Author Archives: Brad Geyer

Former Packaged Seafood Executive Pleads Guilty to Price Fixing

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Wednesday, June 28, 2017

A former senior vice president of sales for a packaged seafood company pleaded guilty for his role in a conspiracy to fix the price of packaged seafood, such as canned tuna, sold in the United States, the Department of Justice announced today.

According to documents filed in this case, Stephen Hodge and his co-conspirators agreed to fix the prices of packaged seafood from as early as 2011 through 2013. He pleaded guilty to a one-count criminal information filed on May 30, 2017, in U.S. District Court for the Northern District of California in San Francisco. Hodge has agreed to pay a criminal fine and cooperate with the Antitrust Division’s ongoing investigation. He will be sentenced by the court at a later date.

“With today’s plea, the Antitrust Division continues to send a strong signal that senior executives will be held accountable for their actions,” said Acting Assistant Attorney General Andrew Finch of the Justice Department’s Antitrust Division. “The division, along with our law enforcement colleagues, will continue to investigate price fixing among packaged seafood companies and the executives who worked at those companies.”

“The FBI will not tolerate the reprehensible behavior of company executives who abuse the trust of the American public for personal gain,” said FBI San Francisco Division Special Agent in Charge John F. Bennett. “We, along with our Justice Department partners, are dedicated to our ongoing investigations into price fixing and will bring these companies to justice.”

According to court documents, Hodge and his co-conspirators discussed the prices of packaged seafood sold in the United States and agreed to fix the prices of those products. Hodge and his co-conspirators negotiated prices and issued price announcements for packaged seafood in accordance with the agreements they reached. Including Hodge, three executives have pleaded guilty for their participation in this conspiracy. Bumble Bee Foods LLC has also been charged for its role in the price-fixing conspiracy. Bumble Bee Foods has a court appearance scheduled for August 2, 2017.

Today’s plea is the result of an ongoing federal antitrust investigation into the packaged seafood industry, which is being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Field Office.

Federal Grand Jury in Chicago Indicts Two Former Tech Executives For Allegedly Conspiring to Obstruct SEC Probe into Sale of Company

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Department of Justice
U.S. Attorney’s Office
Northern District of Illinois
FOR IMMEDIATE RELEASE
Friday, June 30, 2017

CHICAGO — A federal grand jury in Chicago has indicted two former executives of a Florida technology company for allegedly conspiring to obstruct an investigation by the U.S. Securities and Exchange Commission.

CHRISTOPHER YOUNG, the former President of Tampa-based M2 Interactive Group Inc., and JOSHUA CARLUCCI, M2 Interactive’s former Chief Executive Officer, are charged with conspiracy to obstruct, influence, and impede an official proceeding. The pair allegedly conspired with executives from Schaumburg-based Quadrant 4 System Corp. to obstruct an SEC investigation into Quadrant 4’s 2013 purchase of M2 Interactive.

The indictment was returned Thursday in federal court in Chicago. In addition to the conspiracy count, Young, 35, of Norwich, N.Y., and Carlucci, 39, of Tampa, Fla., are also charged with attempting to obstruct, influence, and impede an official proceeding. Carlucci also faces a charge of making false statements to the Federal Bureau of Investigation. The Court will schedule arraignments for Young and Carlucci at a later date.

New and expanded criminal charges were also filed Thursday against the two Quadrant 4 executives, NANDU THONDAVADI and DHRU DESAI. A criminal information filed in federal court in Chicago charged them with wire fraud. Arraignments for Thondavadi, 63, of North Barrington, and Desai, 55, of Barrington, have been scheduled for July 6, 2017, at 10:00 a.m., before U.S. District Judge Charles Norgle.

The charges were announced by Joel R. Levin, Acting United States Attorney for the Northern District of Illinois; and Michael J. Anderson, Special Agent in Charge of the Chicago office of the FBI. The Chicago office of the SEC provided valuable assistance.

M2 Interactive was a technology company that developed applications for mobile devices and conducted business under the name Momentum Mobile. Quadrant 4 provides software products, platforms and consulting services to customers in the healthcare and education sectors. As a public company, Quadrant 4 is required to provide to the SEC a detailed report of its financial condition.

In 2015 the SEC launched an investigation of Quadrant 4 based on indications that the firm may have violated federal securities laws. The FBI initiated an investigation of Quadrant 4 in 2016. As set forth in the information against Thondavadi and Desai, the investigation revealed that Thondavadi and Desai engaged in a wide-ranging scheme to defraud Quadrant 4’s shareholders by misappropriating more than $3 million from the company, fraudulently inflating Quadrant 4’s revenue, and regularly concealing Quadrant 4’s liabilities. The information charges that Thondavadi and Desai certified false SEC reports, including Quadrant 4’s 2014 Form 10-K, in which the defendants fraudulently inflated Quadrant 4’s revenue by more than $4.2 million – nearly 10% of Quadrant 4’s reported income that year.

The fraud scheme also involved numerous misrepresentations related to Quadrant 4’s acquisitions, including misrepresentations about the terms of Quadrant 4’s purchase of Momentum Mobile in 2013. Quadrant 4 purchased Momentum Mobile for $100,000 in cash and 250,000 shares of Quadrant 4 stock, plus assumption of approximately $165,000 in Momentum Mobile liabilities, according to the indictment against Young and Carlucci. Federal authorities discovered that Thondavadi and Desai later concealed the true terms of the deal from Quadrant 4’s auditor and its shareholders, according to the charges. The pair furnished the auditor with a fictitious agreement that Thondavadi created, the charges state. The bogus document inflated the purchase price and failed to mention the liabilities Quadrant 4 assumed, according to the charges.

As set forth in the charges, the investigation further revealed that Thondavadi and Desai attempted to obstruct the SEC’s investigation of Quadrant 4 as it related to the Momentum Mobile acquisition. In July 2016 SEC attorneys sought to question Young and Carlucci, who were unaware of the fictitious acquisition agreement that Thondavadi created. Carlucci notified Thondavadi and Desai of the SEC’s inquiry, and the Quadrant 4 executives responded by striking a deal with Young and Carlucci to pay them cash in exchange for their agreement to send Thondavadi an e-mail falsely stating that Momentum Mobile had previously authorized the terms of the fictitious agreement, according to the charges. The defendants attempted to disguise the payments – $102,900 to Young and $60,000 to Carlucci – as “consulting” fees, the charges state.

The public is reminded that charges are not evidence of guilt. The defendants are presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

The conspiracy, obstruction and wire fraud charges are each punishable by up to 20 years in prison, while making false statements to the FBI is punishable by up to five years. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.

Defense Contractor Sentenced To 30 Months In Federal Prison For $53 Million Procurement Fraud And Illegal Gratuities Scheme

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Department of Justice
U.S. Attorney’s Office
District of Maryland
FOR IMMEDIATE RELEASE
Tuesday, June 27, 2017

JUNE 27, 2017

FOR IMMEDIATE RELEASE                                               Contact ELIZABETH MORSE

www.justice.gov/usao/md                                                                          at (410) 209-4885

Baltimore, Maryland – On June 27, 2017, U.S. District Judge Marvin J. Garbis sentenced Andrew Bennett, age 37, of Tampa, Florida to 30 months in prison, followed by 36 months of supervised release, for a wire fraud conspiracy and for paying illegal gratuities to a government official, in connection with the award of more than $53 million in federal government contracts. Judge Garbis also ordered Bennett to pay forfeiture and restitution in the amount of $500,000.00

 

Co-conspirator John Wilkerson, age 51, of Moultrie, Georgia was previously sentenced to five years in prison, followed by three years of supervised release. James T. Shank, who was separately charged and has pled guilty, was a Program Manager at the United States Navy’s Space and Naval Warfare (SPAWAR) Systems Center.

 

The sentence was announced by Acting United States Attorney for the District of Maryland Stephen M. Schenning; Commander of the Air Force Office of Special Investigations (OSI); Special Agent in Charge Robert Craig, Special Agent in Charge, Robert E. Craig Jr, Defense Criminal Investigative Service (DCIS), Mid-Atlantic Field Office; and U.S. Small Business Administration Acting Inspector General Mike Ware.

 

According to Bennett’s plea agreement, he was a program manager for Advanced C4 Solutions, or AC4S, from 2005 until 2011. AC4S was an information technology company headquartered in Tampa, Florida. In 2011, Bennett left AC4S and went to work for Co-conspirator Wilkerson at Superior Communications Solutions, Inc. (SCSI). According to co-conspirator Shank’s indictment, from August 28, 2006 until he retired on June 30, 2011, Shank was employed as a Program Manager at the United States Navy’s Space and Naval Warfare (SPAWAR) Systems Center. Shank worked with agencies within the Department of Defense to procure telecommunications equipment, software, and related services. According to his plea agreement, Wilkerson was a Department of Defense Account Manager for Iron Bow Technologies, LLC (Iron Bow), which provided IT consulting and other services to government and industry customers. Wilkerson was also part-owner and operated Superior Communications Solutions, Inc. (SCSI).

 

From September 2009 through August 2012 Bennett conspired with Wilkerson, to give them and the companies they worked for and/or owned an unfair competitive advantage in obtaining government contracts. Court documents state that Wilkerson offered, and Shank accepted, employment with SCSI while Shank was still a government employee and while he was taking official actions that benefited Wilkerson. In addition, Wilkerson paid Shank $86,000 in the year after Shank retired from government service, funneling the payment through two other companies in order to conceal the source of the funds.

 

According to Bennett’s plea agreement, Shank improperly shared information with Bennett and Wilkerson, and worked with them to structure the government contracts so as to give their companies an unfair advantage over other potential bidders.

 

For example, according to Bennett’s indictment, Bennett and Wilkerson developed a request for proposal (RFP) for DO27, a contract to supply labor services for an Air Force technology project, including for overall project management services, so that AC4S would win the contract. On June 10, 2010, DO27 was awarded to AC4S in the amount of $18,332,738.10. Wilkerson provided Bennett with a quote for labor for the installation of specific technology on behalf of SCSI that was less than the quote he had previously submitted on behalf of Iron Bow as their sales representative. After SCSI was selected as a subcontractor on DO27, it subcontracted with Iron Bow to provide most of the labor SCSI was supposed to provide under DO27 for the installation of the technology. Wilkerson was able to earn income from the work Iron Bow employees were doing by having SCSI act as a middleman and charging a mark-up on Iron Bow’s work. Bennett and Wilkerson then directed an SCSI employee to create false invoices supposedly documenting the hours SCSI employees spent working on DO27, which were submitted to AC4S and paid by the United States government. SCSI received $6,794,432.98 on DO27 out of the $18 million AC4S received for providing labor for the project.

 

In February 2011, Bennett left AC4S and went to work for Wilkerson at SCSI. According to the plea agreement, Bennett received a $500,000 bonus when he joined SCSI, which was paid for by profit Wilkerson had earned on the Air Force contracts.

 

By March 2011, the Air Force project was incomplete and there were numerous contract disputes related to the project. Shank was directed not to take any other action related to the project without the approval of a senior manager. Nevertheless, in April 2011, Shank accepted more than $3.7 million worth of invoices that benefited SCSI without informing the senior manager. In May, 2011, after Shank accepted employment with SCSI, but was still working for SPAWAR, he allegedly approved more than $1.1 million worth of invoices that benefitted SCSI and Wilkerson.

 

The National Procurement Fraud Task Force was formed in October 2006 to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force includes the United States Attorneys’ Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. This case, as well as other cases brought by members of the Task Force, demonstrate the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.

 

Acting United States Attorney Stephen M. Schenning thanked Air Force OSI, Defense Criminal Investigative Service, and the U.S. Small Business Administration Office of the Inspector General for their work in the investigation. Mr. Schenning commended Assistant U.S. Attorneys Leo J. Wise and Philip A. Selden, who are prosecuting the case.

Duke admits faked data “potentially affected” grant applications

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From Retraction Watch (which makes my list of “must read” blogs):

“A former researcher at Duke University has admitted to faking data that allegedly were used to secure hundreds of millions of dollars in federal grants.

Duke has also admitted that it knew Erin Potts-Kant, a pulmonary scientist, faked data, but it’s unclear whether that was discovered prior to using those data to apply for grants, as a lawsuit alleges.

The admissions come from court documents submitted by Potts-Kant, her supervisor — former Duke researcher William Michael Foster — and Duke itself, responding to allegations in a whistleblower suit that says they defrauded the government.

Regular readers may recall that Joseph Thomas, a former colleague of Potts-Kant and Foster, has filed a False Claims Act suit against the three defendants on behalf of the U.S. government. The responses, submitted separately by the three defendants, are the latest development in what could be a landmark case for research misconduct. The lawsuit has survived motions to dismiss and is moving through the discovery process, which is likely to reveal more than the defendants have already said.

The suit claims that Potts-Kant “knew that the reported research results in question were false and/or fabricated, having generated the results herself.” To which she responded (in writing):

“Defendant admits that she has generated experiment data that was altered.”

Later on, she responded:

“to the extent she altered experiment data, she knew the altered experiment data was false.” 

In addition, Duke has admitted that it found out about the fraud when Potts-Kant told an investigative committee about it. The pulmonary division launched an investigation in 2013 after discovering the embezzlement and Duke launched a formal scientific misconduct investigation in June 2013.

*  *  *

An admission that there’s falsity of data in the context of research misconduct doesn’t in and of itself create False Claims Act liability.

*   *   *   *

Click Here for the Rest of the Retraction Watch Story

CCC’s: What She [Sally Q. Yates] Said….

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June 26, 2017 by Robert Connolly

I have written often about the need to reform the Sentencing Guideline for antitrust violations.  U.S.S.G. 2R1.1. (here)(here)(here).  My major beef is that the antitrust guideline measures culpability primarily by the volume of commerce subject to the agreement, to the exclusion of many other very relevant factors.  The cartel boss who engages the firm in the illegal conduct is tagged with the same volume of commerce as the employee who is assigned the task of going to cartel meetings to work out the details.

Sally Q. Yates served in the Justice Department from 1989 to 2017 as an assistant U.S. attorney, U.S. attorney, deputy attorney general and, briefly this year, as acting attorney general.  Ms. Yates described the problem with overweighting a quantifiable factor better than I ever have, though in a slightly different context:

“But there’s a big difference between a cartel boss and a low-level courier. As the Sentencing Commission found, part of the problem with harsh mandatory-minimum laws passed a generation ago is that they use the weight of the drugs involved in the offense as a proxy for seriousness of the crime — to the exclusion of virtually all other considerations, including the dangerousness of the offender.”

Sally Yates, Making America Scared Won’t Make us Safer.  Washington Post, June 23, 2017

For the record, the issue of mandatory minimums is a far more serious issue than the problem of sentencing individual criminal antitrust offenders.  While I hope for antitrust sentencing reform, it is not really a “need.” The antitrust sentencing guidelines are so divorced from actual culpability that virtually no individual–even a cartel boss–is sentenced to a guideline range term of imprisonment.

Thanks for reading.

Orlando Doctor and Infusion Clinic Owner Sentenced to 64 Months and 90 Months in Prison for Role in Medicare Fraud

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Monday, June 26, 2017

An Orlando medical doctor and an infusion clinic owner were sentenced to 64 months in prison and two years supervised release, and 90 months and two years supervised release, respectively, today for their roles in a $13.7 million Medicare fraud conspiracy that involved submitting claims for expensive infusion-therapy drugs that were never purchased, never provided and not medically necessary.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Stephen Muldrow of the Middle District of Florida and Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services-Office of Inspector General’s (HHS-OIG) Miami Regional Office made the announcement.

Dr. Miguel Burgos, 60, of Gotha, Florida, and Yosbel Marimon, 40, of Winter Park, Florida, were sentenced by U.S. District Judge Roy B. Dalton, Jr. of the Middle District of Florida. Judge Dalton also ordered the defendants to pay $9.8 million in restitution and to forfeit the same amount. As part of his plea, Marimon also consented to the forfeiture of real property valued at approximately $1.7 million. Burgos and Marimon each pleaded guilty to one count of conspiracy to commit health care fraud: Burgos on February 9, Marimon on February 16.

As part of his guilty plea, Burgos admitted that between July 2008 and September 2011, he was the medical director of four Orlando-area infusion clinics that received Medicare funds. Marimon admitted that he was one of the owners of the four clinics. Burgos and Marimon further admitted that they billed Medicare and private insurance companies for, among other things, expensive infusion therapy medications, including anticancer chemotherapeutic medications, despite never administering the drugs. Burgos and Marimon also admitted to submitted false claims to Medicare and private insurance companies for physical therapy conducted at the clinics, even though there was no licensed physical therapist on staff at the clinics, they admitted. In connection with the scheme, the defendants admitted that they billed Medicare and private insurers approximately $13.7 million, of which approximately $9.8 million was paid on the fraudulent claims.

This case was investigated by HHS-OIG. Fraud Section Trial Attorney Timothy Loper prosecuted the case. Assistant U.S. Attorney Nicole Andrejko also provided assistance regarding asset forfeiture issues in this case.

The Criminal Division’s 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 nearly 3,200 defendants who have collectively billed the Medicare program for more than $12 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.

Cardiac Monitoring Companies and Executive Agree to Pay $13.45 Million to Resolve False Claims Act Allegations

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Monday, June 26, 2017

AMI Monitoring Inc. aka Spectocor, its owner, Joseph Bogdan, Medi-Lynx Cardiac Monitoring LLC, and Medicalgorithmics SA, the current majority owner of Medi-Lynx Cardiac Monitoring LLC, have agreed to resolve allegations that they violated the False Claims Act by billing Medicare for higher and more expensive levels of cardiac monitoring services than requested by the ordering physicians, the Department of Justice announced today. Spectocor and Bogdan have agreed to pay $10.56 million, and Medi-Lynx and Medicalgorithmics have agreed to pay $2.89 million.

“Independent diagnostic testing facilities that improperly steer physicians to order higher levels of service will be held accountable,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “We will vigilantly ensure the appropriate use of our country’s limited Medicare funds.”

From 2011 through 2016, Spectocor, headquartered in McKinney, Texas, and Joseph Bogdan, allegedly marketed the Pocket ECG as capable of performing three separate types of cardiac monitoring services—holter, event, and telemetry. When a physician sought to enroll a patient for Pocket ECG, however, the enrollment process allegedly only allowed the physician to enroll in Pocket ECG for the service which provided the highest rate of reimbursement provided by a patient’s insurance, thus steering the ordering physician to a more costly level of service. In 2013, Medi-Lynx, a related company headquartered in Plano, Texas, began selling the Pocket ECG and allegedly adopted this same enrollment procedure. Medicalgorithmics SA, a limited liability company based in Warsaw, Poland, acquired a controlling interest in Medi-Lynx in September 2016.

“Sophisticated medical technology can be used to help doctors dramatically improve the lives of their patients, but it can also be misused to fraudulently increase medical bills,” said Acting U.S. Attorney William E. Fitzpatrick for the District of New Jersey. “Today’s settlement demonstrates that the federal government is committed to preserving the integrity of the Medicare system and ensuring that Medicare funds are spent only for patient care.”

“Billing for unneeded services, as the government alleged, takes unfair advantage of Medicare patients and steals from taxpayers,” said Special Agent in Charge Scott J. Lampert for the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “OIG, along with our law enforcement partners, will aggressively investigate these crimes.”

The settlements resolve allegations filed in a lawsuit by Eben Steele, a former sales manager at Spectocor. The lawsuit was filed in a federal court in Newark, New Jersey, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The Act also allows the government to intervene and take over the action, as it did in this case. Mr. Steele will receive approximately $2.4 million from the two settlements.

The government’s resolution of this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services at 900-HHS-TIPS (800-447-8477).

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

The case is captioned United States ex rel. John Doe v. Spectocor Enterprise Services, LLC, et al., Case No. 14-1387 (KSH) (D. N.J.). The claims resolved by the settlements are allegations only and there has been no determination of liability.

Former U.S. Naval Attaché and Military Advisor to the U.S. Ambassador in the Philippines Sentenced for Taking Bribes

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Friday, June 16, 2017

A Retired U.S. Navy Captain was sentenced in federal court today to 41 months in prison for his role in a massive bribery and fraud scheme involving foreign defense contractor Leonard Glenn Francis and his firm, Singapore-based, Glenn Defense Marine Asia (GDMA).

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Alana W. Robinson Southern District of California, Director Dermot O’Reilly of the Defense Criminal Investigative Service and Director Andrew Traver of the NCIS made the announcement.

In addition to the 41-month prison sentence, U.S. District Judge Janis L. Sammartino ordered Michael Brooks, 59, of Fairfax Station, Virginia, to pay a $41,000 fine and $31,000 in restitution to the U.S. Navy.  Brooks pleaded guilty in November 2016 to one count of conspiracy to commit bribery.

Brooks, who served as the U.S. Naval Attaché at the U.S. Embassy in Manila, Philippines, from 2006 to 2008, has admitted accepting bribes of travel and entertainment expenses, hotel rooms and the services of prostitutes. In return, Brooks admitted that he used his power and influence to benefit GDMA and Francis, including by securing quarterly clearances for GDMA vessels, which allowed GDMA vessels to transit into and out of the Philippines under the diplomatic imprimatur of the U.S. Embassy. Neither GDMA nor any other defense contractor has ever been granted such unfettered clearances.

Brooks admitted that he also allowed Francis to ghostwrite official U.S. Navy documents and correspondence, which Brooks submitted as his own. For example, Brooks admitted allowing GDMA to complete its own contractor performance evaluations. A November 2007 evaluation, drafted by GDMA and submitted by Brooks, described the company’s performance as “phenomenal,” “unsurpassed,” “exceptional” and “world class.” Brooks also admitted providing Francis with sensitive, internal U.S. Navy information, including U.S. Navy ship schedules and billing information belonging to a GDMA competitor, at times using a private Yahoo! e-mail account to mask his illicit acts.

Twenty-one current and former Navy officials have been charged so far in the fraud and bribery investigation; 10 have pleaded guilty and 10 cases are pending. In addition, five GDMA executives and GDMA the corporation have pleaded guilty.

NCIS, DCIS and DCAA are conducting the ongoing investigation. Assistant U.S. Attorneys Mark W. Pletcher and Patrick Hovakimian of the Southern District of California and Assistant Chief Brian R. Young of the Criminal Division’s Fraud Section are prosecuting the case.

Anyone with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DOD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.

Georgia Real Estate Investor Convicted of Bid Rigging and Bank Fraud at Public Foreclosure Auctions

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Friday, June 16, 2017

A federal jury convicted a real estate investor of bid rigging and bank fraud related to public foreclosure auctions held in Georgia, the Department of Justice announced today.

Douglas L. Purdy was convicted today following a two-week trial before the Honorable Richard W. Story in Gainesville, Georgia.  The jury convicted Purdy on one count of bid rigging and two counts of bank fraud for participating in the charged conspiracy and scheme at Forsyth County, Georgia, foreclosure auctions from 2008 to 2011.

The evidence at trial showed that Purdy and his co-conspirators agreed not to compete for real estate at foreclosure auctions in Forsyth County and defrauded lender banks and homeowners.  Among other methods, the conspirators held secret “second auctions” of properties they had obtained through rigged bids, dividing among themselves the auction proceeds that should have gone to pay off debts against the properties and, in some cases, to homeowners.

A federal grand jury in the Northern District of Georgia returned an indictment against Purdy on Feb. 3, 2016.  Including Purdy’s conviction, 23 real estate investors have either pleaded guilty or been convicted after trial as a result of the Department’s ongoing antitrust investigations into bid rigging at public foreclosure auctions in the Atlanta area.

The Antitrust Division’s Washington Criminal II Section and the FBI’s Atlanta Division conducted the investigation, with assistance from the U.S. Attorney’s Office of the Northern District of Georgia.  Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Washington Criminal II Section of the Antitrust Division at 202-598-4000 or call the FBI tip line at 415-553-7400.

Owner of Afghanistan Marble Mining Company Indicted for Defrauding U.S. Agency and Defaulting on a $15.8 M Loan

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Friday, June 16, 2017

The former owner of a now-defunct marble mining company in Afghanistan was charged in an indictment unsealed today with allegedly defrauding the Overseas Private Investment Corporation (OPIC), a U.S. government agency, and defaulting on a $15.8 million loan.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Special Inspector General for Afghanistan Reconstruction (SIGAR) John F. Sopko and Assistant Director in Charge Andrew W. Vale of the FBI’s Washington Field Office made the announcement.

Azam Doost, aka Adam Doost, Mohammad Azam Doost and Mohammad Azim (Doost), 39, most recently of Union City, California, was charged in an indictment filed in U.S. District Court for the District of Columbia with three counts of major fraud against the United States, eight counts of wire fraud, four counts of false statements on loan applications or extensions and eight counts of money laundering. The indictment also has a forfeiture notice.

The indictment alleges that in February 2010, while working at his company, Equity Capital Mining LLC, Doost, along with his brother, obtained a $15.8 million loan from OPIC for the development, maintenance and operation of a marble mine in western Afghanistan. The loan proceeds were paid directly from OPIC to the alleged vendors who provided equipment for the mine, as reported to OPIC by Doost or his consultant. Doost was required to deal with these companies in arms-length transactions or, to the extent any transactions were other than at arms-length, he was required to report any affiliation he had with a vendor. Doost informed OPIC that he had no affiliation with any of the alleged vendors with whom he dealt, when in fact he allegedly had financial relationships with several of them. The indictment alleges that Doost’s business partner was listed with the bank for a number of these alleged vendors and, upon receipt of money from OPIC into the respective accounts, significant amounts of this money were then transferred from that respective account to companies and individuals with whom Doost was associated, or to pay debts Doost owed. Doost’s consultant allegedly received a commission of $444,000 for his alleged consulting services with the first of three disbursements from OPIC, and shortly after $40,000 was transferred from his account to a Doost company in California

The indictment further alleges that when the time came for Equity Capital Mining LLC to repay the loan to OPIC, Doost provided purported reasons to OPIC why it was not able to make those repayments at a time when Doost had control of sufficient funds to make those repayments. Doost and his brother failed to repay any of the principal on the OPIC loan, and only a limited amount of interest, and ultimately defaulted on the loan, the indictment alleges.

An indictment is merely an allegation and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

SIGAR, with assistance from the FBI, investigated the case. Trial Attorney Daniel Butler of the Criminal Division’s Fraud Section is prosecuting the case.