Author Archives: Brad Geyer

Canadian Man Sentenced to 97 months in Prison for Investment Scheme

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Tuesday, June 13, 2017

FORT WORTH — Ryan Steve Magee, a citizen of Canada, was sentenced this morning by Senior U.S. District Judge Terry R. Means to 97 months in federal prison and ordered to pay $2,372,573 in restitution, following his guilty plea in February 2017 to one count of wire fraud, announced U.S. Attorney John Parker of the Northern District of Texas.

Magee, 34, was indicted in July 2016 on five counts of wire fraud. Magee was arrested in December 2016, and has remained in custody since his arrest.

According to plea documents filed in his case, Magee was a business man and an active day trader in the U.S. stock market. Beginning in 2011, and continuing until the end of 2013, Magee devised and operated a scheme to obtain money by means of false and fraudulent material pretense and representations. Magee solicited and obtained money from victim investors by making false representations about how their money would be invested, how much of their money would be invested, how much their investment was earning, how much money they had in their account, and by making other false statements.

Specifically, J.C. and D.C. decided to invest some of their savings with him. At Magee’s direction, D.C. wired $35,000 to Magee’s account on August 12, 2011. After Magee received the money from D.C., he immediately diverted $25,000 for his own personal expenditures. Magee then deposited the remaining $10,000 into his day-trading account located at Interactive Brokers (IB). Magee sent weekly emails to J.C. and D.C. entitled “Trading Update,” which falsely showed the beginning account principal of $35,000 and the daily gains, even though Magee had diverted $25,000 of the investors’ money to his own personal use.

In November 2011, J.C. and D.C. cashed in J.C.’s 401(k) and wired $240,000 to Magee’s account. After Magee received the $240,000, he immediately diverted approximately $160,000 to his personal accounts, transferring only $80,000 into his IB trading account. Magee again sent weekly “Trading Update” emails claiming to have deposited the entire $240,000 in the IB account. Though he lost approximately $75,000 by the end of the month and his trades for November 2011, were a negative 70 percent, Magee listed 200 percent gains in the weekly “Trading Update” emails he sent to J.C. and D.C, between November 16 2011, and November 30, 2011.

On April 10, 2013, in the final “Trading Updates” email Magee sent to J.C. and D.C., Magee claimed their account balance was over $1.3 million. However, Magee’s IB account statement for the time period ending March 31, 2013, showed that Magee’s IB account had a negative cash balance of $9,578. J.C. and D.C. suffered a total loss of approximately $275,000. Between May 2010 and September 2013, other victims of the fraudulent scheme in the United States and Canada suffered a total loss of approximately $2,097,573.

The Federal Bureau of Investigation investigated the case. Assistant U.S. Attorney Nancy Larson prosecuted.

Doctor And Son Admit Defrauding Medicare, Agree To $1.78 Million Settlement

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Tuesday, June 13, 2017

CAMDEN, N.J. – A doctor and his chiropractor son today admitted conspiring to defraud Medicare by using unqualified people to give physical therapy to Medicare recipients, Acting U.S. Attorney William E. Fitzpatrick announced.

Robert Claude McGrath D.O., 65, and his son Robert Christopher McGrath, 47, both of Cherry Hill, New Jersey, each pleaded guilty before U.S. District Judge Robert B. Kugler in Camden federal court to separate informations charging them each with conspiracy to commit health care fraud.

The McGraths, together with their practice, the Atlantic Spine & Joint Institute, have also agreed to pay $1.78 million as part of a civil settlement to resolve allegations that they illegally billed Medicare for those treatments.

“Elderly patients who need physical therapy deserve properly licensed and supervised caregivers,” Acting U.S. Attorney Fitzpatrick said. “Instead, the McGraths for years used unqualified and unsupervised employees to treat their patients, all while fraudulently billing Medicare for the phony services.”

“Patients undergoing physical therapy at the McGraths’ practice sought simply to feel and move better,” said Michael Harpster, Special Agent in Charge of the FBI’s Philadelphia Division. “It seems all the defendants sought was to enrich themselves at those patients’ – and U.S. taxpayers’ – expense. Medicare fraud deals a big blow to a critical piece of our health care system. Every dollar lost to bogus billing is a dollar less to use for legitimate treatments and services.”

According to documents filed in this case and statements made in court:
The McGraths owned and operated Atlantic Spine & Joint Institute, a medical practice with offices in Westmont, New Jersey, and Wayne, Pennsylvania. Under Medicare rules, physical therapy had to be provided by Robert Claude McGrath or by a trained physical therapist under his supervision. However, from January 2011 through April 2016, the McGraths sought to defraud Medicare by employing unlicensed, untrained persons to give physical therapy to Medicare patients, at times when Robert Claude McGrath was not even in the office to supervise. They then submitted bills to Medicare fraudulently identifying Robert Claude McGrath as the provider of physical therapy.
The defendants each face a maximum penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing for both defendants is scheduled for Sept. 19, 2017.

“These criminals face serving time in prison as well as paying out a $1.78 million settlement,” said Scott J. Lampert, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “Additionally, my agency reserves the right to exclude both father and son from Medicare, Medicaid, and other federal health programs.”

“People trust medical professionals to treat them and not cheat them,” said Special Agent in Charge Mark S. McCormack, FDA Office of Criminal Investigations’ Metro Washington Field Office. “Our office will continue to work with our federal law enforcement partners to pursue and bring to justice those who would exploit this vulnerable population.”

In the related civil settlement, also announced today, the McGraths and Atlantic Spine agreed to pay $1.78 million plus interest to the federal government to resolve allegations that the fraudulent bills submitted under the McGraths’ scheme caused false claims to be submitted to Medicare in violation of the False Claims Act.
The civil settlement resolves certain claims filed by Linda Stevens, a former billing manager at Atlantic Spine, in the District of New Jersey, under the federal False Claims Act. The federal False Claims Act contains a qui tam, or whistleblower, provision that permits whistleblowers to file suit on behalf of the United States for false claims against the government, and to share in any recovery. Ms. Stevens will receive approximately $338,200 from the settlement proceeds, along with her attorney’s fees.

Acting U.S. Attorney Fitzpatrick credited agents of the FBI’s South Jersey Resident Agency, under the direction of Special Agent in Charge Harpster in Philadelphia, special agents from the Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge Lampert, and special agents from the Food and Drug Administration, Office of Criminal Investigations, under the direction of Special Agent in Charge McCormack, with the investigation.

Assistant U.S. Attorneys R. David Walk Jr. and Andrew A. Caffrey III of the U.S. Attorney’s Office Health Care and Government Fraud Unit represented the government in the criminal case and the civil case, respectively.

The New Jersey U.S. Attorney’s Office reorganized its health care practice in 2010 and created a stand-along Health Care and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of health care fraud offenses. Since that time, the office has recovered more than $1.33 billion in health care and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act, and other statutes.

Defense counsel:
Robert Christopher McGrath and Atlantic Spine & Joint Institute: Riza I. Dagli Esq., Roseland, New Jersey.
Robert Claude McGrath: Perry Primavera Esq., Hackensack, New Jersey
Counsel for Relator Linda Stevens: Brian J. McCormick Jr., Philadelphia

 

Southern CA Resident Sentenced 34 Months in Prison For Bank Fraud Conspiracy

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Tuesday, June 13, 2017

SAN FRANCISCO – Michael Inman was sentenced to 34 months in prison for his role in a bank fraud conspiracy, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. The sentence was handed down June 7, 2017, by the Honorable Charles R. Breyer, U.S. District Judge, following a guilty plea in which Inman admitted he participated in a scheme to steal checks, open fraudulent bank accounts, write fraudulent checks, and deposit stolen and fraudulent checks as part of a bank fraud scheme.

Inman, 55, of Los Angeles, Calif., pleaded guilty on February 8, 2017, to participating in the bank fraud conspiracy. According to the plea agreement, Inman admitted that beginning in January of 2013, he agreed with at least one other person to commit bank fraud. The plea agreement describes a number of transactions in which Inman stole high value cashier’s checks from the victim and he and his co-conspirators used the stolen identity of the victim to write and deposit fraudulent checks. For example, in January of 2013, members of Inman’s conspiracy opened a bank account in the name of the victim and, in February of 2013, a co-conspirator deposited into the account a stolen $99,000 cashier’s check that had been made out to the victim. Similarly, Inman admitted that in June of 2013, co-conspirators opened another two fraudulent accounts and deposited a $99,000 check. Further, Inman admitted participating in a scheme in which people were provided checks drawn on the fraudulent bank accounts.

A grand jury indicted Inman on February 11, 2016, charging him with one count of conspiracy to commit mail fraud, wire fraud, and bank fraud, in violation of 18 U.S.C. § 1349. Pursuant to the plea agreement, Inman pleaded guilty to the conspiracy count.
In addition to the prison term, Judge Breyer sentenced Inman to pay $198,000 in restitution to the victim and to forfeit $198,000. Judge Breyer ordered the defendant to begin serving his sentence on or before August 2, 2017.

Assistant U.S. Attorneys Marc Price Wolf and Claudia A. Quiroz are prosecuting the case with assistance from Kevin Costello, Yanira Osorio, and Lance Libatique. The prosecution is the result of an investigation by the FBI.

Virginia Man Admits to Falsely Certifying Bridge Inspection Vehicles

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Friday, May 26, 2017

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

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

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

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

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

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

Medicare Advantage Organization & Former COO to Pay $32.5 Million

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Tuesday, May 30, 2017

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

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

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

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

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

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

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

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

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

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

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Thursday, June 15, 2017

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

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

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

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

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

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

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

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

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

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

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

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

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Tuesday, May 30, 2017

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

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

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

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

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

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

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

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

The CBP Officer of the Future

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by [email protected]

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Former CEO And President Of Real Estate Investment Company Pleads Guilty To Embezzling $1.6 Million And Evading Taxes

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Department of Justice
U.S. Attorney’s Office
Southern District of New York
FOR IMMEDIATE RELEASE
Tuesday, May 23, 2017

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that ROCKWELL GAJWANI pled guilty today to one count of wire fraud and three counts of tax evasion in connection with embezzling over $1.6 million from the Manhattan-based real estate investment company for which he had served as chief executive officer and president. As part of his plea, GAJWANI agreed to pay $1,975,068.04 in restitution and $1,612,841 in forfeiture. GAJWANI pled guilty before United States District Judge Loretta A. Preska.

Acting U.S. Attorney Joon H. Kim said: “As he admitted today, for years Rockwell Gajwani siphoned money from his employer’s accounts, lining his own pockets with more than $1.6 million. Instead of working diligently as his company’s CEO, Gajwani put his efforts into concealing his crimes and hiding his ill-gotten gains from the IRS. Thanks to the dedicated work of the Postal Inspection Service and the IRS, Gajwani will now be held to account for his crimes.”

According to the Complaint, the Indictment, and other statements made in open court:

From October 2011 through March 2013, GAJWANI was the chief executive officer and president of a real estate investment company based in Manhattan (the “Manhattan Real Estate Company”). During this period, GAJWANI took more than $1.6 million in company funds to which he was not entitled by, among other means, making wire transfers from the company’s bank account to his personal bank account, writing company checks to himself, and making cash withdrawals from the company’s bank account.

To accomplish this scheme, among other means, GAJWANI took steps to conceal his true salary and to conceal from the Manhattan Real Estate Company’s parent company (the “Parent Company”) the amount of money he had taken from the Manhattan Real Estate Company’s bank account.

Beginning in late 2012, the director of accounting for the Manhattan Real Estate Company (the “Director of Accounting”) asked GAJWANI for details regarding GAJWANI’s compensation on more than one occasion, and GAJWANI repeatedly said he would get such details to her, but failed to do so. On another occasion, in connection with a request from the Parent Company for financial information, GAJWANI told the Director of Accounting not to provide that information to the Parent Company. To further conceal the funds he had taken from the Manhattan Real Estate Company, GAJWANI directed employees of the Manhattan Real Estate Company to lump the compensation of all employees together in accounting materials provided to the Parent Company, so that GAJWANI’s compensation would not be listed separately from the aggregate figure. GAJWANI also directed certain employees of the Manhattan Real Estate Company not to communicate with employees of the Parent Company.

Over the course of his employment, GAJWANI wrote himself over $940,000 in checks from the Manhattan Real Estate Company’s bank account, and wired over $1.7 million to his personal bank account. Although some of these funds were purportedly for expenses, by the end of his employment GAJWANI had taken over $1.6 million more from the Manhattan Real Estate Company’s bank account than he was entitled to under his employment agreement.

GAJWANI also concealed his fraud on the Manhattan Real Estate Company. Specifically, on two occasions in May 2012, wrote checks to an employee of the Manhattan Real Estate Company (“Employee-2”) from the company’s bank account. wrote “expenses” in the memo line of each check, although neither check was meant to pay company expenses, and instructed Employee-2 to write a check in return directly to GAJWANI himself. Employee-2 did so on both occasions. In this manner, was able to secure over $30,000 in payments that GAJWANI appeared to receive from Employee-2 but in reality were funds GAJWANI had taken from the Manhattan Real Estate Company.

In addition to defrauding the Manhattan Real Estate Company, GAJWANI did not file tax returns or pay taxes for his legitimate salary or for the money he had secured through fraud. Ultimately, in July 2015, after he learned of a criminal investigation, GAJWANI filed tax returns for calendar years 2011, 2012, and 2013. Each of those returns included false representations. For tax year 2011, the federal income tax return that GAJWANI filed understated GAJWANI’s actual income by more than $480,000, and included over $85,000 in false, impermissible tax deductions. For tax year 2012, the federal income tax return that GAJWANI filed included over $260,000 in false, impermissible tax deductions. For tax year 2013, the federal income tax return that GAJWANI filed underreported GAJWANI’s actual income by $270,000.

* * *

GAJWANI, 53, of Darien, Connecticut, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison, and three counts of tax evasion, each of which carries a maximum sentence of five years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the Judge. As part of his plea, GAJWANI agreed to pay $1,975,068.04 in restitution and $1,612,841.04 in forfeiture.

GAJWANI is scheduled to be sentenced by Judge Preska on September 12, 2017, at 4:00 p.m.

Mr. Kim praised the outstanding investigative efforts of law enforcement personnel at U.S. Postal Inspection Service and the Internal Revenue Service, Criminal Investigation Division.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jonathan Cohen and Andrew D. Beaty are in charge of the prosecution.

Janet Labuda on Trade by the Numbers

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By [email protected]

Recently, President Trump sent a memo directing Secretary of Commerce, Wilber Ross, to initiate an investigation of steel and aluminum products. The rarely used investigative authority found under section 232(b)(1)(A) of the Trade Expansion Act of 1962 (19 U.S.C. 1862(b)(1) determines any detrimental trade activity affecting U.S. national security.

In addition, the Presidential memo lists other “core industries such as…vehicles, aircraft, shipbuilding, and semiconductors. The administration considers these as “critical elements of our manufacturing and defense industrial bases, which we must defend against unfair trade practices and other abuses.”

The Secretary of Commerce reports to the President, within 270 days of initiating the investigation and focuses on whether the importation of the article in question is in such quantities or under such circumstances as to threaten to impair the national security. The President can concur, or not, with the Secretary’s recommendations, and take action to “adjust the imports of an article and its derivatives,” or other non-trade related actions as deemed necessary.

Another trade remedy is found in Section 301 of the Trade Act of 1974. This law provides the United States with the authority to enforce trade agreements, resolve trade disputes, and open foreign markets to U.S. goods and services. It is the principal statutory authority under which the United States may impose trade sanctions on foreign countries that either violate trade agreements or engage in other unfair trade practices. When negotiations to remove the offending trade practice fail, the United States may take action to raise import duties on the foreign country’s products as a means to address the trade imbalance.

Under section 332 of the Tariff Act of 1930 (19 U.S.C. 1332), the U.S. International Trade Commission (USITC) conducts investigations into trade and tariff matters upon request of the President, the U.S. House Committee on Ways and Means, the U.S. Senate Committee on Finance, either branch of the Congress, or upon the Commission’s own initiative. The USITC has broad authority to investigate matters pertaining to the customs laws of the United States, foreign competition with domestic industries, and international trade relations.

The USITC can also conduct investigations using section 337, to determine whether there is unfair competition in the importation of products into, or their subsequent sale in, the United States. Section 337 declares the infringement of a U.S. patent, copyright, registered trademark, or mask work to be an unlawful practice in import trade. It also declares unlawful other unfair methods of competition and unfair acts in the importation and subsequent sale of products in the United States, the threat or effect of which is to destroy or substantially injure a domestic industry, prevent the establishment of such an industry, or restrain or monopolize trade and commerce in the United States.

Section 337 investigations require formal hearings held before an administrative law judge. If a violation is found, the USITC may issue orders barring the importation of certain products into the United States. In addition to requesting long-term relief, complainants also may move for temporary relief pending final resolution of the investigation based on a showing of, among other things, irreparable harm in the absence of such temporary relief.

Subtitle A of title VII of the Tariff Act of 1930, as added by the Trade Agreements Act of 1979 (19 U.S.C. § 1671 et seq.) and subsequently amended, provides that countervailing duties will be imposed when two conditions are met: (a) the U.S. Department of Commerce (Commerce) determines that the government of a country, or any public entity within the territory of a country, is providing, directly or indirectly, a countervailable subsidy with respect to the manufacture, production, or export of the subject merchandise that is imported or sold (or likely to be sold) for importation into the United States and (b), in the case of merchandise imported from a Subsidies Agreement country, the USITC determines that an industry in the United States is materially injured or threatened with material injury, or that the establishment of an industry is materially retarded, by reason of imports of that merchandise.

If Commerce determines that a countervailable subsidy is being bestowed upon merchandise imported from a country that is not a Subsidies Agreement country, a countervailing duty can be levied on the merchandise in the amount of the net countervailable subsidy without a USITC determination of material injury.

In addition, Subtitle B provides that antidumping duties will be imposed when two conditions are met: (a) Commerce determines that the foreign subject merchandise is being, or is likely to be, sold in the United States at less than fair value, and (b) the USITC determines that an industry in the United States is materially injured or threatened with material injury, or that the establishment of an industry is materially retarded, by reason of imports of that merchandise.

Sections 201 to 204 of the Trade Act of 1974 (19 U.S.C. 2251 to 2254) concern investigations conducted by the USITC to determine if a product is being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to a domestic industry.

If the USITC makes an affirmative determination, it recommends to the President the action that will address the serious injury or threat and facilitate positive adjustment by the industry to import competition. The President makes the final decision on remedy, including the form, amount, and duration.

There is no doubt that the current administration will use every available tool to initiate investigations and take action where such investigations determine injury to U.S. domestic industry by foreign imports. Continue to keep track of the announcements by the White House, Commerce, the USITC and CBP, and don’t get tripped up on the numbers.