case was a result of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.StopFraud.gov.

Caddell Construction Co. Commits to Pay $2 Million Penalty in Agreement to Resolve Criminal Fraud Violations

WASHINGTON – Caddell Construction Company Inc., a major commercial and industrial federal government construction contractor based in Montgomery, Ala., has entered into an agreement with the Department of Justice to resolve criminal fraud violations arising from Caddell’s intentional overstating of developmental assistance provided to a disadvantaged small business as part of a Department of Defense (DoD) program.  The agreement, including a $2 million penalty to be paid by Caddell, was announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

According to the non-prosecution agreement (NPA) between the government and Caddell, in February 2003, Caddell entered into an agreement with Mountain Chief – which is certified as a Native American, woman-owned and economically-disadvantaged small business – to participate in the DoD’s Mentor-Protégé Program, in which major DoD contractors (mentor firms) contract with and provide developmental assistance to disadvantaged small businesses (protégé firms) and are reimbursed by the DoD for related costs.

Around the same time, Caddell began participating with Mountain Chief in DoD’s Indian Incentive Program, which provides incentives – in the form of a rebate of 5 percent of the total dollar amount of work – for major DoD contractors to engage Native-American-owned businesses as subcontractors and suppliers.  Caddell and Mountain Chief participated in these programs in connection with two DoD construction contracts at Fort Bragg, N.C., each worth approximately $65 million and a DoD construction project at Fort Campbell, Ky., worth approximately $34 million.

According to the NPA, from February 2004 to March 2005, Caddell submitted more than 20 requests for payment to the DoD in connection with the Mentor-Protégé Program that significantly overstated the amount of developmental assistance Caddell had provided Mountain Chief.  In addition, Caddell filed documents falsely stating Mountain Chief’s size and income, as well as the status of Mountain Chief’s technical capabilities and business infrastructure.  From April 2003 to October 2004, Caddell also submitted at least eight requests to the DoD for the Indian Incentive Program, for rebates based on services purportedly performed on subcontracts Caddell gave to Mountain Chief.  Mountain Chief performed few, if any of these services, and the invoices were created solely to support Caddell’s applications for payment.

As part of the NPA, Caddell will pay a $2 million criminal penalty, and must cooperate with the Department of Justice for the two-year term of the agreement.  The agreement recognizes Caddell’s voluntary disclosure; thorough self-investigation of the underlying conduct; and full cooperation with the department and remedial measures already undertaken and to be undertaken, including employment actions and improving reporting systems, corporate governance, and compliance training and oversight.  As a result of these factors, among others, the department agreed not to prosecute Caddell for the improper pay requests, provided Caddell satisfies its ongoing obligations under the agreement.

In January 2012, Daniel W. Chattin, 50, of Granite Bay, Calif., the son of Mountain Chief’s owner and a project manager and consultant for Mountain Chief, and Mark L. Hill, 57, of Montgomery, Ala., the Mentor-Protégé Program Coordinator and a director of business development at Caddell, were indicted in the Middle District of Alabama on three counts of major fraud against the United States stemming from the same scheme.  In addition, Hill was charged with one count of making a false statement to the DoD.  Chattin and Hill await trial, which is scheduled to begin on April 22, 2013.  The charges and allegations against Chattin and Hill are merely accusations and they are considered innocent unless and until proven guilty.

This investigation is being conducted by the General Services Administration – Office of Inspector General, and the DoD’s Defense Criminal Investigative Service.  This case is being handled by Assistant Chief Albert B. Stieglitz Jr. and Trial Attorney Thomas B.W. Hall of the Criminal Division’s Fraud Section.