Monthly Archives: May 2013

Rockville, Md., Property Purchased with Nigerian Corruption Proceeds Forfeited Through Justice Department’s Kleptocracy Initiative

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A forfeiture judgment was executed today against real property with an estimated value of more than $700,000 in Rockville, Md., that had been purchased with corruption proceeds traceable to Diepreye Solomon Peter Alamieyeseigha, a former Governor of Bayelsa State, Nigeria, announced Acting Assistant Attorney General Mythili Raman of the Criminal Division and U.S. Immigration and Customs Enforcement (ICE) Director John Morton.

“Foreign officials who think they can use the United States as a stash-house are sorely mistaken,” said Acting Assistant Attorney General Raman.  “Through the Kleptocracy Initiative, we stand with the victims of foreign official corruption as we seek to forfeit the proceeds of corrupt leaders’ illegal activities.”

“This investigation was initiated by ICE’s Homeland Security Investigations (HSI) Asset Identification & Removal Group (AIRG) in Baltimore, in an effort to recover the criminal proceeds from Diepreye Solomon Peter Alamieyeseigha’s assets, whose shell companies were convicted of money laundering offenses in Nigeria,” said ICE Director Morton.  “HSI’s AIRG will continue working with the Department of Justice to seek to recover illicit proceeds gained through foreign corruption and to protect the U.S. financial system from being utilized by criminals.”

Alamieyeseigha, aka DSP, was the elected governor of oil-producing Bayelsa State in Nigeria from 1999 until his impeachment in 2005.  As alleged in the U.S. forfeiture complaint, DSP’s official salary for this entire period was approximately $81,000, and his declared income from all sources during the period was approximately $248,000.  Nevertheless, while governor, DSP accumulated millions of dollars’ worth of property located around the world through corruption and other illegal activities.  The complaint alleges that DSP acquired the Rockville property during his first term as governor of Bayelsa State with funds obtained through corruption, abuse of office, money laundering and other violations of Nigerian and U.S. law.  Title to the property was transferred to Solomon & Peters, Ltd., a shell corporation controlled by DSP and on whose behalf the former governor entered a guilty plea to money laundering in Nigeria in 2007.

On May 24, 2013, U.S. District Court Judge Roger W. Titus of the District of Maryland granted a motion for a default judgment filed by the Criminal Division’s Asset Forfeiture and Money Laundering Section and issued a final decree of forfeiture.  The order extinguishes all prior title and authorizes forfeiture to the United States of the private residence located in Rockville, Maryland, estimated to be worth more than $700,000 and allows the United States to liquidate the property in accordance with federal law.  In a related action in the District of Massachusetts, the Department of Justice and ICE Homeland Security Investigations successfully forfeited approximately $400,000 from an investment account traceable to DSP.

Both actions were brought under the Justice Department’s Kleptocracy Asset Recovery Initiative announced by the Attorney General in 2010.  Through this initiative, the Department of Justice, along with federal law enforcement agencies, seeks to identify and forfeit the proceeds of foreign official corruption, and where possible and appropriate return those corruption proceeds for the benefit of the people of the nations harmed by the corruption.

The case was investigated by the HSI’s Asset Identification & Removal Group (AIRG) in Baltimore. The case was prosecuted by Assistant Deputy Chief Daniel H. Claman and Trial Attorney Tracy Mann of the Criminal Division’s Asset Forfeiture and Money Laundering Section, with assistance from the U.S. Attorney’s Office of the District of Maryland.

Individuals with information about possible proceeds of foreign corruption in the United States, or funds laundered through institutions in the United States, should contact Homeland Security

For-Profit School in Texas to Pay United States up to $2.5 Million for Allegedly Submitting False Claims for Federal Student Financial Aid

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American Commercial Colleges Inc. (ACC) has agreed to pay the United States up to $2.5 million, plus interest, to resolve allegations that it violated the civil False Claims Act by falsely certifying that it complied with certain eligibility requirements of the federal student aid programs, the Justice Department announced today.

To maintain eligibility to participate in federal student aid programs authorized by Title IV of the Higher Education Act of 1965, for-profit colleges such as ACC must obtain no more than ninety percent of their annual revenues from Title IV student aid programs.  At least ten percent of their revenues must come from other sources, such as payments from students using their own funds or private loans independent of Title IV.  Congress enacted this “90/10 Rule” based on the belief that quality schools should be able to attract at least a portion of their funding from private sources, and not rely solely upon the Federal Government.  The civil settlement resolves allegations that ACC violated the False Claims Act when it orchestrated certain short-term private student loans that ACC repaid with federal Title IV funds to artificially inflate the amount of private funding ACC counted for purposes of the 90/10 Rule.  The short-term loans at issue in this case were not sought or obtained by students on their own; rather, the United States contends ACC orchestrated the loans for the sole purpose of manipulating its 90/10 Rule calculations.

“American taxpayers have a right to expect federal student aid to be used as intended by Congress —  to help students obtain a quality education from an eligible institution,” said Stuart F. Delery, Acting Assistant Attorney General for the Department of Justice’s Civil Division.  “The Department of Justice is committed to making sure that for-profit colleges play by the rules and that Title IV funds are used as intended.” Under the False Claims Act settlement, ACC, a privately-owned college operating several campuses in Texas, will pay the United States $1 million, plus interest, over five years, and could be obligated to pay an additional $1.5 million under the terms of the agreement.

“Misuse of taxpayers’ dollars cannot be tolerated – not only for the sake of taxpayers, but especially in the case of innocent individuals who seek to improve their lives through a quality education,” said U.S. Attorney for the Northern District of Texas Sarah R. Saldaña.

Today’s settlement resolves allegations brought by Shawn Clark and Juan Delgado, former directors of ACC campuses in Odessa and Abilene, respectively, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens with knowledge of fraud against the government to bring an action on behalf of the United States and to share in any recovery.  Messrs. Clark and Delgado will receive $170,000 of the $1 million fixed portion of the government’s recovery, and would receive an additional $255,000 if ACC becomes obligated to pay the maximum $1.5 million contingent portion of the settlement.

This case was handled by the Civil Division of the Department of Justice, the U.S. Attorney’s Office for the Northern District of Texas; and the Department of Education’s Office of Inspector General and Office of General Counsel.

The lawsuit is captioned United States ex rel. Clark, et al., v. American Commercial Colleges, Inc., No. 5:10-cv-00129 (N.D. Tex.).  The claims settled by this agreement are allegations only, and there has been no determination of liability.

French Oil and Gas Company, Total, S.A., Charged in the United States and France in Connection with an International Bribery Scheme

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Total, S.A., a French oil and gas company that trades on the New York Stock Exchange, has agreed to pay a $245.2 million monetary penalty to resolve charges related to violations of the Foreign Corrupt Practices Act (FCPA) in connection with illegal payments made through third parties to a government official in Iran to obtain valuable oil and gas concessions, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, and U.S. Attorney Neil H. MacBride for the Eastern of Virginia.

As part of the agreed resolution, the department today filed a criminal information in U.S. District Court for the Eastern District of Virginia charging Total with one count of conspiracy to violate the anti-bribery provisions of the FCPA, one count of violating the internal controls provision of the FCPA, and one count of violating the books and records provision of the FCPA.  The department and Total agreed to resolve the charges by entering into a deferred prosecution agreement for a term of three years.  In addition to the monetary penalty, Total also agreed to cooperate with the department and foreign law enforcement to retain an independent corporate compliance monitor for a period of three years and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.

Also today, the U.S. Securities and Exchange Commission (SEC) entered into a cease-and-desist order against Total in which the company agreed to pay an additional $153 million in disgorgement and prejudgment interest.  Total also agreed with the SEC to comply with certain undertakings regarding its FCPA compliance program, including the retention of a compliance consultant.

In addition, French enforcement authorities announced earlier today that they had requested that Total, Total’s Chairman and Chief Executive Officer, and two additional individuals be referred to the Criminal Court for violations of French law, including France’s foreign bribery law.

“Today we announce the first coordinated action by French and U.S. law enforcement in a major foreign bribery case,” said Acting Assistant Attorney General Raman.  “Our two countries are working more closely today than ever before to combat corporate corruption, and Total, which bought business through bribes, now faces the criminal consequences across two continents.”

“The Eastern District of Virginia, through our strong partnership with the Criminal Division’s Fraud Section, is committed to holding accountable those who violate the Foreign Corrupt Practices Act,” said U.S. Attorney MacBride.  “Today’s deferred prosecution agreement, with both its punitive and forward-looking compliance provisions, dovetails with our goals of bringing violators to justice and preventing future misconduct.”

According to the deferred prosecution agreement, in 1995 Total sought to re-enter the Iranian oil and gas market by attempting to obtain a contract with the National Iranian Oil Company (NIOC) to develop the Sirri A and E oil and gas fields.  In May 1995, Total entered into negotiations with an Iranian official who served as the chairman of an Iranian state-owned and state-controlled engineering company.  Total subsequently entered into a purported consulting agreement pursuant to which Total would corruptly make payments to an intermediary designated by the Iranian official to secure NIOC signing a development agreement with Total for the Sirri A and E project, which NIOC did in July 1995.  Over the next two-and-a-half years, Total paid approximately $16 million in bribes under the purported consulting agreement.

In 1997, Total sought to negotiate a contract with NIOC to develop a portion of the South Pars gas field, the world’s largest gas field.  At the direction of the Iranian official, Total and a second intermediary entered into another purported consulting agreement that called for Total to make large payments to the intermediary.  In September 1997, Total executed a contract with NIOC that granted it a 40 percent interest in developing phases two and three of the South Pars gas field.  Over the next seven years, Total made unlawful payments of approximately $44 million pursuant to the second purported consulting agreement.

In sum, between 1995 and 2004, at the direction of the Iranian official, Total corruptly made approximately $60 million in bribe payments under the agreements for the purpose of inducing the Iranian official to use his influence in connection with Total’s efforts to obtain and retain lucrative oil rights in the Sirri A and E and South Pars oil and gas fields.  Total mischaracterized the unlawful payments as “business development expenses” when they were, in fact, bribes designed to corruptly influence a foreign official.  Further, Total failed to implement effective internal accounting controls, permitting the consulting agreements’ true nature and true participants to be concealed and thereby failing to maintain accountability for assets.

The case is being prosecuted by Trial Attorney Andrew Gentin of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Charles Connolly of the U.S. Attorney’s Office for the Eastern District of Virginia.  Significant assistance was provided by the Criminal Division’s Office of International Affairs and by the SEC’s New York Regional Office.  The department also acknowledges and expresses its deep appreciation for the cooperation and partnership of French law enforcement authorities.

Former Corporate Officers of China-Based Oil and Gas Company Charged with Fraud and False Statements

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WASHINGTON – The former president and CEO, and the former vice president of corporate finance of China North East Petroleum Holdings Limited (CNEP), an oil and gas company whose stock is traded in the United States, have been charged with defrauding investors in connection with public offerings of stock.

Acting Assistant Attorney General Mythili Raman of the Criminal Division; U.S. Attorney for the District of Columbia Ronald C. Machen Jr.; Assistant Director in Charge George Venizelos of the FBI’s New York Field Office; and Chief Richard Weber of the Internal Revenue Service’s Criminal Investigation (IRS-CI), made the announcement.

Wang Hongjun, 41, and Chao Jiang, 32, both Chinese citizens residing in California and New York, respectively, were indicted on May 23, 2013, with one count of conspiracy to commit wire and securities fraud and four counts of securities fraud, which each carry a maximum penalty of 25 years in prison. Jiang is also charged with two counts of false statements to the U.S. Securities and Exchange Commission (SEC) during sworn testimony, which each carry a maximum penalty of five years in prison. The indictment was made public today.

According to the indictment, Hongjun served as the president and CEO of CNEP from 2009 to 2010, and as the chairman of the Board of Directors beginning in 2010.  Jiang served as the vice president of corporate finance and corporate secretary of CNEP from 2008 until approximately 2011.  The charges allege that in June of 2009, CNEP registered a shelf offering with the SEC proposing to sell up to $40 million of CNEP common stock in the United States on the New York Stock Exchange.  In September and December of 2009, CNEP made two separate offerings pursuant to the June registration.  In documents filed with the SEC related to the offerings, and in other public statements to investors, Hongjun and Jiang informed investors that CNEP intended to use the funds raised from the securities offerings for general corporate purposes and to repay a prior corporate debt.

The indictment alleges that, instead of using the offering proceeds as represented to CNEP’s investors, Hongjun and Jiang misappropriated approximately $1,265,000 of the proceeds by wiring the money to bank accounts in the name of their family members – approximately $965,000 to Jiang’s father and approximately $300,000 to Hongjun’s wife – which was used, in part, to purchase a home in California, jewelry and a Mercedes-Benz.

In addition, the indictment alleges that Jiang testified falsely under oath to the SEC in Washington, D.C., about these transactions.  In that testimony, Jiang stated that none of his family members had received anything of value over $500 from CNEP, despite having wired $965,000 from CNEP’s bank account to the account of his father.  Jiang also testified falsely regarding the use of proceeds from the securities offerings.

An indictment is merely an accusation, and defendants are presumed innocent until proven guilty in a court of law.

In a related action, the SEC had previously filed a civil enforcement action against Hongjun, Jiang and others in the Southern District of New York.

The case was investigated by the FBI’s New York Field Office and IRS-CI.  The department wishes to thank the SEC for its significant assistance in this case. The investigation is continuing.

This case is being prosecuted by Trial Attorneys Daniel Kahn and Kevin Muhlendorf of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David Johnson for the District of Columbia.

 

ISTA Pharmaceuticals Inc. Pleads Guilty to Federal Felony Charges; Will Pay $33.5 Million to Resolve Criminal Liability and False Claims Act Allegations

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Pharmaceutical company ISTA Pharmaceuticals, Inc. pled guilty earlier today to conspiracy to introduce a misbranded drug into interstate commerce and conspiracy to pay illegal remuneration in violation of the Federal Anti-Kickback Statute, the Department announced today.  U.S. District Court Judge Richard J. Arcara accepted ISTA’s guilty pleas.  The guilty pleas are part of a global settlement with the United States in which ISTA agreed to pay $33.5 million to resolve criminal and civil liability arising from its marketing, distribution and sale of its drug Xibrom.

ISTA pled guilty in the Western District of New York to criminal charges that the company conspired to illegally introduce a misbranded drug, Xibrom, into interstate commerce.  Under the Food, Drug and Cosmetic Act (FDCA), it is illegal for a drug company to introduce into interstate commerce any drug that the company intends will be used for uses not approved by the Food and Drug Administration (FDA).  Xibrom is an ophthalmic, nonsteroidal, anti-inflammatory drug that was approved by FDA to treat pain and inflammation following cataract surgery.  In order to expand sales of Xibrom outside of its approved use, ISTA conspired to introduce misbranded Xibrom into interstate commerce.

Between 2005 and 2010, some ISTA employees promoted Xibrom for unapproved new uses, including the use of Xibrom following Lasik and glaucoma surgeries, and for the treatment and prevention of cystoid macular edema.  The evidence showed that continuing medical education programs were used to promote Xibrom for uses that were not approved by the FDA as safe and effective, and that post-operative instruction sheets for unapproved uses were paid for by some company employees and provided to physicians.  These activities are evidence of intended uses unapproved by FDA, which rendered the drug misbranded under the FDCA.

ISTA pled guilty to a felony based on evidence that some ISTA employees were told by management not to memorialize in writing certain interactions with physicians regarding unapproved new uses, and not to leave certain printed materials in physicians’ offices relating to unapproved new uses.  These instructions were given in order to avoid having their conduct relating to unapproved new uses being detected by others.  ISTA agreed that this conduct represented an intent to defraud under the law.

In addition, ISTA pled guilty to a conspiracy to knowingly and willfully offering or paying remuneration to physicians in order to induce those physicians to prescribe Xibrom, in violation of the federal Anti-Kickback Statute.  Under the law, it is illegal to offer or pay remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to physicians to induce them to refer individuals to pharmacies for the dispensing of drugs, for which payments are made in whole or in part under a Federal health care program.  In this matter, certain ISTA employees, with the knowledge and at the direction of ISTA, offered and provided physicians with free Vitrase, another ISTA product, with the intent to induce such physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom.  In addition, ISTA provided other illegal remuneration, including a monetary payment to sponsor an event of a non-profit group associated with a particular physician, a golf outing, a wine-tasting event, paid consulting or speaker arrangements, and honoraria for participation in advisory meetings which were intended to be marketing opportunities, with the intent to induce physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom.

Under the terms of the plea agreement, ISTA will pay a total of $18.5 million, including a criminal fine of $16,125,000 for the conspiracy to introduce misbranded Xibrom into interstate commerce, $500,000 for the conspiracy to violate the Anti-Kickback Statute, and $1,850,000 in asset forfeiture associated with the misbranding charge.

ISTA also entered into a civil settlement agreement under which it agreed to pay $15 million to the federal government and states to resolve claims arising from its marketing of Xibrom, which caused false claims to be submitted to government health care programs.  The civil settlement resolved allegations that ISTA promoted the sale and use of Xibrom for certain uses that were not FDA-approved and not covered by the Federal health care programs, including prevention and treatment of cystoid macular edema, treatment of pain and inflammation associated with non-cataract eye surgery, and treatment of glaucoma.  The United States further alleged that ISTA’s violations of the Anti-Kickback Statute resulted in false claims being submitted to federal health care programs.  The federal share of the civil settlement is $14,609,746.16, and the state Medicaid share of the civil settlement is $390,253.84.  Except as admitted in the plea agreement, the claims settled by the civil settlement agreement are allegations only, and there has been no determination of liability as to those claims.

“As today’s global resolution demonstrates, the Department of Justice is committed to making sure that pharmaceutical companies play by the rules,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division.  “Health care fraud in any form undermines the integrity of our health care system and can drive up costs for all of us.”

“Today’s resolution sends a clear message that pharmaceutical companies cannot put profit ahead of people, by disregarding laws designed to protect the health of the American public,” said United States Attorney William J. Hochul, Jr.  “The fact that ISTA offered doctors illegal inducements – such as a wine tasting, golf outing, and payments to attend what were in essence marketing sessions – makes the company’s illegal conduct particularly deserving of the hefty penalty ISTA has agreed to pay.”

“It is especially concerning when companies actively take steps to conceal improper conduct which may jeopardize public health,” said Antoinette V. Henry, Special Agent in Charge, Metro-Washington Field Office, FDA Office of Criminal Investigations. “We will continue to work tirelessly with the Department of Justice and our law enforcement counterparts to uncover such conduct.”

In addition to the criminal fines and asset forfeiture, ISTA’s parent company, Bausch+Lomb, Incorporated (B+L), has agreed to maintain a Compliance and Ethics Program.  B+L has agreed that it will maintain policies and procedures that: (1) prohibit the involvement of sales and marketing personnel and others on the businesses’ commercial team in the final decision-making process with respect to educational grants in the United States, while also ensuring that the educational programming is focused on objective scientific and educational activities and discourse; (2) require sales agents to discuss only those product uses that are consistent with what is indicated on the product’s approved package labeling and to forward requests for information regarding uses of B+L’s products not approved by FDA to a Medical Affairs Professional; and (3) prohibit the company from engaging in any conduct that violates the Anti-Kickback Statute, including the offering or paying of any remuneration to any person to induce such person to prescribe any drug for which payment may be made in whole or in part under a Federal health care program.  The Program also requires that B+L’s President of Global Pharmaceuticals conduct an annual review of the effectiveness of B+L’s Program as it relates to the marketing, promotion, and sale of prescription pharmaceutical products, and certify that to the best of his or her knowledge, the Program was effective in preventing violations of Federal health care program requirements and the FDCA regarding sales, marketing, and promotion of B+L’s prescription pharmaceutical products.

The civil settlement resolves two lawsuits filed under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The civil lawsuits were filed in the Western District of New York and are captioned United States ex rel. Keith Schenker v. ISTA Pharmaceuticals, Inc. and United States, et al., ex rel. DJ PARTNERSHIP 2011, LLP  v. ISTA Pharmaceuticals, Inc.  As part of today’s resolution, Mr. Schenker will receive approximately $2.5 million from the federal share of the civil recovery.

Upon conviction for the criminal charges described above, ISTA will face mandatory exclusion from Federal healthcare programs.  Exclusion will mean that on the effective date of the exclusion, any ISTA labeled drugs in ISTA’s possession would no longer be reimbursable by Medicare, Medicaid, or other Federal healthcare programs.  In June 2012, B+L acquired ISTA.  Simultaneous with the False Claims Act settlement and the entry of the plea, the U.S. Department of Health and Human Services’ Office of Inspector General, ISTA, and B+L will enter into a Divestiture Agreement under which ISTA agrees to be excluded for 15 years, effective six months after the date of the settlement.  Under the terms of the Divestiture Agreement, ISTA will transfer all assets to B+L or a B+L subsidiary and will stop shipping ISTA labeled drugs within six months of the Divestiture Agreement.  Six months after the effective date of the Divestiture Agreement, all ISTA labeled drugs in the possession of ISTA or B+L will no longer be reimbursable by Medicare, Medicaid, and other Federal healthcare programs.  Those ISTA labeled drugs in the stream of commerce at that time will continue to be reimbursable.

“We agreed to enter into this Divestiture Agreement based on the facts of this case, including that B+L did not have a corporate relationship with ISTA during the improper conduct,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services.  “In addition, B+L acquired ISTA more than a year after the improper conduct ended, and B+L did not hire any of ISTA’s executives or senior management.”

The criminal case was prosecuted by Assistant Director Jeffrey Steger of the Consumer Protection Branch of the Civil Division of the Department of Justice and Assistant United States Attorney MaryEllen Kresse of the Office of the U.S. Attorney for the Western District of New York.  They were assisted by Associate Chief Counsel Kelsey Schaefer of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services.  The case was investigated by the Food and Drug Administration’s Office of Criminal Investigations and Health and Human Services Office of Inspector General.  The civil settlement was handled by Trial Attorneys Colin Huntley and Benjamin Young of the Commercial Litigation Branch of the Civil Division of the Department of Justice and Assistant United States Attorney Kathleen Lynch of  the Office of the U.S. Attorney for the Western District of New York.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $10.4 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.3 billion.

Health Care Clinic Director Sentenced in Miami to 111 Months for His Role in $63 Million Health Care Fraud Scheme

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A former health care clinic director and licensed therapist was sentenced in Miami to 111 months in prison today in connection with a health care fraud scheme involving defunct health provider Health Care Solutions Network Inc. (HCSN).

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, 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, made the announcement.

Paul Thomas Layman, 66, of Miami, pleaded guilty on March 7, 2013, to conspiracy to commit health care fraud.

During the course of the conspiracy, Layman was employed as a substance abuse counselor, therapist and clinical director of HCSN’s Partial Hospitalization Program (PHP).  A PHP is a form of intensive treatment for severe mental illness.   HCSN of Florida (HCSN-FL) operated community mental health centers at three locations. During his employment, Layman worked full time at all HCSN-FL locations in various capacities.  According to court documents, Layman was aware that HCSN-FL paid illegal kickbacks to owners and operators of Miami-Dade County Assisted Living Facilities (ALF) in exchange for patient referral information to be used to submit false and fraudulent claims to Medicare and Medicaid.  Layman also knew that many of the ALF referral patients were ineligible for PHP services because many patients suffered from mental retardation, dementia and Alzheimer’s disease.

Court documents reveal that Layman was aware that HCSN-FL personnel were fabricating patient medical records. Many of these medical records were created weeks or months after the patients were admitted to HCSN-FL for purported PHP treatment and were utilized to support false and fraudulent billing to government sponsored health care benefit programs, including Medicare and Florida Medicaid.  During his employment at HCSN-FL, Layman signed fabricated PHP therapy notes and other medical records used to support false claims to government sponsored health care programs.

HCSN of North Carolina (HCSN-NC) operated one location in Hendersonville, N.C.  At HCSN-NC, Layman served as the clinical director and assisted HCSN owner Armando Gonzalez in obtaining necessary licensing, credentials and Medicare authorizations for HCSN-NC.  According to court documents, from 2008 through 2009, Layman purportedly supervised the therapists within the HCSN-NC PHP, including Alexandra Haynes, who was an unlicensed therapist purportedly performing PHP therapy to HCSN-NC patients.  Gonzalez and Haynes were sentenced to 168 months and 70 months, respectively, in prison.

According to court documents, from 2004 through 2011, HCSN billed Medicare and the Florida Medicaid program approximately $63 million for purported mental health services.

This case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida. The cases are being prosecuted by Trial Attorney Allan J. Medina and Special Trial Attorney William J. Parente of 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 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Attorney Convicted in Multimillion-Dollar Stock Fraud

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Attorney Mitchell J. Stein, 53, of Hidden Hills, Calif., was convicted by a jury in the Southern District of Florida for his role in operating a five-year, multimillion-dollar market manipulation and fraud scheme, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.

Stein was charged in a December 2011 indictment and on May 20, 2013, he was convicted on all counts: conspiracy to commit mail and wire fraud and three counts each of mail fraud and wire fraud, each of which carries a maximum penalty of 20 years in prison; three counts of securities fraud, which each carry a maximum penalty of 25 years; three counts of money laundering, which each carry a maximum penalty of 10 years; and one count of conspiracy to obstruct justice, which carries a maximum penalty of five years in prison. Stein is being detained until sentencing, which is scheduled for Aug. 16, 2013.

According to evidence presented at trial, Stein’s wife held a controlling interest in Signalife Inc., a publicly-traded company currently known as Heart Tronics that purportedly sold electronic heart monitoring devices.  Stein engaged in a scheme to artificially inflate the price of Signalife stock by creating the false impression of sales activity for Signalife.  Specifically, the evidence at trial showed that Stein and his co-conspirators created fake purchase orders and related documents from fictitious customers, then caused Signalife to issue press releases and file documents with the U.S. Securities and Exchange Commission (SEC) trumpeting these fictitious sales.  Evidence at trial also proved that in a further effort to create the false appearance of sales activity, Stein arranged to have Signalife products shipped to and temporarily stored with an individual who had not purchased any products.

Evidence at trial further proved that Stein disguised his selling of stock during the conspiracy by placing shares in purportedly blind trusts, and that he had a co-conspirator sell shares of Signalife stock after Stein caused false information to be disseminated to the public.  Stein also caused Signalife to issue shares to third parties so that those third parties could sell the shares and remit the proceeds of those sales to Stein.  From one co-conspirator alone, Stein received illicit gains of over $1.8 million.     In addition, evidence at trial proved that Stein conspired to obstruct the SEC’s investigation into Heart Tronics by testifying falsely and arranging for others to testify falsely in an effort to conceal the scheme described above.

This case was investigated by the U.S. Postal Inspection Service and the Office of the Special Inspector General for the Troubled Asset Relief Program.

This matter was referred to the Department by the SEC, which conducted a parallel investigation and in December 2011 announced the filing of a civil enforcement action against Stein and others.  The Department thanks the SEC for its substantial assistance in this matter.  The Department also acknowledges the substantial assistance of FINRA’s Criminal Prosecution Assistance Group.     This case is being prosecuted by Assistant Chief Albert B. Stieglitz, Jr. and Trial Attorneys Kevin B. Muhlendorf and Andrew H. Warren of the Criminal Division’s Fraud Section.

U.S. Renal Care to Pay $7.3 Million to Resolve False Claims Act Allegations

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U.S. Renal Care, headquartered in Plano, Texas, has agreed to pay $7.3 million to resolve allegations that Dialysis Corporation of America (DCA) violated the False Claims Act by submitting false claims to the Medicare program for more Epogen than was actually administered to dialysis patients at DCA facilities, the Justice Department announced today.  U.S. Renal Care, which acquired DCA in June 2010, owns and operates more than 100 freestanding outpatient dialysis facilities throughout the United States.

Epogen is an intravenous medication that is used to treat anemia, a common condition afflicting patients with end-stage renal disease.  Epogen vials contain a small amount of medication in excess of the labeled amount, known as “overfill,” to compensate for medication that may remain in the vial after extraction and in the syringe upon administration.  The United States contends that from January 2004 through May 2011, DCA billed for 10-11% overfill whenever it administered Epogen.  However, because of the types of syringes DCA used, the United States alleges that DCA was not able to withdraw and administer 10-11% overfill every time it administered Epogen to patients, and thus submitted false claims to Medicare that overstated the amount of Epogen that it was actually providing.

“Today’s settlement shows that the Justice Department will aggressively pursue those health care providers who cut corners at the expense of the American taxpayers, such as by billing for items and services that were not provided,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.  “We will continue to protect scarce Medicare dollars.”

“Medical care providers who submit false claims for services and products that were not actually delivered threaten the financial viability of the Medicare Trust Fund,” said Rod J. Rosenstein, U.S. Attorney for the District of Maryland.

“Health providers billing for phantom services cheat taxpayers, cheat programs straining to pay for vitally needed care, and cheat patients who pay inflated copayments,” said Nick DiGiulio, Special Agent in Charge, Office of Inspector General, U.S. Department of Health and Human Services for the region including Maryland.  “We will continue to work with the Department of Justice to ensure health professionals get reimbursed only for services they actually provide”

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover $10.2 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.2 billion.

The allegations settled today arose from a lawsuit filed by Laura Davis against DCA under the qui tam, or whistleblower, provisions of the False Claims Act. The Act allows private citizens with knowledge of fraud to bring civil actions on behalf of the United States and share in any recovery.  Ms. Davis will receive $1,314,000 as part of today’s settlement.

This case was handled by the Civil Division of the Department of Justice and the U.S. Attorney’s Office for the District of Maryland with assistance from the Office of Inspector General for the Department of Health and Human Services.  The claims settled by this agreement are allegations only, and there has been no determination of liability.  The whistleblower suit is captioned United States ex rel. Laura Davis v. Dialysis Corporation of America, No. 1:08-cv-2829 (D. Md.).

TWO DENSO CORPORATION EXECUTIVES AGREE TO PLEAD GUILTY FOR PRICE FIXING AND BID RIGGING ON AUTO PARTS INSTALLED IN U.S. CARS

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WASHINGTON — Two DENSO Corp. executives – Yuji Suzuki and Hiroshi Watanabe – have agreed to plead guilty for their roles in international conspiracies to fix prices and rig bids of certain automotive components installed in U.S. cars, the Department of Justice announced today. The executives, both Japanese nationals, have also agreed to serve time in a U.S. prison.

Yuji Suzuki, a senior manager in DENSO’s Toyota Sales Division, has agreed to serve 16 months in a U.S. prison, to pay a $20,000 criminal fine and to cooperate with the department’s ongoing investigation. Hiroshi Watanabe, a group leader in DENSO’s Toyota Sales Division at the time of the offense, has agreed to serve 15 months in a U.S. prison, to pay a $20,000 criminal fine and to cooperate with the department’s ongoing investigation.

“The conspirators reached agreements to fix prices and allocate bids, and took measures such as using code names and meeting in secret to cover their tracks,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. “Cracking down on international price-fixing cartels that target U.S. businesses and consumers has been, and will continue to be, among the top priorities for the Antitrust Division.”

According to the two-count felony charge filed today in U.S. District Court for the Eastern District of Michigan in Detroit, Suzuki, along with co-conspirators, engaged in a conspiracy to rig bids for, and to fix, stabilize and maintain the prices of, electronic control units and heater control panels sold to Toyota Motor Corporation and Toyota Motor Engineering and Manufacturing North America Inc. in the United States and elsewhere. According to the charges, Suzuki participated in the electronic control units conspiracy from at least as early as August 2005 until at least December 2008 and participated in the heater control panels conspiracy from at least as early as July 2005 until at least December 2008.

According to a one-count felony charge filed today in the U.S. District Court for the Eastern District of Michigan in Detroit, Watanabe participated in a conspiracy to rig bids for, and to fix, stabilize and maintain the prices of, heater control panels sold to Toyota from at least as early as June 2008 and continuing until at least February 2010 in the United States and elsewhere.

In March 2012, DENSO pleaded guilty and was sentenced to pay a $78 million criminal fine for its role in the conspiracies related to electronic control units and heater control panels.

Electronic control units are electrical components, similar to tiny computers, which are embedded throughout cars and control various electrical systems or subsystems in an automobile. For example, a body electronic control unit controls the power windows, power locks and other electronic components on the door. Heater control panels are located in the center console of a car and control the temperature inside the car.

“Those individuals who engage in price fixing and bid rigging negatively impact the automotive industry by causing vehicle buyers and makers to pay higher prices. The FBI is committed to pursuing and prosecuting these criminals,” said Robert D. Foley III, Special Agent in Charge, FBI Detroit Division.

According to the charges against Suzuki and Watanabe, they carried out the conspiracies by participating, or directing the participation of subordinate employees, in meetings and conversations to coordinate and fix prices of automotive parts installed in U.S. cars and elsewhere.

To date, nine companies and 14 executives have pleaded guilty or agreed to plead guilty in the department’s ongoing investigation into price fixing and bid rigging in the automotive parts industry. DENSO, Nippon Seiki Ltd., Tokai Rika Co. Ltd., Furukawa Electric Co. Ltd, Yazaki Corp., G.S. Electech Inc., Fujikura Ltd., Autoliv Inc. and TRW Deutschland Holding GmbH pleaded guilty and were sentenced to pay a total of more than $809 million in criminal fines. Additionally, 12 individuals have been sentenced to pay criminal fines and to serve jail sentences ranging from a year and a day to two years each.

Suzuki and Watanabe are charged with price fixing in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals. 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 maximum fine.

The charges are the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by each of the Antitrust Division’s criminal enforcement sections and the FBI. Today’s charges were brought by the Antitrust Division’s National Criminal Enforcement Section and the FBI’s Detroit Field Office, with the assistance of the FBI headquarters’ International Corruption Unit.

Eighth Individual Sentenced in Connection with Costa Rica-Based Business Opportunity Fraud Ventures

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Sean Rosales, a dual United States and Costa Rican citizen, was sentenced today in connection with a series of business opportunity fraud ventures based in Costa Rica, the Justice Department and the U.S. Postal Inspection Service announced today.  Rosales was sentenced by U.S. District Court Judge Ursula M. Ungaro in Miami to 97 months in prison and 5 years supervised release.  Rosales was also ordered to pay more than $7.3 million in restitution.

On March 20, Rosales pled guilty to one count of an indictment pending against him, charging conspiracy to commit mail and wire fraud.  Rosales was arrested in Chicago, Illinois late last year following his indictment by a federal grand jury in Miami on Nov. 29, 2011.   The indictment alleged that Rosales and his co-conspirators purported to sell beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses.  The charges form part of the government’s continued nationwide crackdown on business opportunity fraud.

Prior to Rosales’ sentencing today, eleven other individuals were charged in connection with business opportunity fraud ventures based in Costa Rica.  Rosales is the eighth of those individuals to be convicted and sentenced in the United States.

“Many Americans dream of owning and operating their own small business, but fraud schemes such as the one perpetrated by this defendant can turn that dream into a nightmare,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division. “The Department of Justice will continue to be aggressive in prosecuting those who take advantage of innocent, hardworking Americans through business opportunity fraud.”

Beginning in May 2005, Rosales and his coconspirators fraudulently induced purchasers in the United States to buy business opportunities in USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., Cards-R-Us Inc., Premier Cards Inc., The Coffee Man Inc., and Powerbrands Distributing Company.  The business opportunities cost thousands of dollars each, and most purchasers paid at least $10,000.  Each company operated for several months, and after one company closed, the next opened.  The various companies used bank accounts, office space and other services in the Southern District of Florida and elsewhere.

Rosales, using aliases, participated in a conspiracy that used various means to make it appear to potential purchasers that the businesses were located entirely in the United States.  In reality, Rosales operated out of Costa Rica to fraudulently induce potential purchasers in the United States to buy the purported business opportunities.

The companies made numerous false statements to potential purchasers of the business opportunities, including that purchasers would likely earn substantial profits; that prior purchasers of the business opportunities were earning substantial profits; that purchasers would sell a guaranteed minimum amount of merchandise, such as greeting cards and beverages; and that the business opportunity worked with locators familiar with the potential purchaser’s area who would secure or had already secured high-traffic locations for the potential purchaser’s merchandise stands.  Potential purchasers also were falsely told that the profits of some of the companies were based in part on the profits of the business opportunity purchasers, thus creating the false impression that the companies had a stake in the purchasers’ success and in finding good locations.

The companies employed various types of sales representatives, including fronters, closers and references.  A fronter spoke to potential purchasers when the prospective purchasers initially contacted the company in response to an advertisement.  A closer subsequently spoke to potential purchasers to finalize deals.  References spoke to potential purchasers about the financial success they purportedly had experienced since purchasing one of the business opportunities.  The companies also employed locators, who were typically characterized by the sales representatives as third parties who worked with the companies to find high-traffic locations for the prospective purchaser’s merchandise display racks.

Rosales, using aliases, was a fronter for USA Beverages, a fronter and reference for Twin Peaks, a fronter and reference for Cards-R-Us, a fronter, locator and reference for Premier Cards, a locator for Coffee Man, and a locator for Powerbrands.

Each of the companies was registered as a corporation and rented office space to make it appear to potential purchasers that its operations were fully in the United States.  USA Beverages was registered as a Florida and New Mexico corporation and rented office space in Las Cruces, N.M.  Twin Peaks was registered as a Florida and Colorado corporation and rented office space in Fort Collins, Colo., and Cards-R-Us was registered as a Nevada corporation and rented office space in Reno, Nev.  Premier Cards was registered as a Colorado and Pennsylvania corporation and rented office space in Philadelphia, and The Coffee Man was registered as a Colorado corporation and rented office space in Denver.  Powerbrands was registered as a Wisconsin corporation and rented office space in Glendale, Wisconsin and Palm Beach Gardens, Fla.  “Fraudulent business opportunity sellers must realize that financial fraud victimizing Americans will be prosecuted vigorously, even if the fraudsters conduct their operations from abroad,” said Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida.  “Increased international law enforcement cooperation eliminates safe havens for those who seek to cheat Americans from overseas.”

“The success of this investigation shows that the U.S. Postal Inspection Service is committed to working with the Department of Justice and our law enforcement partners, both foreign and domestically, to protect Americans from the predatory nature of business opportunity frauds,” said Ronald Verrochio, U.S. Postal Inspector in Charge, Miami Division.

Acting Assistant Attorney General Delery commended the investigative efforts of the Postal Inspection Service.  The case was being prosecuted by Assistant Director Jeffrey Steger and trial attorney Alan Phelps with the U.S. Department of Justice Consumer Protection Branch.