Author Archives: Brad Geyer

Guilty Plea in Bribery Scheme Involving $800 Million Vietnamese Real Estate Deal

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Wednesday, June 21, 2017

Defendant Double-Crossed His Clients and Stole a $500,000 Bribe Intended to Influence a South Korean Company’s Sale of the Landmark 72 Building in Hanoi, Vietnam

The middleman in a foreign bribery scheme pleaded guilty today to wire fraud and money laundering charges for his role in a scheme to bribe a foreign official in the Middle East to land a real estate deal, and to defrauding his co-schemers.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Joon H. Kim for the Southern District of New York, and Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office made the announcement.

Malcolm Harris pleaded guilty to wire fraud and money laundering charges arising from his role as a middleman in a corrupt scheme to pay millions of dollars in bribes to a foreign official (“Foreign Official-1”) of a country in the Middle East (“Country-1”). The bribes were intended to facilitate the sale by South Korean construction company Keangnam Enterprises Co., Ltd. (“Keangnam”) of a 72-story commercial building known as Landmark 72 in Hanoi, Vietnam, to Country-1’s sovereign wealth fund (the “Fund”) for $800 million. Instead of paying an initial $500,000 bribe to Foreign Official-1 as he had promised, Harris simply pocketed the money and spent it on himself. Harris pleaded guilty before U.S. District Judge Edgardo Ramos who is scheduled to sentence Harris on September 27.

According to the allegations contained in the Indictment to which Harris pleaded guilty, and statements made during the plea and other court proceedings:

From in or about March 2013 through in or about May 2015, Harris co-defendants Joo Hyun Bahn, a/k/a “Dennis Bahn” (“Bahn”) and his father Ban Ki Sang (“Ban”) engaged in an international conspiracy to bribe Foreign Official-1 in connection with the attempted $800 million sale of a building complex in Hanoi, Vietnam, known as Landmark 72.

During this time, Ban was a senior executive at Keangnam, a South Korean construction company that built and owned Landmark 72. Ban convinced Keangnam to hire his son Bahn, who worked as a broker at a commercial real estate firm in Manhattan, to secure an investor for Landmark 72.

Instead of obtaining financing through legitimate channels, Bahn and Ban engaged in a corrupt scheme to pay bribes to Foreign Official-1, through Harris, who held himself out as an agent of Foreign Official-1, to induce Foreign Official-1 to use his influence to convince the Fund to acquire Landmark 72 for approximately $800 million. In furtherance of the scheme, Harris sent Bahn numerous emails purportedly sent by Foreign Official-1 and bearing Foreign Official-1’s name. In or about April 2014, following communications with Harris, Bahn and Ban agreed to pay, through Harris, a $500,000 upfront bribe and a $2,000,000 bribe upon the close of the sale of Landmark 72 to Foreign Official-1 on behalf of Keangnam.

Unbeknownst to Bahn or Ban, however, Harris did not have the claimed relationship with Foreign Official-1 and did not intend to pay the bribe money to Foreign Official-1. Instead, Harris simply stole the $500,000 upfront bribe arranged by Bahn and Ban, which Harris then spent on lavish personal expenses, including rent for a luxury penthouse apartment in Williamsburg, Brooklyn.

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Harris, 53, of San Miguel de Allende, Mexico, pleaded guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison, and one count of conducting monetary transactions in illicit funds, which carries a maximum sentence of 10 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only as any sentencing of the defendant will be determined by the judge.

The case against Bahn is pending before Judge Ramos, and Ban is a fugitive believed to be residing in South Korea. All defendants are presumed innocent unless and until convicted beyond a reasonable doubt in a court of law.

The FBI’s International Corruption Squad in New York City investigated the case. In 2015, the FBI formed International Corruption Squads across the country to address national and international implications of foreign corruption. Trial Attorney Dennis R. Kihm of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Daniel S. Noble of the Southern District of New York are prosecuting the case. The Criminal Division’s Office of International Affairs also provided substantial assistance in this matter.

The Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal-fraud/foreign-corrupt-practices-act.

Genesis Healthcare Pays $53.6 Million to Settle False Claims Act Suit for Rehabilitation and Hospice Services

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Friday, June 16, 2017

The Justice Department announced today that Genesis Healthcare Inc. (Genesis) will pay the federal government $53,639,288.04, including interest, to settle six federal lawsuits and investigations alleging that companies and facilities acquired by Genesis violated the False Claims Act by causing the submission of false claims to government health care programs for medically unnecessary therapy and hospice services, and grossly substandard nursing care. Genesis, headquartered in Kennett Square, Pennsylvania, owns and operates through its subsidiaries skilled nursing facilities, assisted/senior living facilities, and a rehabilitation therapy business.

“We will continue to hold health care providers accountable if they bill for unnecessary or substandard services or treatment,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Today’s settlement demonstrates our unwavering commitment to protect federal health care programs against unscrupulous providers.”

This settlement resolves four sets of allegations. First, the settlement resolves allegations that from April 1, 2010 through March 31, 2013, Skilled Healthcare Group Inc. (SKG) and its subsidiaries, Skilled Healthcare LLC (Skilled LLC) and Creekside Hospice II LLC, knowingly submitted or caused to be submitted false claims to Medicare for services performed at the Creekside Hospice facility in Las Vegas, Nevada by: (1) billing for hospice services for patients who were not terminally ill and so were not eligible for the Medicare hospice benefit and (2) billing inappropriately for certain physician evaluation management services.

Second, this settlement resolves allegations that from Jan. 1, 2005 through Dec. 31, 2013, SKG and its subsidiaries, Skilled LLC and Hallmark Rehabilitation GP LLC, knowingly submitted or caused to be submitted false claims to Medicare, TRICARE, and Medicaid at certain facilities by providing therapy to certain patients longer than medically necessary, and/or billing for more therapy minutes than the patients actually received. The settlement also resolves allegations that those companies fraudulently assigned patients a higher Resource Utilization Group (RUG) level than necessary. Medicare reimburses skilled nursing facilities based on a patient’s RUG level, which is supposed to be determined by the amount of skilled therapy required by the patient.

Third, this settlement resolves allegations that from Jan. 1, 2008, through Sept. 27, 2013, Sun Healthcare Group Inc., SunDance Rehabilitation Agency Inc., and SunDance Rehabilitation Corp. knowingly submitted or caused the submission of false claims to Medicare Part B by billing for outpatient therapy services provided in the State of Georgia that were (1) not medically necessary or (2) unskilled in nature.

Finally, this settlement resolves allegations that between Sept. 1, 2003 and Jan. 3, 2010, Skilled LLC submitted false claims to the Medicare and Medi-Cal programs at certain of its nursing homes for services that were grossly substandard and/or worthless and therefore ineligible for payment. More specifically, the settlement resolves allegations that Skilled LLC violated certain essential requirements that nursing homes are required to meet to participate in and receive reimbursements from government healthcare programs and failed to provide sufficient nurse staffing to meet residents’ needs.

SKG and its subsidiaries were acquired by Genesis after the conduct at issue in this settlement. Sun Healthcare Group Inc., SunDance Rehabilitation Agency Inc. and SunDance Rehabilitation Corp. were acquired by Genesis in December 2012.

“Safeguarding federal health care programs and patients is a priority,” said Acting U.S. Attorney Steven W. Myhre for the District of Nevada. “Today’s settlement is an example of the U.S. Attorney’s Office’s commitment to holding medical providers accountable for fraudulent billing of medically unnecessary treatments and services. We are committed to protecting federal health care programs, including Medicare, TRICARE, and Medicaid, which are funded by taxpayer dollars.”

“We are committed to protecting the federal health care programs and the patients who are enrolled in them,” said U.S. Attorney Brian J. Stretch for the Northern District of California. “We will continue to vigorously pursue companies and individuals who provide care that is grossly deficient or unnecessary.”

“Health care providers that falsify claims for unauthorized or unnecessary services steal precious taxpayer dollars, and we will aggressively seek to recover those funds for the program that needs them,” said U. S. Attorney John Horn for the Northern District of Georgia.

“It’s disturbing when health care companies bill Medicare and Medicaid to care for vulnerable patients, but provide grossly substandard care and medically unnecessary services just to boost company profits,” said Special Agent in Charge Steven J. Ryan of the Department of Health and Human Services, Office of Inspector General (HHS-OIG). “We will continue to crack down on medical providers who betray the public’s trust and the needs of vulnerable patients through fraudulent billing and irresponsible practices.”

“At a time when the cost of healthcare weighs heavy on many taxpayers, it is imperative that people who illegally bill our healthcare system are held accountable and forced to pay restitution,” said FBI Atlanta Special Agent in Charge David J. LeValley. “This case is an example of how committed the FBI and its partners are to keeping healthcare providers from abusing the system.”

The settlement, which was based on the company’s ability to pay, resolves allegations originally brought in lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act by Joanne Cretney-Tsosie, Jennifer Deaton, Kimberley Green, Camaren Hampton, Teresa McAree, Terri West, and Brian Wilson, former employees of companies acquired by Genesis. The act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. The government may intervene and file its own complaint in such a lawsuit. The whistleblowers will receive a combined $9.67 million as their share of the recovery in this case.

This matter was handled by the Civil Division’s Commercial Litigation Branch; the U.S. Attorneys’ Offices for the Northern District of California, the Northern District of Georgia, the Western District of Missouri, and the District of Nevada and HHS-OIG.

The claims resolved by the settlement are allegations only; there has been no determination of liability.

The cases are docketed as United States, ex rel. Cretney-Tsosie v. Creekside Hospice II, LLC, Case No. 2:13-cv-167-HDM (D. Nev.); United States ex rel. McAree v. SunDance Rehabilitation Corp., Case No. 1:12-CV-4244 (N.D. Ga.); United States, ex rel. West v. Skilled Healthcare Group Inc., et. al., Case No. 11-02658-ED (N.D. Cal.); United States ex rel. Deaton v. Skilled Healthcare Group, Inc. et al., Case No. 4:14-cv-00219 (W.D. Mo.); and United States ex rel. Wilson v. Skilled Healthcare Group, Inc. et al., Case No. 14-cv-860 (W.D. Mo.).

Co-Owners of Miami Home Health Agencies Sentenced to Over 10 Years in Prison for $20 Million Fraud Scheme

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Wednesday, June 14, 2017

A mother and daughter who secretly co-owned and operated seven home health care agencies in the Miami, Florida area were each sentenced to over 10 years in prison today for their roles in a $20 million Medicare fraud conspiracy that involved paying illegal health care kickbacks to patient recruiters and medical professionals.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Benjamin G. Greenberg of the Southern District of Florida, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office, Special Agent in Charge Brian Swain of the U.S. Secret Service’s Miami Regional Office 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.

Mildrey Gonzalez, 61, and her daughter, Milka Alfaro, 39, both of Miami, were sentenced by U.S. District Judge Jose E. Martinez of the Southern District of Florida to 135 and 151 months in prison, respectively, for their roles in the scheme. The defendants were further ordered to pay approximately $22,900,000 in joint and several restitution. Gonzalez and Alfaro each pleaded guilty on March 2, having been charged in a July 2016 superseding indictment. Gonzalez pleaded guilty to one count of conspiracy to commit health care fraud and one count of health care fraud, while Alfaro pleaded guilty to one count of conspiracy to commit health care fraud and wire fraud.

Alfaro and Gonzalez previously admitted that they secretly co-owned and operated seven home health agencies in the Miami area, yet failed to disclose their ownership interests in any of these agencies to Medicare, as required by relevant rules and regulations. In addition, Alfaro and Gonzalez admitted to paying illegal health care kickbacks to a network of patient recruiters in order to bring Medicare beneficiaries into the scheme, to paying bribes and kickbacks to medical professionals in return for providing home health referrals, and to directing co-conspirators to open shell corporations, into which millions of dollars’ worth of fraud proceeds were funneled. Furthermore, Alfaro and Gonzalez each admitted to perjuring themselves at a hearing before U.S. Magistrate Judge Jonathan Goodman of the Southern District of Florida, to attempting to influence the testimony of potential trial witnesses, and to submitting false affidavits concerning their assets to the court.

This case was investigated by the FBI, the U.S. Secret Service and HHS-OIG. Former Fraud Section Trial Attorney and current Southern District of Florida Assistant U.S. Attorney Lisa H. Miller and Fraud Section Trial Attorney L. Rush Atkinson prosecuted the case. Assistant U.S. Attorneys Evelyn B. Sheehan and Alison W. Lehr 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 2,300 defendants who have collectively billed the Medicare program for more than $7 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.

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

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Thursday, June 15, 2017

A Northern California real estate investor pleaded guilty yesterday for his role in a conspiracy to rig bids at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

California real estate investor Ramin Rad “Ray” Yeganeh pleaded guilty to one count of bid rigging in U.S. District Court for the Northern District of California in Oakland.  He was charged in an indictment returned by a federal grand jury in the Northern District of California on June 25, 2015.

According to court documents, as early as September 2008 and continuing until in or about January 2011, Yeganeh conspired with others not to bid against one another, instead designating a winning bidder to obtain selected properties at public real estate foreclosure auctions in Alameda County.  The selected properties were then awarded to the conspirators who submitted the highest bids in second, private auctions.  The private auctions often took place at or near the courthouse steps where the public auctions were held.

The Department determined that the primary purpose of the conspiracies was to suppress and eliminate competition in order to obtain selected real estate offered at Alameda County public foreclosure auctions at noncompetitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.

The guilty plea entered yesterday was the result of the Department’s ongoing investigation into bid rigging at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties, California. To date, 60 individuals have agreed to plead or have pleaded guilty.

These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Office. Anyone with information concerning bid rigging or fraud related to real-estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at (415) 934-5300 or call the FBI tip line at (415) 553-7400.

SEC Obtains Final Judgments Against Investment Adviser and CEO for Failure to Disclose Fees to Clients

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U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23847 / May 26, 2017
Securities and Exchange Commission v. Momentum Investment Partners LLC (D/B/A Avatar Investment Management) and Ronald J. Fernandes, No. 16-cv-00832 -VLB (D. Conn. filed May 31, 2016)

The Securities and Exchange Commission today announced that it obtained final judgments by consent against Connecticut-based investment adviser Momentum Investment Partners LLC (doing business as Avatar Investment Management) (“Avatar”), and its CEO, Ronald J. Fernandes, for failing to disclose to some of Avatar’s advisory clients certain fees they were being charged. Among other things, the judgments order the defendants to pay a total of over $230,000.

On May 31, 2016, the Commission filed a complaint in federal court in Hartford, Connecticut, alleging that Avatar and Fernandes failed to disclose material conflicts of interest in connection with investments Avatar made in new mutual funds that it created and managed. Specifically, the complaint alleges that Avatar and Fernandes failed to disclose that moving clients’ assets into these newly-created mutual funds would increase the clients’ total advisory fees paid to Avatar without changing the clients’ investment strategy. The complaint alleges that between May 2013 and March 2014, Avatar’s clients paid almost $111,000 in additional fees, including approximately $61,000 that was ultimately paid to Avatar, for no additional services.

The final judgments, entered by the Honorable Vanessa L. Bryant of the U.S. District Court for the District of Connecticut on May 26, 2017, permanently enjoin Avatar and Fernandes from violating Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”), Avatar from violating Sections 204, 206(4) and 207 of the Advisers Act and Rules 204-1 and 206(4)-7 thereunder, and Fernandes from aiding and abetting violations of Sections 204, 206(4) and 207 of the Advisers Act and Rules 204-1 and 206(4)-7 thereunder. The judgments also order the defendants to disgorge, on a joint and several basis, $61,275.52 in ill-gotten gains plus $7,400.85 in prejudgment interest, for a total of $68,676.37, and order Avatar to pay a civil penalty of $125,000 and Fernandes to pay a civil penalty of $40,000. The defendants neither admit nor deny the allegations in the SEC’s complaint.

Birmingham CPA Sentenced to Eight Years in Prison, Must Repay $11 Million Embezzled

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Friday, June 16, 2017

BIRMINGHAM – A federal judge today sentenced a Birmingham man to eight years in prison and ordered him to repay $10.9 million he embezzled from the Shelby County scrap metal brokerage where he was chief financial officer, announced Acting U.S. Attorney Robert O. Posey and FBI Special Agent in Charge Roger Stanton.

U.S. District Court Judge Abdul K. Kallon sentenced THOMAS L HINSON JR., 70, on five counts of wire fraud for depositing checks stolen from Strickland Trading Inc. into the account of Strickland Trading Company, LLC, a company Hinson formed to carry out his embezzlement. Hinson pleaded guilty to the charges in March. He must report to prison July 31.

Along with the millions in restitution that Hinson must pay, he also must forfeit his interest in properties in Huntsville, Birmingham, Virginia Beach, Va., Lutz, Fla., and Sevierville, Tenn.

Hinson “abused his position as Chief Financial Officer of Strickland Trading, Inc., and violated his long-running friendships with Strickland Trading’s principals, to perpetuate a nine years long scheme to defraud,” the government states in its sentencing memorandum.

The company’s principals and employees suffered substantial financial hardship because of Hinson’s long-term crime, the memorandum says.

The five wire fraud counts Hinson pleaded guilty to represent five of the more than 225 checks totaling more than $11.2 million that were intended for Strickland Trading Inc., but which Hinson deposited into his Strickland Trading Company, LLC, account, between April 2007 and April 2016. He used the money he embezzled over the years to pay expenses and purchase real estate, automobiles, and other assets for himself, his family, and friends.

According to the court documents, Hinson conducted his scheme as follows:

Hinson was a certified public accountant in private practice who worked for Strickland Trading Inc. from 1991 to April 2016. In 2000, he began working as Strickland Trading Inc.’s CFO. In April 2007, Hinson filed documents with the State of Alabama creating Strickland Trading Company, LLC, and provided the name and address of a friend in Madison County as its organizer so he could conceal his own association with the new company.

Using the similarity in the names of the two companies, Hinson took checks mailed to Strickland Trading Inc. by its customers and deposited the checks into his Strickland Trading Company, LLC, account for his personal use. He made false entries in the financial records of Strickland Trading Inc., prepared false financial statements and made other false representations to Strickland Trading Inc. corporate officers to conceal his embezzlement.

The FBI investigated the case, which Assistant U.S. Attorney George Martin prosecuted.

US Seeks Approximately $540 Million From Conspiracy Involving Malaysian Sovereign Wealth Fund

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Thursday, June 15, 2017

LOS ANGELES – The Justice Department today filed civil forfeiture complaints seeking the forfeiture and recovery of approximately $540 million in assets associated with an international conspiracy to launder funds misappropriated from a Malaysian sovereign wealth fund.

Combined with civil forfeiture complaints filed in July 2016 that seek more than $1 billion, and civil forfeiture complaints filed last week that seek approximately $100 million in assets, this case represents the largest action brought under the Kleptocracy Asset Recovery Initiative. Assets now subject to forfeiture in this case total almost $1.7 billion.

The complaints filed today seek the forfeiture of Red Granite Pictures’ interest in the movies “Dumb and Dumber To” and “Daddy’s Home,” a condominium in New York City worth nearly $5 million, diamond jewelry, artworks by Picasso and Basquiat, and a $260 million megayacht called The Equanimity.

According to the complaints, from 2009 through 2015, more than $4.5 billion in funds belonging to 1Malaysia Development Berhad (1MDB) was allegedly misappropriated by high-level officials of 1MDB and their associates. 1MDB was created by the government of Malaysia to promote economic development in Malaysia through global partnerships and foreign direct investment, and its funds were intended to be used for improving the well-being of the Malaysian people.

“These cases involve billions of dollars that should have been used to help the people of Malaysia, but instead was used by a small number of individuals to fuel their astonishing greed,” said Acting United States Attorney Sandra R. Brown. “The misappropriation of 1MDB funds was accomplished with an extravagant web of lies and bogus transactions that were brought to light by the dedicated attorneys and law enforcement agents who continue to work on this matter. We simply will not allow the United States to be a place where corrupt individuals can expect to hide assets and lavishly spend money that should be used for the benefit of citizens of other nations.”

“The Criminal Division is steadfast in our efforts to protect the security, safety, and integrity of the American financial system from all manner of abuse, including by kleptocrats seeking to hide their ill-gotten or stolen wealth,” said Acting Assistant Attorney General Kenneth A. Blanco. “Today’s complaints reveal another chapter of this multi-year, multi-billion-dollar fraud scheme, bringing the total identified stolen proceeds to $4.5 billion. This money financed the lavish lifestyles of the alleged co-conspirators at the expense and detriment of the Malaysian people. We are unwavering in our commitment to ensure the United States is not a safe haven for corrupt individuals and kleptocrats to hide their ill-gotten wealth or money, and that recovered assets be returned to the victims from which they were taken.”

As alleged in the complaints, the members of the conspiracy – which included officials at 1MDB, their relatives and other associates – diverted more than $4.5 billion in 1MDB funds. Using fraudulent documents and representations, the co-conspirators allegedly laundered the funds through a series of complex transactions and shell companies with bank accounts located in the United States and abroad. These transactions allegedly served to conceal the origin, source and ownership of the funds, and ultimately passed through U.S. financial institutions to then be used to acquire and invest in assets located in the United States and overseas.

The complaints filed today allege that in 2014, the co-conspirators misappropriated approximately $850 million in 1MDB funds under the guise of repurchasing certain options that had been given in connection with a guarantee of 2012 bonds. As the complaints allege, 1MDB had borrowed a total of $1.225 billion from a syndicate of banks to fund the buy-back of the options. The complaints allege that approximately $850 million was instead diverted to several offshore shell entities. From there, the complaints allege, the funds stolen in 2014, in addition to money stolen in prior years, were used, among other things, to purchase the 300-foot luxury yacht valued at over $260 million, certain movie rights, high-end properties, tens of millions of dollars of jewelry and artwork. A portion of the diverted loan proceeds were also allegedly used in an elaborate, Ponzi-like scheme to create the false appearance that an earlier 1MDB investment had been profitable.

“Today’s filing serves as a reminder of the important role that the FBI plays in rooting out international corruption. When corrupt foreign officials launder funds through the United States in furtherance of their criminal activity, the FBI works tirelessly to help hold those officials accountable, and recover the misappropriated funds,” said Assistant Director Stephen E. Richardson of the FBI’s Criminal Investigative Division. “I applaud all my colleagues and our international partners who have worked to help recover an immense amount of funds taken from the Malaysian people, who are the victims of this abhorrent case of kleptocracy.”

“Today’s announcement is the result of untangling a global labyrinth of multi-layered financial transactions allegedly used to divert billions of dollars from the people of Malaysia and fund the co-conspirators’ lavish lifestyles,” said Deputy Chief Don Fort of IRS Criminal Investigation. “The IRS is proud to partner with other law enforcement agencies and share its world-renowned financial investigative expertise in this complex financial investigation. It’s important for the world to see, that when people use the American financial system for corruption, the IRS will take notice.”

As alleged in the earlier complaints, in 2009, 1MDB officials and their associates embezzled approximately $1 billion that was supposed to be invested to exploit energy concessions purportedly owned by a foreign partner. Instead, the funds allegedly were transferred through shell companies and were used to acquire a number of assets. The complaints also allege that the co-conspirators misappropriated close to $1.4 billion in funds raised through the bond offerings in 2012, and more than $1.2 billion following another bond offering in 2013.

The FBI’s International Corruption Squads in New York City and Los Angeles, and IRS Criminal Investigation are investigating the case.

Assistant United States Attorneys John Kucera and Christen Sproule of the Asset Forfeiture Section, along with Deputy Chief Woo S. Lee and Trial Attorneys Kyle R. Freeny and Jonathan Baum of the Criminal Division’s Money Laundering and Asset Recovery Section, are prosecuting the case. The Criminal Division’s Office of International Affairs is providing substantial assistance.

The Kleptocracy Asset Recovery Initiative is led by a team of dedicated prosecutors in the Criminal Division’s Money Laundering and Asset Recovery Section, in partnership with federal law enforcement agencies and U.S. Attorney’s Offices, to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered asset to benefit the people harmed by these acts of corruption and abuse of office. In 2015, the FBI formed International Corruption Squads across the country to address national and international implications of foreign corruption. Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to [email protected](link sends e-mail) or https://tips.fbi.gov/.

A civil forfeiture complaint is merely an allegation that money or property was involved in or represents the proceeds of a crime. These allegations are not proven until a court awards judgment in favor of the United States.

Illinois Real Estate Developer Pleads Guilty to Investment Fraud Scheme

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Thursday, May 25, 2017

ROCK ISLAND, Ill. – A Rock Island, Ill., businessman, Todd B. Raufeisen, waived indictment and pled guilty to an information that charged him with defrauding investors in his land development and management projects of approximately $1.7 million. Raufeisen, 56, entered his guilty pleas to one count each of wire fraud and money laundering today before U.S. District Judge Sara Darrow. Sentencing is scheduled on Sept. 14, 2017.

In court documents and statements, Raufeisen admitted that from 2010 to August 2016, he engaged in a scheme that defrauded approximately 22 investors in his development projects and resulted in a loss of approximately $1.7 million. Raufeisen engaged in business under various business names, including RDC Hotel Solutions.

As part of the scheme, Raufeisen promised prospective investors a higher rate of interest than conventional, insured investments and short turnarounds on return of the principle and interest. In exchange for the money invested, Raufeisen promised certain investors that the money would be placed in escrow until needed, would only be used for specific development or management projects, and, if unused, the money would be returned to the investor. In fact, Raufeisen used the investors’ money for personal expenses and to pay previous investors to whom he was indebted.

Further, Raufeisen provided certain investors with promissory notes that promised repayment of invested principle and interest. The notes were purportedly signed and guaranteed by persons who knew nothing of the promissory notes and had not guaranteed repayment to the investors. In fact, Raufeisen admitted that he forged the signatures on the promissory notes.

The Internal Revenue Service Criminal Investigation Division; Federal Bureau of Investigation; and, the Office of the Illinois Secretary of State conducted the investigation. Assistant U.S. Attorney Donald Allegro is prosecuting the case on behalf of the government.

The maximum statutory penalties for the offenses – 20 years in prison for wire fraud; 10 years for money laundering – are provided here for informational purposes, as final sentencing is determined by the court based on the advisory Sentencing Guidelines and other statutory factors. The court may also order the defendant to pay restitution to victims of the offenses.

12 Debarred Over Role in Syria Humanitarian Aid Fraud Scheme

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May 26, 2017

Washington, D.C.—The U.S. Agency for International Development (USAID) Office of
Inspector General (OIG) announced the debarment of 12 companies and individuals over their participation in a fraud scheme affecting humanitarian aid in Syria. USAID officials made the decision in April barring Orhan Senkardes, the Senkardes Company, and certain related individuals and companies from future business with the
U.S. Government for 5 years.

USAID OIG, which has been investigating corruption in cross-border humanitarian aid programs in Syria since 2015, provided information that led to USAID’s debarment action. “OIG’s pursuit of corrupt actors in Syria and the surrounding region remains as critical as ever as we work to protect life-saving aid programs from fraud, waste, and abuse,” said Ann Calvaresi Barr, USAID Inspector General. “I commend our special agents for their tenacity, insight, and continued dedication to our investigative efforts and recognize USAID’s willingness to take decisive action to protect taxpayer resources based on OIG’s work.” The OIG’s investigation is open and ongoing.

USAID’s debarment of the 12 companies and individuals applies across the U.S. Government. OIG’s investigative work contributed to the decision, establishing that Orhan Senkardes, the Senkardes Company, and Mr. Senkardes’ affiliated companies or personnel participated in a procurement fraud scheme with corrupt nongovernmental organization staff, including Luan Meraku, who implemented USAID-funded programs. Further, investigative results revealed that although the Senkardes Company, Selkas, Forvet, and Yigit Motorlu companies were all under Mr. Senkardes’ control, they bid against each other for U.S.-funded procurements under the appearance of fair and open competition. The debarred companies and affiliated individuals are:

  • Senkardes Gida San ve Tic Ltd.
  • Selcuk Benli
  • Forvet
  • Ismet Kalin
  • Selkas
  • Hecran Kalin
  • Yigit Motorlu
  • Zerrin Nalbanoglu
  • Orhan Senkardes
  • Erol Senkardes
  • Luan Meraku
  • Erdal Senkardes

The U.S. Government’s System for Award Management (SAM), www.sam.gov, provides further information on each of the debarred entities and individuals, which are currently excluded from transactions with U.S. Government departments, agencies, and contractors.

To date, OIG’s investigations in Syria and the surrounding region have identified a
network of commercial vendors and nongovernmental organizations employees who
colluded to engage in bid-rigging and multiple kickback schemes related to Syrian
humanitarian aid awards. The investigations to date have led to $239 million in
suspended program funds; 35 agency suspension or debarment decisions; 19 personnel resignations, terminations, or suspensions; and $19.6 million in savings for USAID.

Throughout the course of investigations, OIG coordinates closely with USAID’s Bureau
for Management, Office of Management Policy, Budget, and Performance, Compliance
Division. The division is responsible for making recommendations on potential
suspension and debarment actions to the agency.

Protecting humanitarian operations from organized crime is a top priority for USAID
OIG’s Office of Investigations. In addition to aggressively investigating allegations,
USAID OIG has also published a fraud awareness handbook and is actively engaged in providing fraud awareness training within the industry. The handbook, Compliance and Fraud Prevention: A Pocket Guide for the Middle East Crisis Humanitarian Response, can be found on OIG’s web site.

Anyone with information about suspected fraud, waste, or abuse in USAID programs in Syria and around the world is urged to contact USAID OIG directly.
Telephone
+1 (800) 230-6539 or +1 (202) 712-1023
Email
Syria Investigations Team: [email protected]

General: [email protected]

Online, via OIG’s public web site
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Misr Sons Development S.A.E. Agrees to Pay $1.1 Million to Resolve False Claims Act Allegations

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Tuesday, June 13, 2017

Misr Sons Development S.A.E. (Hassan Allam Sons, “HAS”), a construction company with its principal place of business in Cairo, Egypt, has agreed to pay $1.1 million to settle allegations that HAS submitted false claims in connection with U.S. Agency for International Development (USAID) contracts, the Justice Department announced today.

“Contractors who misrepresent their eligibility for government contracts undermine the government procurement process,” said Deputy Assistant Attorney General Joyce R. Branda of the Civil Division. “The Justice Department will take action to protect that process and to ensure that taxpayer funds are not misused.”

“USAID Office of Inspector General extensively investigated this matter and thanks the Department of Justice for its tenacity and dedication,” said Special Agent in Charge Jonathan Schofield of USAID Office of Inspector General. “Total settlements on this matter exceed $10 million and demonstrate once again that the United States expects its contractors to execute their awards in accordance with all requisite terms and conditions, whether operating domestically or overseas.”

The settlement concerns USAID-funded contracts for the construction of water and wastewater infrastructure projects in the Arab Republic of Egypt in the 1990s. The contracts were awarded to a joint venture partnership that included Washington Group International Inc. (WGI), Contrack International Inc. (Contrack) and HAS. The United States filed suit under the False Claims Act and the Foreign Assistance Act, alleging that HAS was ineligible to participate in the joint venture but that its participation was concealed from USAID. As a result, HAS and its partners allegedly received USAID-funded contracts to which they were not entitled. The settlement resolves only HAS’ liability. The United States previously settled with Contrack and WGI.

This settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the District of Idaho and the USAID Office of Inspector General.

The case is captioned United States v. Washington Group International Inc. f/k/a/ Morrison Knudsen, Corporation, Contrack International, Inc.; and Misr Sons Development S.A.E. a/k/a Hassan Allam Sons, No. 04-555 (D. Idaho). The claims resolved by this settlement are allegations only and there has been no determination of liability.