Monthly Archives: December 2012

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

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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.

Clinical Director for Miami-based Health Care Clinic Sentenced to Prison for Role in $50 Million Medicare Fraud Scheme

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 WASHINGTON – A former clinical director for Biscayne Milieu, a Miami-based mental-health clinic, was sentenced today to 100 months in prison for his participation in a Medicare fraud scheme involving the submission of more than $50 million in fraudulent billings to Medicare, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Acting Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami Office.

Rafael Alalu, 47, of Miami, was sentenced today by U.S. District Judge Robert N. Scola Jr. in the Southern District of Florida.  Alalu was convicted on Aug. 24, 2012, of one count of conspiracy to commit health care fraud and two substantive counts of health care fraud, following a two-month jury trial.  The evidence at trial showed that Alalu participated in treating ineligible patients, concealing that fact by falsifying patient files and writing fraudulent group therapy notes, and instructing others to do the same.  In addition to the prison term, Alalu was ordered to pay more than $5.6 million in restitution, jointly and severally with his co-defendants.

Various owners, doctors, managers, therapists, patient brokers and other employees of Biscayne Milieu have also been charged with various health care fraud, kickback, money laundering and other offenses in two indictments unsealed in September 2011 and May 2012.  Biscayne Milieu, its owners, and more than 25 of the individual defendants charged in these cases have pleaded guilty or have been convicted at trial.  Antonio and Jorge Macli and Sandra Huarte – the owners and operators of Biscayne Milieu – and Dr. Gary Kushner – its medical director – were each convicted at trial of various offenses and are scheduled for sentencing in March 2013.

According to the evidence at trial, the defendants and their co-conspirators caused the submission of over $50 million dollars in false and fraudulent claims to Medicare through Biscayne Milieu, which purportedly operated a partial hospitalization program (PHP) – a form of intensive treatment for severe mental illness.  Instead, the defendants devised a scheme in which they paid patient recruiters to refer ineligible Medicare beneficiaries to Biscayne Milieu for services that were never provided.  Many of the patients admitted to Biscayne Milieu were not eligible for PHP because they were chronic substance abusers, suffered from severe dementia and would not benefit from group therapy, or had no mental health diagnosis but were seeking exemptions for their U.S. citizenship applications.  The evidence at trial showed that once these ineligible patients were admitted to Biscayne Milieu, Alalu and others concealed the fraud by falsifying patients’ group therapy notes to reflect legitimate PHP treatment that was never provided, and directed others to do so.

The case is being prosecuted by Assistant U.S. Attorneys Michael Davis and Marlene Rodriguez of the U.S. Attorney’s Office for the Southern District of Florida, and by Trial Attorney James V. Hayes of the Fraud Section of the Justice Department’s Criminal Division.  The case was investigated by the FBI with the assistance of HHS-OIG, and was brought by the U.S. Attorney’s Office for the Southern District of Florida in coordination with the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

UBS Securities Japan to Plead Guilty to Felony Wire Fraud For Long Running Manipulation of LIBOR Benchmark Interest Rates

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Two Former Senior UBS Traders Face Felony Charges Unsealed Today

UBS AG to Pay Substantial Penalty in Agreement Reflecting
Substantial Cooperation, Significant Changes

WASHINGTON — UBS Securities Japan Co. Ltd. (UBS Japan), an investment bank, financial advisory securities firm and wholly-owned subsidiary of UBS AG, has agreed to plead guilty to felony wire fraud and admit its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark used in financial products and transactions around the world, Attorney General Eric Holder announced today.  The criminal information, filed today in U.S. District Court in the District of Connecticut, charges UBS Japan with one count of engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating LIBOR benchmark interest rates.

As part of the ongoing criminal investigation by the Criminal and Antitrust Divisions of the Justice Department and the FBI into LIBOR manipulation, two former senior UBS traders also are charged.  Tom Alexander William Hayes, 33, of England, and Roger Darin, 41, of Switzerland, were both charged with conspiracy in a criminal complaint unsealed in Manhattan federal court earlier today.  Hayes is also charged with wire fraud, based on the same scheme, and a price fixing violation arising from his collusive activity with another bank to manipulate LIBOR benchmark rates.

UBS Japan has signed a plea agreement with the government admitting its criminal conduct, and has agreed to pay a $100 million fine.  In addition, UBS AG, the parent company of UBS Japan headquartered in Zurich, has 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 the Commodity Futures Trading Commission (CFTC) action; $259.2 million as a result of the U.K. Financial Services Authority (FSA) action; and $64.3 million as a result of the Swiss Financial Markets Authority (FINMA) action – the Justice Department’s criminal penalties bring the total amount of the resolution to more than $1.5 billion.

“By causing UBS and other financial institutions to spread false and misleading information about LIBOR, the alleged conspirators we’ve charged – along with others at UBS – manipulated the benchmark interest rate upon which many transactions and consumer financial products are based.  They defrauded the company’s counterparties of millions of dollars.  And they did so primarily to reap increased profits, and secure bigger bonuses, for themselves,” said Attorney General Holder. “Today’s announcement – and $1.5 billion global resolution – underscores the Justice Department’s firm commitment to investigating and prosecuting such conduct, and to holding the perpetrators of these crimes accountable for their actions.”

“UBS manipulated one of the cornerstone interest rates in our global financial system,” said Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.  “The scheme alleged is epic in scale, involving people who have walked the halls of some of the most powerful banks in the world.  Today’s agreement by UBS Japan to plead guilty, the charges against individual alleged perpetrators of these crimes, and our agreement recognizing the steps being taken by UBS AG to right itself demonstrate the Justice Department’s determination to hold accountable those in the financial marketplace who break the law.  We cannot, and we will not, tolerate misconduct on Wall Street of the kind admitted to by UBS today, and by Barclays last June.  We will continue to follow the facts and the law wherever they lead us in this matter, as we do in every case.”

“The criminal complaint charges two senior UBS traders with colluding to manipulate Yen LIBOR interest rates for the purpose of improving trading positions held by Hayes and UBS,” said Deputy Assistant Attorney General Scott D. Hammond of the Justice Department’s Antitrust Division.  “Coordinating the movement of interest rates even by a very small margin meant higher profits and bigger bonuses for the conspirators at the expense of those that relied on LIBOR as a reference rate.”

“The manipulation of LIBOR affects financial products including mortgages, credit cards, student loans and many other interest rate products,” said FBI Associate Deputy Director Kevin L. Perkins.  “This practice further erodes Main Street’s confidence in Wall Street.  The public expects our financial institutions to maintain proper oversight of their businesses and to ensure the public is not harmed by criminal activity within these institutions.  In this case, UBS acknowledged its failures and cooperated with our investigation.  The FBI would like to thank its federal partners in this investigation – the Department of Justice Criminal Division’s Fraud Section and Antitrust Division, Commodity Futures Trading Commission’s Division of Enforcement and the Securities and Exchange Commission’s Division of Enforcement whose joint efforts brought a successful resolution to this matter.”
 
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.

Between July 2006 and September 2009, Hayes was a senior trader employed in the Tokyo office of UBS Japan, which then operated under the name UBS Securities Japan Ltd.  Among other financial products, Hayes traded in interest rate derivatives that essentially consisted of bets against other traders on the direction in which Yen LIBOR would move.  UBS was a member of the Yen LIBOR panel, and Darin was, at certain times relevant to the criminal complaint, a trader responsible for making and supervising LIBOR submissions to the BBA on behalf of the bank.  In a statement of facts attached to the NPA and plea agreement, Hayes is referred to as “Trader-1” and Darin is referred to as “Submitter-1.”

Beginning in September 2006, UBS Japan and Hayes orchestrated a sustained, wide-ranging and systematic scheme to move Yen LIBOR in a direction favorable to Hayes’ trading positions, defrauding UBS’ counterparties and harming others with financial products referencing Yen LIBOR who were unaware of the manipulation.  Between November 2006 and August 2009, Hayes or one of his colleagues 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 Hayes’ trading positions, even slight moves of a fraction of a percent in Yen LIBOR could generate large profits.  For example, Hayes 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 Japan and Hayes employed three strategies to execute the scheme: from November 2006 through September 2009, Hayes conspired with Darin and others within UBS to cause the bank to make false and misleading Yen LIBOR submissions to the BBA; also, Hayes caused 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 Hayes communicated 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.

As alleged in the charging documents, Hayes, Darin and other co-conspirators often executed their scheme through electronic chats.  On Nov. 20, 2006, for example, Hayes asked a UBS Yen LIBOR submitter who was substituting for Darin, “hi . . .  [Darin] and I generally coordinate ie sometimes trade if ity [sic] suits, otherwise skew the libors a bit.”  Hayes went on to request, “really need high 6m [6-month] fixes till Thursday.”  The submitter responded, “yep we on the case there . . . will def[initely] be on the high side.”  The day before this request, UBS’s 6-month Yen LIBOR submission had been tied with the lowest submissions included in the calculation of the LIBOR fix.  Immediately after this request for high submissions, however, UBS’s 6-monthYen LIBOR submissions rose to the highest submission of any bank in the contributor panel and remained tied for the highest, precisely as Hayes had requested.

Another example of such an alleged accommodation occurred on March 29, 2007, when Hayes asked Darin, “can we go low 3[month] and 6[month] pls?  . . .  3[month] esp.” Darin responded “ok”, and the two had the following exchange:

Hayes:

 what are we going to set?

Darin:

 too early to say yet . . .  prob[ably]  .69 would be our unbiased contribution

Hayes:

 ok wd really help if we cld keep 3m low pls
Darin: as i said before – i [don’t] mind helping on your fixings, but i’m not setting libor 7bp away from the truth. . .  i’ll get ubs banned if i do that, no interest in that.
Hayes: ok obviousl;y [sic] no int[erest] in that happening either . . . not asking for it to be 7bp from reality anyway any help appreciated[.]

Hayes received the help he requested.

In addition, the criminal complaint charges Hayes with colluding with a trader employed at another LIBOR panel bank in May 2009, in violation of the Sherman Antitrust Act.  Hayes allegedly engaged in the collusive scheme to fix the price of derivative instruments whose price was based on Yen LIBOR.  In electronic chats, Hayes asked the trader to move 6-month Yen LIBOR up due to a “gigantic” position Hayes had taken.  For the trade in question, UBS trading records confirmed that each 0.01 percent movement in LIBOR would generate profits of approximately $459,000 for Hayes’ book.  The trader at the other bank responded that he would comply, and his bank’s submission moved by 0.06 percent compared to its submission the previous day, for which Hayes thanked him.

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 Swiss Financial Market Supervisory Authority (FINMA) and the Japan Financial Services Authority (JFSA) describing, respectively, progress that UBS has made in its approach to compliance and enforcement and UBS Japan’s effective implementation of the remedial measures the JFSA imposed based on findings relating to the attempted manipulation of Yen benchmarks.

The investigation is being handled by Deputy Chiefs William Stellmach and Daniel Braun and Trial Attorney Luke Marsh of the Criminal Division’s Fraud Section, and Assistant Chief Elizabeth Prewitt and Trial Attorney Richard Powers of the Antitrust Division, New York Field Office.  Assistant Chief Rebecca Rohr and Trial Attorneys Alexander Berlin and Thomas Hall of the Criminal Division’s Fraud Section, Trial Attorneys Portia Brown and Wendy Norman of the Antitrust Division, and Assistant U.S. Attorneys Eric Glover and Liam Brennan of the U.S. Attorney’s Office for the District of Connecticut have also provided valuable assistance.  The Criminal Division’s Office of International Affairs also provided assistance in this matter.  The investigation is being conducted by the FBI’s Washington Field Office.

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 Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the Department and, along with the FSA, has played a major role in the investigation.  The Securities and Exchange Commission 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 are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the Department is grateful for their cooperation and assistance.

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. For more information about the task force visit: www.stopfraud.gov.

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NJ Company Pleads Guilty For Role in Bid Rigging Scheme at Municipal Tax Lien Auctions

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Investigation Has Yielded 11 Guilty Pleas

WASHINGTON — A New Jersey company in the business of receiving the assignment of municipal tax liens pleaded guilty today for its role in a conspiracy to rig bids for the sale of tax liens auctioned by municipalities in New Jersey, the Department of Justice announced.

A felony charge was filed today in U.S. District Court for the District of New Jersey in Newark, against Mercer S.M.E. Inc., a company located in Burlington, N.J. According to the charges, from at least 2003 until approximately February 2009, Mercer, in conjunction with a nonprofit corporation and others participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey.  As part of the conspiracy, the co-conspirators agreed to allocate the liens on which each would bid.  Among other things, Mercer was assigned tax liens it understood were purchased in accordance with the unlawful agreement.

“The conspirators agreed to coordinate their bids and allocate the tax liens amongst themselves, at the expense of distressed property owners,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “Today’s guilty plea sends a message that those who profit from illegal, anticompetitive conduct will be held accountable.”

The department said that the primary purpose of the conspiracy was to suppress and restrain competition in order to obtain selected municipal tax liens offered at public auctions at non-competitive interest rates. When the owner of real property fails to pay taxes on that property, the municipality in which the property is located may attach a lien for the amount of the unpaid taxes. If the taxes remain unpaid after a waiting period, the lien may be sold at auction. State law requires that investors bid on the interest rate delinquent property owners will pay upon redemption. By law, the bid opens at 18 percent interest and, through a competitive bidding process, can be driven down to zero percent. If a lien remains unpaid after a certain period of time, the investor who purchased the lien may begin foreclosure proceedings against the property to which the lien is attached.

According to the court documents, Mercer, along with the nonprofit corporation which assigned some of its liens to Mercer, was involved in a conspiracy with others not to bid against one another at municipal tax lien auctions in New Jersey. Since the conspiracy permitted the conspirators to purchase tax liens with limited competition, each conspirator was able to obtain liens which earned a higher interest rate. Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition, the department said.

A violation of the Sherman Act carries a maximum penalty of $100 million criminal fine for corporations. The maximum fine for a Sherman Act violation may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than the statutory maximum.

Today’s plea is the 11th guilty plea resulting from an ongoing investigation into bid rigging or fraud related to municipal tax lien auctions. Eight individuals – Isadore H. May, Richard J. Pisciotta Jr., William A. Collins, Robert W. Stein, David M. Farber, Robert E. Rothman, Stephen E. Hruby and David Butler – and two companies, DSBD LLC and Crusader Servicing Corp., have previously pleaded guilty as part of this investigation.

Today’s charge is part of efforts underway 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.

This ongoing investigation is being conducted by the Antitrust Division’s New York Field Office and the FBI’s Atlantic City, N.J., office. Anyone with information concerning bid rigging or fraud related to municipal tax lien auctions should contact the Antitrust Division’s New York Field Office at 212-335-8000, visit www.justice.gov/atr/contact/newcase.htm or contact the Atlantic City Resident Agency of the FBI at 609-677-6400.

AU Optronics Executive Convicted For LCD Price-Fixing Conspiracy

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WASHINGTON — Following a three-week trial, a federal jury in San Francisco today convicted an executive of the largest Taiwan liquid crystal display (LCD) producer for his participation in a worldwide conspiracy to fix the prices of thin-film transistor-liquid crystal display (TFT-LCD) panels sold worldwide, the Department of Justice announced.

Shiu Lung Leung, AU Optronics Corp.’s former senior manager in the Desktop Display Business Group, was found guilty today in U.S. District Court for the Northern District of California in San Francisco, of participating in a worldwide TFT-LCD price-fixing conspiracy from May 15, 2002 to Dec. 1, 2006.

AU Optronics Corp., based in Hsinchu, Taiwan, and its American subsidiary, AU Optronics Corp. America, headquartered in Houston, were found guilty on March 13, 2012, following an eight-week trial. Former AU Optronics Corp. president Hsuan Bin Chen and former AU Optronics Corp. executive vice president Hui Hsiung were also found guilty at that time. A mistrial was declared against Leung after that trial. Today’s verdict is the result of Leung’s retrial.

“This international price-fixing conspiracy impacted countless American consumers by raising the price of computer monitors, notebooks and televisions containing LCD panels,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. “Today’s guilty verdict demonstrates that the Antitrust Division will continue to hold executives accountable for crimes that undermine a competitive marketplace.”

The indictment charged that AU Optronics Corp. participated in the worldwide price-fixing conspiracy from Sept. 14, 2001, to Dec. 1, 2006, and that its subsidiary joined the conspiracy as early as spring 2003. Today a jury found that Leung, along with the previously convicted companies and former executives, was guilty of fixing the prices of LCD panels sold in the United States. The conspirators fixed the prices of LCD panels during monthly meetings with their competitors, which were secretly held in hotel conference rooms, karaoke bars and tea rooms around Taiwan.

LCD panels are used in computer monitors and notebooks, televisions and other electronic devices. By the end of the conspiracy, the worldwide market for LCD panels was valued at $70 billion annually. The LCD price-fixing conspiracy affected some of the largest computer manufacturers in the world, including Hewlett Packard, Dell and Apple.

The company and its U.S. subsidiary were sentenced on Sept. 20, 2012, before Judge Susan Illston, to pay a $500 million criminal fine, matching the largest fine imposed against a company for violating U.S. antitrust laws. Chen and Hsiung were each sentenced to serve three years in prison and to each pay a $200,000 criminal fine.

As a result of this ongoing investigation, eight companies have pleaded guilty or been convicted to date and have been sentenced to pay criminal fines totaling more than $1.39 billion. Of the 22 charged executives, 13 have pleaded guilty or have been convicted and seven remain fugitives.  The executives who have been sentenced have been ordered to serve a combined total of 4,871 days in prison.

The maximum penalty for a Sherman Act violation for an individual is 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory fine.

Today’s charges are the result of a joint investigation by the Department of Justice Antitrust Division’s San Francisco Field Office and the FBI in San Francisco. Anyone with information concerning illegal conduct in the TFT-LCD industry is urged to call the Antitrust Division’s San Francisco Field Office at 415-436-6660 or visit www.justice.gov/atr/contact/newcase.htm.

Pfizer Agrees to Pay $55 Million for Illegally Promoting Protonix for Off-Label Use

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FOR IMMEDIATE RELEASE
Wednesday, December 12, 2012
Pfizer Agrees to Pay $55 Million for Illegally Promoting Protonix for Off-Label Use

Pfizer Inc. will pay $55 million plus interest to resolve allegations that Wyeth LLC illegally introduced and caused the introduction into interstate commerce of a misbranded drug, Protonix, between February 2000 and June 2001, the Justice Department announced today.

 

Wyeth manufactured and promoted Protonix tablets. Protonix is a proton pump inhibitor (PPI) that was used by physicians to treat various forms of gastro-esophageal reflux disease (GERD).  Wyeth sought and obtained approval from the Food and Drug Administration (FDA) to promote Protonix for short-term treatment of erosive esophagitis–a condition associated with GERD that can only be diagnosed with an invasive endoscopy. However, the government alleges that Wyeth fully intended to, and did, promote Protonix for all forms of GERD, including symptomatic GERD, which was far more common and could be diagnosed without an endoscopy.

 

Under the Federal Food Drug and Cosmetic Act, manufacturers must obtain FDA approval for any indication for use for which a manufacturer intends to market a drug.   A drug is misbranded if its labeling does not bear adequate directions for use by a layman safely and for the purposes for which it is intended.   A prescription drug must be prescribed by a physician and is only exempt from the adequate directions for use requirement if a number of conditions are met, including that the manufacturer only intended to sell that drug for an FDA-approved use.   A prescription drug marketed for unapproved off-label uses does not qualify for the exemption and is misbranded.

 

As alleged in the government’s complaint, Wyeth’s illegal promotional campaign for Protonix was multi-faceted. Before Wyeth even began promoting Protonix, the FDA warned Wyeth that its proposed promotional materials were misleading because Wyeth had “overstated” its “erosive esophagitis indication” by “suggesting that Protonix is safe and effective in the treatment of patients with . . . GERD. Protonix is not indicated for treatment of GERD symptoms that occur in the absence of esophageal erosions.”   Despite the FDA’s admonishment, the government alleges that Wyeth trained its sales force to promote Protonix for all forms of GERD, beyond its limited erosive esophagitis indication, and that Wyeth sales representatives frequently promoted Protonix to physicians for unapproved uses, such as symptomatic GERD.

 

In addition, Wyeth allegedly promoted Protonix as the “best PPI for nighttime heartburn.” even though there was never any clinical evidence that Protonix was more effective than any other PPI for nighttime heartburn. The allegations in the complaint are that this superiority slogan was formulated at the highest levels of the company. Wyeth retained an outside market research firm, at the cost of tens of thousands of dollars, to ensure that sales representatives delivered that misleading superiority message.

 

Finally, the government alleges that Wyeth used continuing medical education (CME) programs to promote Protonix for unapproved uses. CME programs are sponsored by accredited independent providers, such as universities, nonprofit organizations, or specialty societies. Pharmaceutical companies are permitted to provide financial support for CME programs, but they are not permitted to use CME programs as promotional vehicles for off-label indications.According to the complaint, Wyeth spent millions of dollars providing “unrestricted educational grants” to CME providers, and these grants invariably included promises that Wyeth would not attempt to influence the content of the program in any way. Nevertheless, the government alleges that one of Wyeth’s core marketing tactics for Protonix was to use CME programs to drive off-label use of the drug. According to the complaint, the Protonix “brand team” influenced virtually every aspect of these CME programs:   program topics, speaker selection, organization, and content. In addition, the government alleges that Wyeth even insisted that the CME program materials use the same color and appearance as Protonix promotional materials–a tactic that Wyeth and the vendor called “branducation.”

 

“Today’s settlement once again demonstrates our commitment to making sure drug manufacturers follow the rules,” said Stuart Delery, Principal Deputy Assistant Attorney General of the Department of Justice’s Civil Division.   “Drug manufacturers should not be permitted to profit from misbranding their products; the disgorgement remedy here ensures that this does not happen in this case.”

 

“Wyeth tried to cheat the system by obtaining a limited FDA approval for Protonix, fully intending to promote this drug for additional, unapproved uses,” said U.S. Attorney Carmen M. Ortiz. “Wyeth ignored the FDA’s warning not to promote Protonix off-label, and then went so far as to contaminate CME programs that physicians rely on for unbiased, independent scientific information. Today’s settlement reinforces this office’s historic commitment to holding drug companies responsible for their misconduct.”

 

This case was litigated by Assistant U.S. Attorneys David Schumacher and Susan Winkler of Ortiz’s Health Care Fraud Unit, together with former Trial Attorney Kevin Larsen and Deputy Director Jill Furman in the Department of Justice Consumer Protection Branch.   This case was investigated by the FDA’s Office of Criminal Investigations; the Office of Inspector General of the Department of Health and Human Services, the Department of Veterans’ Affairs, and the FBI.

 

This civil complaint and settlement resolve the United States’ investigation of Wyeth related to the promotion of Protonix for unapproved uses.   The claims settled by this agreement are allegations only, allegations which Pfizer denies; there has been no determination of liability. Pfizer acquired Wyeth in October 2009.   Since August 2009, Pfizer has been under a Corporate Integrity Agreement with the Department of Health and Human Services, which agreement remains in effect.

Two Alabama Real Estate Investors and their Company Plead Guilty to Conspiracy to Rig Bids and Commit Mail Fraud Involving Real Estate Foreclosure Auctions

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Investigation Has Yielded 10 Guilty Pleas to Date

WASHINGTON — Two Alabama real estate investors and their company pleaded guilty today for their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in southern Alabama, the Department of Justice announced.

Robert M. Brannon, of Laurel, Miss.; his son, Jason R. Brannon, of Mobile, Ala.; and their Mobile-based company, J & R Properties LLC, pleaded guilty today to an indictment originally returned on June 28, 2012 in the U.S. District Court for the Southern District of Alabama charging each of them with one count of bid rigging and one count of conspiracy to commit mail fraud.  According to court documents, the Brannons and their company conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama. After a designated bidder bought a property at a public auction, which typically takes place at the county courthouse, the conspirators would generally hold a secret, second auction, at which each participant would bid the amount above the public auction price he or she was willing to pay. The highest bidder at the secret, second auction won the property.

The Brannons and their company were also charged with conspiring to use the U.S. mail to carry out a fraudulent scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators, and to cause financial institutions, homeowners and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties. The Brannons and their company are charged with participating in the bid-rigging and mail fraud conspiracies from as early as October 2004 until at least August 2007.

“The conspirators subverted the competitive bidding process by engaging in a collusive scheme to artificially depress prices at real estate foreclosure auctions and to defraud financial institutions and homeowners out of money and property,” said Renata B. Hesse, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “Today’s guilty pleas send a strong message that the division is committed to prosecuting those who fraudulently subvert competition for their own financial gain.”

“The success of this investigation represents the FBI’s staunch commitment to target and investigate those who are willing to abuse and exploit illegal advantages during this legal process for personal gain at the expense of suffering citizens and businesses,” said Acting Special Agent in Charge of the FBI’s Mobile Division Stephen E. Richardson.

Including today’s pleas, to date, eight individuals—Harold H. Buchman, Allen K. French, Bobby Threlkeld Jr., Steven J. Cox, Lawrence B. Stacy, David R. Bradley and the Brannons—and two companies—M & B Builders LLC and J & R Properties— have pleaded guilty in the U.S. District Court for the Southern District of Alabama in connection with this ongoing investigation.

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals, and a $100 million fine for companies. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. Each count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine of $250,000 for individuals, and a fine of $500,000 for companies. The fine may be increased to twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.

The investigation into fraud and bid rigging at certain real estate foreclosure auctions in southern Alabama is being conducted by the Antitrust Division’s Atlanta Field Office and the FBI’s Mobile Office, with the assistance of the U.S. Attorney’s Office for the Southern District of Alabama. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s Atlanta Field Office at 404-331-7100 or visit www.justice.gov/atr/contact/newcase.htm.

Today’s charges are part of efforts underway 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.

Las Vegas Man Sentenced to 37 Months in Prison for Foreclosure Rescue Scam and Theft of Government Funds

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FOR IMMEDIATE RELEASE
Tuesday, December 11, 2012
Las Vegas Man Sentenced to 37 Months in Prison for Foreclosure Rescue Scam and Theft of Government Funds

WASHINGTON – A Las Vegas man was sentenced today to 37 months in prison for operating a foreclosure rescue scam that defrauded distressed homeowners who were struggling to pay their mortgages, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Daniel G. Bogden of the District of Nevada.

Alex P. Soria, 65, was sentenced today by U.S. District Judge Lloyd D. George in the District of Nevada.  In addition to his prison term, Soria was sentenced to serve three years of supervised release and ordered to pay $320,266 in restitution.

In August 2012, Soria pleaded guilty to one count of wire fraud in connection with his scheme to defraud distressed homeowners and one count of theft of government funds for defrauding the Social Security Disability Insurance benefits program.

According to court documents, Soria identified homeowners whose mortgage debt exceeded the value of their homes and charged them a fee purportedly to reduce the principal balance of their mortgages using money from the Department of the Treasury’s Troubled Asset Relief Program (TARP).  Soria admitted in court that he lied to homeowners about his affiliation with several mortgage lenders and that he provided victims with fraudulent letters stating they had been approved for loans.  Soria also admitted he falsely told victims that his loan program had been successful in the past and charged homeowners for loan modifications he knew he could not deliver.  Court documents show that Soria concealed from homeowners the fact that the state of Nevada had issued a cease and desist order which legally prohibited him from working in the mortgage industry.  Soria collected over $100,000 in fees from distressed homeowners, many of whom lost their homes to foreclosure after Soria failed to deliver the loan modifications he promised.

As part of the same case, Soria also admitted to stealing government funds by continuing to collect Social Security Disability Insurance benefits while at the same time receiving income from his foreclosure relief operation.  The Social Security Disability Insurance program is a federal program that replaces the wages of individuals who become unable to work due to a disability.  Soria admitted to collecting over $200,000 in disability benefits from 1990 to 2010 while at the same time receiving income that he concealed from the Social Security Administration.

This case is being prosecuted by Trial Attorneys Brian R. Young and Mary Ann McCarthy of the Criminal Division’s Fraud Section.  The U.S. Attorney’s Office for the District of Nevada assisted with the investigation and prosecution. The case was investigated by the Offices of Inspector General for the Department of Housing and Urban Development and the Social Security Administration.

This prosecution is part of efforts underway 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.

British Contractor Agrees to Plead Guilty to Wire Fraud Conspiracy Related to Iraq Reconstruction Efforts

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Monday, December 10, 2012
British Contractor Agrees to Plead Guilty to Wire Fraud Conspiracy Related to Iraq Reconstruction Efforts

WASHINGTON – British contractor APTx Vehicle Systems Limited agreed today to plead guilty to conspiracy to defraud the United States, the Coalition Provisional Authority that governed Iraq from April 2003 to June 2004, the government of Iraq and JP Morgan Chase Bank.  A civil settlement agreement resolving a related action filed under the False Claims Act was also announced today.

APTx was charged with one count of wire fraud conspiracy in a criminal information filed today in U.S. District Court in Massachusetts.  As part of the plea agreement filed with the information, APTx agreed to pay a criminal fine of $1 million.

The charges and resolutions were announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, Principal Deputy Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division and U.S. Attorney for the District of Massachusetts Carmen M. Ortiz.

According to the criminal information, APTx engaged in a fraudulent scheme involving an August 2004 contract valued at over $8.4 million for the procurement of 51 vehicles for the Iraqi Police Authority.  The contract was initially awarded to a different, “prime” contractor, which in turn subcontracted the procurement to APTx for over $5.7 million.  Payment under the contract was by letters of credit issued by JP Morgan Bank.

The criminal information further charges that in May and June 2005, APTx submitted shipping documents to JP Morgan to draw down on the letters of credit, which falsely and fraudulently asserted that all 51 vehicles were produced and ready to ship to Iraq.   In fact, as APTx knew, none of the vehicles had been built, none of the vehicles were legally owned or held by APTx and none of the vehicles were in the process of transport to Iraq.  The fraudulent shipping documents also listed a company as the freight carrier that APTx knew was not a shipping company and named a fictitious company as the freight forwarder.

In a related civil settlement agreement, APTx, along with Alchemie Grp Ltd., a United Kingdom corporation, and Haslen Back, the director and shareholder of Alchemie, agreed to pay $2 million to the United States to resolve claims originated by Ian Rycroft, an individual retained by the prime contractor to oversee transportation of the vehicles, under the qui tam, or whistleblower, provisions of the False Claims Act in the District of Massachusetts.  The False Claims Act authorizes private whistleblowers to bring suit for false claims submitted to the United States and to share in any recovery.  Rycroft’s estate will receive $540,000 as its share of the settlement amount.

Benjamin Kafka, a representative for APTx in the United States, was charged on April 13, 2009, with one count of misprision of a felony in connection with his role in the wire fraud conspiracy.  According to court documents, Kafka allegedly allowed APTx to use his corporate name and identity as the freight carrier and freight forwarder on the fraudulent shipping documents presented to JP Morgan.

The criminal case is being prosecuted by Director of Procurement Fraud Catherine Votaw and Trial Attorney William H. Bowne III of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorneys Eugenia M. Carris and Jeffrey Cohen of the District of Massachusetts.  The civil case is being handled by Trial Attorney Diana Younts of the Civil Division, and by Assistant U.S. Attorney Christine Wichers of the District of Massachusetts.  The investigation was conducted by the Special Inspector General for Iraq Reconstruction, the Defense Criminal Investigative Service Boston Resident Agency and U.S. Immigration and Customs Enforcement Homeland Security Investigations in Washington, D.C.

Virginia Anesthesiologist Sentenced for Filing False Tax Returns

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Wednesday, December 5, 2012
Virginia Anesthesiologist Sentenced for Filing False Tax Returns

Dr. George Anderson, 57, of Farmville, Va., was sentenced today to 33 months in prison, followed by one year of supervised release, for criminal tax fraud, the Justice Department and Internal Revenue Service (IRS) announced. U.S. District Judge Henry Hudson, sitting in Richmond, Va., also ordered Anderson to pay $471,919 of restitution to the IRS.

 

Anderson had earlier pleaded guilty to two counts of willfully filing false tax returns. According to the statement of facts filed with the court, Anderson was the sole owner of Farmville Anesthesia Associates Inc. Beginning in 2001, Anderson attempted to reduce his business’s tax liability to zero by diverting income to sham and nominee entities. Specifically, Anderson paid hundreds of thousands of dollars worth of bogus expenses out of Farmville Anesthesia’s bank accounts to other accounts held in the names of nominee trusts and limited liability companies Anderson himself controlled.   He then falsely reported these payments on Farmville Anesthesia’s corporate income tax returns as legitimate business expenses. Later, Anderson spent substantial funds out of the nominee bank accounts for his personal benefit, including for the construction of his personal residence, and did not report the expenditures as income on his personal tax returns.

 

In his guilty plea, Anderson admitted that he filed a false 2007 corporate income tax return on behalf of Farmville Anesthesia Associates. That return was false because it reported the bogus expenses paid to Anderson-controlled sham entities. Anderson also admitted to filing a false 2005 personal income tax return. That return was false because it did not report the income Anderson spent for his benefit out of the bank accounts held in the names of the nominee trusts and LLCs.

 

This case was investigated by IRS Criminal Investigation and was prosecuted by Trial Attorney Jonathan Marx of the Justice Department’s Tax Division and Assistant U.S. Attorney David Maguire of the U.S. Attorney’s Office for the Eastern District of Virginia.