Monthly Archives: June 2017

Virginia Man Admits to Falsely Certifying Bridge Inspection Vehicles

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Friday, May 26, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, today announced that CAROL “CASEY” SMITH, 56, of Chester, Virginia, waived his right to be indicted and pleaded guilty yesterday before U.S. District Judge Stefan R. Underhill in Bridgeport to a federal charge related to his false certification of bridge inspection vehicles.

According to court documents and statements made in court, Under Bridge Inspection (“UBI”) vehicles are vehicles that contain a moveable boom with a platform. The vehicles are used to conduct inspections of bridges by positioning the vehicle on top of the bridge and, using the boom, lifting a platform carrying inspectors alongside or beneath a bridge deck. “Company A” rents or leases bridge access equipment, including UBI vehicles, to engineering companies and government agencies for use on bridge inspection and bridge maintenance projects. Company A’s UBI vehicles travel on interstate highways to job locations throughout the U.S. Company A has several locations, including one in Connecticut.

SMITH was the president and chief surveyor for Virginia-based Martin Enterprizes, Inc. (“MEI”). Between January 2012 and January 2015, SMITH falsely represented that he, as the chief surveyor for MEI, examined the UBI vehicles in Company A’s fleet on an annual basis. During that time, SMITH created 165 Certificates of Unit Text/Examination of Material Handling Device (the “Certificate of Inspection”) for UBI vehicles in Company A’s fleet. As part of the Certificate of Inspection, SMITH verified that he personally examined the specified UBI vehicle and that the UBI vehicle met federal requirements. SMITH also issued 165 annual stickers representing that he had inspected the UBI Vehicles, and he knew that an employee or employees of Company A would affix the stickers to the UBI vehicles, and that those UBI vehicles would be driven on interstate highways and used on jobs throughout the U.S., including Connecticut.

Between 2012 and 2015, in exchange for the Certificates of Inspection for the UBI vehicles, as well as other vehicles in its fleet, Company A paid SMITH a total of $76,400.

SMITH pleaded guilty to one count of making a false statement, which carries a maximum term of imprisonment of five years. A sentencing date is not scheduled.

This matter is being investigated by the U.S. Department of Transportation – Office of Inspector General and the U.S. Department of Labor – Office of Inspector General. The case is being prosecuted by Assistant U.S. Attorney Nancy V. Gifford.

Medicare Advantage Organization & Former COO to Pay $32.5 Million

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Tuesday, May 30, 2017

Freedom Health Inc., a Tampa, Florida-based provider of managed care services, and its related corporate entities (collectively “Freedom Health”), agreed to pay $31,695,593 to resolve allegations that they violated the False Claims Act by engaging in illegal schemes to maximize their payment from the government in connection with their Medicare Advantage plans, the Justice Department announced today. In addition, the former Chief Operating Officer (COO) of Freedom Health Siddhartha Pagidipati, has agreed to pay $750,000 to resolve his alleged role in one of these schemes.

“When entering into agreements with managed care providers, the government requests information from those providers to ensure that patients are afforded the appropriate level of care,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Today’s result sends a clear message to the managed care industry that the United States will hold managed care plan providers responsible when they fail to provide truthful information.”

The government alleged that Freedom Health submitted or caused others to submit unsupported diagnosis codes to CMS, which resulted in inflated reimbursements from 2008 to 2013 in connection with two of their Medicare Advantage plans operating in Florida. It also alleged that Freedom Health made material misrepresentations to CMS regarding the scope and content of its network of providers (physicians, specialists and hospitals) in its application to CMS in 2008 to expand in 2009 into new counties in Florida and in other states. The government’s settlement with Mr. Pagidipati resolves his alleged role in this latter scheme.

“Medicare Advantage plans play an increasingly important role in our nation’s health care market,” said Acting U.S. Attorney Stephen Muldrow. “This settlement underscores our Office’s commitment to civil health care fraud enforcement.”

“Medicare Advantage insurers must play by the rules and provide Medicare with accurate information about their provider networks and their patients’ health,” said Chief Counsel to the Inspector General Gregory Demske of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “OIG will investigate and hold managed care organizations accountable for fraud. Moving forward, the innovative CIA reduces the risks to patients and taxpayers by focusing on compliance issues unique to Medicare Advantage plans.”

The allegations resolved by these settlements were brought in a lawsuit under the qui tam, or whistleblower, provisions of the Federal False Claims Act and the Florida False Claims Act. These statutes permit private parties to sue on behalf of the government for false claims and to receive a share of any recovery. The whistleblower in this action is Darren D. Sewell, who was a former employee of Freedom Health. The whistleblower’s share in this case has not yet been determined.

The corporate entities related to Freedom and which were part of today’s settlements are: Optimum HealthCare Inc., America’s 1st Choice Holdings of Florida LLC, Liberty Acquisition Group LLC, Health Management Services of USA LLC, Global TPA LLC, America’s 1st Choice Holdings of North Carolina LLC, America’s 1st Choice Holdings of South Carolina LLC, America’s 1st Choice Insurance Company of North Carolina Inc. and America’s 1st Choice Health Plans Inc.

Today’s settlements were the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, The U.S. Attorneys’ Office for the Middle District of Florida, HHS-OIG and the Florida Office of the Attorney General.

The claims resolved by the settlements are allegations only, and there has been no determination of liability. The case is captioned United States ex rel. Sewell v. Freedom Health, Inc., et al., Case No. 8:09-cv-1625 (M.D. Fla.).

US Files Forfeiture Complaint Against Chinese Company for Laundering Money for North Korea

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Thursday, June 15, 2017

Company Allegedly Violated Sanctions by Laundering U.S. Dollar Transactions on Behalf of North Korea’s Foreign Trade Bank
WASHINGTON – The United States has filed a complaint to civilly forfeit $1,902,976 from Mingzheng International Trading Limited (Mingzheng), a company based in Shenyang, China. The complaint alleges that Mingzheng is a front company that was created to launder United States dollars on behalf of sanctioned North Korean entities.
According to the complaint, Mingzheng conspired to evade U.S. economic sanctions by facilitating prohibited U.S. dollar transactions through the United States on behalf of the Foreign Trade Bank, a sanctioned entity in the Democratic People’s Republic of Korea (North Korea) and to launder the proceeds of that conduct through U.S. financial institutions.

The forfeiture action was announced today by U.S. Attorney Channing D. Phillips and Michael DeLeon, Special Agent in Charge of the FBI’s Phoenix Field Office.

The action represents one of the largest seizures of North Korean funds by the Department of Justice.

“This complaint alleges that parties in China established and used a front company to surreptitiously move North Korean money through the United States and violated the sanctions imposed by our government on North Korea,” said U.S. Attorney Phillips. “Sanctions laws are critical to our national security and foreign policy interests, and this case demonstrates that we will seek significant remedies for those companies that violate them.”

“The FBI has dedicated substantial resources to investigate complex illegal monetary transactions involving foreign adversaries. This specific case has significant national security implications,” said Special Agent in Charge DeLeon. “The men and women of the FBI’s Phoenix Field Division worked diligently to identify the illegal transactions. We hope this sends a strong message to those who utilize US banking systems for illegal activities.”

The complaint was filed on June 14, 2017, in the U.S. District Court for the District of Columbia. According to the complaint, Mingzheng is owned by a Chinese national and is based in Shenyang, China. Mingzheng allegedly operated as a front company for a foreign-based branch of the North Korea-based Foreign Trade Bank (FTB). In March 2013, the U.S. Treasury Department designated the Foreign Trade Bank as a sanctioned entity pursuant to the Weapons of Mass Destruction Proliferators Sanctions Regulations. The designation noted that the Foreign Trade Bank is a state-owned bank, and “acts as North Korea’s primary foreign exchange bank.” The designation further noted that North Korea uses the Foreign Trade Bank to facilitate millions of dollars in transactions on behalf of actors linked to its proliferation network.

The United Nations Panel of Experts reported in 2017 as to how North Korean banks have been able to evade sanctions and continue to access the international banking system. Specifically, despite strengthened financial sanctions, North Korean networks are adapting by using greater ingenuity in accessing formal banking channels. This includes maintaining correspondent bank accounts and representative offices abroad, which are staffed by foreign nationals making use of front companies. These broad interwoven networks allow the North Korean banks to conduct illicit procurement and banking activity.

An FBI investigation revealed that Mingzheng’s alleged activities mirror this money laundering paradigm. Specifically, Mingzheng acts a front company for a covert Chinese branch of the Foreign Trade Bank. This branch is operated by a Chinese national who has historically been tied to the Foreign Trade Bank.

The government is seeking to forfeit $1,902,976 that was transacted in October and November of 2015 by Mingzheng, via wire transfers, using their Chinese bank accounts. These U.S. dollar payments, which cleared through the United States, are alleged to violate U.S. law, because Mingzheng was surreptitiously making them on behalf of the Foreign Trade Bank, whose designation precluded such U.S. dollar transactions.

The claims made in the complaint are only allegations and do not constitute a determination of liability.

The FBI’s Phoenix Field Office is investigating the case. Assistant U.S Attorneys Arvind K. Lal, Zia M. Faruqui, Christopher B. Brown, Deborah Curtis and Brian P. Hudak are prosecuting the case, with assistance from Paralegal Specialist Toni Anne Donato.

Houston Man Faces Twenty Years in Prison for His Role in $6.5 Million Diamond Fraud Scheme

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Tuesday, May 30, 2017

DALLAS — A Houston man, Christopher Arnold Jiongo, appeared this morning before U.S. Magistrate Judge Paul D Stickney and pleaded guilty to one count of wire fraud, announced U.S. Attorney John Parker of the Northern District of Texas.

Jiongo, 55, faces a maximum statutory penalty of twenty years in federal prison and a $250,000 fine. He will remain on bond pending sentencing, which is set for September 11, 2017, before U.S. District Judge David C. Godbey. Co-defendants Craig Allen Otteson, 64, of McKinney and Jay Bruce Heimburger, 58, of Dallas, are scheduled for trial July 17, 2017.

According to plea documents filed in the case, Otteson acted as the Managing Member and Chief Compliance Officer of Stonebridge Advisors, LLC, located on Belt Line road in Dallas. Stonebridge Advisors was involved as the Managing Partner of Worldwide Diamond Ventures, L.P., located at 6029 Belt Line in Dallas, and it acted as the General Partner of Worldwide Diamond. Heimburger acted as a Principal Partner of Worldwide Diamond, and he was also listed as the registered agent and Director of JBH Securities, Inc. located on San Rafael in Dallas. JBH Securities was primarily involved in the business of providing investment advice. Worldwide Diamond was primarily involved in the business of buying and reselling diamonds on the international market. On October 1, 2013, Worldwide Diamond filed for bankruptcy in the Northern District of Texas.

During the summer of 2011 through November 2011, Jiongo drafted $50,000 diamond notes which were later used as investment vehicles to generate investment funds. Jiongo, Otteson and Heimburger represented that all investment funds would be used to buy and resell diamonds and that every dollar invested would always be fully secured by the cash and diamond inventory of Worldwide Diamond. Sometime in the summer of 2011, Jiongo, Otteson and Heimburger realized that the original business plan was not working out as planned and that the defendants therefore could not honor the original promises and representations made to investors. Jiongo, Otteson, and Heimburger then engaged in a scheme to defraud investors by fraudulently concealing from investors that investor funds were being used for unauthorized purposes unrelated to the purchase and resale of diamonds. These unauthorized purposes included making several loans totaling approximately $2.4 million to third parties and to Global Reach Industries Limited for purposes not disclosed to or authorized by the investors. Jiongo, Otteson and Heimburger also fraudulently concealed from Worldwide Diamond investors that defendants planned to make an unauthorized $1 million loan of investor funds to Global Reach Industries Limited, a company established and controlled by defendant Jiongo.

During July 2011, Jiongo, Otteson and Heimburger all agreed to fraudulently wire transfer $400,000 of investor funds into several bank accounts designated by Jiongo. In August 2011, all three defendants agreed that defendant Jiongo would cause another $600,000 of investor funds to be wire transferred directly into a trust account controlled by Jiongo.

As a result of this scheme to defraud during the period from about 2011 through 2012, documents reflect that millions of dollars were fraudulently collected from Worldwide Diamond investors.

This case is one of several felony prosecutions of bankruptcy-related crimes generated by the Bankruptcy Fraud Initiative in the Northern District of Texas. Of the 26 defendants charged as part of that initiative – 17 have been convicted, 1 resulted in a mistrial and 8 are pending trial.

The U.S. Postal Inspection Service investigated the case. Assistant U.S. Attorney David Jarvis is in charge of the prosecution.

The CBP Officer of the Future

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by [email protected]

At the recent U.S Customs and Border Protection (CBP) west coast trade symposium, a panel titled “Global Innovation,” which included representatives from the Department of Homeland Security’s Office of Science and Technology, CBP’s National Targeting Center [It is not clear if this is one or two organizations.] discussed innovations in software applications and data usage that enhance supply chain security.

 

One question raised by the panel was, what would a future port look like?  The question I raised, in return, was what will a future CBP officer look like? The question remained unanswered, but is one that needs to be considered seriously.

 

As CBP continues to seek and use innovative technologies, it is the officer who needs to understand the technology as it will serve as his/her partner in both the agency’s enforcement and facilitation missions. Ultimately, the officer will need to become a savvy data analyst.

 

In addition, the operational personnel, i.e., Customs and Border Protection officers, import specialists, and trade analysts must be grounded in a solid understanding of the import and export dynamics of international trade. This includes production, sourcing, and logistics trends.

 

In order to be able to maximize the use of available technology, strategic and critical thinking skills must be in the officer’s tool box. Being able to identify, address and prioritize problems will be essential. The days of continuing to focus on low-hanging fruit that fails to bring positive returns to both the agency and the trade community will be over.

 

The mere accessing of data is a waste of time if the ability to evaluate it does not exist. Effective evaluation is critical to enabling supervisors and managers to make decisions on the optimal deployment of limited resources.

 

In general, the officer must be flexible and nimble as global trade trends shift along with the potential risk. Continuing to hold onto historic trends and patterns will only cause the officer to be reactive, instead of proactive, as new challenges emerge. In addition, quick communication by analysts to officers at the port is vital. There is nothing worse than acting on inaccurate or old data. If your efforts do not produce results you must swiftly react to make necessary adjustments.

 

Corporate compliance officers need to have the same skills and approaches to be effective and provide a value-added service across company operations.