Monthly Archives: September 2013

Former Airline Executive Sentenced to Prison for Schemes to Defraud Illinois-Based Ryan International Airlines

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A former executive of Ryan International Airlines, a charter airline company located in Rockford, Ill., was sentenced today to serve 87 months in prison and to pay restitution for participating in kickback schemes to defraud Ryan, the Department of Justice announced.

Wayne E. Kepple, the former vice president of ground operations for Ryan, was sentenced to serve 87 months in prison and to pay $529,998 in restitution.  On Nov. 4, 2011, Kepple pleaded guilty in U.S. District Court in West Palm Beach, Fla., to three counts of conspiracy to commit wire fraud and honest services fraud and three counts of wire fraud.  The charges against Kepple stem from a kickback scheme involving Robert A. Riddell, the former owner and operator of an airline security and ground service company, as well as separate kickback schemes involving David A. Chaisson, the former owner and operator of an Indiana flight management services company, James E. Murphy, the former owner and operator of a Florida aviation fuel supply company, and others.

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

“Today’s sentence should serve as a stiff deterrent to executives who might be tempted to solicit a kickback from their supplies in exchange for their honest services,” said Bill Baer, Assistant Attorney General in charge of the Antitrust Division. “The Antitrust Division is committed to ensuring that contracts are won based on competition and not collusion.”

According to court documents, Kepple was in charge of contracting with providers of goods and services on behalf of Ryan and approving the invoices submitted by the providers to Ryan for payment. From October 2005 through at least August 2009, Kepple participated in three separate conspiracies in which he received kickback payments of more than $520,000 from Riddell, Murphy, Chaisson and others in exchange for Kepple awarding them Ryan airline services and fuel contracts.  According to court documents, the payments from Chaisson and Riddell included the proceeds of fabricated invoices submitted by their companies to Ryan.

As a result of the ongoing investigation, four individuals, including Kepple, have pleaded guilty and been sentenced to prison.  On Oct. 28, 2011, Murphy was sentenced to serve 23 months in prison and to pay $42,500 in restitution and Chaisson was sentenced to serve 16 months in prison and to pay $50,742 in restitution.  On Jan. 27, 2012, Riddell was sentenced to serve 24 months in prison and to pay $131,540 in restitution. Kepple’s 87-month sentence reflects his central role in multiple kickback schemes.

On Aug. 13, 2013, a fifth individual, Sean E. Wagner, and his company, Aviation Fuel International Inc. (AFI), a Florida-based airline fuel supply company, were indicted for participating in a conspiracy to defraud Ryan by making kickback payments to Kepple in exchange for awarding business to AFI.  That case is ongoing.

The investigation is 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.  Anyone with information concerning anticompetitive conduct in the airline charter services industry is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694 or visit

GeyerGorey LLP’s Allen Grunes quoted in Washington Post: “AMR, US Airways Attack U.S. Merger Suit as Bad for Consumers.”

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AMR, US Airways Attack U.S. Merger Suit as Bad for Consumers

David McLaughlin and Sara Forden
Sep 11, 2013 11:52 am ET

Sept. 11 (Bloomberg) — American Airlines and US Airways Group Inc. defended their proposed merger against a U.S. antitrust lawsuit, saying the combination would generate more than $500 million a year in benefits to consumers.

The combined airline will create an effective competitor to Delta Air Lines Inc. and United Continental Holdings Inc., the airlines said in filings yesterday in federal court in Washington arguing that the U.S. effort to stop the deal should be denied.

“It is the complaint — by interposing the heavy hand of federal and state regulation — which will lessen competition by precluding the market from creating new and competitive flight options for passengers,” Tempe, Arizona-based US Airways said.

The U.S. Justice Department, joined by seven states and the District of Columbia, are suing American parent AMR Corp. and US Airways to block the merger, arguing the tie-up would reduce competition and hurt consumers. U.S. District Judge Colleen Kollar-Kotelly has scheduled the case to go to trial beginning Nov. 25.

The U.S. and the attorneys general argue the proposed merger, by reducing the number of legacy carriers from four to three, would increase the likelihood of coordinated behavior among the airlines, leading to higher fares and fees and diminished service. American and US Airways can compete effectively on their own, the government has said.

Service Cuts

The main issue in the case is whether the merger would lead to cuts in service and increases in domestic fares, said Allen Grunes, a lawyer with GeyerGorey LLP in Washington who formerly worked in the Justice Department’s antitrust division.

“The American and U.S. Airways answers paint a picture of the merger as some kind of silver bullet that will miraculously transform the two companies into the greatest thing since sliced bread,” he said. “That’s more than a little optimistic, and it’s going to be tough for them to prove it.”

The merger, which would create the world’s largest airline, forms the basis for American’s plan to exit bankruptcy protection and pay creditors. Fort Worth, Texas-based AMR filed for bankruptcy in November 2011 and reached the merger agreement with US Airways in February.

“We believe this merger would result in consumers paying more for airfares and receiving less service,” Gina Talamona, a spokeswoman for the Justice Department’s antitrust division, said in an e-mail. “The department’s lawsuit seeks to maintain competition in the airline industry.”

More Competition

American said in its court filing that the deal with US Airways would create a more competitive airline industry that would give passengers more choices.

The U.S. complaint “concocts an imaginary narrative where airlines tacitly collude and where prices are higher than in the past, but the real facts are just the opposite,” American said.

US Airways said the U.S. complaint improperly focuses on maintaining the number of legacy carriers, “those airlines that, prior to 1978, endured the well-documented failure of federal regulation of routes and fares.” Those carriers are by most relevant measures the least financially successful companies in the industry, US Airways said.

Low-Cost Competition

The U.S. ignores the effect on the airline industry of low- cost carriers including Southwest Airlines Co. and JetBlue Airways Corp., according to the filing. The success of those airlines is the “most meaningful competitive development” in the industry since deregulation, US Airways said.

During the past 12 years, American lost $10.3 billion and US Airways lost $3.4 billion, according to the filing by US Airways. US Airways has been in bankruptcy twice in that period.

“Blocking the merger will not sharpen competition — it will prolong this cycle of crisis to the detriment of passengers, the employees of American and US Airways, and the communities the airlines serve,” US Airways said.

The case is U.S. v. US Airways Group Inc., 13-cv-01236, U.S. District Court, District of Columbia (Washington).

G.S. ELECTECH INC. EXECUTIVE INDICTED FOR ROLE IN BID RIGGING AND PRICE FIXING ON AUTOMOBILE PARTS INSTALLED IN U.S. CARS

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WASHINGTON — A federal grand jury in Covington, Ky., has returned an indictment against G.S. Electech Inc. executive, Shingo Okuda for his role in an international conspiracy to fix prices and rig bids of auto parts used on antilock brake systems installed in U.S. cars, the Department of Justice announced today. Today’s charge is the first to be filed in Kentucky in the department’s ongoing investigation into anticompetitive conduct in the automotive parts industry.

The indictment, filed today in the U.S. District Court for the Eastern District of Kentucky, charges Okuda, a Japanese national, with engaging in a conspiracy to rig bids for, and to fix, stabilize, and maintain the prices of speed sensor wire assemblies, which are installed in automobiles with an antilock brake system (ABS), sold to Toyota Motor Corp. and Toyota Motor Engineering and Manufacturing North America Inc. (collectively Toyota) in the United States and elsewhere.

G.S. Electech Inc. manufactures, assembles and sells a variety of automotive electrical parts, including speed sensor wire assemblies. The speed sensor wire assemblies connect a sensor on each wheel to the ABS to instruct it when to engage.

According to the charge, Okuda and his co–conspirators carried out the conspiracy by, among other things, agreeing during meetings and discussions to coordinate bids and fix prices of automotive parts submitted to Toyota. According to the charge, Okuda’s involvement in the conspiracy lasted from at least as early as January 2003 until at least February 2010.

“Today’s indictment marks the 16th executive to be charged in the Antitrust Division’s continuing investigation of price fixing in the auto parts industry,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. “Holding individuals accountable for their actions is the surest way to deter executives from choosing to collude rather than to compete for business.”

“Those who engage in price fixing, bid rigging and other fraudulent schemes harm the automotive industry by driving up costs for vehicle makers and buyers,” said John Robert Shoup, Acting Special Agent in Charge, FBI Detroit Division.  “The FBI is committed to pursuing and prosecuting these individuals for their crimes.”

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

Including Okuda, 11 companies and 16 executives have been charged in the Justice Department’s ongoing investigation into the automotive parts industry. To date, more than $874 million in criminal fines have been imposed and 14 individuals have been sentenced to pay criminal fines and to serve jail sentences ranging from a year and a day to two years each. One other executive has agreed to serve time in prison and is scheduled to be sentenced on Sept. 25, 2013.

In May 2012, G.S. Electech Inc. pleaded guilty and was sentenced to pay a $2.75 million criminal fine for its role in the conspiracy related to speed sensor wire assemblies.

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

Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions

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A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

 Felony charges were filed today in the U.S. District Court for the Northern District of California in San Francisco against Daniel Rosenbledt of Hillsborough, Calif. Rosenbledt is the 36th individual to plead guilty or agree to plead guilty as a  result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

According to court documents, Rosenbledt conspired with others not to bid against one another, but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in San Mateo and San Francisco counties, Calif. Rosenbledt was also charged with conspiring to use the mail to carry out schemes to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs, and to divert to co-conspirators money that would have otherwise gone to mortgage holders and others.

Court papers stated Rosenbledt conspired with others to rig bids and commit mail fraud at public real estate foreclosure auctions in San Mateo County beginning as early as April 2008 and continuing until about January 2011. Rosenbledt was also charged with similar conduct in San Francisco County beginning as early as November 2009 and continuing until about January 2011.

“The Antitrust Division remains committed to vigorously pursuing  conspirators who collude at foreclosure auctions at the expense of lenders and distressed homeowners,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “A competitive process benefits those homeowners who are looking for the best possible outcome during a difficult situation.”

The filing stated that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at San Mateo and San Francisco County public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.

  “For those who engage in illegal anticompetitive practices at foreclosure actions, we will hold you accountable for your actions and bring you to justice,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office.  “The FBI and the Antitrust Division are committed to rooting out those who undermine the real estate market and take advantage of legitimate home buyers and sellers.”

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.

The charges today are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Alameda and Contra Costa counties, Calif. These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm  or call the FBI tip line at 415-553-7400.

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 .