Monthly Archives: August 2013

Three Former Broker-dealer Employees Plead Guilty in Manhattan Federal Court to Bribery of Foreign Officials, Money Laundering and Conspiracy to Obstruct Justice

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Three employees of a New York-based U.S. broker-dealer have pleaded guilty for their roles in bribery schemes involving two state economic development banks in Venezuela.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge George Venizelos of the New York Office of the FBI made the announcement.

Ernesto Lujan, Jose Alejandro Hurtado and Tomas Alberto Clarke Bethancourt pleaded guilty in New York federal court to conspiring to violate the Foreign Corrupt Practices Act (FCPA), to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses.  These charges relate to a scheme to bribe a foreign official named Maria de los Angeles Gonzalez de Hernandez at Banco de Desarrollo Económico y Social de Venezuela (BANDES), a state economic development bank in Venezuela, in exchange for receiving trading business from BANDES.  Lujan, Hurtado and Clarke each also pleaded guilty to an additional charge of conspiring to violate the FCPA in connection with a similar scheme to bribe a foreign official employed by Banfoandes (the “Banfoandes Foreign Official”), another state economic development bank in Venezuela, and to conspiring to obstruct an examination by the U.S. Securities and Exchange Commission (SEC) of the New York-based broker-dealer (the “Broker-Dealer”) where all three defendants had worked, to conceal the true facts of the Broker-Dealer’s relationship with BANDES.

Lujan, 50, and Clarke, 43, entered their guilty pleas yesterday before U.S. Magistrate Judge James C. Francis IV, and Hurtado, 38, pleaded guilty today, also before Judge Francis. The men each pleaded guilty to the same six offenses and face a maximum penalty of five years in prison on each count except money laundering, which carries a maximum penalty of 20 years in prison.  Sentencing for Lujan and Clarke is scheduled for Feb. 11, 2014, before U.S. District Judge Paul G. Gardephe.  Hurtado is scheduled for sentencing before U.S. District Judge Harold Baer Jr. on March 6, 2014.

According to the informations filed against Lujan, Hurtado and Clarke this week, the criminal complaints previously filed, and statements made during the plea proceedings, Lujan, Clarke and Hurtado worked or were associated with the Broker-Dealer, principally through its Miami offices.  In 2008, the Broker-Dealer established a group called the Global Markets Group, which included Lujan, Clarke and Hurtado, and which offered fixed income trading services to institutional clients.

One of the Broker-Dealer’s clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance.  The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding.  Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity.  At her direction, BANDES conducted substantial trading through the Broker-Dealer.  Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed-income investments for which the Broker-Dealer charged the bank a mark-up on purchases and a mark-down on sales.

The Broker-Dealer also conducted business with Banfoandes, another state development bank in Venezuela that, along with its 2009 successor Banco Bicentenario, operated under the direction of the Venezuelan Ministry of Finance.  Banfoandes acted as a financial agent of the Venezuelan government in order to promote economic and social development by, among other things, offering credit to low-income Venezuelans.  The Banfoandes Foreign Official was responsible for some of Banfoandes’s foreign investments.

Court records state that from early 2009 through 2012, Lujan, Clarke and Hurtado participated in a bribery scheme in which Gonzalez allegedly directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez.  During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES.  Agents and employees of the Broker-Dealer, including Lujan, Clarke and Hurtado, devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer.  Emails, account records and other documents collected from the Broker-Dealer and other sources reveal that Gonzalez allegedly received a substantial share of the revenue generated by the Broker-Dealer for BANDES-related trades.  Specifically, Gonzalez allegedly received kickbacks and payments from Broker-Dealer agents and employees that were frequently in six-figure amounts.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places.  For instance, Lujan, Clarke and Hurtado used accounts they controlled in Switzerland to transfer funds to an account Gonzalez allegedly controlled in Switzerland.  Additionally, Hurtado and his spouse received substantial compensation from the Broker-Dealer, portions of which Hurtado transferred to an account allegedly held by Gonzalez in Miami and to an account held by an associate of Gonzalez in Switzerland.  Hurtado also sought and allegedly received reimbursement from Gonzalez for the U.S. income taxes he had paid on money that he used to make kickback payments to Gonzalez.  Lujan and Clarke also derived substantial profit from their roles in the bribery scheme.

According to court records, beginning in or about November 2010, the SEC commenced a periodic examination of the Broker-Dealer, and from November 2010 through March 2011 the SEC’s examination staff made several visits to the Broker-Dealer’s offices in Manhattan.  In early 2011, Lujan, Clarke and Hurtado discussed their concern that the SEC was examining the Broker-Dealer’s relationship with BANDES and asking questions regarding certain emails and other information that the SEC examination staff had discovered.  Lujan, Clarke and Hurtado agreed that they would take steps to conceal the true facts of the Broker-Dealer’s relationship with BANDES, including deleting emails.  Lujan, Clarke and Hurtado then, in fact, deleted emails.  Additionally as part of this effort to obstruct the SEC examination, Clarke lied to SEC examination staff in response to an interview question about his relationship to an individual who had received purported foreign associate payments relating to BANDES.

In a related scheme, from 2008 through mid-2009, Lujan, Clarke and Hurtado paid bribes to the Banfoandes Foreign Official, who, in exchange, directed Banfoandes trading business to the Broker-Dealer.

Gonzalez was charged in a criminal complaint and arrested on May 3, 2013, in connection with the BANDES bribery scheme.  The charges against Gonzalez are merely accusations, and she is presumed innocent unless and until proven guilty.

This ongoing investigation is being conducted by the FBI, with assistance from the SEC and the Justice Department’s Office of International Affairs.

Assistant Chief James Koukios and Trial Attorneys Maria Gonzalez Calvet and Aisling O’Shea of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Harry A. Chernoff and Jason H. Cowley of the Southern District of New York’s Securities and Commodities Fraud Task Force are in charge of the prosecution.  Assistant U.S. Attorney Carolina Fornos is responsible for the forfeiture aspects of the case.

Army Soldier Pleads Guilty in Kentucky to Bribery Charges for Facilitating Thefts of Fuel in Afghanistan

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U.S. Army Sergeant Kevin Bilal Abdullah pleaded guilty today to bribery charges for his role in the theft of fuel at Forward Operating Base (FOB) Fenty, near Jalalabad, Afghanistan.

The guilty plea was announced by Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney for the Western District of Kentucky David J. Hale.

Abdullah, 30, of Fort Campbell, Ky., pleaded guilty before U.S. District Judge Thomas B. Russell in the Western District of Kentucky to one count of conspiracy to commit bribery and one substantive count of bribery.

According to court documents, in approximately May and June 2010, Abdullah was involved in overseeing the delivery of fuel from FOB Fenty to other military bases.  As part of this process, documents generally described as “transportation movement requests” (TMRs or mission sheets) were created to authorize the movement of fuel.

According to court documents, Abdullah created fraudulent TMRs that purported to authorize the transport of fuel from FOB Fenty to other military bases, even though no legitimate fuel transportation was required.  After the trucks were filled with fuel, the fraudulent TMRs were used by the drivers of the fuel trucks at FOB Fenty’s departure checkpoint in order to justify the trucks’ departures from FOB Fenty.  In truth, the fuel was simply stolen.

Abdullah pleaded guilty to receiving payments from a representative of the trucking company in exchange for facilitating the theft of approximately 25 truckloads of fuel.  According to court documents, the loss to the United States as a result of the theft was in excess of $400,000.

Abdullah’s plea is the third guilty plea arising from this investigation of fuel thefts at FOB Fenty.  On Aug. 3, 2012, Jonathan Hightower, a civilian employee of a military contractor who had conspired with Abdullah, pleaded guilty to similar charges.  On Oct. 10, 2012, Christopher Weaver also pleaded guilty to fuel theft charges.  A fourth individual, Stephanie Charboneau, was indicted April 9, 2013, and is pending trial on fuel theft-related charges.

This case is being prosecuted by Trial Attorney Mark H. Dubester of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Michael A. Bennett of the Western District of Kentucky.  This case was investigated by the Special Inspector General for Afghanistan Reconstruction; Department of the Army, Criminal Investigations Division; Defense Criminal Investigative Service; and FBI.

MRI Diagnostic Testing Company, Imagimed LLC, and Its Former Owners and Chief Radiologist to Pay $3.57 Million to Resolve False Claims Act Allegations

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New York-based Imagimed LLC, the company’s former owners, William B. Wolf III and Dr. Timothy J. Greenan, and the company’s former chief radiologist, Dr. Steven Winter, will pay $3.57 million to resolve allegations that they submitted to federal healthcare programs false claims for magnetic resonance imaging (MRI) services, the Justice Department announced today.  Imagimed owns and operates fifteen MRI facilities, located primarily in New York state, under the name “Open MRI.”

 Allegedly, from July 1, 2001, through April 23, 2008, Imagimed, Greenan, Wolf and Winter submitted claims to Medicare, Medicaid and TRICARE for MRI scans performed with a contrast dye without the direct supervision of a qualified physician.  Since a potential adverse side effect of contrast dye is anaphylactic shock, federal regulations require that a physician supervise the administration of contrast dye when it is used for an MRI.  Also, allegedly, from July 1, 2005, to April 23, 2008, Imagimed, Greenan, Wolf and Winter submitted claims for services referred to Imagimed by physicians with whom Imagimed had improper financial relationships.  In exchange for these referrals, Imagimed entered into sham on-call arrangements, provided pre-authorization services without charge and provided various gifts to certain referring physicians, in violation of the Stark Law and the Anti-Kickback Statute.

“The Department of Justice is committed to guarding against abuse of federal healthcare programs,” said Stuart F. Delery, Assistant Attorney General for the Civil Division.  “We will help protect patients’ health by ensuring doctors who submit claims to federal healthcare programs follow proper safety precautions at all times.”

U.S. Attorney for the Northern District of New York, Richard S. Hartunian said: “This case is an example of our commitment to using all of the remedies available, including civil actions under the False Claims Act, to ensure patient safety and combat health care fraud.  Stripping away the profit motive for circumventing physician supervision requirements has both a remedial and a deterrent effect.  The settlement announced today advances our critical interest in both the integrity of our health care system and the safe delivery of medical services.”

The allegations resolved by the settlement were brought in a lawsuit filed under the False Claims Act’s whistleblower provisions, which permit private parties to sue for false claims on behalf of the government and to share in any recovery.  The whistleblower in this case, Dr. Patrick Lynch, was a local radiologist and will receive $565,500.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  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 this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $14.8 billion through False Claims Act cases, with more than $10.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The investigation and settlement were the result of a coordinated effort among the U.S. Attorney’s Office for the Northern District of New York; the Justice Department’s Civil Division, Commercial Litigation Branch and the Department of Health and Human Services’ Office of Inspector General.

The case is United States of America ex rel. Lynch v. Imagimed LLC, et al. (N.D. N.Y.).  The claims released by the settlement are allegations only, and there has been no determination of liability.

Southwest Seen Overlooked as U.S. Seeks to Block AMR Deal

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“If the Justice Department defines Southwest and JetBlue out of the market, they’ve got to have good documentary and economic evidence to support that allegation,” said Grunes, the former Justice Department lawyer. Baer, the U.S. antitrust chief, “would not allow it to be in the complaint otherwise.”

Southwest Seen Overlooked as U.S. Seeks to Block AMR Deal

By Mary Schlangenstein

August 23, 2013 12:01 AM EDT

Texas-Based School Chain to Pay Government $3.7 Million for Submitting False Claims for Federal Student Financial Aid Schools Located in Texas, Florida, New Mexico and Oklahoma

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ATI Enterprises Inc. will pay the government $3.7 million to resolve False Claims Act allegations that it falsely certified compliance with federal student aid programs’ eligibility requirements and submitted claims for ineligible students, the Justice Department announced today.

“Federal financial aid is meant to help students obtain a quality education from an eligible institution, and the Department of Justice is committed to ensuring colleges comply with the rules to make certain that happens,” said Stuart F. Delery, Assistant Attorney General for the Civil Division.

Allegedly, ATI Enterprises knowingly misrepresented to the Texas Workforce Commission and to the Accrediting Commission of Career Schools and Colleges its job placement statistics to maintain its state licensure and accreditation. To participate in federal student aid programs, as authorized by Title IV of the Higher Education Act of 1965, as amended (Title IV), schools must enter into a contract with the Secretary of Education called a Program Participation Agreement, in which they agree to a number of terms. For example, if an institution advertises its job placement rates as a means of attracting students to enroll, it must make available to prospective students its most recent and accurate employment statistics to substantiate the truthfulness of its advertisements. The government alleged that, by misrepresenting its job placement statistics, ATI Enterprises fraudulently maintained its eligibility for federal financial aid under Title IV.

The government further alleged that ATI employees engaged in fraudulent practices to induce students to enroll and maintain their enrollment in the schools. This falsely increased the schools’ enrollment numbers, and consequently, the amount of federal dollars they received at the expense of taxpayers and students, who incurred long-term debt.

“Misuses of the federal student aid system must not be tolerated, for the sake of the taxpayers and of the innocent individuals who are seeking a quality education,” said Sarah R. Saldaña, U.S. Attorney for the Northern District of Texas, where some of the ATI campuses involved in the lawsuit are located.

Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida said: “Federal financial aid is there to help students attain their dreams and goals, and misuse of these funds to increase corporate profits is unacceptable. We are committed to ensuring that federal student aid is used for the benefit of students.”

The settlement amount will be paid from funds supporting three letters of credit that ATI provided to the Department of Education. In addition to the False Claims Act settlement, the Department of Education will disburse from the letter of credit funds $2 million for student loan refunds in relation to cases students filed against ATI in Texas state courts and other related arbitrations.

“Federal student aid exists so that students can make the dream of a higher education a reality. That’s why misuse in any way of these vital funds cannot be tolerated,” said Kathleen Tighe, Inspector General of the U.S. Department of Education. “I’m proud of the work of OIG special agents for holding ATI Enterprises accountable and for protecting the integrity of federal education dollars.”

The settlement resolves allegations made in two separate complaints against ATI Enterprises Inc., and related entities filed under the False Claims Act’s qui tam, or whistleblower, provisions, which permit a private individual to file suit for false claims to the government and to share in any recovery. The first complaint, U.S. ex rel. Aldridge, et al. v. ATI Enterprises Inc., et al., was filed in July 2009 in the U.S. District Court for the Northern District of Texas. The second complaint, U.S. ex rel. Ramirez-Damon v. ATI Enterprises Inc., was filed in July 2011 in the U.S. District Court for the Southern District of Florida.

This matter was investigated by the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of Texas, the U.S. Attorney’s Office for the Southern District of Florida, and the Department of Education’s Office of Inspector General and Office of General Counsel. The claims settled by this agreement are allegations only, and there has been no determination of liability.

Law 360: DOJ’s Airline Merger Challenge Recalls AT&T Fight

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“If you think since the 1990s, what’s been popular has always been a unilateral effects theory,” said Stucke, who is also of counsel at GeyerGorey LLP. “This is almost entirely a coordinated effects theory, [and] I think it’s very strategically well thought-out, [because the airlines] can’t really now divest a few landings. The way the complaint is described, it’s hard to see any remedies short of a full-blown injunction.”

DOJ’s Airline Merger Challenge Recalls AT&T Fight

 

 

GeyerGorey LLP Issues Updated Representative Matters List; Experience is Wide and Deep

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Representative Matters

Our attorneys have led and participated in some of the highest profile matters in the past decade, both while in the government and in private practice. We have been involved in the most significant criminal cartel cases, the most important mergers, the most notable civil antitrust investigations, the largest procurement fraud cases, and game-changing antitrust cases that reached the United States Supreme Court. Our collective experience stands as a testament to our work ethic, our drive for excellence, and the trust and responsibility we have been given by our clients and the government.

International Cartels:

  • Led investigation and prosecution of marine contractors engaged in conspiracy to suppress and eliminate competition to install deep sea oil platforms
  • Led investigation and prosecution of international freight forwarders engaged in conspiracy to fix prices on international air cargo shipments
  • Led investigation and prosecution of household-goods moving contractors engaged in conspiracy to fix prices for international moving services provided to Department of Defense
  • Investigation and prosecution of graphite electrodes manufacturers
  • Investigation and prosecution of ocean shipping companies
  • Investigation and prosecution of a FTSE 250 engineering company that resulted in the indictment, extradition and conviction of its former chief executive
  • Defended foreign construction company in investigation and prosecution of alleged billion-dollar bid rigging scheme, in related qui tam litigation, and in other related matters
  • Defended foreign vitamin manufacturers in investigations and prosecutions of alleged international price-fixing agreements
  • Defended foreign specialty chemical manufacturers in investigations and prosecutions of alleged international price-fixing agreements
  • Defended U.S.-based executive of foreign company in criminal and civil litigation related to his alleged role in an international cartel to fix prices in the marine supply industry
  • Defended foreign executive of foreign company in criminal and civil litigation related to his alleged role in the conspiracy to fix air cargo rates around the world
  • Defended international freight forwarder in criminal litigation related to its alleged role in an international conspiracy to rig bids on U.S. military shipping contracts
  • Investigation and subsequent prosecution of foreign vitamin manufacturers for price fixing conspiracy

Domestic Price Fixing and Bid Rigging:

  • Defended electrical products manufacturer in first felony prosecution under the Sherman Act and in civil treble damage litigation
  • Represented a class of nurses in litigation against a hospital association and a number of Arizona hospitals
  • Represented the State of Ohio against a number of dairies for allegedly rigging bids of school milk
  • Investigation and prosecution of highway paving contractors in multiple districts for bid rigging
  • Investigation and prosecution of military insignia providers supplying the Army Air Force Exchange System with over 4,000 items of insignia
  • Represented metal drum manufacturer in prosecution for price fixing
  • Investigation of polypropylene bag manufacturers and that resulted in the prosecution of a manufacturer for Buy American Act violations and conspiracy to defraud
  • Investigation and prosecution of nearly 40 cases against paving contractors for conspiring to rig bids in connection with federal and state highway and airport contracts
  • Investigation and prosecution of an auction rigging conspiracy involving auto parts to by the Department of Defense at Defense Reutilization Marketing Offices (DRMO)
  • Investigation and prosecution of multiple electrical construction contractors for conspiring to rig bids for major power wiring contracts associated with steel mills and waste water treatment plants
  • Investigation and prosecution of multiple wholesale grocery companies and bid managers for rigging bids to school districts, hospitals and jails in southern Texas
  • Investigation and prosecution of multiple dairies for rigging bids for school milk sold to districts in Louisiana
  • Investigation and prosecution of crawfish processors for fixing prices paid to crawfish farmers and fishermen
  • Investigation and prosecution of bribery conspiracy involving the reconstruction of the New Orleans levee system after Hurricane Katrina
  • Investigation and prosecution of fire protective services company and its president
  • Investigation and prosecution of an Iraq-based general construction bid rigging scheme
  • Investigation and prosecution of conspiracy to solicit kickback scheme involving security services on a US Agency for International Development contract
  • Investigation and prosecution of fuel theft from an overseas United States military facility
  • Investigation and prosecution of a Europe-based scheme to defraud the Iraqi government by facilitating the fraudulent claim for payment of armored vehicles that were never delivered
  • Represented individual accused of defrauding government defense agency out of hundreds of thousands of dollars of grant money
  • Represented company accused of defrauding government by failing to supply vitamin-enriched food products with the proper level of enrichment
  • Represented large computer software company in internal investigation of improper influence on government contracting process

General Criminal:

  • Defended CEO and three closely-held companies in a multi-state racketeering and tax fraud prosecution
  • Investigation and prosecution of multiple labor racketeering cases ranging from prosecutions of United Mine Worker Union officials for theft of union funds used to pay for the murder of a political opponent of the union president to the prosecution of two Boston-based racketeers for actions associated with their travel to California in connection with a union organizing effort at a San Rafael newspaper
  • Investigation and prosecution of the mayor of a New Jersey town for taking bribes in connection with the permitting of a tank farm at the terminus point of a major Gulf Coast to East Coast pipeline
  • Investigation and prosecution of the most prolific serial bank robber in United States history
  • Investigation and prosecution of the murder for hire of a government witness and one of the largest cocaine importation conspiracies East of the Mississippi River
  • Investigation and prosecution of numerous gun, drug and false identity cases
  • Investigation and prosecution of multiple obstructions of justice, contempt, false statement, witness tampering and perjury cases arising out of grand jury investigations
  • Investigation and prosecution of bank fraud cases
  • Represented individuals before the District of Columbia Court of Appeals in appeals from criminal convictions (more than a dozen cases)
  • Defended individual in intelligence community in investigation by DCIS for alleged violations of public corruption statutes (18 U.S.C §§ 207 & 208)
  • Defended individual in criminal investigation by Inspector General of NASA
  • Defended individual in federal bribery investigation
  • Defended government contractor in investigation by the Inspector General of the Department of Agriculture
  • Defended several regional hospitals in various unrelated federal investigations of allegedly fraudulent billing practices, Stark violations
  • Represented hospital CEO in investigation of alleged Stark violations
  • Represented pathology laboratory in healthcare fraud investigation
  • Represented national healthcare company in investigation of allegedly criminal off-label marketing
  • Represented various individuals in applications for presidential pardons

Mergers and Acquisitions:

  • Represented Warner Music in connection with the proposed acquisition of EMI by Universal Music
  • Represented DISH Network in opposition to the proposed acquisition of T-Mobile by AT&T
  • Represented Merck in connection with its acquisition of Schering Plough
  • Represented Simon Properties in connection with its acquisition of Prime Outlets
  • Obtained antitrust clearance in the acquisition of Liquid Container by Graham Packaging
  • Obtained consent decree against nuclear engineering firm which had acquired another firm with the same engineering specialty
  • Represented major home healthcare provider in acquisition valued in excess of $500 million
  • Represented pathology laboratory in merger valued in excess of $100 million
  • Represented foreign mining company in acquisition of US coal mines valued over $1 billion
  • Represented hospital management company in acquisition valued in excess of $500 million
  • Represented individual in several acquisitions of stock each valued in excess of $100 million
  • Represented major over-the-counter pharmaceutical company in four different acquisitions over several years whose values ranged from over $100 million to over $500 million
  • Represented national restaurant chain in acquisition valued at about $1 billion
  • Represented regional hospital chain in acquisition of a hospital valued above $50 million
  • Represented hospital valued in excess of $100 million in sale to state hospital system

Civil Antitrust Matters:.

  • Defended large telecommunications provider in three week trial for alleged exclusionary conduct directed towards telecom services resellers.
  • Represented large telecommunications provider as plaintiff in case alleging monopolization of market for telecom switch software.
  • Represented leading music copyright licensing organization in a decade-long investigation by the Department of Justice
  • Led the investigation of Ticketmaster at the Department of Justice
  • Led major, successful prosecution by United States Department of Justice of conspiracy among twenty-four leading market-makers in NASDAQ stocks, including Goldman, Sachs & Co. and J. P. Morgan Securities,  Inc. who had conspired to maintain spreads between buying and selling prices of NASDAQ stocks
  • Defended large telecommunications provider in multi-year litigation brought by competitive telecom carrier alleging monopolization of market for high speed data services
  • Led successful investigation and prosecution of Salomon Bros Inc. and two hedge funds, Caxton Corporation and Steinhardt Partners, LP, to limit the supply of two-year Treasury notes to the “repo,” or “repurchase agreement,” market
  • Successfully brought the Reagan Administrations ‘s first challenge to a merger (brewing industry)
  • Successfully represented the United States in a litigated matter challenging field of use restrictions in patent licensing agreement in specialty chemicals
  • Successfully represented the United States in challenge to professional rules of conduct limiting competition among accountants in Texas
  • Successfully represented the United States in challenge to acquisition by Texaco, Inc. of an independent oil refining company
  • Represented high-tech electronic service provider with respect to antitrust issues in a bet-the-company patent infringement case
  • Represented sporting goods manufacturer in vacating a consent decree
  • Represented leading music copyright pool in civil antitrust investigation leading to vacating of an earlier consent decree and modification of another consent decree
  • Represented hospital CEO in litigation arising from denial of physician staff privileges

Antitrust Compliance Counseling:

  • Advised large telecommunications provider on its price and product bundling
  • Advised large telecom provider in connection with a joint venture of three carriers to entire the mobile payments market with mobile phones
  • Advised major manufacturer of household appliances on antitrust compliance
  • Advised major manufacturer of high-end kitchen appliances on antitrust compliance
  • Advised major manufacturer of over-the-counter pharmaceutical on antitrust compliance
  • Advised regional airport on state action doctrine and compliance with antitrust laws
  • Advised national trade association on antitrust compliance and Noerr-Pennington doctrine
  • Advised international shipping company on compliance regarding competition, fraud, and foreign corrupt practices
  • Advised African government on contracting and anti-fraud and anti-corruption best practices

Other Civil Litigation:

  • Represented Haiti in multinational investigation and litigation leading to the recovery of money stolen by its former president Jean-Claude Duvalier
  • Represented developers in multiple appeals involving alleged illegal cooperative conversion terms
  • Defended law firm in $10 million professional malpractice action
  • Defended various healthcare providers in numerous different federal investigations of alleged fraud, related qui tam cases, and related whistleblower termination actions
  • Defended CMS contractor in qui tam case
  • Represented regional Medicare Advantage organization in suit against the U.S. Government
  • Defended book distributor and publisher in defamation case
  • Defended author in defamation case
  • Represented gaming company in civil rights action relating to state gaming regulations
  • Defended copyright and trademark owner in intellectual property litigation
  • Defended local retailer of gray market goods in trademark infringement litigation
  • Represented major multinational corporation in suit seeking refund of local corporate franchise tax
  • Represented government contractor in appeal of denial of security clearance
  • Defended employers in cases alleging violation of wage-and-hour statute
  • Represented developers in multiple appeals involving alleged illegal cooperative conversion terms
  • Defended employer in case alleging employment discrimination
  • Defended employer in case alleging sexual harassment
  • Defended employers in cases alleging unlawful discharge

Experience by Industry:

  • Air Cargo
  • Aircraft Parts (Domestic)
  • Airlines
  • Airport Contracts
  • Automobile Dealers (Domestic)
  • Airlines
  • Asset Forfeiture
  • Auction Rigging (Multiple Industries)
  • Banking (International)
  • Baked Goods (Domestic)
  • Baking Soda
  • Book Publishing
  • Bridge Construction
  • Carbon Products
  • Caustic Soda
  • Cell Towers (Domestic)
  • Chemicals (Multiple Products, Domestic and International)
  • Clothing and Textiles (Multiple Products, Domestic and International)
  • Computer Software
  • Construction (Domestic and International)
  • Copyright and Trademark
  • Dairy Products
  • Deep sea Oil Platforms
  • Democratization Programs
  • Electrical Products
  • Embassy Construction
  • Engineering
  • Export-Import Bank Clients (Multiple Industries, International)
  • Food Service Contracts (Multiple Industries, Domestic and International)
  • Financial Institutions (Domestic and International)
  • Fire Protection Services
  • Freight Forwarding (Domestic and International)
  • Fuel Supply (Domestic and International)
  • General Construction (Multiple Industries, Domestic and International)
  • Government Contracts (Multiple Industries, Domestic and International)
  • Graphite Electrodes
  • Highway Construction
  • Hospitals
  • Housing Foreclosure Auctions (Domestic)
  • Information Technology (Multiple Industries, Domestic and International)
  • Industrial Gases (Domestic and Multiple Products)
  • LIBOR
  • Marine Contractors
  • Medical Products (Multiple Products, Domestic and International)
  • Metal Drums
  • Military Insignia (International)
  • Military Moving and Storage
  • Mining and Related Products (Multiple Industries, Domestic)
  • Motor Vehicles (Domestic)
  • Municipal Bonds (Multiple Industries, Domestic and International)
  • Nursing
  • Ocean Shipping (International)
  • Oilfield Supplies
  • Pharmaceuticals (Multiple Products, Domestic and International)
  • Polypropylene bags
  • Rock Salt
  • Seafood
  • Security Contracts
  • School District Contracts (Multiple Industries)
  • Soda Ash
  • Shipping (Multiple Industries, Domestic and International)
  • Slag Removal
  • Telecommunications
  • Tobacco
  • Translation Services
  • Trucking
  • US Agency for International Development Contractors and Grant Recipients
  • Vitamins
  • Warzone
  • Waste Hauling
  • Wholesale Groceries
  • Wireless
  • World Bank Contractors and Grant Recipients (International)
  • Vitamins

 

Experience by Subject Matter:

  • Antitrust (Civil and Criminal)
  • Auction Rigging
  • Bank Robberies (Domestic)
  • Bank Fraud
  • Bid-Rigging
  • Bribery
  • Buy American Act Violations
  • Capital Crimes
  • Cartels (Multiple Products, Domestic and International)
  • Cash Smuggling (International, multiple procurements by multiple governments)
  • Civil Merger and Non-Merger Cases (Multiple Products, Multiple Industries Domestic and International)
  • Civil Rights Actions
  • Competition Advocacy
  • Contempt
  • Contracting Fraud
  • Corporate Defense (Multiple Industries, Domestic and International)
  • Criminal Conspiracies
  • Defamation
  • Disaster Fraud
  • Drug Cartels and Trafficking
  • Embezzlement
  • Employment Law
  • False Claims
  • False Statements
  • Federal Trade Commission Matters
  • Firearms and Weapons Offenses (Domestic and International)
  • Foreign Corrupt Practices Act (FCPA) (Multiple Industries)
  • Forgery
  • Fuel Theft
  • Grant Fraud (Multiple Industries, Multiple Agencies, Domestic and International)
  • Hart-Scott-Rodino Pre-Merger Notification
  • Health Care Fraud (Compliance, Organizational Defense, Whistleblowers)
  • Kickbacks
  • Identity Theft
  • Intellectual Property
  • Mail Fraud
  • Market Allocation
  • Mergers and Acquisitions
  • Money Laundering (Multiple Industries, Domestic and International)
  • Monopolies (Multiple Industries, Domestic and International)
  • Murder for Hire
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Shands Healthcare to Pay $26 Million to Resolve Allegations Related to Inpatient Stays at Six Florida Hospitals

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Shands Teaching Hospital & Clinics Inc., Shands Jacksonville Medical Center Inc. and Shands Jacksonville Healthcare Inc. (collectively, Shands Healthcare), which operates a network of health care providers in Florida, will pay the government and the state of Florida a total of $26 million to settle allegations that six of its health care facilities submitted false claims to Medicare, Medicaid and other federal health care programs for inpatient procedures that should have been billed as outpatient services, the Justice Department announced today.  The six Florida hospitals are:  Shands at Jacksonville; Shands at Gainesville, also known as Shands at the University of Florida; Shands Alachua General Hospital; Shands at Lakeshore; Shands Starke and Shands Live Oak.

“The Department of Justice is committed to ensuring that Medicare funds are expended appropriately, based on the medical needs of patients rather than the desire of health care providers to maximize profits,” said Stuart F. Delery, Assistant Attorney General for the Civil Division.  “Hospitals participating in Medicare must bill for their services accurately and honestly.”

Allegedly, from 2003 through 2008, the six hospitals knowingly submitted inpatient claims to Medicare, Medicaid and TRICARE for certain services and procedures that Shands Healthcare knew were correctly billable only as outpatient services or procedures.

“The public expects its medical professionals to operate with a high degree of integrity,” said A. Lee Bentley III, Acting U.S. Attorney for the Middle District of Florida.  “When health care providers seek higher profits at the expense of their professional judgment, the public trust in the medical system is compromised.”

“Regardless of the complexity of these schemes to siphon off crucial health care dollars,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services, “our law enforcement officials will work tirelessly to seek justice.”

The six Florida hospitals were named as defendants in a qui tam, or whistleblower, lawsuit brought under the False Claims Act, which permits private citizens to sue on behalf of the government and receive a portion of the proceeds of any settlement or judgment awarded against a defendant.  The lawsuit was filed in federal district court in Jacksonville, Fla., by Terry Myers, the president of a healthcare consulting firm, YPRO Corp.  Of the $26 million settlement, $25,170,400 will go to Medicare and other federal health care payors.  The settlement also resolved allegations under the Florida False Claims Act; the state of Florida will receive $829,600.  Myers’ portion of these recoveries has yet to be determined.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  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 this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $14.8 billion through False Claims Act cases, with more than $10.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was the result of a coordinated effort among the U.S. Attorney’s Office for the Middle District of Florida, the Commercial Litigation Branch of the Justice Department’s Civil Division, the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General, and the Florida Attorney General’s Office.

The claims resolved by these settlements are allegations only, and there has been no determination of liability.   The lawsuit is captioned United States of America and the State of Florida ex rel. Terry L. Myers v. Shands Healthcare et al., Civil Action No. 3:08-cv-441-J-16HTS (M.D. Fla.).

Justice Department Announces Charges Filed Against Two Derivatives Traders in Connection with Multi-Billion Dollar Trading Loss at JPMorgan Chase & Company Defendants Hid More Than Half-a-Billion Dollars in Losses Resulting from Derivatives Trading in JPMorgan’s Chief Investment Office A Third Trader, Bruno Iksil, Entered a Non-Prosecution Cooperation Agreement

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Justice Department Announces Charges Filed Against Two Derivatives Traders in Connection with Multi-Billion Dollar Trading Loss at JPMorgan Chase & Company
Defendants Hid More Than Half-a-Billion Dollars in Losses Resulting from Derivatives Trading in JPMorgan’s Chief Investment Office A Third Trader, Bruno Iksil, Entered a Non-Prosecution Cooperation Agreement

U.S. Attorney General Eric Holder, U.S. Attorney for the Southern District of New York Preet Bharara and Assistant Director-in-Charge of the FBI’s New York Field Office George Venizelos announced the unsealing of criminal complaints against Javier Martin-Artajo and Julien Grout for their alleged participation in a conspiracy to hide the true extent of losses in a credit derivatives trading portfolio maintained by the Chief Investment Office (CIO) of JPMorgan Chase & Company (JPMorgan).  Martin-Artajo served as a Managing Director and Head of Credit and Equity Trading for the CIO, and Grout was a Vice President and derivatives trader in the CIO.

“Our financial system has been hurt in recent years not just by risky bets gone bad, but also, in some cases, by criminal wrongdoing,” said Attorney General Holder.  “We will not stop pursuing those who violate the public trust and compromise the integrity of our markets. I applaud U.S. Attorney Bharara, his colleagues in the Southern District of New York, and all of our partners on the President’s Financial Fraud Enforcement Task Force for their longstanding commitment to combating all forms of financial fraud. And I pledge that we will continue to move both fairly and aggressively to bring the perpetrators of financial crimes to justice.”

“As alleged, the defendants, Javier Martin-Artajo and Julien Grout, deliberately and repeatedly lied about the fair value of billions of dollars in assets on JPMorgan’s books in order to cover up massive losses that mounted month after month at the beginning of 2012, which ultimately led JPMorgan to restate its losses by $660 million,” said U.S. Attorney Bharara.   “The defendants’ alleged lies misled investors, regulators, and the public, and they constituted federal crimes.  As has already been conceded, this was not a tempest in a teapot, but rather a perfect storm of individual misconduct and inadequate internal controls.  The difficulty inherent in precisely valuing certain kinds of financial positions does not give people a license to lie or mislead to cover up losses; it does not confer a license to create false books and records or to make false public filings.  And that goes double for handsomely-paid executives at a public company whose actions can roil markets and upend the economy.”

“The complaints tell a story of a group of traders who got in over their heads, and to get out, doubled down on a series of risky positions,” said FBI Assistant Director-in-Charge Venizelos.  “In the first quarter of 2012, boom turned to bust, as the defendants, concerned about losing control to other traders at the bank, fudged the numbers on their daily book, and in some cases completely made them up.  It brought a whole new meaning to cooking the books.”
In a separate action, the U.S. Securities and Exchange Commission (SEC) announced civil charges against Martin-Artajo and Grout.

According to the allegations in the criminal complaints unsealed today in Manhattan federal court:

JPMorgan’s CIO, is a component of the bank’s Corporate/Private Equity line of business, which, according to the bank, exists to manage the bank’s excess deposits – approximately $350 billion in 2012.  Since approximately 2007, the CIO’s investments have included a so-called Synthetic Credit Portfolio (SCP), which consists of indices and tranches of indices of credit default swaps (CDS).  A credit default swap is essentially an insurance contract on an underlying credit risk, such as corporate bonds.  CDS indices are collections of CDSs that are traded as one unit, while CDS tranches are portions of those indices, usually sliced up by riskiness.

Under U.S. Generally Accepted Accounting Principles (GAAP) and according to JPMorgan policy, CDS traders were required to value the securities in their portfolios on a daily basis.  Those values, or “marks,” became part of the bank’s daily books and records.  Because CDS indices and tranches are not traded over an exchange, traders are required to look to various data points in order to value their securities, such as actual transaction prices, price quotations from market makers, and values provided by independent services (such as Totem and MarkIT).   JPMorgan’s accounting policy, which used the same methodology employed by the independent services, provided that the “starting point for the valuation of a derivatives portfolio is mid-market,” meaning the mid-point between the price at which market-makers were willing to buy or sell a security.  Through about January 2012, CIO traders generally marked the securities in the SCP approximately to this mid-point, which they sometimes referred to as the “crude mid.”

The SCP was extremely profitable for JPMorgan – it produced approximately $2 billion in gross revenues since its inception – but in the first quarter of 2012, the SCP began to sustain consistent and considerable losses.  From at least March 2012, Martin-Artajo and Grout conspired to artificially manipulate the SCP marks to disguise those losses.  They did so, among other reasons, to avoid losing control of the SCP to other traders at JPMorgan.

Although Martin-Artajo pressured his traders, including Grout, to “defend the positions” in early 2012 by executing trades at favorable prices, the SCP lost approximately $130 million in January 2012 and approximately $88 million in February 2012.  In March 2012, when the market moved even more aggressively against the CIO’s positions, Martin-Artajo specifically instructed Grout and the head SCP trader, Bruno Iksil (who has entered a non-prosecution agreement), not to report losses in the SCP unless they were tied to some identifiable market event, such as a bankruptcy filing by a company whose bonds were in the CDS index.  Martin-Artajo explained that “New York” – meaning, among others, JPMorgan’s Chief Investment Officer – did not want to see losses attributable to market volatility.

By mid-March 2012, Grout was explicitly and admittedly “not marking at mids.”  He maintained a spreadsheet that kept track of the difference between the price that Grout recorded in JPMorgan’s books and records, on the one hand, and the “crude mids,” on the other.  By March 15, 2012, according to Grout’s spreadsheet, the difference had grown to approximately $292 million.  In a recorded on-line chat the same day, Grout explained that he was trying to keep the marks for most of the SCP’s positions “relatively realistic,” with the marks for one particular security “put aside.”  That is, Grout mispriced that one particular security, of which the SCP held billions of dollars’ worth, by the full $292 million.  The following day, Iksil told Martin-Artajo that the difference had grown to $300 million, and “I reckon we get to 400 [million] difference very soon.”  In a separate conversation, Iksil remarked to Grout that “I don’t know where he [Martin-Artajo] wants to stop, but it’s getting idiotic.”

In the days that followed, Grout at times ignored Iksil’s instructions on how to mark the positions, and instead, followed Martin-Artajo’s mandate to continue to hide the losses.  By March 20, 2012, Iksil insisted that Grout show a significant loss: $40 million for the day.  In a recorded call, Martin-Aartajo excoriated Iksil, finally emphasizing, “I didn’t want to show the P&L [the profit and loss].”  Throughout the remainder of March 2012, while Iksil continued to try to insist that Martin-Artajo acknowledge the reality of the losses, Grout, at Martin-Artajo’s instructions, continued to hide them.  As of March 30, 2012 – the last day of the first quarter of 2012 – Grout continued to fraudulently understate the SCP’s losses.  These incorrect figures in the SCP were not only integrated into JPMorgan’s books and records, but also – as Martin-Artajo and Grout were well aware – into the bank’s quarterly financial filing for the first quarter of 2012 with the SEC.

During the course of the mis-marking scheme carried out by Martin-Artajo and Grout, the CIO’s Valuation Control Group (VCG) was supposed to serve as an independent check on the valuations assigned by traders to the securities that the traders were marking at month-end.  The VCG, however, was effectively only staffed by one person and did not perform any independent review of the valuations.  Instead, the VCG tolerated valuations outside of the bid-offer spread as presented by Martin-Artajo and other CIO traders.

In Aug. 2012, after Martin-Artajo and Grout were stripped of their responsibilities over the SCP and their scheme was discovered, JPMorgan restated its first quarter 2012 earnings, and recognized an additional loss of $660 million in net revenue attributable to the mis-marking of the SCP.  JPMorgan announced that it was restating its earnings because it had lost confidence in the “integrity” of the marks submitted by Grout, at Martin-Artajo’s direction.

Martin-Artajo, 49, a Spanish citizen, and Grout, 35, a French citizen, are charged in one count of conspiracy; one count of falsifying the books and records of JPMorgan; one count of wire fraud; and one count of causing false statements to be made in JPMorgan’s filings with the SEC.  They each face a maximum sentence of five years in prison on the conspiracy count, and 20 years in prison on each of the three remaining counts in the complaints, and a fine of the greater of $5,000,000 or twice the gross gain or gross loss as to certain of the offenses.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group.  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.

The case was investigated by the FBI.  The SEC and the Justice Department’s Office of International Affairs were also involved.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Eugene Ingoglia and Matthew L. Schwartz are in charge of the prosecutions.

The charges contained in the complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.