Monthly Archives: July 2013

Three Former UBS Executives Sentenced to Serve Time in Prison for Frauds Involving Contracts Related to the Investment of Municipal Bond Proceeds

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Three former financial services executives were sentenced today in U.S. District Court for the Southern District of New York for their participation in frauds related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.

  Peter Ghavami, Gary Heinz and Michael Welty, all former UBS AG executives, were convicted on Aug. 31, 2012, after a five-week trial for their roles in the frauds.  They were sentenced today by U.S. District Court Judge Kimba Wood.  Ghavami was sentenced to serve 18 months in prison and to pay a $1 million criminal fine;  Heinz was sentenced to serve 27 months in prison and to pay a $400,000 criminal fine; and  Welty was sentenced to serve 16 months in prison and to pay a $300,000 criminal fine.

“For years, these executives corrupted the competitive bidding process and defrauded municipalities across the country for important public works projects,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. “The division will continue to prosecute those who subvert and corrupt competitive markets for personal profit.”

According to evidence presented at trial, while employed at UBS, Ghavami, Heinz and Welty participated in multiple fraud conspiracies and schemes with various financial institutions and with a broker, at various time periods from as early as March 2001 until at least November 2006.  These financial institutions, or providers, offered a type of contract – known as an investment agreement – to state, county and local governments and agencies, and not-for-profit entities, throughout the United States. The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects. Public entities typically hire a broker to assist them in investing their money and to conduct a competitive bidding process to determine the winning provider.

At trial, the Department of Justice showed that while acting as providers, Ghavami, Heinz and Welty conspired with other providers and with a broker to corrupt the bidding process for more than a dozen investment agreements in order to increase the number and profitability of the agreements awarded to UBS.  At other times, while acting as brokers, Ghavami, Heinz, Welty and their co-conspirators arranged for UBS to receive kickbacks in exchange for manipulating the bidding process and steering investment agreements to certain providers. Ghavami, Heinz and Welty deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities to refinance outstanding debt and for various public works projects, such as for building or repairing schools, hospitals and roads. Evidence at trial established that they cost municipalities around the country and the U.S. Treasury millions of dollars.

During the trial, the government presented specific evidence relating to 26 corrupted bids, including 76 recorded conversations made by the co-conspirator financial institutions. Among the issuers and not-for-profit entities whose agreements or contracts were subject to the defendants’ schemes were the commonwealth of Massachusetts, the New Mexico Educational Assistance Foundation, the Tobacco Settlement Financing Corporation of Rhode Island, the Hospital Authority of Forsyth County, Ga., and the RWJ Health Care Corp. at Hamilton in New Jersey.

“The charges against these individuals outline a deceptive scheme to subvert competition in the marketplace. Those who engage in this type of criminal activity not only stand to defraud public entities, but erode the public’s trust in the competitive bidding process,” said George Venizelos, Acting Director in Charge of the FBI in New York.  “The sentences announced today remind the public that the FBI will continue to work with the Antitrust Division to ensure the integrity of competitive bidding in public finance.”

“Those who manipulate the competitive bidding system to benefit themselves will be held accountable for their criminal activity,” said Richard Weber, Chief, Internal Revenue Service – Criminal Investigation (IRS-CI). “The defendants conspired with others to corrupt the bidding process for more than a dozen investment agreements in order to increase the profitability of the agreements awarded to UBS. Quite simply, they enriched themselves at the expense of the towns and cities that needed the money for important public works projects such as building and repairing schools, hospitals and roads. IRS-CI is committed to using our financial expertise to uncover this kind of corruption.”

Ghavami was found guilty on two counts of conspiracy to commit wire fraud and one count of substantive wire fraud. Heinz was found guilty on three counts of conspiracy to commit wire fraud and two counts of substantive wire fraud. Welty was found guilty on three counts of conspiracy to commit wire fraud.

A total of 20 individuals have been charged as a result of the department’s ongoing municipal bonds investigation, and 19 have been convicted or pleaded guilty. Another individual awaits trial. Additionally, one company, Rubin/Chambers, Dunhill Insurance Services Inc. has pleaded guilty.

The sentences announced today resulted from an ongoing investigation conducted by the Antitrust Division’s New York and Chicago Offices, the FBI and the IRS-CI. The division is coordinating its investigation with the U.S. Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.

Today’s charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established 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 nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.

Owner of California Medical Equipment Supply Company Found Guilty of $11 Million Medicare Fraud Scheme

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The daughter of a church pastor and owner of a California-based durable medical equipment (DME) supply company was found guilty by a jury of Medicare fraud charges for her role in a Medicare fraud scheme that resulted in over $11 million in fraudulent billings to Medicare.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney André Birotte Jr. of the Central District of California; Special Agent in Charge Glenn R. Ferry of the Los Angeles Region of the U.S. Department of Health and Human Services’s Office of Inspector General (HHS-OIG); Assistant Director in Charge Bill Lewis of the FBI’s Los Angeles Field Office; and Special Agent in Charge Joseph Fendrick of the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse made the announcement.

Obiageli Agbu, 26, of Carson, Calif., was found guilty on July 19, 2013, of one count of conspiracy to commit health care fraud and eight counts of health care fraud following a two-week trial.

The evidence introduced at trial showed that Agbu owned Ibon Inc., a fraudulent DME supply company that she operated from a nondescript office building in Carson.  Agbu’s father and co-defendant, Charles Agbu, a church pastor who pleaded guilty to Medicare fraud and money laundering charges in December 2012, ran a fraudulent DME supply company called Bonfee Inc. from the same office building that housed Ibon.  The trial evidence showed that from Ibon and Bonfee, Agbu, her father and others working with them submitted more than $11 million in fraudulent claims from Ibon and Bonfee to Medicare for expensive, high-end power wheelchairs, hospital beds, braces and other DME that customers either did not need or receive.

According to evidence at trial, Agbu and her father purchased the power wheelchairs wholesale for approximately $900 per wheelchair, but they billed the wheelchairs to Medicare at $4,000 to $5,000 per power wheelchair.  These power wheelchairs were a type of medical equipment of last resort reserved for people with severe mobility limitations and could cause harm if the wheelchairs were supplied to people who did not have a legitimate medical need for them.

Agbu and her father paid kickbacks to street-level patient recruiters or “marketers” who would find senior citizens with Medicare and Medi-Cal benefits and cajole the seniors into agreeing to accept power wheelchairs and other DME that the seniors did not need.  The seniors were directed to doctors who received cash kickbacks of $200 to $1,000 to write fraudulent prescriptions and other Medicare-specific documents conspirators used at Bonfee and Ibon to submit fraudulent claims to Medicare.

As a result of this scheme, between July 2005 and February 2011, Agbu, her father and those working with them submitted approximately $11,094,918 million in fraudulent claims to Medicare and received approximately $5,788,725 on those claims.

At sentencing, scheduled for Oct. 17, 2013, Agbu faces a maximum penalty of 10 years in prison for each count of conviction.  Agbu’s father is scheduled for sentencing on Aug. 15, 2013.  Agbu’s other co-defendants – Dr. Juan Van Putten, Dr. Emmanuel Ayodele, Alejandro Maciel and Candalaira Estrada – have each pleaded guilty to Medicare fraud charges and are scheduled for sentencing in September and October 2013.

The case is being investigated by the FBI, HHS-OIG and the California Department of Justice.  The case is being prosecuted by Trial Attorneys Jonathan T. Baum and Alexander Porter of the Criminal Division’s Fraud Section, with assistance from Trial Attorney William Kanellis.

The case 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 Central District of California.  The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

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.

Former Senior Executive of ArthroCare Corp. Pleads Guilty in $400 Million Securities Fraud Scheme

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A former senior executive of ArthroCare Corp., a publicly traded medical device company based in Austin, Texas, pleaded guilty for his role in a scheme to defraud the company’s shareholders and members of the investing public by falsely inflating ArthroCare’s earnings, announced Acting Assistant Attorney Mythili Raman of the Department of Justice’s Criminal Division and U.S. Attorney Robert Pitman of the Western District of Texas. The plea was taken under seal on June 24, 2013, and unsealed late yesterday.

John Raffle, 45, of Austin, pleaded guilty before U.S. Magistrate Judge Mark Lane in Austin to conspiracy to commit securities, mail and wire fraud and two false statements violations.  Raffle was the senior vice president of Strategic Business Units at ArthroCare, overseeing all sales and marketing staff at the company.  Raffle admitted that he and other co-conspirators falsely inflated ArthroCare’s sales and revenue through a series of end-of-quarter transactions involving ArthroCare’s distributors and that he and other co-conspirators caused ArthroCare to file a Form 10-K for 2007 and Form 10-Q for the first quarter of 2008 with the U.S. Securities and Exchange Commission that materially misrepresented ArthroCare’s quarterly and annual sales, revenues, expenses and earnings.  As part of his plea, Raffle agreed that his conduct and the conduct of his co-conspirators caused more than $400 million in losses to shareholders.

According to court documents, Raffle and others determined the type and amount of product to be shipped to distributors – notably ArthroCare’s largest distributor, DiscoCare Inc. –  based on ArthroCare’s need to meet sales forecasts, rather than the distributors’ actual orders. Raffle and others then caused ArthroCare to “park” millions of dollars worth of ArthroCare’s medical devices at its distributors at the end of each relevant quarter. ArthroCare would then report these shipments as sales in its quarterly and annual filings at the time of the shipment, enabling the company to meet or exceed internal and external earnings forecasts.

According to the superseding information, DiscoCare agreed to accept shipment of approximately $37 million of product in exchange for substantial, upfront cash commissions, extended payment terms and the ability to return product, as well as other special conditions, allowing ArthroCare to falsely inflate its revenue by tens of millions of dollars.  To conceal the fact that DiscoCare owed ArthroCare a substantial amount of money on the unused inventory, Raffle and others caused ArthroCare to acquire DiscoCare on Dec. 31, 2007.

According to court documents, between December 2005 and December 2008, ArthroCare’s shareholders held more than 25 million shares of ArthroCare stock.  On July 21, 2008, after ArthroCare announced publicly that it would be restating its previously reported financial results from the third quarter 2006 through the first quarter 2008 to reflect the results of an internal investigation, the price of ArthroCare shares dropped from $40.03 to $23.21 per share.  The drop in ArthroCare’s share price caused an immediate loss in shareholder value of more than $400 million.

Raffle faces a maximum prison sentence of five years in prison for each charge.  A sentencing date has yet to be scheduled.  Raffle’s co-defendant David Applegate pleaded guilty on May 9, 2013.  ArthroCare’s Chief Executive Officer, Michael Baker, and Chief Financial Officer, Michael Gluk, were indicted as part of the same alleged securities fraud scheme on July 16, 2013.  An indictment is merely a charge, and the defendants are presumed innocent until proven guilty.

This case was investigated by the FBI’s Austin office.  The case is being prosecuted by Deputy Chief Benjamin D. Singer and Trial Attorneys Henry P. Van Dyck and William Chang of the Criminal Division’s Fraud Section.  The Department recognizes the substantial assistance of the U.S. Securities and Exchange Commission.

FORMER OWNER OF TWO FLORIDA AIRLINE FUEL SUPPLY COMPANIES CHARGED FOR ROLE IN SCHEME TO DEFRAUD ILLINOIS-BASED RYAN INTERNATIONAL AIRLINES

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WASHINGTON — A former owner and operator of two Florida-based  airline fuel supply service companies made his initial appearance today in the U.S.  District Court for the Southern District of Florida in West Palm Beach on  charges of participating in a scheme to defraud Illinois-based Ryan International Airlines, the Department of Justice announced.

Sean E. Wagner was arrested on  July 19, 2013, in Weston, Fla., on a one-count criminal complaint to commit  wire fraud and honest services fraud relating to a scheme to defraud Ryan, a charter  airline company based in Rockford, Ill.  At today’s hearing, the department said that Wagner  was arrested after there were indications that he was a flight risk.

The  criminal complaint alleges that Wagner participated in a conspiracy to defraud  Ryan by making kickback payments to Wayne Kepple, the former vice president of  ground operations for Ryan in charge of contracting with providers of goods and  services on behalf of the company.  In  exchange, Kepple awarded business to Wagner’s fuel supply service companies. According  to the criminal complaint, from at least as early as December 2005 through at  least August 2009, Wagner, his companies, and others made kickback payments  totaling more than $200,000, in the form of checks, wire transfers, gift cards and  cash, to Kepple while working at Ryan.

Ryan provided air passenger and  cargo services for corporations, private individuals, and the U.S. government,  including the U.S. Department of Defense, the U.S. Department of Homeland Security and the U.S. Marshals Service.

“The Antitrust Division will take  enforcement action against those who subvert the competitive process by trading  contracts for kickbacks, especially where the U.S. government is being  victimized,” said Bill Baer, Assistant Attorney General in charge of the  Department of Justice’s Antitrust Division. “The Antitrust Division will hold  accountable those who seek to defraud the government and U.S. taxpayers.”

Wagner is  charged with one count of conspiracy to commit wire fraud and honest services  fraud, which carries a maximum sentence of 20 years in prison and a $250,000  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 amount is greater than the statutory maximum fine.

As a result  of this ongoing investigation, four individuals have pleaded guilty to date. Three  of the individuals have been ordered to serve sentences ranging from 16 to 24  months in prison and to pay more than $220,000 in restitution. The fourth  individual, Wayne Kepple, pleaded guilty and is awaiting sentencing.

This charge  is the result of an investigation being conducted by the Antitrust Division’s  National Criminal Enforcement Section and the U.S. Department of Defense’s  Office of Inspector General, with assistance from the U.S. Attorney’s Office  for the Southern District of Florida.

Home Health Agency Owner Pleads Guilty for Role in $13.8 Million Medicare Fraud Scheme

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Detroit-area resident Javed Rehman pleaded guilty today for his role in a $13.8 million Medicare fraud scheme, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Robert D. Foley III of the FBI’s Detroit Field Office and Special Agent in Charge Lamont Pugh III of the Chicago Regional Office for the U.S. Department of Health and Human Service’s Office of Inspector General (HHS-OIG).

 

Rehman, 50, of Farmington Hills, Mich., pleaded guilty before U.S. District Judge Gerald E. Rosen in the Eastern District of Michigan to one count of conspiracy to commit health care fraud.  At sentencing, scheduled for Nov. 7, 2013, Rehman faces a maximum penalty of 10 years in prison.

According to information contained in plea documents, in or around May 2009, Rehman purchased Quantum Home Care Inc. with co-conspirators Tausif Rahman and Muhammad Ahmad.  Rehman paid kickbacks to recruiters to obtain Medicare beneficiary information used to bill Medicare for home health services – including physical therapy and skilled nursing services – that were never rendered.  Rehman was the administrator of Quantum and was responsible for the submission of false and fraudulent claims to Medicare based on falsified files created by the co-conspirators.

Medicare paid approximately $1.7 million to Quantum for physical therapy and skilled nursing services that Quantum purported to render between approximately June 2009 and September 2011.  According to court documents, between 2008 and 2009, Rehman’s co-conspirators acquired control of three other home health care companies. The four companies, including Quantum, received approximately $13.8 million from Medicare in the course of the conspiracy.

Rahman pleaded guilty on Jan. 5, 2012, to one count of conspiracy to commit health care fraud and one count of money laundering and is scheduled for sentencing on Oct. 30, 2013. Ahmad pleaded guilty on Aug. 28, 2012, to one count of conspiracy to commit health care fraud and is scheduled for sentencing on Oct. 29, 2013.

This case was investigated by the FBI, HHS-OIG, and IRS Criminal Investigation 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 Eastern District of Michigan. It is being prosecuted by Assistant Chief Catherine K. Dick 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.

Cheating in Contracts: A $30 Million Case of Corruption

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Cheating in Contracts
A $30 Million Case of Corruption

07/19/13

 

Five aces

It’s been billed as the “largest domestic bribery and bid-rigging scheme in the history of federal contracting cases.”

 

Specifically, over a five-year period, more than $30 million was illegally siphoned from federal coffers by a ring of crooked public officials and government contractors in the D.C. area operating via bribes, kickbacks, and other dirty dealings.

 

A big fix, especially in lean budget times. The plot was thickening, too—a billion-dollar government contract was about to be steered illegally into favored hands in exchange for sizeable payments under the table.

 

But ultimately the hammer fell, and fell hard, following a massive, multi-year investigation by the FBI and its partners called Five Aces (a reference to cheating by stacking the deck) that came to light in October 2011 after the first arrests. A total of 15 federal employees and contractors—plus one company, Nova Datacom—have since pled guilty. That includes the mastermind of the conspiracy, Kerry Khan, who just last week was sentenced to nearly 20 years in prison.

 

Khan, while serving as a program manager and contracting officer’s technical representative for the U.S. Army Corps of Engineers, cooked up the bribery scheme in 2006 with his co-worker Michael Alexander to take their own piece of the contracting pie.

 

The case evolved into a complicated conspiracy, involving six different companies and several shady practices. The FBI began its investigation in the summer of 2009, when we received a tip indicating that an area business was submitting phony references and evaluations to boost its chances of getting government contracts. The company, we discovered, also had a disabled veteran falsely posing as its owner—which gave it an advantage under federal contracting laws.

 

We soon learned that Khan and his criminal colleague had created a network of crooked contractors who agreed to pay them bribes and kickbacks in exchange for winning deals. In most of those cases, the contracts were fulfilled and the work done, but often times there were extra charges disguised as “overhead” on the bills…and most of that money ended up in Khan’s pockets. In other instances, Khan awarded contracts to straw subcontractors and paid fake invoices submitted by the fictitious companies.

 

For the members of the criminal conspiracy, it was a lucrative enterprise—especially for Khan, who was paid, directly and indirectly, more than $12 million. Khan used the money to live large: in addition to paying off his mortgage and remodeling his house, he purchased flat screen TVs, computers, luxury watches, airline tickets, accommodations in five-star hotels, high-end liquor, and a dozen properties in three states. And apparently, money is thicker than blood in some cases—Khan got his son and brother involved in the scheme (both have since pled guilty).

 

Five Aces was a multi-agency undertaking from the start, with the FBI and its partners uncovering vital evidence using sophisticated investigative techniques, including consensual recordings by cooperating witnesses and court-authorized wiretaps. We heard details about crimes directly from the mouths of the criminals committing them.

 

Justice has been served, and just as importantly, more than $32 million is being rightfully returned to the U.S. government and the American people. It’s another case in point as to why the FBI continues to focus squarely on public corruption as its top criminal investigative priority.

Owner of Los Angeles-area DME Company Pleads Guilty to Conspiring to Defraud Medicare and Medi-Cal

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The owner of a Los Angeles-area durable medical equipment (DME) supply company has pleaded guilty to conspiring to defraud Medicare and Medi-Cal of more than $650,000.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney André Birotte Jr. of the Central District of California; Special Agent in Charge Glenn R. Ferry for the Los Angeles Region of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG); Assistant Director in Charge Steven Martinez of the FBI’s Los Angeles Field Office; and Special Agent in Charge Joseph Fendrick of the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse, made the announcement.

Kim Ricks, of Moreno Valley, Calif., pleaded guilty on July 17, 2013, before U.S. District Judge Fernando M. Olguin in the Central District of California to one count of conspiracy to commit health care fraud.

In court, Ricks admitted that she owned and operated Kim’s Medical Supplies (“KMS”), a DME company that was located in Moreno Valley.  Ricks enrolled KMS in both Medicare and Medi-Cal, which allowed her to submit claims to both programs.  Ricks admitted that between approximately December 2005 and September 2012, she submitted claims to Medicare and Medi-Cal for power wheelchairs (PWCs) and other DME on behalf of people who did not have a legitimate medical need for the equipment, a practice that, Ricks admitted in court, she knew violated Medicare and Medi-Cal rules and regulations.

Ricks also admitted that she submitted claims to Medicare and Medi-Cal for PWCs and other DME that neither she nor her co-conspirators delivered to KMS’s customers, which Ricks knew violated the rules and regulations of both Medicare and Medi-Cal.  In some cases, Ricks obtained the Medicare billing and personal information of individuals and, without their knowledge, used that information to submit claims to Medicare and Medi-Cal for PWCs and other DME that neither she nor her co-conspirators provided to the individuals.  Ricks admitted that she submitted these types of claims to Medicare and Medi-Cal because she needed the money to keep KMS viable.  Ricks also admitted that she submitted claims to Medicare and Medi-Cal for power wheelchairs and DME that she knew were supported by fraudulent prescriptions forged by her co-conspirators.

Ricks admitted that she was responsible for the claims that KMS submitted to Medicare and Medi-Cal, although, at times, her co-conspirators used her Medicare and Medi-Cal provider numbers to submit false and fraudulent claims to both programs.  As a result of this conspiracy, Ricks admitted that she and her co-conspirators submitted and caused the submission of approximately $643,468 in fraudulent Medicare claims and received approximately $236,882 in ill-gotten reimbursement payments.  Ricks admitted further that she and her co-conspirators submitted and caused the submission of approximately $11,849 in fraudulent Medi-Cal claims and received approximately $8,660 in ill-gotten reimbursement payments.

At sentencing, scheduled for Oct. 24, 2013, Ricks faces a maximum penalty of 10 years in prison.

The case is being prosecuted by Trial Attorney Jonathan T. Baum of the Criminal Division’s Fraud Section.  The case is being investigated by the HHS-OIG and the California Department of Justice.

The case 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 Central District of California.  The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

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.

US Army Sergeant Pleads Guilty in Georgia to Stealing Identity Information from US Army Computer System

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Ammie Brothers, 29, of Columbus, Ga., a sergeant in the U.S. Army, pleaded guilty today to unlawfully obtaining personal information from the U.S. Army’s Army Knowledge Online computer system.

The guilty plea was announced by Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Virginia Neil H. MacBride; U.S. Attorney for the Middle District of Georgia Michael J. Moore; and Director Daniel T. Andrews of the U.S. Army Criminal Investigation Command’s Computer Crime Investigative Unit.

Brothers pleaded guilty before U. S. District Judge Clay Land in Columbus, Ga., to one count of unauthorized access to information from a U.S. Army computer system.  She was charged on Feb. 14, 2013, in a five-count indictment returned by a federal grand jury in Alexandria, Va.

In a statement of facts filed with the plea agreement, Brothers admitted that between April 24, 2009, and Oct. 5, 2011, she repeatedly and intentionally accessed two victims’ Army Knowledge Online accounts, which contain personnel files for members of the armed services.  Brothers initially gained access by calling the Army Knowledge Online help desk in the Eastern District of Virginia and providing the victims’ Social Security numbers and dates of birth in order to obtain temporary passwords.

When law enforcement searched Brothers’s home in Columbus, they recovered numerous documents printed from the Army Knowledge Online system that contained victims’ Social Security numbers, bank account numbers and employment history, including the Social Security number of one minor child.  Brothers admitted to law enforcement that, in addition to illegally accessing the victims’ Army Knowledge Online accounts, she regularly harassed the victims by telephone and accessed several credit card accounts belonging to one victim, and in one case authorized charges without the victim’s knowledge or consent.

At sentencing, scheduled for Oct. 24, 2013, Brothers faces a maximum penalty of five years in prison.

This case was investigated by the Computer Crime Investigative Unit of U.S. Army Criminal Investigation Command.   The case is being prosecuted by Trial Attorney Peter V. Roman of the Justice Department’s Computer Crime and Intellectual Property Section, Assistant U.S. Attorney Lindsay Kelly of the Eastern District of Virginia and Assistant U.S. Attorney Crawford L. Seals of the Middle District of Georgia.

PANASONIC AND ITS SUBSIDIARY SANYO AGREE TO PLEAD GUILTY IN SEPARATE PRICE-FIXING CONSPIRACIES INVOLVING AUTOMOTIVE PARTS AND BATTERY CELLS

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WASHINGTON — Panasonic Corp. and its subsidiary, SANYO Electric Co. Ltd.,  have agreed to plead guilty and to pay a total of $56.5 million in criminal  fines for their roles in separate price-fixing conspiracies involving automotive parts and battery cells, the Department of Justice announced  today.  LG Chem Ltd., a leading  manufacturer of secondary batteries, has agreed to plead guilty and to pay a  $1.056 million criminal fine for price fixing involving battery cells.

Osaka, Japan-based Panasonic agreed to pay a $45.8 million criminal  fine for its role in the automotive parts conspiracy. SANYO agreed to pay a  $10.731 million criminal fine for its role in the battery cells conspiracy.  The guilty pleas against SANYO and LG Chem  are the first in the department’s ongoing investigation into anticompetitive  conduct in the cylindrical lithium ion battery cell industry.

The three-count felony charge against Panasonic was filed in U.S.  District Court for the Eastern District of Michigan.  Separate one-count felony charges were filed  against SANYO and LG Chem in U.S. District Court for the Northern District of  California.  As part of the plea  agreements, which are subject to court approval, the charged companies have  agreed to cooperate in the department’s ongoing antitrust investigations.

Panasonic has agreed to plead  guilty for its role in a conspiracy to fix prices of switches, steering angle sensors and automotive high intensity discharge (HID) ballasts installed in  cars sold in the United States and elsewhere.   SANYO and LG Chem Ltd. have agreed to plead guilty for their roles in a  conspiracy to fix the prices of cylindrical lithium ion battery cells sold  worldwide for use in notebook computer battery packs.

“Panasonic is charged with participating in separate price-fixing  conspiracies affecting numerous parts used in cars made and sold in the United  States while its subsidiary was also fixing prices on battery cells used by  consumers of notebook computers,” said Scott D. Hammond, Deputy Assistant  Attorney General for the Antitrust Division’s criminal enforcement program.  “Pleading guilty and cooperating with the  division’s ongoing investigations is a necessary step in changing a corporate culture that turned customers into price-fixing victims.”

According  to the first count of a three-count felony charge filed today in U.S. District  Court for the Eastern District of Michigan in Detroit, Panasonic participated  in a conspiracy to rig bids for, and to fix, stabilize and maintain the prices  of steering wheel switches, turn switches, wiper switches, combination switches  and door courtesy switches sold to Toyota Motor Corp. and Toyota Motor  Engineering & Manufacturing North America Inc. in the United States and  elsewhere. According to the court document, Panasonic and its co-conspirators  carried out the conspiracy from at least as early as September 2003 until at  least February 2010.

The  second count charges that Panasonic, during this same time period, participated  in a conspiracy to rig bids for, and to fix, stabilize,  and maintain the prices of steering angle sensors sold to Toyota in the United  States and elsewhere. The department said that Panasonic and its  co-conspirators agreed, during meetings and conversations, to suppress and  eliminate competition in the automotive parts industry by agreeing to rig bids for, and to fix,  stabilize, and maintain the prices of steering angle sensors sold to Toyota  Motor Corp. and Toyota Motor Engineering & Manufacturing North America Inc.  in the United States and elsewhere.

According  to the third count of the charge, from at least as early as July 1998 and  continuing until at least February 2010, Panasonic and its co-conspirators  participated in a conspiracy to suppress and eliminate competition in the  automotive parts industry by agreeing, during meetings and conversations, to rig bids for, and to fix,  stabilize, and maintain the prices of automotive HID ballasts sold to Honda  Motor Co. Ltd. and American Honda Motor Co. Inc., Mazda Motor Corp. and Mazda  Motor of America Inc., and Nissan Motor Co. Ltd. and Nissan North America Inc.  in the United States and elsewhere.

Including Panasonic, 11 companies and 15 executives have pleaded  guilty or agreed to plead guilty and have agreed to pay a total of more than  $874 million in criminal fines as a result of the auto parts investigation. Additionally, 12 of the individuals have been sentenced to pay criminal fines and to serve jail sentences ranging from a year and a day to two years each. The three additional executives have agreed to serve time in prison and are currently awaiting sentencing.

“The FBI remains committed to protecting American consumers and  businesses from corporate corruption. The conduct of Panasonic, SANYO, and LG Chem  resulted in inflated production costs for notebook computers and cars purchased  by U.S. consumers,” said Joseph S. Campbell, FBI Criminal Investigative Division Deputy Assistant Director.  “These investigations illustrate our efforts to ensure market fairness for U.S. businesses by bringing corporations to justice when their commercial activity violates antitrust laws.”

According to the one-count felony charge  filed today in the U.S. District Court for the Northern District of California  in San Francisco, SANYO and LG Chem engaged in a conspiracy to fix the price of the cylindrical lithium ion battery cells used in notebook computer battery packs from about April 2007 until about September 2008. Cylindrical  lithium ion battery cells are rechargeable batteries that are often incorporated in groups into more powerful battery packs commonly used to power electronic devices.

According to the charges, SANYO, LG Chem and  their co-conspirators carried out the conspiracy by, among other things, agreeing during meetings and conversations to price cylindrical lithium ion  battery cells for use in notebook computer battery packs to customers at  predetermined levels and issuing price quotations to customers in accordance  with those agreements. The department also said that SANYO, LG Chem and their  co-conspirators collected and exchanged information for the purpose of  monitoring and enforcing adherence to the agreed-upon prices and took steps to  conceal the conspiracy.

Panasonic, SANYO and LG Chem are each charged with price fixing in  violation of the Sherman Act, which carries a maximum penalty of a $100 million criminal fine for corporations. The maximum fine for the company may be  increased to twice the gain derived from the crime or twice the loss suffered  by the victims, if either of those amounts is greater than the statutory  maximum fine.

Today’s charges arose from an ongoing  investigation in the cylindrical lithium ion battery cells industry being  conducted by the Antitrust Division’s San Francisco Office and the FBI in San  Francisco as well as 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 automotive parts 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. Anyone with information on price  fixing, bid rigging and other anticompetitive conduct related to other products  in the automotive parts industry should contact the Antitrust Division’s  Citizen Complaint Center at 1-888-647-3258, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Detroit Field Office at 313-965-2323. Anyone  with information concerning illegal or anticompetitive conduct in the battery industry is urged to call the Antitrust Division’s San Francisco Office at  415-436-6660 or visit www.justice.gov/atr/contact/newcase.htm.

Seven Defendants in Mortgage Origination Fraud Scheme Indicted for Bank Fraud Conspiracy Along with Other Charges

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The Justice Department announced that seven defendants were arrested and arraigned today for their roles in a mortgage fraud conspiracy that operated in Detroit.

A federal grand jury in the Eastern District Court of Michigan indicted Peter Allen, Suhail Hallak, Al Karana, Joey Murad, Jason Najor, Jeffrey Najor and Wasseem Shamoun with conspiracy to commit bank fraud, numerous counts of bank fraud and other fraud charges.

The indictment alleges that from approximately January 2006 to December 2008, the defendants conspired to defraud lending institutions by obtaining mortgage loans using fraudulent information.  According to the indictment, the defendants devised a scheme wherein they purchased property for approximately $5,000 to $40,000 per home, then recruited straw buyers to submit fraudulent loan applications for home mortgages in exchange for a fee. According to the indictment, the scheme caused financial institutions to pay approximately $10 million in fraudulent mortgage loan funds.

In addition to the conspiracy charge, Hallak, Karana, Jason Najor, Jeffrey Najor, and Shamoun are charged with 20 counts of bank fraud, Murad is charged with seven counts of bank fraud and Allen is charged with two counts of bank fraud.  Jeffrey Najor is also charged with two counts of assisting in the filing of false tax returns, in connection with his filings on behalf of J.A. Najor Corporation.  Jeffrey Najor is also charged with one count of bankruptcy fraud.

An indictment is not a finding of guilt. Individuals charged in indictments are presumed innocent until proven guilty.  If convicted of the conspiracy charge, the defendants face up to 30 years in prison and a $1 million fine.  Each count of bank fraud carries a maximum penalty of 30 years in prison and $1 million fine.   Assisting in the filing of a false return is punishable by up to three years in prison and a fine of $250,000.  The bankruptcy fraud charge has a maximum penalty of five years in prison and a fine of $250,000.

This case was investigated by Internal Revenue Service – Criminal Investigation, the Drug Enforcement Administration and the FBI and is being prosecuted by Senior Litigation Counsel Corey Smith and Trial Attorney Mark McDonald of the Justice Department’s Tax Division.