Monthly Archives: July 2015

Hawaii Businessman Convicted of Federal Tax Crimes for Failing to Report Millions of Dollars in Income Disguised as Company Expenses

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A Hawaii businessman was convicted yesterday following an 11-day jury trial in Honolulu of one count of corruptly endeavoring to obstruct the administration of the Internal Revenue Code and six counts of filing false individual income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Florence T. Nakakuni of the District of Hawaii.

The jury convicted Albert S.N. Hee, 61, of Kailua, Hawaii, of filing false income tax returns for tax years 2007 through 2012, and of obstructing the Internal Revenue Service (IRS) from 2002 through 2012.  According to court documents and the evidence introduced at trial, Hee owned Waimana Enterprises Inc., a telecommunications holding company based in Honolulu.  Over the course of a decade, Hee directed Waimana to pay millions of dollars in personal expenses on his behalf.  He falsely deducted the payments from his corporate tax returns as if they were legitimate business expenses, and failed to report the payments as income on his individual returns.

“The jury’s verdict reflects the department’s unwavering commitment to U.S. taxpayers to aggressively pursue and prosecute individuals like Mr. Hee, who cheat the government to line their own pockets and finance their extravagant lifestyles,” said Acting Assistant Attorney General Ciraolo.

Hee’s lavish spending included paying more than $96,000 for personal massages; paying his wife and children full-time salaries with benefits packages, even though they performed little to no work for the company; and paying more than $736,900 in college tuition and housing for his three children.  Hee also directed Waimana to pay various expenses on his personal credit card, including family trips to Walt Disney World, Tahiti, France, Switzerland, and a four-day vacation at the Mauna Lani resort on the Big Island of Hawaii, which Hee falsely characterized as a “stockholder’s meeting” and deducted as a business expense on the company’s tax return.

In 2008, Hee used company funds to purchase a home in Santa Clara, California, valued at $1.3 million.  Hee told his accountants that the property would be used as an employee retreat in an attempt to disguise it as a legitimate business expense.  However, Hee’s children testified at trial that from 2008 through 2012, they lived in the home while attending college in Santa Clara and did not pay rent to Waimana for their use of the property.  Hee’s son testified that the house was walking distance from the college campus, and that he and his sister rented other rooms of the house to their college friends, but kept the rent that they collected from their roommates and did not give it to their father’s company.

At Hee’s scheduled Oct. 26 sentencing, he faces a statutory maximum sentence of three years in prison for each charge, a fine of up to $250,000 and restitution to the IRS.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Nakakuni commended the special agents of IRS–Criminal Investigation, who investigated the case, and Trial Attorney Quinn P. Harrington of the Tax Division and Assistant U.S. Attorneys Les Osborne and Larry Tong of the District of Hawaii, who are prosecuting the case.

U.S. Seeks to Recover $12.5 Million Obtained from High-Level Corruption in the Philippines

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The Department of Justice filed a civil forfeiture complaint today seeking to recover approximately $12.5 million in assets found in the United States that derive from bribery and kickback schemes in the Philippines spanning nearly a decade.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Field Office made the announcement.

“Over nearly a decade, Janet Napoles allegedly stole millions of dollars in funds entrusted to her for development assistance and disaster relief for the people of the Philippines,” said Assistant Attorney General Caldwell.  “In an effort to disguise and enjoy her ill-gotten gains, Napoles purchased properties and other assets in the United States for herself and her family members, including a condominium at the Ritz and a Porsche.  The Justice Department will not allow the United States to become a playground for the corrupt or a place to hide and invest stolen riches.”

“The FBI is committed to ensuring that the U.S. financial system is not used to launder the proceeds of foreign bribery schemes,” said Assistant Director in Charge Bowdich.  “Nor is the United States a safe haven for the fruits of corruption.”

As alleged in the complaint, from approximately 2004 to 2012, Philippine businesswoman Janet Napoles, 51, paid tens of millions of dollars in bribes and kickbacks to Philippine politicians and other government officials in exchange for over $200 million in funding for purported development assistance and disaster relief.  Napoles’ non-governmental organizations (NGOs), however, then either failed to provide, or under-delivered on, the promised support.  The complaint further alleges that Napoles also diverted NGO funds for her own personal use and benefit, often draining accounts within days of government disbursements.  For this conduct, the Philippines’ Office of the Ombudsman has charged Napoles, two of her children and numerous current and former Philippine politicians and other government officials in connection with what has been nicknamed the “pork barrel scam.”

The complaint alleges that Napoles transferred over $12 million in Philippine government-awarded funds to bank accounts in the United States in the names of, or controlled by, her family members.  According the complaint, Napoles used the money to purchase numerous assets, including a condominium at the Ritz-Carlton in Los Angeles for her 21-year-old daughter.  The complaint seeks to forfeit the proceeds from the sale of the Los Angeles condominium, along with several other assets, including a motel near Disneyland in Anaheim, California; properties in Covina and Irvine, California; a 19 percent stake in a California-based consulting company; and a Porsche Boxster that was purchased for another daughter.

Napoles is currently serving a sentence of life in prison in the Philippines for her role in the kidnapping and detention of her cousin, Benhur Luy, who served as Napoles’s finance officer and tracked her schemes.

The complaint was brought under the Kleptocracy Asset Recovery Initiative, in which a team of dedicated prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section work in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, return those proceeds to benefit the people harmed by these acts of corruption and abuse of office.  Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to [email protected]

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The investigation was conducted by the FBI’s Los Angeles Field Office.  The case is being handled by Trial Attorney Alexis J. Loeb of the Criminal Division’s Asset Forfeiture and Money Laundering Section, with substantial support from the U.S. Attorney’s Office of the Central District of California, the U.S. Marshals Service and the Criminal Division’s Office of International Affairs.  The Justice Department also thanks the Philippines’ Office of the Ombudsman, Anti-Money Laundering Council, National Bureau of Investigation and Department of Justice for their cooperation in this matter.

 

Six Nigerian Nationals Extradited from South Africa to Mississippi to Face Fraud Charges

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Six Nigerian nationals were extradited from South Africa to Gulfport, Mississippi, to face a nine-count federal indictment in the Southern District of Mississippi alleging various Internet fraud schemes.  A total of 20 defendants are charged in this case.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Gregory K. Davis of the Southern District of Mississippi made the announcement.

Oladimeji Seun Ayelotan, 30; Rasaq Aderoju Raheem, 31; Olusegun Seyi Shonekan, 33; Taofeeq Olamilekan Oyelade, 30; Olufemi Obaro Omoraka, 26; and Anuoluwapo Segun Adegbemigun, 39, are charged along with 15 others in an Oct. 7, 2014, indictment with conspiracy to commit mail fraud, wire fraud, bank fraud, conspiracy to commit identity theft, use of unauthorized account access devices, theft of U.S. government funds and conspiracy to commit money laundering.  The charges stem from the defendants alleged participation in numerous Internet-based complex financial fraud schemes, including romance scams, re-shipping scams, fraudulent check scams and work-at-home scams, as well as bank, financial and credit card account takeovers.

According to the allegations in the indictment, from as early as 2001, the defendants identified and solicited potential victims through online dating websites and work-at-home opportunities.  In some instances, the defendants allegedly carried on fictitious online romantic relationships with victims for the purpose of using the victims to further certain objectives of the conspiracy.  For example, the indictment alleges that the defendants convinced victims to ship and receive merchandise purchased with stolen personal identifying information (PII) and compromised credit card and banking information, to deposit counterfeit checks, and to transfer proceeds of the conspiracy via wire, U.S. mail or express delivery services.

To date, defendants Teslim Olarewaju Kiriji, 30; Olutoyin Ogunlade, 41; and Dennis Brian Ladden, 75, have been convicted of offenses relating to their roles in the schemes.  Defendants Susan Anne Villeneuve, 49; and Genoveva Farfan, 45; Sesan Olumide Farin, 40; Femi Alexander Mewase, 44; Rhulane Fionah Hlungwane, 24; and Adekunle Adefila, 40, are awaiting trial.  The United States is seeking extradition from Nigeria of defendants Kayode Bamidele, Ajayi Oluwaseyi Stephen and Emmanuel Adeniyi Osokomaiya.  Defendants Gabriel Oludare Adeniran and Oduntan Sikiru Lawani remain fugitives.

The charges and allegations in the indictment are merely accusations.  A defendant is presumed innocent until and unless proven guilty.

This case is being investigated by Homeland Security Investigations (HSI) and the U.S. Postal Inspection Service.  Significant assistance was also provided by the Criminal Division’s Office of International Affairs, the HSI Cyber Crimes Center, HSI Attachés in Pretoria and Dakar, U.S. Marshals Service’s International Investigations Branch and the Southern District of Mississippi, the South African Police Service (SAPS) Directorate of Priority Crimes Investigation (DPCI) Electronic Crimes Unit, the SAPS Interpol Extradition Unit, the South African National Prosecution Authority, and the South African Department of Justice and Constitutional Development.  The case is being prosecuted by Trial Attorney Robert Tully of the Criminal Division’s Organized Crime Gang Section and Assistant U.S. Attorneys Annette Williams and Scott Gilbert of the Southern District of Mississippi.

 

Investment Company Executives Indicted for $1.5 Billion Ponzi Scheme

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The president and chief executive officer and two former Asia-based executives of a Las Vegas investment company were indicted today for their roles in an alleged $1.5 billion Ponzi scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Special Agent in Charge Laura A. Bucheit of the FBI’s Las Vegas Division made the announcement.

“The defendants allegedly preyed on thousands of unsuspecting Japanese victims to enrich themselves by operating a billion-plus dollar Ponzi scheme,” said Assistant Attorney General Caldwell.  “This prosecution shows that the Criminal Division will pursue not only those who victimize American citizens, but also those who use the U.S. as a home base to defraud victims abroad.”

“Investment fraud and other financial fraud cases are a high priority for the U.S. Attorney’s Office in Nevada,” said U.S. Attorney Bogden.  “These defendants are accused of using a Nevada corporation to conduct their $1.5 billion fraud scheme and falsely telling thousands of overseas victims that their investments would be safely held and managed by an independent, third-party escrow agent in Nevada.  Fraudulent ruses and schemes perpetrated by Nevadans using Nevada corporations and entities will continue to be addressed by this office.”

“These indictments are a reminder of the FBI’s determination to identify, investigate and bring to justice those who are committing financial crimes against innocent consumers,” said Special Agent in Charge Bucheit.  “We are appreciative of the continued support we receive from our international, federal, state and local law enforcement partners.”

Edwin Fujinaga, 68, of Las Vegas; Junzo Suzuki, 66, of Tokyo; and Paul Suzuki, 36, of Tokyo, were charged in an indictment with eight counts of mail fraud and nine counts of wire fraud.  Fujinaga also is charged with three counts of money laundering.  The indictment seeks from all three defendants forfeiture of the proceeds from the alleged crimes.

Fujinaga was the president and CEO of Las Vegas-based MRI International Inc. (MRI).  Junzo Suzuki previously was MRI’s executive vice president for Asia Pacific, and Paul Suzuki previously was the company’s general manager for Japan operations.  MRI purportedly specialized in “factoring,” whereby the company purchased accounts receivable from medical providers at a discount, and then attempted to recover the entire amount, or at least more than the discounted amount, from the debtor.

According to allegations in the indictment, from at least 2009 to 2013, Fujinaga and the Suzukis fraudulently solicited investments from thousands of Japanese residents, and MRI currently owes investors over $1.5 billion.  Specifically, the indictment alleges that Fujinaga and the Suzukis promised investors a series of interest payments that would accrue over the life of the investment and that would be paid out along with the face value of the investment at the conclusion of the investments’ duration.  The defendants allegedly solicited investments by, among other things, promising investors that their investments would be used only for the purchase of medical accounts receivable (MARS) and by representing that investors funds would be managed and safeguarded by an independent third-party escrow company.

The indictment further alleges that MRI operated as a Ponzi scheme, wherein the defendants used new investors’ money to pay prior investors’ maturing investments.  According to the indictment, the defendants also allegedly used investors’ funds for purposes other than the purchase of MARS, including paying themselves sales commissions, subsidizing gambling habits, funding personal travel by private jet, and other personal expenses.

The charges contained in an indictment are merely accusations.  A defendant is presumed innocent until and unless proven guilty.

This case is being investigated by the FBI’s Las Vegas Division.  Significant assistance was provided by the U.S. Securities and Exchange Commission, the Criminal Division’s Office of International Affairs and Japanese authorities.  This case is being prosecuted by Assistant Chief Albert B. Stieglitz Jr. and Trial Attorney Melissa Aoyagi of the Criminal Division’s Fraud Section and First Assistant U.S. Attorney Steven W. Myhre of the District of Nevada.

If you believe you are a victim of this offense, please click on the following link for more information: justice.gov/usao-nv/united-states-v-edwin-fujinaga-junzo-suzuki-and-paul-suzuki-mri.

 

Former President of Townsend Controls Inc. Sentenced to Prison for Failing to Pay Over $3.3 Million in Federal Employment Taxes and Interest

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A Burbank, Washington, businesswoman was sentenced yesterday to serve more than three years in prison following her February 2015 conviction of 10 counts of failing to pay over federal employment taxes to the Internal Revenue Service (IRS) after a five-day jury trial in U.S. District Court for the Eastern District of Washington, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Michael C. Ormsby of the Eastern District of Washington.

Maria Elizabeth Townsend, 39, was sentenced by U.S. District Court Judge Thomas O. Rice to serve 40 months in prison to be followed by three years of supervised release, and ordered to pay $3,327,124.49 in restitution to the IRS for employment taxes due and owing plus interest for her 10 counts that she was convicted of in the indictment, a $1,000 special assessment and $8,048.49 in prosecution costs.  At the conclusion of yesterday’s sentencing hearing, Judge Rice remanded Townsend to the custody of the U.S. Marshals Service.

“Holding business owners accountable who willfully evade their employment tax obligations to line their own pockets is among the Tax Division’s highest priorities,” said Acting Assistant Attorney General Ciraolo.  “These offenders, who not only steal from the United States, but also take advantage of honest competitors, will be prosecuted to the fullest extent of the law, and like Ms. Townsend, will face incarceration and substantial financial penalties.”

“The sentence imposed in this case reflects the seriousness of ‘white collar’ crime and that those accused of failing to pay over payroll taxes deducted from their employee’s pay checks to the IRS will be fairly and justly held accountable for their criminal conduct,” said U.S. Attorney Ormsby.  “This case is yet another example of the commitment of the U.S. Attorney’s Office to prosecute aggressively fraud cases in the Eastern District of Washington.  IRS-Criminal Investigation is commended for its tireless efforts in thoroughly investigating this case.”

“Employers who do not withhold employment taxes are not only cheating the government, they are cheating their own employees and creating financial problems for them,” said Chief Richard Weber of IRS-Criminal Investigation.  “Ms. Townsend chose to ignore her duty to timely file and pay employment taxes and now has to pay the consequences.  Investigating employment tax crimes remains one of IRS-CI’s highest priorities, keeping the playing field level for all businesses in the United States who obey the law and pay their taxes.”

According to information disclosed in court documents and at trial, Townsend was the president and majority shareholder of Townsend Controls Inc. (TCI), a Pascoelectrical contractor.  Over time, TCI grew from a small company of 15 employees to more than 150 employees by 2008.  The majority of TCI’s employees were members of Local 112 of the International Brotherhood of Electrical Workers Union (Local Union 112).  Townsend was responsible for TCI’s operations and finances, and was required to file the Employer’s Quarterly Federal Tax Returns (IRS Forms 941) and pay over to the IRS the company’s federal income, social security and Medicare taxes, known as Federal Insurance Contribution Act (FICA) taxes, that were withheld from the wages of TCI’s employees.  For 16 tax quarters, between Oct. 1, 2005, and Sept. 30, 2009, Townsend withheld $3,361,246 in federal employment taxes from the wages of Local Union 112 TCI employees, as well as TCI’s non-union employees, and failed to pay over those taxes due and owing to the IRS.  In addition to failing to pay over the taxes due and owing, Townsend also did not file any Forms W-2 for her employees for 2007 and 2008 with the Social Security Administration.

Between April 2007 and September 2009, rather than pay the accumulating employment taxes due to the IRS, Townsend authorized the disbursement of more than $31 million in TCI funds to pay vendors and other business and personal expenses.  Specifically, using TCI’s funds, Townsend paid TCI’s vendors and employees; paid a dividend of approximately $200,000 to one of her partners who co-signed a business loan; disbursed $300,000 towards the payment of her joint personal income tax obligations; disbursed more than $260,000 in funds to family members; and spent $22,000 to construct a pool at her residence, $30,000 to purchase a boat, $30,000 to purchase a Cadillac Escalade, $42,982 to purchase a Jeep Commander, $14,850 to purchase a timeshare at Walt Disney World and to fund various physical improvements to TCI’s headquarters.

During court proceedings, a psychiatrist for Townsend testified that she was suffering from multiple psychiatric disorders that paralyzed her when it came to being able to pay over the quarterly employment taxes to the IRS, despite receiving quarterly notices from the IRS that taxes were due and owing.  At sentencing, Judge Rice credited the testimony of the psychiatrist who testified for the government and commented that in every other aspect of her life, Townsend was functioning, which included paying the company’s state tax obligations.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Ormsby commended the special agents of IRS-Criminal Investigation, who investigated the case, and Assistant U.S. Attorney George J.C. Jacobs III of the Eastern the District of Washington and Trial Attorney Lisa L. Bellamy of the Tax Division, who are prosecuting the case.

Contractor Admits Attempting To Bribe West New York, New Jersey, Official To Eliminate More Than $8.7 Million In Fire Code Violations

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NEWARK, N.J. – A North Bergen, New Jersey, man today admitted paying cash bribes to a West New York, New Jersey, fire official to eliminate millions of dollars in outstanding fines and penalties on buildings with fire code violations, U.S. Attorney Paul J. Fishman announced.

Victor Coca, 48, pleaded guilty before U.S. District Judge Esther Salas to Count One and Count Two of an indictment charging him with paying bribes to a local government employee.

According to documents filed in this case and statements made in court:

Coca was the owner and president of a general contracting company in West New York. Two buildings in West New York had outstanding fines for fire code violations. The first building, located on Bergenline Avenue and owned by a friend of his, had approximately $14,500 in fines and penalties for outstanding fire code violations. Coca agreed to pay a fire official for the West New York Bureau of Fire Prevention, a witness who was voluntarily cooperating with federal authorities, a $2,000 cash bribe to eliminate the outstanding fire code fines and penalties. On March 27, 2014, Coca handed the fire official a $2,000 cash bribe.

The second building, located on Hudson Avenue and partly-owned by Coca, had more than $8.7 million in fines and penalties for outstanding fire code violations. Coca paid a $5,000 cash bribe to the fire official in return for the fire official purportedly reducing the amount due to the West New York Bureau of Fire Prevention to the initial fine amount of $5,000.

The two bribery counts to which Coca pleaded guilty each carry a maximum potential penalty of 10 years in prison and a $250,000 fine, or twice the gain or loss from the offense. Sentencing is scheduled for Oct. 20, 2015.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Richard M. Frankel in Newark, with the investigation leading to today’s plea.

The government is represented by Assistant U.S. Attorney Rahul Agarwal of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

Defense counsel:

Howard Brownstein Esq., Union City, New Jersey
Nelson Gonzalez Esq., Dover, New Jersey

Virginia Resident Sentenced to Prison in Connection with Lottery Scheme Based in Jamaica

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A Jamaican citizen residing in Virginia was sentenced to prison today for his role in an international lottery scam, the Justice Department and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) announced.

Carlos O’Brien Ricketts, 32, was sentenced by U.S. District Court Judge Michael F. Urbanski of the Western District of Virginia to serve 10 months in prison to be followed by three years of supervised release, and ordered him to pay $74,450 in restitution to his victims.

Ricketts was indicted on Nov. 6, 2014, by a federal grand jury in Harrisonburg, Virginia, in connection with a fraudulent lottery scheme based in Jamaica that induced elderly victims to send thousands of dollars to cover fees for lottery winnings that the victims had not in fact won.  On March 24, Ricketts pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud.

“The masterminds of lottery fraud from Jamaica use co-conspirators in the United States not only to help collect money from innocent victims, but also to make their scheme appear less suspicious,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to prosecute those who direct or facilitate these international lottery schemes.”

As part of his guilty plea, Ricketts acknowledged that, had the case gone to trial, the government would have proved beyond a reasonable doubt that from May 2010 through April 2011, he was a middleman in the United States for a fictitious sweepstakes operating from Jamaica.  According to the indictment, a co-conspirator induced elderly victims in the United States to send thousands of dollars to Ricketts to cover fees for purported lottery winnings that, in fact, the victims had not won.

This case is part of the government’s crackdown on international fraudulent lottery schemes that target elderly individuals in the United States.  The indictment alleged that the co-conspirator instructed the victims to send their payments to Ricketts in the form of cash and checks via mail and as wire transfers.

As part of his guilty plea, Ricketts acknowledged that, had the case gone to trial, the government would have proved beyond a reasonable doubt that he received payments at his home address in Stephens City, Virginia, and at another address in Winchester, Virginia, sometimes using his own name and at other times used the name “Kevin Brown” to receive the money.  Ricketts further acknowledged that had the case gone to trial, the government would have proved that he kept part of the money for himself and then sent the remainder of the money in wire transfers to Jamaica, sometimes using the “Kevin Brown” name and addresses other than his own in order to evade detection.

“Fraud schemes like this one that prey on senior citizens will not be tolerated,” said Acting U.S. Attorney Anthony P. Giorno of the Western District of Virginia.  “Our office will provide whatever resources and assistance may be required in order to identify and bring these criminals to justice.”

“Homeland Security Investigations is committed to disrupting and combatting these international lottery schemes,” said Special Agent in Charge Clark E. Settles of HSI Washington, D.C., which oversees the agency’s Harrisonburg office.  “While fraudulent schemes of any kind are despicable, targeting vulnerable populations is especially depraved and will not be tolerated.”

Principal Deputy Assistant Attorney General Mizer and Acting U.S. Attorney Giorno commended HSI’s investigative efforts.  The case was prosecuted by Trial Attorney Kathryn Drenning of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Grayson Hoffman of the Western District of Virginia.

Second Circuit Affirms Apple’s Liability for Per Se Unlawful E-Book Price-Fixing Conspiracy

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Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division released the following statement today after the U.S. Court of Appeals for the Second Circuit ruling in United States v. Apple Inc.:

“We are gratified by the court’s decision.  The decision confirms that it is unlawful for a company to knowingly participate in a price-fixing conspiracy, whatever its specific role in the conspiracy or reason for joining it.  Because Apple and the defendant publishers sought to eliminate price competition in the sale of e-books, consumers were forced to pay higher prices for many e-book titles.

“I am proud of the outstanding work done by the trial team who initially established Apple’s liability and by the lawyers who defended the district court’s decision in this appeal.  The Antitrust Division will continue to vigorously protect competition and enforce the antitrust laws in this important business, and in other industries that affect the everyday lives of consumers.”

Background

On April 11, 2012, the department filed a civil antitrust lawsuit in the U.S. District Court for the Southern District of New York against Apple, Hachette Book Group (USA), HarperCollins Publishers L.L.C., Holtzbrinck Publishers LLC (which does business as Macmillan), Penguin Group (USA) Inc. and Simon & Schuster Inc. for conspiring to end e-book retailers’ freedom to compete on price by taking control of pricing from e-book retailers and substantially increasing the prices that consumers paid for e-books.

At the same time that it filed the lawsuit, which was consolidated with suits brought by 33 states and territories, the department reached settlements with three of the publishers – Hachette, HarperCollins and Simon & Schuster.  Those settlements were approved by the court in September 2012.  The department settled with Penguin on Dec. 18, 2012, and with Macmillan on Feb. 8, 2013.  The Penguin settlement was approved by the court in May 2013 and the Macmillan settlement was approved in August 2013.  Under the settlements, each publisher was required (a) to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers and (b) to allow for retail price competition in renegotiated e-book distribution agreements.

The department’s trial against Apple, which was overseen by U.S. District Judge Denise L. Cote of the Southern District of New York, began on June 3, 2013.  The trial lasted for three weeks, with closing arguments taking place on June 20, 2013.  Judge Cote issued her opinion and order on July 10, 2013, finding Apple liable for knowingly participating in and facilitating a conspiracy with the publishers.  On Sept. 5, 2013, Judge Cote entered a final judgment prohibiting Apple from immediately reestablishing e-book distribution agreements with the defendant publishers similar to the agreements that were established through the conspiracy and from entering e-book distribution agreements containing most-favored-nations provisions; requiring Apple to adopt a rigorous antitrust compliance program; and imposing an external compliance monitor to evaluate and recommend improvements to Apple’s antitrust compliance and training programs.

VMWare and Carahsoft Agree to Pay $75.5 Million to Settle Claims that they Concealed Commercial Pricing and Overcharged the Government

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VMware Inc. and Carahsoft Technology Corporation have agreed to pay $75.5 million to resolve allegations that they violated the False Claims Act by misrepresenting their commercial pricing practices and overcharging the government on VMware software products and related services, the Department of Justice announced today.  VMware is a Delaware corporation that specializes in computer virtualization software and has its principal place of business in Palo Alto, California.  Carahsoft is a privately held Maryland corporation that distributes information technology products to federal, state and local governments and has its principal place of business in Reston, Virginia.

“Today’s settlement demonstrates our continuing vigilance to ensure that those doing business with the government give the taxpayers a fair deal,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division.  “Government contractors who seek to profit improperly at the expense of taxpayers face serious consequences.”

“Transparency by contractors in the disclosure of their discounts and prices offered to commercial customers is critical in the award of GSA Multiple Award Schedule contracts and the prices charged to government agency purchasers,” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

“We will continue to look into all allegations of false claims in GSA contracts,” said Acting Inspector General Robert C. Erickson of the U.S. General Services Administration (GSA).  “I appreciate the hard work of our auditors, our agents and the attorneys on this complex case that has resulted in a large amount of money being returned to the United States.” Under the Multiple Award Schedule (MAS) Program, prospective vendors agree to disclose commercial pricing policies and practices to the GSA in exchange for the opportunity to gain access to the broad federal marketplace and the ease of administration that comes from selling to any government purchaser under one central contract.  GSA regulations require that, during contract negotiations with GSA, prospective vendors seeking an MAS contract make “current, accurate and complete” disclosures of the standard and non-standard discounts they offer to commercial customers.  The GSA relies on the accuracy of these disclosures in order to negotiate fair pricing for government purchasers.  Additionally, after the MAS contract is awarded, regulations require that MAS Program vendors disclose to the GSA changes in their commercial pricing practices, including improved discounts that are offered to commercial customers, after the MAS contract is in place.

The settlement resolves allegations that VMware and Carahsoft made false statements to the government in connection with the sale of VMware products and services under Carahsoft’s MAS contract.  These false statements allegedly concealed the companies’ commercial pricing practices and enabled the companies to overcharge the government for VMware’s products and services from 2007 through 2013.

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The civil lawsuit was filed in the Eastern District of Virginia by Dane Smith, who is a former vice president of the Americas at VMware Inc.  Mr. Smith’s share of the recovery has not been determined.

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Virginia and the GSA’s Office of Inspector General, with assistance from the Defense Criminal Investigative Service Mid-Atlantic Field Office.  The case is captioned United States ex rel. Smith v. VMware, Inc., et al., Case No. 10-CV-769 (E.D. Va.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.

Department of Justice Seeks Forfeiture of $34 Million in Bribe Payments to the Republic of Chad’s Former Ambassador to the U.S. and Canada

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The Department filed a complaint today seeking the civil forfeiture of approximately $34 million, which represents the cash value of shares in a Canadian energy company that the company used to bribe Chad’s former Ambassador to the United States and Canada for the purpose of influencing the award of oil development rights.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Assistant Director Joseph S. Campbell of the FBI’s Criminal Investigative Division made the announcement.

From 2004 to 2012, Mahamoud Adam Bechir, 50, served as Chad’s Ambassador to the United States and Canada.  From approximately 2007 to 2015, Youssouf Hamid Takane, 52, was the Deputy Chief of Mission.  As alleged in the complaint, in 2009, Bechir and Takane agreed to use their official positions to influence the award of oil development rights in Chad to Griffiths Energy International Inc., a Canadian oil company, in exchange for shares in the company.  Thereafter, in or about October 2009, Griffiths Energy issued four million shares to the wives of Bechir and Takane and to another associate.

The complaint further alleges that Griffiths Energy agreed with Bechir and his wife that the company would pay a $2 million “consulting fee” to Bechir’s wife to influence the award of oil development rights in Chad.  After securing the desired oil development rights in February 2011, Griffiths Energy allegedly transferred $2 million to an account held by a shell company created by Bechir’s wife.  This bribe payment was commingled and laundered through U.S. bank accounts and real property, and eventually was transferred to Bechir’s bank account in South Africa, where he is now serving as Chad’s Ambassador.  In 2013, Griffiths Energy pleaded guilty in Canadian court to bribing Bechir.

The $34 million that the United States seeks in forfeiture represents the cash value of the four million shares in Griffiths Energy that were provided to the wives of Bechir and Takane and to their associate.  In a separate action filed in 2014, the United States also is seeking the civil forfeiture of over $100,000 in allegedly laundered funds traceable to the $2 million bribe payment.  Takane resides in the United States.

The investigation was conducted by the FBI.  The case is being handled by Trial Attorney Nalina Sombuntham and Senior Trial Attorney Steven C. Parker of the Criminal Division’s Asset Forfeiture and Money Laundering Section.

This case was brought under the Kleptocracy Asset Recovery Initiative by a team of dedicated prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section, working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, return those proceeds to benefit the people harmed by these acts of corruption and abuse of office.  Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to[email protected]

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