Author Archives: Brad Geyer

Two University of Missouri Physicians Plead Guilty to Health Care Fraud

Posted on by

Wednesday, July 19, 2017

JEFFERSON CITY, Mo. – Tom Larson, Acting United States Attorney for the Western District of Missouri, announced today that two physicians at the University of Missouri School of Medicine in Columbia, Mo., have pleaded guilty in federal court, in separate cases, to engaging in a health care fraud scheme that totaled more than $190,000.

Kenneth Loem Rall, 82, and Michael Edward Richards, 65, both of Columbia, Mo., each waived his right to a grand jury and pleaded guilty before U.S. Magistrate Judge Matt J. Whitworth on Tuesday, July 18, 2017, to a federal information that charges him with one count of health care fraud.

Rall, who was employed at the university from July 1, 1998, until June 1, 2012, was chairman of the department of radiology at the School of Medicine until his resignation from that position on Dec. 20, 2011. Richards, who was head of mammography, was employed at the university from July 10, 2003, to June 1, 2012. Rall and Richards were both attending physicians in the university hospital, and teaching physicians and members of the faculty of the School of Medicine.

By pleading guilty, Rall and Richards each admitted that he signed interpretations of exams performed by residents at the hospital without actually viewing the images. Rall admitted that he caused more than $120,000 in fraudulent claims to be filed with federal health benefit programs from March 2010 through December 2011. Richards admitted that he caused more than $70,000 in fraudulent claims to be filed with federal health benefit programs from March 2010 through December 2011.

Federal health benefit programs (such as Medicare, Medicaid and Tricare) pay for the interpretation of diagnostic radiology and other diagnostic tests only if the interpretation is performed or reviewed by a teaching physician. If a resident prepares and signs the interpretation, the teaching physician must indicate that he or she personally viewed the relevant images and agrees with the resident’s interpretation, or edits the findings.

Rall and Richards admitted they falsely certified that they had viewed hundreds of files and records, when in fact they did not view the images. In each instance, the federal health benefit plan caused money to be paid, relying on their certification that they had done the work required by the pertinent regulations.

Under federal statutes, Rall and Richards are each subject to a sentence of up to 10 years in federal prison without parole. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

These cases are being prosecuted by Assistant U.S. Attorneys Lawrence E. Miller and Cindi S. Woolery. They were investigated by the U.S. Department of Health and Human Services – Office of the Inspector General, the Defense Criminal Investigative Service and the FBI.

Guardianship Firm and its Principals Charged with Federal Conspiracy, Fraud, Theft and Money Laundering Offenses

Posted on by

Wednesday, July 19, 2017

Twenty-Eight Count Indictment Alleges that Co-Founders of Ayudando Guardians, Inc., Embezzled Millions from Client Accounts to Support Lavish Lifestyles

U.S. Marshals Service Assumes Control of Ayudando Guardians, Inc.,

to Ensure Continuity of Services for Special Needs Clients

ALBUQUERQUE – Federal law enforcement officials today announced the filing of conspiracy, fraud, theft and money laundering charges against Ayudando Alpha, Inc., d/b/a “Ayudando Guardians, Inc.” (Ayudando), and its co-founders, Susan Harris, 70, and Sharon Moore, 62, both residents of Albuquerque, N.M. The charges, which are contained in a 28-count indictment, arise out of an alleged decade-long sophisticated scheme to embezzle funds from client trust accounts managed by Ayudando, a non-profit corporation that provides guardianship, conservatorship and financial management services to hundreds of individuals with special needs.

According to the indictment, Ayudando – which means “helping” in Spanish – receives government benefit payments from the U.S. Department of Veterans Affairs (VA) and U.S. Social Security Administration (SSA) on behalf of many of its clients, and acts as a fiduciary or representative payee for these clients by paying their expenses and maintaining the balances for the benefit of the clients. The indictment alleges that Harris and Moore, the primary owners and operators of Ayudando, have embezzled millions of dollars from their special needs clients to support lavish lifestyles for themselves and their families.

The charges against Ayudando, Harris and Moore are the result of an ongoing multi-agency investigation by the FBI, IRS Criminal Investigation, U.S. Marshals Service (USMS), VA Office of Inspector General and SSA Office of Inspector General. This morning federal law enforcement agents arrested Harris and Moore. Harris and Moore made their initial appearances in federal court in Albuquerque this morning. They are scheduled to return to court at 9:30 a.m. tomorrow, July 20, 2017, to be arraigned on the indictment and for detention hearings.

Federal authorities also enforced a federal court order that authorized the USMS’s Complex Assets Unit to assume control of Ayudando’s business operations. The court order appoints the USMS as the Receiver and Monitor of Ayudando, including all its financial accounts. The order authorizes the USMS to operate the business to ensure that its assets are not improperly spent or removed, and that the interests of Ayudando clients are protected as the prosecution of the criminal case goes forward. The USMS’s operation of Ayudando will ensure continuity of services for Ayudando clients.

The charges against Ayudando, Harris and Moore were announced by Acting U.S. Attorney James D. Tierney, U.S. Marshal Conrad E. Candelaria, Special Agent in Charge Terry Wade of the Albuquerque Division of the FBI, Special Agent in Charge Ismael Nevarez Jr., of the Phoenix Field Office of IRS Criminal Investigation, Special Agent in Charge Carl D. Scott of the Criminal Investigations Division of the VA’s Office of Inspector General, and Special Agent in Charge Robert Feldt of the Dallas Field Division of the SSA’s Office of the Inspector General.

In making the announcement, Acting U.S. Attorney James D. Tierney said, “This case is all about the victims. The victims in this case relied upon Ayudando to manage their finances and meet their needs. If the allegations in the indictment are true, the principals of Ayudando cruelly violated the trust of their clients and looted their benefits. Federal law enforcement has now stepped in to ensure that the looting stops. The U.S. Attorney’s Office and its partners will conduct this prosecution in a manner that provides for the continued receipt of benefits by Ayudando’s clients, while holding the principals of the company accountable for their conduct.”

“This morning the U.S. Marshals Service assumed control of Ayudando’s business operations to ensure that the victims of the crimes charged in the indictment, which include our disabled veterans, and other Ayudando clients will continue to receive the services they deserve and are entitled to,” said U.S. Marshal Conrad E. Candelaria. “The U.S. Marshals Service also will continue to assist its law enforcement partners in the continuing investigation.”

“Many of our most vulnerable Americans, such as those with special needs, trust fiduciaries to handle their government benefits for them. Unfortunately, there are plenty of criminals willing to steal what could be a person’s only source of income, using the money to support a lavish lifestyle,” said Special Agent in Charge Terry Wade of the FBI’s Albuquerque Division. “The FBI, working with our law enforcement and government partners, is committed to bringing to justice those individuals whose greed destroys the lives and dreams of innocent people.”

“The indictment alleges that, instead of helping people with special needs, the defendants were greedy and helped themselves to their clients’ money,” said Special Agent in Charge Ismael Nevarez Jr., of the Phoenix Field Office of IRS Criminal Investigation. “IRS Criminal Investigation will always investigate individuals who misuse non-profit businesses and cause harm to those whose needs are supposed to be served by those businesses.”

“Professional fiduciaries who defraud vulnerable veterans are reprehensible,” said Special Agent in Charge Carl D. Scott of the Criminal Investigations Division of the VA Office of Inspector General. “The VA OIG will continue to work with other law enforcement agencies to expose those who harm veterans or exploit VA benefits systems and bring them to justice.”

“The SSA OIG is committed to investigating cases of suspected representative payee fraud, which can involve the theft of government funds and harm some of our most vulnerable citizens,” said Special Agent in Charge Robert Feldt of the Dallas Field Division of the SSA Office of the Inspector General. “We will continue to work with our law enforcement partners and the U.S. Attorney’s Office on this case.”

The 28-count indictment, which was filed under seal on July 11, 2017 and was unsealed and publicly posted earlier today, includes two conspiracy counts, ten counts of mail fraud, nine counts of aggravated identify theft and six counts of money laundering. According to the indictment, from Nov. 2006, when Harris and Moore founded Ayudando, and continuing until July 2017, Ayudando, Harris and Moore embezzled millions of dollars from Ayudando client accounts to cover their personal expenses and support lavish lifestyles for themselves and their families. The indictment alleges that Harris and Moore perpetuated the embezzlement scheme by:

  • Establishing Ayudando as a non-profit corporation in Nov. 2006, to position it as a guardian, conservator, fiduciary and representative payee for individuals needing assistance with their financial affairs;
  • Setting up client trust and company bank accounts which only they controlled;
  • Transferring funds from client accounts to Ayudando company accounts;
  • Using client funds to pay off more than $4 million in charges on a company credit card account used by Harris, Moore and their families for personal purposes;
  • Writing checks from Ayudando company accounts to themselves, cash and to cover personal expenses;
  • Replenishing depleted client accounts with funds taken from other clients;
  • Mailing fraudulent statements and certifications to the VA; and
  • Forging and submitting forged bank statements to the VA.

The indictment identifies some of the ways in which Harris and Moore used the money they allegedly stole from Ayudando clients. For example, the indictment alleges that between June 2011 and March 2014, Harris wrote 12 checks in the total amount of $457,883 on the Ayudando client reimbursement account for personal purpose, including a $50,950 check made out to Mercedes Benz of Albuquerque and a $26,444 check made out to Myers RV Center. It also alleges that between Jan. 2013 and Feb. 2017, Harris used an Ayudando company credit card to pay $140,790 to cover luxury vacations for herself and others, including cruises in the Caribbean isles and a “Final Four” basketball junket, while knowing that Moore would pay off the charges using client funds.

The mail fraud charges in the indictment describe some of the fraudulent documents allegedly mailed by Ayudando, Harris and Moore to the VA to perpetuate and conceal their embezzlement scheme. For example, between Jan. 2016 and Nov. 2016, Moore allegedly mailed fraudulent documents to the VA that falsely represented the balances in ten client accounts. According to the indictment, the documents falsely claimed that the ten client accounts had an aggregate balance of $1,906,908, when the actual value of the ten accounts was only $72,281. The ten client accounts identified in the indictment are examples of the fraud allegedly perpetrated by the defendants as part of their embezzlement scheme.

According to the indictment, Ayudando, Harris and Moore also engaged in aggravated identify theft by using their clients’ names, dates of birth, Social Security Numbers and VA file numbers to commit mail fraud offenses. Harris and Moore also allegedly committed money-laundering offenses by using $392,623 from the Ayudando client reimbursement account to pay off balances on a company credit card used by the defendants and their families for personal purposes. The indictment includes forfeiture provisions that seek forfeiture to the United States of any proceeds and property involved in, or derived from, the defendants’ unlawful conduct.

If the defendants are convicted on the crimes charged in the indictment, they face the following maximum statutory penalties:

  • Count 1, conspiracy – 30 years of imprisonment and a $250,000 fine;
  • Counts 2-11, mail fraud – 30 years of imprisonment and a $250,000 fine;
  • Counts 12-21, aggravated identity theft – a mandatory two-years of imprisonment that must be served consecutive to any other sentence imposed on other counts and a $250,000 fine;
  • Counts 22-27, money laundering – ten years of imprisonment and a $250,000 fine or twice the amount of the property involved in the crime; and
  • Count 28, conspiracy to commit money laundering – ten years of imprisonment and a $250,000 fine or twice the amount of the property involved in the crime.

The Albuquerque offices of the FBI and IRS Criminal Investigation conducted the investigation, which resulted in the charges in the indictment, and are leading the continuing investigation. The Complex Assets Unit and the Albuquerque office of the USMS, the Criminal Investigations Division of the VA Office of Inspector General, and the Dallas Field Division of the SSA Office of Inspector General are assisting in the investigation. Assistant U.S. Attorneys Jeremy Peña and Brandon L. Fyffe are prosecuting the case.

Ayudando clients or family members of Ayudando clients who need to speak with someone about their accounts or expenses should call Ayudando, which is now being operated by the U.S. Marshals Service, at 505-332-4357.

Starting tomorrow, information about the federal investigation into Ayudando, including the indictment and the federal court order, will be available at www.justice.gov/usao-nm/ayudando-guardians. Also starting tomorrow, Ayudando clients can direct their comments or concerns to the U.S. Attorney’s Office at [email protected](link sends e-mail) or 505-346-6902.

Charges in indictment are merely allegations and defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

 

Ayudando Indictment

Nine Miami-Dade Assisted Living Facility Owners Sentenced to Federal Prison for Receipt of Health Care Kickbacks

Posted on by

Wednesday, July 19, 2017

Miami-Dade County assisted living facility owners, Marlene Marrero, 60, of Miami, Norma Casanova, 67, of Miami Lakes, Yeny De Erbiti, 51, of Miami, Rene Vega, 57, of Miami, Maribel Galvan, 43, of Miami Lakes, Dianelys Perez, 34, of Miami Gardens, Osniel Vera, 47, of Hialeah, Alicia Almeida, 56, of Miami Lakes, and Jorge Rodriguez, 57, of Hialeah, were sentenced to prison for receiving health care kickbacks. United States District Judge Marcia G. Cooke imposed sentences upon the nine defendants ranging from eight months to one year and one day, in prison. One assisted living facility owner, Blanca Orozco, 69, of Miramar, was sentenced to home confinement. In addition to their federal convictions, all ten defendants were also ordered to serve three years of supervised release, pay restitution and are subject to forfeiture judgments.

Benjamin G. Greenberg, Acting United States Attorney for the Southern District of Florida, Pam Bondi, Florida Attorney General, Shimon R. Richmond, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), and George L. Piro, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, made the announcement.

All ten defendants previously pled guilty to receipt of kickbacks in connection with a federal health care program, in violation of Title 42, United States Code, Section 1320a-7b(b)(1)(A). According to court documents, these assisted living facility owners conspired with the former owner of Florida Pharmacy to receive kickbacks and bribes in exchange for referring beneficiaries living in their facilities for prescription medication and durable medical equipment paid for by Medicare and Medicaid. The assisted living facility owners participated in the fraudulent scheme, in violation of their Medicaid provider agreement as well as federal and state anti-kickback rules and regulations.

Mr. Greenberg commended the investigative efforts of the Medicare Fraud Strike Force participating partners, including HHS-OIG, the State of Florida’s Medicaid Fraud Control Unit, and the FBI. The case was prosecution by Special Assistant United States Attorney Hagerenesh Simmons.

The Medicare Fraud Strike Force operates in nine locations nationwide. Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

In addition, HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.

Clinical Psychologist and Owner of Psychological Services Centers Sentenced to 264 Months for Roles in $25 Million Psychological Testing Scheme Carried out Through Eight Companies in Four States

Posted on by

Friday, July 14, 2017

Two owners of psychological services companies, one of whom was a clinical psychologist, were sentenced yesterday for their involvement in a $25.2 million Medicare fraud scheme carried out through eight companies at nursing homes in four states in the Southeastern U.S.

The announcement was made by Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Duane A. Evans of the Eastern District of Louisiana, Special Agent in Charge Jeffrey S. Sallet of the FBI’s New Orleans Field Office and Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Dallas Regional Office.

Rodney Hesson, 47, of Slidell, Louisiana, and Gertrude Parker, 63 of Slidell, Louisiana, were sentenced on July 13, to 180 months’ imprisonment and 84 months’ imprisonment by U.S. District Court Judge Carl J. Barbier of the Eastern District of Louisiana. Judge Barbier also ordered Hesson to pay $13,800,553.57 in restitution, and ordered Parker to pay $7,313,379.75 in restitution. The defendants were each convicted of one count of conspiracy to commit health care fraud and one count of conspiracy to make false statements related to health care matters on January 24.

According to evidence presented at trial, Hesson and Parker’s companies, Nursing Home Psychological Services (NHPS) and Psychological Care Services (PCS), respectively, contracted with nursing homes in Alabama, Florida, Lousiana and Mississippi to allow NHPS and PCS clinical psychologists to provide psychological services to nursing home residents. Hesson and Parker caused these companies to bill Medicare for psychological testing services that these nursing home residents did not need or in some instances did not receive, the trial evidence showed. During trial, evidence was entered showing that between 2009 and 2015, NHPS and PCS submitted over $25.2 million in claims to Medicare, the vast majority of which were fraudulent, while Medicare paid more than $13.5 million on the fraudulent claims. The jury verdict included a money judgment of $8,956,278, as well as forfeiture of Hesson’s home and at least $525,629 in seized currency.

The case was investigated by the FBI and HHS-OIG, and brought by the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Louisiana. The case is being prosecuted by Senior Litigiation Counsel John Michelich and Trial Attorneys Katherine Raut and Katherine Payerle of the Fraud Section.

The Fraud Section leads the Medicare Fraud Strike Force. Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged over 3,000 defendants who collectively have billed the Medicare program for over $11 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.

Florida Businessman Sentenced to Prison for Conspiring to Commit Tax and Bank Fraud

Posted on by

Monday, July 17, 2017

Concealed Approximately $2.5 Million in Secret Belize Accounts

A Florida businessman was sentenced today to 57 months in prison in U.S. District Court for the Middle District of Florida for conspiring to commit tax and bank fraud, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.

According to documents filed with the court, Casey Padula, 48, of Port Charlotte, was the sole shareholder of Demandblox Inc., a marketing and information technology business. Padula conspired with others to move funds for his benefit from Demandblox to offshore accounts in Belize and disguised these transfers as business expenses in Demandblox’s corporate records. Padula created two offshore companies in Belize: Intellectual Property Partners Inc. (IPPI) and Latin American Labor Outsourcing Inc. (LALO). He opened and controlled bank accounts in the names of these entities at Heritage International Bank & Trust Limited (Heritage Bank), a financial institution located in Belize. From 2012 through 2013, Padula caused periodic payments to be sent from Demandblox to his accounts at Heritage Bank and deposited approximately $2,490,688. Padula used the funds to pay for personal expenses and purchase significant personal assets. However, he falsely recorded these payments in Demandblox’s corporate books as intellectual property rights or royalty fees and deducted them as business expenses on Demandblox’s 2012 and 2013 corporate tax returns. As a result of these false deductions, Padula caused a tax loss of more than $728,000.

Padula also conspired with investment advisors Joshua VanDyk and Eric St-Cyr at Clover Asset Management (CAM), a Cayman Islands investment firm, to open and fund an investment account that he would control, but that would not be in his name. Heritage Bank had an account at CAM in its name and its clients could get a subaccount through Heritage Bank that would not be in the client’s name but rather would be a numbered account. Padula transferred $1,000,080 from the IPPI bank account at Heritage Bank in Belize to CAM to fund a numbered account that concealed his financial interest in it. Padula failed to disclose this account to the U.S. Department of Treasury and the Internal Revenue Service (IRS) despite being required to do so under the law.

In addition to the tax fraud, Padula also conspired with others to commit bank fraud. Padula had a mortgage on his Port Charlotte, Florida home of approximately $1.5 million with Bank of America (BoA). In 2012, he sent a letter to the bank stating that he could no longer repay his loan. At the same time, Padula provided Robert Robinson III, 43, who acted as a nominee buyer, with more than $625,000 from his IPPI bank account in Belize to fund a short sale of Padula’s home. Padula and Robinson signed a contract, which falsely represented that the property was sold through an “arms-length transaction,” and agreed that Padula would not be permitted to remain in the property after the sale. Padula in fact never moved from his home and less than two months after the closing, Robinson conveyed it back to Padula by transferring ownership to one of Padula’s Belizean entities for $1. Robinson was also sentenced today to five years of probation for signing a false Form HUD-1 in connection with his role in the scheme.

“Casey Padula used secret numbered bank accounts, foreign shell companies and phony deductions to hide millions and evade U.S. taxes,” said Acting Deputy Assistant Attorney General Goldberg. “His 57 month sentence today makes clear that there is no place safe in the world for tax cheats to hide their money and feel secure that the Department of Justice and the IRS will not uncover their scheme and hold them fully accountable.”

“As Mr. Padula has learned, using shell companies and offshore accounts is not tax planning; it’s tax fraud,” said Chief Don Fort of IRS Criminal Investigation (CI). “The use of sophisticated international financial transactions does not prevent IRS CI from following the trail of money back to the person breaking the law. In conjunction with our law enforcement partners, we will continue our ongoing efforts to pursue individuals who use these offshore schemes to circumvent the law.”

In addition to the term of prison imposed by U.S. District Court Judge Sherri Polster Chappell, Padula was ordered to serve three years of supervised release and to pay a fine of $100,000 and to pay restitution of $728,609 to the IRS and to BoA in the amount of $739,459.90. He was remanded into custody.

Acting Deputy Assistant Attorney General Goldberg thanked special agents of IRS CI, who conducted the investigation, and Assistant Chiefs Todd Ellinwood and Caryn Finley of the Tax Division, who prosecuted this case. Acting Deputy Assistant Attorney General Goldberg also thanked the U.S. Attorney’s Office of the Middle District of Florida for its assistance.

Additional information about the Tax Division’s enforcement efforts can be found on the division’s website.

Three Former Traders for Major Banks Arraigned in Foreign Currency Exchange Antitrust Conspiracy

Posted on by

Monday, July 17, 2017

Three United Kingdom nationals and former traders of major banks voluntarily surrendered to the FBI and were arraigned on a charge arising from their alleged roles in a conspiracy to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange (FX) spot market, the Justice Department announced today.

A one-count indictment, filed in the U.S. District Court for the Southern District of New York on January 10, 2017, charges Richard Usher (former Head of G11 FX Trading-UK at an affiliate of The Royal Bank of Scotland plc, as well as former Managing Director at an affiliate of JPMorgan Chase & Co.), Rohan Ramchandani (former Managing Director and head of G10 FX spot trading at an affiliate of Citicorp) and Christopher Ashton (former Head of Spot FX at an affiliate of Barclays PLC) with conspiring to fix prices and rig bids for U.S. dollars and euros exchanged in the FX spot market.

The charge in the indictment carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by victims if either amount is greater than $1 million.

According to the indictment, from at least December 2007 through at least January 2013, Usher, Ramchandani and Ashton (along with unnamed co-conspirators) conspired to fix prices and rig bids for the euro – U.S. dollar currency pair. Called “the Cartel” or “the Mafia,” this group of traders carried out their conspiracy by participating in telephone calls and near-daily conversations in a private electronic chat room. Their anticompetitive behavior included colluding around the time of certain benchmark rates known as fixes, such as by coordinating their bidding/offering and trading to manipulate the price of the currency pair by the time of the fix or otherwise profit as a result of the fix price. The conspirators also coordinated their trading activities outside of fix times, such as by refraining from entering bids/offers or trading at certain times as a means of stabilizing or controlling price.

The charge in the indictment is merely an allegation, and the defendants are presumed innocent unless and until proven guilty.

This prosecution is being handled by the Antitrust Division’s New York Office and the FBI’s Washington Field Office. Anyone with information concerning price fixing or other anticompetitive conduct in the FX market should contact the Antitrust Division’s Citizen Complaint Center at (888) 647-3258, visit https://www.justice.gov/atr/report-violations or call the FBI tip line at (415) 553-7400.

District Man Sentenced to Year in Prison For Carrying Out Bank Fraud Scheme

Posted on by

Monday, July 17, 2017

Admitted Filing Forged Documents, Leading to Nearly $340,000 in Ill-Gotten Gains

WASHINGTON – David Tyrone Johnson, 48, of Washington, D.C., was sentenced today to a year and a day in prison on federal charges arising from a real estate scheme involving forged mortgage satisfaction documents, announced U.S. Attorney Channing D. Phillips and Andrew Vale, Assistant Director in Charge of the FBI’s Washington Field Office.

Johnson pled guilty in April 2017, in the U.S. District Court for the District of Columbia, to charges of bank fraud and making false statements. He was sentenced by the Honorable Ketanji Brown Jackson. Following his prison term, Johnson will be placed on two years of supervised release. He also must pay $337,105 in restitution to Fidelity National Title Insurance Company, as well as a forfeiture money judgment of $170,688.

According to a statement of offense submitted at the time of the guilty plea, SunTrust Mortgage, Inc. loaned a friend of Johnson’s approximately $470,000 in 2008 to purchase residential real estate in the 100 block of 57th Street SE. By 2009, the friend had failed to repay the mortgage loans, and in 2010, SunTrust Mortgage filed a notice of foreclosure with the District of Columbia’s Recorder of Deeds. In April 2013, SunTrust Mortgage began the process of foreclosing on the mortgage and taking possession of the property, due to the friend’s failure to make good and timely payments on the mortgage loans.

Sometime before Oct. 2, 2013, Johnson caused the creation of two phony and forged certificates of satisfaction, which falsely represented that the SunTrust Mortgage loans at the property on 57th Street SE had been paid and that his friend owned the property “free and clear.” According to the statement of offense, on Oct. 2, 2013, Johnson filed these two phony certificates of satisfaction with the Recorder of Deeds.

In or about December 2013, after the fake certificates of satisfaction allowed the friend to sell the property without paying the outstanding mortgages, the title and escrow company wired out the sales proceeds of $337,105, of which approximately $170,688 was obtained by Johnson.

In addition, in 2015, Johnson was required to submit a financial disclosure form to his government agency employer; however, on that form, Johnson failed to disclose the money he obtained from the sales proceeds of the property, knowing that he had obtained the money. This failure to inform his government agency employer was material or important to his employer, and one that resulted in a false statement on his financial disclosure form.

In announcing the sentence, U.S. Attorney Phillips and Assistant Director in Charge Vale expressed appreciation for the work performed by those who investigated the case and assisted in preparing it for trial from the FBI, including the Washington Field Office and the FBI Laboratory. They also acknowledged the efforts of those working on the case from the U.S. Attorney’s Office, including Paralegal Specialist Christopher Toms; former Paralegal Specialists Corinne Kleinman and Kaitlyn Krueger; Litigation Tech Specialist Ron Royal, and Assistant U.S. Attorney Thomas Swanton, who assisted with forfeiture issues. Finally, they commended the work of Assistant U.S. Attorney Virginia Cheatham, who prosecuted the case.

Manhattan U.S. Attorney Announces $4.4 Million Settlement Of Civil Lawsuit Against VNS Choice For Improper Collection Of Medicaid Payments

Posted on by

Monday, July 17, 2017

VNS Choice Admits to Collecting Medicaid Payments for Hundreds of Beneficiaries Who It Failed to Timely Disenroll From Its Managed Long-Term Care Plan

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that the United States has settled a civil fraud lawsuit against VNS CHOICE, VNS CHOICE COMMUNITY CARE, and VISITING NURSE SERVICE OF NEW YORK (collectively, “VNS”) for improperly collecting monthly Medicaid payments for 365 Medicaid beneficiaries whom VNS Choice failed to timely disenroll from the VNS Choice Managed Long-Term Care Plan (“Choice MLTCP”). Most of the beneficiaries who should have been disenrolled from the Choice MLTCP were no longer receiving health care services from VNS. Under the terms of the settlement approved today by United States District Judge Ronnie Abrams, VNS Choice must pay a total sum of $4,392,150, with $1,756,860 going to the United States and the remaining amount to the State of New York. In the settlement, VNS admits that VNS Choice failed to timely disenroll 365 Choice MLTCP members and, as a result, received Medicaid payments to which it was not entitled.

Acting Manhattan U.S. Attorney Joon H. Kim said: “VNS Choice failed to timely disenroll individuals from its managed care plan and continued to collect Medicaid payments for their care, even when it provided no medical services to them. This Office is committed to holding accountable those who receive government health care program dollars to which they are not entitled.”

HHS-OIG Special Agent in Charge Scott J. Lampert said: “As State Medicaid Programs increasingly have moved to managed care arrangements, we have adapted our investigative tools accordingly. We will continue to work closely with our state and federal law enforcement partners to unravel these schemes, and hold health care providers accountable for the money they receive.”

VNS Choice administers a Managed Long-Term Care Plan for Medicaid beneficiaries pursuant to a contract with the New York State Department of Health (“MLTC Contract”). VNS Choice receives payments for each member enrolled in the Plan (called “capitation payments”) in exchange for arranging and providing certain community-based long-term care services, such as care management, skilled nursing services, physical therapy, speech therapy, occupational therapy, and preventive services. During the relevant period, VNS Choice received a monthly capitation payment of $3,800 to $4,200 for each Choice MLTC member.

The MLTC Contract sets forth various circumstances under which members must be disenrolled. For example, VNS Choice is required to disenroll Choice MLTCP members when it knows that a member no longer resides in the service area, a member has been absent from the service area for a specified number of consecutive days, a member is hospitalized for 45 consecutive days or longer, a member is no longer eligible to receive Medicaid benefits, or a member is deemed to be no longer eligible for managed long-term care. VNS Choice also must initiate disenrollment upon a member’s voluntary request.

As alleged in the United States’ Complaint filed in Manhattan federal court, VNS Choice failed to timely disenroll 365 Choice MLTCP members as required by the MLTC Contract and regulatory requirements during the period January 1, 2011, through March 31, 2015. In many instances, VNS Choice continued to collect capitation payments for several months after the date the member should have been disenrolled, during which time VNS Choice provided no health care services to the member. Approximately half of the 365 members moved out of VNS Choice’s service area or left the service area for extended periods of time. Other members notified VNS Choice of their desire to disenroll from the Choice MLTCP or repeatedly refused services but were not timely disenrolled. VNS Choice also failed to promptly disenroll members after determining that they no longer met managed long-term care eligibility criteria. Although VNS Choice eventually disenrolled the 365 members, it kept the Medicaid payments it had improperly received for these members while delaying their disenrollment.

As part of the settlement, VNS admits, acknowledges, and accepts responsibility for the following conduct:

  • VNS Choice failed to identify and disenroll 365 Choice MLTCP members in a timely manner and, as a result, received monthly capitation payments to which it was not entitled.
  • With respect to a number of these 365 Choice MLCTP Members, VNS Choice was aware at the time it ultimately disenrolled the members that the members should have been disenrolled earlier, but failed to repay Medicaid for the monthly capitation payments that VNS Choice had improperly received for those members.

In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had been filed under seal pursuant to the False Claims Act. The Government previously partially intervened in this whistleblower lawsuit and entered into a settlement with VNS to resolve allegations relating to the use of social adult day care centers to enroll ineligible members in the Choice MLTCP.

* * *

Mr. Kim thanked the Office of the Inspector General for HHS for its assistance. Kim also thanked the Medicaid Fraud Control Unit of the New York State Attorney General’s Office for its investigative efforts and work on the case.

The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.

Former DHS Employee Sent to Prison for Scheme to Steal USDA Funds Intended to Feed Hungry Children

Posted on by

Monday, July 17, 2017

LITTLE ROCK—Patrick C. Harris, Acting United States Attorney for the Eastern District of Arkansas, announced Monday that United States District Court Judge James M. Moody, Jr., sentenced Gladys Waits, 37, of Little Rock, to prison for her role in a scheme to steal money intended for feeding children in low income areas.

Judge Moody sentenced Waits, who pleaded guilty to conspiring to commit wire fraud on March 30, 2016, to 108 months’ imprisonment, to be followed by three years of supervised release. She was also ordered to pay restitution in the amount of $9,669,269.66.

The United States Department of Agriculture (USDA) feeding programs in Arkansas are administered through the Arkansas Department of Human Services (DHS). Sponsors who want to participate in the feeding programs must submit an application to DHS for approval. After they are approved, they can provide meals as part of the feeding programs, and they are reimbursed for the eligible meals they serve.

Waits is the eighth defendant to be sentenced for her involvement in a scheme to fraudulently obtain USDA program funds intended to feed children in low income areas. Other defendants sentenced include: Kattie Jordan, 63 months’ imprisonment on March 15, 2016; Reuben Nims, 21 months’ imprisonment on November 2, 2016; Tonique Hatton, 108 months’ imprisonment on January 4, 2017; James Franklin, 24 months’ imprisonment on January 10, 2017; Maria Nelson, 30 months’ imprisonment on January 31, 2017; Michael Lee, 30 months’ imprisonment on May 1, 2017; and Christopher Nichols, 3 years’ probation on May 16, 2017.

Waymon Weeams, Dortha Harper, Francine Leon, Alexis Young, and Erica Warren have all pleaded guilty to conspiring to defraud USDA feeding programs and are awaiting sentencing. Jacqueline Mills and Anthony Waits were convicted on April 6, 2017, following a jury trial and are also awaiting sentencing.

Gladys Waits worked for DHS and her responsibilities included processing applications from sponsors who applied to participate in the feeding programs, determining their eligibility, and approving their proposed feeding sites. Waits was responsible for approving the feeding programs for Mills, Jordan, Nims, Franklin, Nichols, Weeams, and Harper at various times between August 2012 and August 2014. The sponsors submitted claims with inflated numbers of children fed. Waits also helped these sponsors avoid DHS’s detection of the fraud.

Gladys Waits received bribe payments from some sponsors, both directly through checks made payable to her and indirectly through checks made payable to relatives, including her husband, Anthony Waits. Anthony Waits recruited sponsors Nims, Franklin, Nichols, Weeams and Harper to participate and they paid a percentage of the proceeds they received from the programs back to Anthony Waits.

The investigation is ongoing and is being conducted by the USDA–Office of Inspector General, Federal Bureau of Investigation, Internal Revenue Service–Criminal Investigations, and United States Marshals Service. The case is being prosecuted by Assistant United States Attorneys Jana Harris, Allison W. Bragg, and Cameron McCree.

If you are aware of any fraudulent activity regarding feeding programs, please email that information to [email protected](link sends e-mail).

CCC’s: The Sherman Act is An Unconstitutional Criminal Statute (Part II)

Posted on by

July 19, 2017 by Robert Connolly 2 Comments

In Part 1 of this article (here), I argued that the Sherman Act was unconstitutional as a criminal statute because it is void for vagueness.  A statute that criminalizes all restraints of trade cannot be saved by the Supreme Court explaining what Congress really must have really meant. What passed constitutional muster when the Sherman Act was a misdemeanor[1] merits another look now that the statute carries a maximum jail time of 10 years in prison.

In Part II I discuss how I think the criminal element of the Sherman Act should be fixed.

 The Heir Locators Criminal Indictment May Make This Issue Topical

I want to explain why this topic has come to mind. The Antitrust Division’s heir locators investigation/prosecution garners little attention in the world of massive international cartel investigations, but an indictment in this investigation could have major implications for criminal antitrust prosecutions.[2]  In a recent development, the trial judge ruled that the criminal case should be tried under the Rule of Reason. It is possible this development will set off a chain of events that leads to the Supreme Court revisiting what is necessary for a criminal conviction under the Sherman Act.

Heir locator firms locate potential heirs to an estate from public records and agree to help with their claim in return for a contingency fee.  The amount of the contingency fee depends on factors such as the complexity of the claim, potential recovery etc.  Since the potential heirs are located from public records, they may be contacted by more than one heir locator firm.  According to the indictment, the defendants agreed to allocate customers on a “first to contact basis.”  The firm to which the customers were allocated would pay the firm that “backed off” a percentage of the contingency recovered.  The Division has obtained two guilty pleas in the investigation but defendants Kemp & Associates and its co-owner Daniel J. Mannix were indicted in August 2016 and have pled not guilty.

The indictment appears to be a straight forward customer allocation scheme—a per seviolation.  The defendants:

  • agreed, during those conversations and other communications, that when both co-conspirator companies contacted the same unsigned heir to an estate, the co-conspirator company that first contacted that heir would be allocated certain remaining heirs to that estate who had yet to sign a contract with an Heir Location Services provider;

  • agreed that the co-conspirator company to which heirs were allocated would pay to the other co-conspirator company a portion of the contingency fees ultimately collected from those allocated heirs;

If anything is a per se violation, customer allocation should earn the title.  It eliminates price competition and it can be an easier agreement to monitor/enforce than price fixing.  If you lose a customer you were supposed to get, you know it.  But, the defendants moved that the case should be tried under the rule of reason.  The briefs in the case were filed under seal so it is impossible at this point to understand the defendants’ argument and the government’s response.  Nonetheless, on June 21, 2017 U.S. District Judge David Sam heard oral argument and then granted the defendants’ motion that the case is subject to the rule of reason. He reserved judgment on the motion to dismiss “for further disposition pending the government’s further evaluation of the case.”

I predict that the Antitrust Division will not try a criminal case under the Rule of Reason.  The government will either seek an interlocutory appeal to reverse the district court’s ruling, or drop the case.  The Division is in a tough position because three defendants have already pled guilty.[3]  The Division will not lightly walk away from a prosecution where others have already taken a plea.  On the other hand, the Antitrust Division will not want a precedent that allows the defendant to raise the reasonableness of the conduct.  Defendants have argued in previous criminal cases that the restraint should be judged under a rule of reason, but the Division has had ample authority to beat that argument back.  But, what if the defendants go for the whole enchilada, and seek not just a rule of reason trial, but a complete dismissal of the charges?   It certainly would be helpful to the defendants to have a criminal case tried under the rule of reason, but it would be a home run, or antitrust Hall of Fame material to get the indictment dismissed in its entirety as unconstitutionally void for vagueness.

A Rule of Reason Criminal Case?

One reason the defendants may have moved for a rule of reason trial is that the Supreme Court has already said that this would be permissible.  In United States v. U.S. Gypsum,[4]the Supreme Court held that in a criminal prosecution under the Sherman Act that was subject to rule of reason analysis, “action undertaken with knowledge of its probable consequences and having the requisite anticompetitive effects can be a sufficient predicate for a finding of criminal liability under the antitrust laws.”[5]  That would seem to settle the question, but the Supreme Court has been rightly flexible with stare decisis in overruling numerous other “conventional wisdom” tenets in the antitrust area.  Think vertical restraints, maximum resale price maintenance and resale price maintenance as examples.[6]  Would the Supreme Court decide that a rule of reason criminal case (or a per se case) is unconstitutional.  Would an after-the-fact rule of reason determination (after a quick look?) (or full blown inquiry?) meet the “notice” standard required for a criminal statute?  But, what about the Gypsum required showing of intent of anticompetitive conduct?  Does that save the statute?  But what does that even mean?  Anticompetitive under the “consumer welfare model?”  Measured by the Chicago School?  Post Chicago School?  School of Rock?

I have a proposal to amend the elements of a Sherman Act criminal conviction that eliminates these questions/issues and is warranted in light of the 10-year maximum jail sentence.  (And not to forget, a corporation has paid a $500 million criminal fine.)

If the Restraint is Fraudulent—It’s Criminal

Every head of the Antitrust Division in recent memory has made statements such as, “price fixing, market allocation and bid rigging steal from, and commit fraud upon, American business and customers.”[7] Similarly, an Antitrust Division official has testified, “the [criminal] cases that we are charging and prosecuting are unmistakable fraud.”[8]  Simply put, the litmus test for criminality should be whether the restraint of trade also involves fraud (i.e. a per se violation).  The substantial hammer of justice –lengthy prison sentences, Red Notices, extradition, should be reserved for when a jury finds the defendant engaged in a restraint of trade that involved fraud.

Today, criminal antitrust indictments contain an element of fraud, because of [wise] prosecutorial discretion, not because of the dictates of the statute.  But, antitrust jurisprudence could have taken the path down a fraud requirement instead of veering off to a per se rule (a conclusive presumption that takes the issue of reasonableness out of the juries’ hand), and found that the criminality in the Sherman Act is confined to those agreements that have an element of fraud. Early cases interpreting what was an unreasonable restraint of trade were heading in that direction.

What we now call per se offenses were originally called fraud.  This was recognized as early as 1875 in Craft v. McConoughy,[9] a case involving a secret scheme to fix prices among four Illinois warehouses. The court stated, “To the public the four houses were held out as competing firms for business. Secretly they had conspired together.”[10]  The scheme enabled the parties “by secret and fraudulent means, to control the price of grain.”[11]  In the seminal antitrust case of United States v. Addyston Pipe,[12] the court found secret agreements to refrain from bidding to be a form of fraud: “It is well settled that an agreement between intending bidders at a public auction or a public letting not to bid against each other, and thus prevent competition, is a fraud.”[13] In McMullen v. Hoffman,[14] the Court refused to enforce a contract when one conspirator sued for his portion of the profits from a successful collusive bidding scheme. The Court explained that the agreement “tend[ed] to induce the belief that there really is competition . . . although the truth is that there is no such competition.”[15] The Court held that “the illegal character of the agreement is founded not alone upon the fact that it tends to lessen competition, but also upon the fact of the commission of a fraud by the parties in combining their interests and concealing the same.”[16] The Court distinguished a secret agreement from a known joint venture, where “[t]he public may obtain at least the benefit of the joint responsibility. . . . The public agents know then all that there is in the transaction, and can more justly estimate the motives of the bidders, and weigh the merits of the bid.”[17]  Over a century later, in response to a question as to whether antitrust crimes are crimes of moral turpitude, Antitrust Division Assistant Attorney General Bill Baer responded that “price-fixing, bid-rigging and market allocation agreements among companies that hold themselves out to the public as competitors are inherently deceptive and defraud consumers who expect the benefit of competition.”[18]

Drawing on the wisdom of early Supreme Court decisions and the recent pronouncements of the Antitrust Division, the demarcation between a restraint of trade that can subject the violator to civil penalties and one that subjects the violator to criminal penalties is whether there was an element of fraud.  The Sherman Act should reflect this, either by amendment in Congress, or by Supreme Court further interpretation of what the government is required to prove to subject the defendant to criminal penalties.   In a criminal case the government’s burden should include proving that the agreement was a restraint of trade where the agreement was actively concealed or where the defendant held him/itself out to the public as a competitor when in fact an agreement not to compete or limit competition had been reached without the knowledge of the customer.  In a previous article, I have labeled this standard Per Se Plus.[19]

How would the heir locators indictment fare under such a standard? It is hard to know for sure but the indictment suggests that customers shopped around or there would have been no need for an agreement at all.  And when customers got quotes from more than one company, the customer would reasonably assume there was competition.  And the fraud would be, as the Supreme Court said long ago, “in [the defendants] combining their interests and concealing the same.”

Conclusion

Would requiring the government to prove an element of fraud to obtain a criminal conviction make obtaining convictions more difficult?  The answer must be yes, but as a former Antitrust Division prosecutor, to convince a jury to convict you must argue that the crime wasn’t an “unreasonable restraint of trade” whatever the heck that is—but it was fraud by the lying cheating defendants.  There are benefits to the Antitrust Division that would flow from having to prove fraud, but that’s for another post. Here, I’ll end with this.  The crime should fit the punishment; and with punishment of up to ten years in prison for an individual and hundreds of millions of dollars for a corporation, the Sherman Act needs to be amended to include an element of fraud for a criminal conviction because it is currently unconstitutional.

Thanks for reading.

*********************************************************************************

[1] When the per se rule was announced in United States v. Socony-Vacuum Oil Co., 310 U.S 150 (1940). a jail sentence was virtually a non-existent possibility. The maximum sentence imposed on any of the convicted individual defendants in Socony Vacuum was a fine of $1000. See Daniel A. Crane, The Story of United States v. Socony Vacuum: Hot Oil and Antitrust in the Two New Deals, in ANTITRUST STORIES 107 (Eleanor M. Fox & Daniel A. Crane eds., 2007).

[2]  U.S. v. Kemp & Associates, Inc. and Daniel J. Mannix, Case: 2:16-cr-00403, (D. Utah 2016) (DS), available at  https://www.justice.gov/atr/file/887761/download.

[3]  Richard Blake agreed to plead guilty in January 2016 as part of a proposed plea agreement between the Antitrust Division and Blake.  His company was not charged, most likely because it had received leniency. California-based Brandenburger & Davis and its president Bradley Davis agreed to plead guilty in December 2015.

[4]  438 U.S. 422 (1978).

[5]  Gypsum, 438 U.S. at 444. fn 21.

[6] The Supreme Court stated in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 899 (2007).   “Stare decisis is not as significant in this case, however, because the issue before us is the scope of the Sherman Act,” which the Court has treated as a common-law statute.  The Court has been receptive to reviewing the per se rule in light of “new circumstances and new wisdom.”  The severe loss of personal liberty and other consequences now at stake in a Sherman Act criminal case is a new circumstance that warrants an evolution in the application of the per se rule to criminal antitrust cases so that the test for liability will better match the evolution of the law on consequences

[7] Anne K. Bingaman, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, The Clinton Administration: Trends in Criminal Antitrust Enforcement, Remarks Before the Corporate Counsel Inst. (Nov. 30, 1995), available at http://www.justice.gov/atr/public/speeches/0471.htm.

[8] Scott D. Hammond, Deputy Assistant Att’y Gen., Antitrust Div., U.S. Dep’t. of Justice, Transcript of Testimony Before the United States Sentencing Commission Concerning Proposed 2005 Amendments to Section 2R1.1 at 3 (Apr. 12, 2005), available at http://www.justice.gov/atr/public testimony/209071.pdf.

[9] 79 Ill. 346 (1875).

[10] Id. at 348.

[11] Id. at 349.

[12] 85 F. 271 (6th Cir. 1898).

[13] Id. at 293 (emphasis added) (citations omitted).

[14] 174 U.S. 639 (1899)

[15] Id. at 646.

[16] Id. at 649.

[17] Id. at 652 (citations omitted).

[18] Letter from Peter J. Kadzik, Principal Deputy Assistant Att’y Gen., U.S. Dep’t of Justice, to Senator Patrick Leahy Attaching Responses of William Baer, Assistant Att’y Gen. Antitrust Div., U.S. Dep’t of Justice to Questions for the Record Arising from the Nov. 14, 2013 Hearing of the Senate Comm. of the Judiciary Regarding Cartel Prosecution: Stopping Price Fixers and Protecting Consumers at 3 (Jan. 24, 2014) (emphasis added), available at http://www.judiciary.senate.gov/imo/media/doc/111413QFRs-Baer.pdf.

[19]  Robert E. Connolly, Per Se “Plus:” A Proposal to Revise the Per se Rule in Criminal Antitrust Cases, Antitrust, Vol. 29, No. 2, Spring 2015, p. 105.