Author Archives: Brad Geyer

Former Executive Pleads Guilty to Conspiring to Bribe Panamanian Officials

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A former regional director of SAP International Inc. pleaded guilty today to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) by participating in a scheme to bribe Panamanian officials to secure the award of government technology contracts for SAP.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Melinda Haag of the Northern District of California, Special Agent in Charge George L. Piro of the FBI’s Miami Division and Acting Special Agent in Charge Thomas McMahon of the Internal Revenue Service-Criminal Investigation (IRS-CI) made the announcement.

Vicente Eduardo Garcia, 65, of Miami, pleaded guilty to a one-count information charging him with conspiracy to violate the anti-bribery provisions of the FCPA.  Sentencing before Senior U.S. District Court Judge Charles R. Breyer of the Northern District of California is scheduled for Dec. 16, 2015.

According to plea documents, in late 2009, SAP sought a multi-million dollar contract to provide a Panamanian state agency with a technology upgrade package.  In connection with his guilty plea, Garcia admitted that, to secure the contract, he conspired with others, including advisors and consultants to SAP, to pay bribes to two Panamanian government officials, as well as to the agent of a third government official (with the understanding that at least a portion of the money would be transmitted to the third official).  According to Garcia’s admissions, the conspirators used sham contracts and false invoices to disguise the true nature of the bribes.  Garcia further admitted that he believed paying such bribes was necessary to secure both the initial contract and additional Panamanian government contracts.

Ultimately, SAP’s Panamanian channel partner secured the technology upgrade contract for $14.5 million, which included $2.1 million in SAP software licenses.  Soon thereafter, the Panamanian government awarded SAP’s channel partner additional contracts that included the provision of SAP products.

The investigation is being conducted by FBI and the IRS-CI.  The Criminal Division’s Office of International Affairs and the Securities and Exchange Commission’s Division of Enforcement, which separately announced civil charges against Garcia, provided assistance.  The case is being prosecuted by Trial Attorney Aisling O’Shea of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Adam A. Reeves of the Northern District of California.

Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

Remarks at a Press Conference Announcing Major Enforcement Charges Involving a Massive Hacking Trading Scheme

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Chair Mary Jo White

Newark, New Jersey

Aug. 11, 2015

Good morning. Thank you, U.S. Attorney Paul Fishman, for inviting me to be here today. I congratulate all of the law enforcement agencies represented for their extraordinary efforts on this groundbreaking case to safeguard the integrity of our markets.

I will just briefly comment on the securities law violations alleged in the SEC’s complaint, which shows how cutting-edge and important this case is. It also illustrates the risks posed for our global markets by today’s sophisticated hackers.

While the SEC has uncovered and successfully litigated hacking and trading schemes in the past, today’s international case is unprecedented in terms of the scope of the hacking at issue; the number of traders involved; the number of securities unlawfully traded; and the amount of profits generated. Over the course of 5 years, the 32 defendants named in this complaint are charged with carrying out a brazen scheme to steal non-public earnings information for hundreds of publicly traded companies, and then placing thousands of trades through a network of U.S. and overseas traders located in the Russian Federation, Ukraine, Malta, Cyprus, France, New York, Pennsylvania and Georgia—geographies electronically connected by this illicit network.

According to the complaint, these traders located across the globe executed thousands of illicit trades on the basis of this material, nonpublic information, concealing their scheme by spreading the transactions across multiple accounts held in the names of many individuals and entities. And, the traders were market savvy, using equities, options and contracts-for-differences to maximize their profits.

Two Ukrainian hackers are charged with spearheading the scheme, Ivan Turchynov and Okelsandr Ieremenko. Along with the 30 other defendants, they are collectively alleged to have made more than $100 million in illegal profits by trading based on pre-release corporate earnings announcements stolen from multiple newswire services. We charged these defendants in a complaint unsealed today with multiple securities fraud violations, seeking disgorgement and penalties, and we obtained an asset freeze against the overseas traders, which secured at least $20 million of the defendants’ ill-gotten gains. And the SEC’s investigation continues.

The complaint charges that Turchynov and Ieremenko used malicious programming code and other deceptive techniques to hack into the computer systems of multiple newswire services that stored unpublished corporate earnings announcements. These announcements were slated for public release at a prescheduled date and time, and the hackers took advantage of the time gap. According to the complaint, the two primary hackers brazenly recruited traders with a video showcasing the hackers’ ability to steal and transmit earnings information before its public release.

This case highlights a number of important points. It demonstrates the enhanced trading surveillance and analysis capabilities that the SEC has developed over the last few years. It also highlights our use of market experts with specialized skills and experience. We now have new technological tools and investigative approaches that allow us not only to pinpoint suspicious trading across multiple securities but also to identify relationships among traders. The SEC’s Enforcement Division sorted through literally millions of trades, thousands of earnings announcements and gigabytes of data on IP addresses in order to identify these defendants who went to great lengths to evade detection, often identifying these traders based on their patterns of trading. With these enhanced capabilities, we are now more capable than ever of rooting out even the most sophisticated of trading schemes. Maintaining the integrity of our high-tech markets requires that kind of regulatory expertise and vigilance to match the sophisticated trading and market manipulation we see in the markets.

Today’s case also serves as a stark reminder to companies that your computer systems are vulnerable targets. Be vigilant in protecting your systems, taking measures to detect and guard against hacking, and working together with law enforcement to uncover the theft and misuse of stolen information.

Today’s case also highlights the SEC’s continued partnership with the criminal authorities in investigating securities law violations, including misconduct that crosses international borders. Each of us brings to bear the unique tools, expertise and remedies that we have and together we are able to bring innovative cases like this one which serve as a stronger deterrent to unlawful conduct.

The work of everyone involved in this investigation, from every agency, has been extraordinary. For the SEC, I want to recognize our Market Abuse Unit, the Complex Financial Instruments Unit, the Home Office staff in D.C., as well as the Denver and Philadelphia regional office staffs, together with the Division of Economic and Risk Analysis and Office of International Affairs, who all worked tirelessly on this matter. The SEC staff’s expertise and unwavering dedication are essential to the protection of our markets and investors. I will end by recognizing and thanking all of our law enforcement partners, as always, for their outstanding work and cooperation in this investigation.

INDIVIDUAL CONVICTED OF CONSPIRACY AND MONEY LAUNDERING FOR ROLE IN COSTA RICAN TELEMARKETING SCHEME

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An Ohio man was convicted yesterday after a two-day jury trial in the Western District of North Carolina for his role in a Costa Rican telemarketing scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina made the announcement.

Paul Ronald Toth Jr., 40, of Wintersville, Ohio, was convicted of one count of conspiracy to commit money laundering and six counts of international money-laundering concealment.  Sentencing before U.S. District Judge Robert J. Conrad Jr. of the Western District of North Carolina will be scheduled at a later date.

According to the evidence presented at trial, Toth was involved in a telemarketing scheme in which his co-conspirators contacted U.S. residents from call centers in Costa Rica, falsely informing them that they had won substantial cash prizes in “sweepstakes.”  To claim the cash prizes, the victims – many of whom were elderly – were instructed to send a purported “refundable insurance fee.”

The trial evidence showed that, between approximately November 2009 and November 2010, Toth was a United States-based “smasher” who facilitated the laundering of funds received from the elderly victims.  Specifically, according to the evidence presented at trial, Toth and others he recruited and supervised received over $300,000 from victims and, using various individuals as senders and recipients to conceal the fraudulent nature of the transactions, wired over $200,000 of those funds to co-conspirators in Costa Rica.  The evidence further demonstrated that Toth kept the remainder as his profit.

This case is being investigated by the U.S. Postal Inspection Service, the FBI, the Internal Revenue Service, Federal Trade Commission and Department of Homeland Security.  The case is being prosecuted by Senior Litigation Counsel Patrick Donley and Trial Attorneys William Bowne and Anna Kaminska of the Criminal Division’s Fraud Section.

FORMER NATIONAL GEOSPATIAL-INTELLIGENCE AGENCY OFFICIAL PLEADS GUILTY TO MAKING FALSE STATEMENTS

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A former National Geospatial-Intelligence Agency (NGA) official pleaded guilty to making false statements to federal investigators regarding his financial interest in a private company.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia, Assistant Inspector General for Investigations Patricia C. Langford of NGA and Acting Special Agent in Charge Paul Sternal of the Defense Criminal Investigative Service (DCIS) Mid-Atlantic Field Office made the announcement.

Brian P. Hearing, 43, of Falls Church, Virginia, pleaded guilty before U.S. District Judge T. S. Ellis III of the Eastern District of Virginia to an information charging him with making material false statements to federal investigators.

According to the statement of facts filed along with his plea agreement, Hearing worked at NGA from 2011 to 2015 in its Innovision Directorate, an applied science and technology research group.  Hearing admitted that, during this time, he also co-founded a private company for the purpose of developing and commercializing a certain type of automated detection system.  Hearing also admitted that he inappropriately used his position with the NGA to promote the company.

In connection with his guilty plea, Hearing also admitted that, when questioned by federal agents about his involvement with the company, he lied to conceal his conflict of interest.  Among other things, Hearing admitted to falsely claiming that another individual was the only founder of the company and to denying having any legal or financial connections to the company when, in fact, he co-founded the company and shared equal ownership of it.

This case was investigated by the NGA-OIG and the DCIS.  The case is being prosecuted by Trial Attorney Heidi Boutros Gesch of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Paul J. Nathanson of the Eastern District of Virginia.

FORMER DIRECTOR OF VIRGIN ISLANDS PUBLIC FINANCE AUTHORITY AND OTHERS CHARGED WITH CONSPIRACY AND BRIBERY

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Three Virgin Islands men were charged in an indictment unsealed today with various offenses based on their participation in a bribery scheme involving over $17 million in construction contracts awarded by the Virgin Islands Public Finance Authority (VIPFA).

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Ronald W. Sharpe of the District of the Virgin Islands, Special Agent in Charge Carlos Cases of the FBI’s San Juan, Puerto Rico, Division, Virgin Islands Inspector General Steven Van Beverhoudt and Special Agent in Charge Kelly R. Jackson of the Internal Revenue Service-Criminal Investigation (IRS-CI) made the announcement.

Julito Francis, 53, former Director of Finance and Administration for the VIPFA, is charged with 11 counts of conspiracy, bribery, extortion under color of official right, honest services wire fraud and perjury.  Gerard Castor, 69, president and owner of Balbo Construction Corporation, is charged with 10 counts of conspiracy, bribery and honest services wire fraud.  John Woods, 59, co-principal of an architectural company that worked on behalf of the VIPFA, is charged with three counts of conspiracy, bribery and extortion under color of official right.

Francis, Castor and Woods were arrested earlier today and appeared before U.S. Magistrate Judge Ruth Miller of the District of the Virgin Islands.  The defendants were released pending an August 12 arraignment.

According to the indictment, Castor provided more than $400,000 in improvements to Francis’ personal residence, and over $10,000 in improvements to Woods’ personal property.  In    return, Francis and Woods used their official positions to ensure that Balbo Construction was awarded construction contracts by the VIPFA that were worth over $17 million, including a multi-million contract, and supplements thereto, to build the St. Thomas Regional Library.  The indictment further alleges that the defendants attempted to conceal the bribery scheme by creating false documents that suggested Francis and Woods intended to pay Castor for the work performed.

The charges and allegations contained in an indictment are merely accusations.  The defendants are presumed innocent unless and until proven guilty.

This case is being investigated by the FBI’s San Juan Division, St. Thomas Resident Agency, the Virgin Islands Office of the Inspector General and IRS-CI.  This case is being prosecuted by Trial Attorneys Laura Fulton and Justin D. Weitz of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Nelson Jones of the District of the Virgin Islands.  Deputy Chief Tracee Plowell of the Criminal Division’s Office of Enforcement Operations and Trial Attorney Jennifer Blackwell of the Environment and Natural Resources Division’s Environmental Crimes Section participated in the investigation when they were assigned to the Public Integrity Section.

Four Men Charged with Trafficking in Pet Products with Counterfeit Labels

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An indictment was recently unsealed in Houston charging four men with various offenses based on their roles in smuggling pet products with counterfeit labels into the United States.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Special Agent in Charge Catherine A. Hermsen of the Food and Drug Administration – Office of Criminal Investigations (FDA-OCI) Kansas City, Missouri, Field Office and Special Agent in Charge Brian M. Moskowitz of the U.S. Immigration and Customs Enforcement Homeland Security Investigations’ (HSI) Houston Field Office made the announcement.

Iain Nigel MacKellar, 58, of England; Lam Ngoc Tran, aka Mark Tran, 40, of Fountain Valley, California; Allen Smith, 49, of Phoenix; and William Humphreys, 58, of Laguna Hills, California, were indicted on July 9, 2015.  They are charged with conspiracy to commit wire fraud, mail fraud and trafficking in counterfeit labels, and smuggling goods into the United States.  Mackellar and Tran also are charged with additional counts of wire fraud, mail fraud, trafficking in counterfeit labels and smuggling.  The defendants were suspected members of one of the largest known groups of importers of counterfeit packaged pet products.

Smith turned himself in to authorities this morning and made his initial appearance before U.S. Magistrate Judge Mary Milloy.  Humphreys and Tran were taken into custody in Phoenix and in California, respectively.  Tran made his initial appearance in Houston on July 29, while Humphreys is set to appear tomorrow before Judge Milloy.  MacKellar is considered a fugitive and a warrant remains outstanding for his arrest.

The indictment alleges the defendants smuggled veterinary products that were not manufactured for the U.S. market into the United States for distribution under false labels, including Frontline and Frontline Plus pesticides manufactured by Merial Pharmaceutical Company (Merial).  In some cases, the defendants allegedly imported the products into the U.S. under the pretense that the products were destined for use by charitable organizations, but instead distributed the products to large retail outlets for commercial sale, according to the indictment.

Merial did not participate in or authorize the alleged unlawful conduct.  All known counterfeit veterinary products have been removed from store shelves.

The charges contained in an indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

This case is being investigated by the FDA-OCI, HSI and the Environmental Protection Agency.  The case is being prosecuted by Assistant Deputy Chief John H. Zacharia of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorneys Jennifer Lowery and Kebharu Smith of the Southern District of Texas.  The U.S. Attorney’s Office of the Central District of California and the CCIPS Cybercrime Lab provided significant assistance.

Former Alabama Jail Employee Sentenced for Stealing Identities as Part of Tax Refund Fraud Scheme

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A Troy, Alabama, man was sentenced to prison today in U.S. District Court for the Middle District of Alabama for his involvement in a stolen identity tax refund fraud scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama.

Devon Tucker, 31, a former jailer of the Troy Police Department at the city jail, pleaded guilty earlier this year to one count of conspiracy to defraud the United States and one count of aggravated identity theft.  U.S. District Judge Callie V.S. Granade sentenced Tucker to serve 32 months in prison and three years of supervised release, and ordered him to pay $13,162 in restitution to the Internal Revenue Service (IRS).

According to court documents, from January 2014 to January 2015, Tucker stole the personal identification information of approximately 150 individuals who were processed into the Troy city jail.  Tucker provided those identities to his co-conspirators for the purpose of filing false federal income tax returns claiming fraudulent refunds from the U.S. Treasury.  Tucker was paid in pre-paid debit cards in the names of the identity theft victims for his involvement in the scheme.

“The Tax Division will vigorously pursue and prosecute government employees who abuse their positions by exploiting their access to personal information to victimize members of the community and steal from the U.S. Treasury,” said Acting Assistant Attorney General Ciraolo.

“It is always a sad day when a law enforcement officer sworn to uphold the law, takes advantage of his position for his own personal gain,” stated U.S. Attorney Beck.  “This district will continue to vigorously prosecute those who steal identities and file fraudulent tax returns, regardless of where they are employed or what position they hold.”

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Gregory P. Bailey and Michael P. Hatzimichalis of the Tax Division and Assistant U. S. Attorney Jonathan Ross of the Middle District of Alabama, who prosecuted this case.

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

Congressman Chaka Fattah and Associates Charged with Participating in Racketeering Conspiracy

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A member of Congress and four of his associates were indicted today for their roles in a racketeering conspiracy involving several schemes that were intended to further the political and financial interests of the defendants and others by, among other tactics, misappropriating hundreds of thousands of dollars of federal, charitable and campaign funds.

Congressman Chaka Fattah Sr., 58, of Philadelphia; lobbyist Herbert Vederman, 69, of Palm Beach, Florida; Fattah’s Congressional District Director Bonnie Bowser, 59, of Philadelphia; and Robert Brand, 69, of Philadelphia; and Karen Nicholas, 57, of Williamstown, New Jersey, were charged today in a 29-count indictment with participating in a racketeering conspiracy and other crimes, including bribery; conspiracy to commit mail, wire and honest services fraud; and multiple counts of mail fraud, falsification of records, bank fraud, making false statements to a financial institution and money laundering.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania, Special Agent in Charge Edward J. Hanko of the FBI’s Philadelphia Division and Special Agent in Charge Akeia Conner of the Internal Revenue Service-Criminal Investigation (IRS-CI) Philadelphia Field Office made the announcement.

“As charged in the indictment, Congressman Fattah and his associates embarked on a wide-ranging conspiracy involving bribery, concealment of unlawful campaign contributions and theft of charitable and federal funds to advance their own personal interests,” said Assistant Attorney General Caldwell.  “When elected officials betray the trust and confidence placed in them by the public, the department will do everything we can to ensure that they are held accountable.  Public corruption takes a particularly heavy toll on our democracy because it undermines people’s basic belief that our elected leaders are committed to serving the public interest, not to lining their own pockets.”

“The public expects their elected officials to act with honesty and integrity,” said U.S. Attorney Memeger.  “By misusing campaign funds, misappropriating government funds, accepting bribes, and committing bank fraud, as alleged in the Indictment, Congressman Fattah and his co-conspirators have betrayed the public trust and undermined faith in government.”

“These crimes and the subsequent elaborate cover-up constitute an egregious breach of public trust,” said Special Agent in Charge Hanko.  “It is the duty of the FBI, IRS and Department of Justice to investigate and prosecute those who violate this trust and put personal gain above public service.”

“Public corruption by our elected officials and their associates undermines the American public’s confidence in our government,” said Special Agent in Charge Conner.  “When our elected officials and their associates violate the law and create sophisticated financial schemes to enrich themselves, the Internal Revenue Service-Criminal Investigation, will work diligently with our fellow law enforcement partners to restore the public’s trust.”

Specifically, the indictment alleges that, in connection with his failed 2007 campaign to serve as mayor of Philadelphia, Fattah and certain associates borrowed $1 million from a wealthy supporter and disguised the funds as a loan to a consulting company.  After he lost the election, Fattah allegedly returned $400,000 to the donor that the campaign had not used, and arranged for Educational Advancement Alliance (EAA), a non-profit entity that he founded and controlled, to repay the remaining $600,000 using charitable and federal grant funds that passed through two other companies, including one run by Brand.  To conceal the contribution and repayment scheme, the defendants and others allegedly created sham contracts and made false entries in accounting records, tax returns and campaign finance disclosure statements.

In addition, the indictment alleges that after his defeat in the mayoral election, Fattah sought to extinguish approximately $130,000 in campaign debt owed to a political consultant by agreeing to arrange for the award of federal grant funds to the consultant.  According to the allegations in the indictment, Fattah directed the consultant to apply for a $15 million grant, which he did not ultimately receive, on behalf of a then non-existent non-profit entity.  In exchange for Fattah’s efforts to arrange the award of the funds to the non-profit, the consultant allegedly agreed to forgive the debt owed by the campaign.

The indictment further alleges that Fattah misappropriated funds from his mayoral and congressional campaigns to repay his son’s student loan debt.  To execute the scheme, Fattah and Bowser allegedly arranged for his campaigns to make payments to a political consulting company, which the company then used to lessen Fattah’s son’s student loan debt.  According to the allegations in the indictment, between 2007 and 2011, the consultant made 34 successful loan payments on behalf of Fattah’s son, totaling approximately $23,000.

In another alleged scheme, beginning in 2008, Fattah communicated with individuals in the legislative and executive branches in an effort to secure for Vederman an ambassadorship or an appointment to the U.S. Trade Commission.  In exchange, Vederman provided money and other items of value to Fattah.  As part of this scheme, the indictment alleges that the defendants sought to conceal an $18,000 bribe payment from Vederman to Fattah by disguising it as a payment for a car sale that never actually took place.

Finally, the indictment alleges that Nicholas obtained $50,000 in federal grant funds that she claimed would be used by EAA to support a conference on higher education.  The conference never took place.  Instead, Nicholas used the grant funds to pay $20,000 to a political consultant and $10,000 to her attorney, and wrote several checks to herself from EAA’s operating account.

The charges and allegations contained in an indictment are merely accusations.  The defendants are presumed innocent until and unless proven guilty.

The case is being investigated by the FBI and IRS-CI.  Assistance was also provided by the Department of Justice’s Office of the Inspector General, the NASA Office of Inspector General and the Department of Commerce’s Office of Inspector General.  The case is being prosecuted by Trial Attorneys Eric L. Gibson, T. Patrick Martin and Jonathan Kravis of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Paul L. Gray of the Eastern District of Pennsylvania.  Trial Attorney Bob Dalton of the Criminal Division’s Organized Crime and Gang Section also provided assistance in this case.

 

Leader of Coupon Counterfeiting Ring on Silk Road Websites Pleads Guilty

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A leader of a coupon counterfeiting ring pleaded guilty today to participating in a conspiracy to sell counterfeit coupons using the “Silk Road” online marketplace, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth A. Polite of the Eastern District of Louisiana.

Beau Wattigney, 30, New Orleans, pleaded guilty before U.S. District Judge Ivan L.R. Lemelle of the Eastern District of Louisiana to conspiracy to commit wire fraud and conspiracy to commit trademark counterfeiting.  Sentencing has been scheduled for Oct. 28, 2015.

In connection with his plea, Wattigney admitted that, between May 2012 and November 2014, he used the online monikers “PurpleLotus” and “GoldenLotus” to sell counterfeit coupons for various goods and services on Silk Road 1.0, which was a hidden website through which users around the world bought and sold illegal drugs, goods and services.  Wattigney further admitted that he engaged in the same conduct on Silk Road 2.0, a successor to Silk Road 1.0, using the monikers “PurpleLotus” and “CouponKing.”

The coupons allowed purchasers to obtain significant discounts on a variety of goods and services offered by the victim companies, including Hopster, Veri-fi, SmartSource, RedPlum and Visa.  For example, Wattigney sold a counterfeit coupon that allowed users to purchase $50.00 Visa Gift Cards for $0.01 each.

Wattigney admitted that he created and manufactured the fraudulent coupons with the assistance of several co-conspirators, and that they designed the coupons to look like original print-at-home manufacturers’ coupons by using the companies’ trademarks.  He also admitted that the scheme affected more than 50 U.S.-based businesses, and caused or attempted to cause more than one million dollars in intended losses.

The investigation is being conducted by the FBI Philadelphia Division, with assistance from the FBI New Orleans Field Office.  The case is being prosecuted by Senior Counsel Marie-Flore Johnson, Gavin Corn and Robert Wallace of the Criminal Division’s Computer Crime and Intellectual Property Section, and Assistant U.S. Attorney Jordan Ginsberg of the Eastern District of Louisiana.

Thirteen U.S. Soldiers Sentenced for Roles in Fraudulent Military Recruiting Bonus Scheme

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Thirteen members of the Texas Guard have received their sentences for their roles in wide-ranging bribery and fraud schemes that caused more than $170,000 in losses to the United States.  Seven of those members were sentenced this past week in Houston.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas made the announcement.

  • Jammie Martin, 38, of Katy, Texas, and Michelle Davis, 34, of Houston, were convicted in February of this year after a five-day trial of conspiracy, bribery, wire fraud and aggravated identity theft.  Martin was sentenced to serve 102 months in prison and Davis was sentenced to serve 57 months in prison.
  • Vanessa Phillips, 37, of Houston, pleaded guilty to one count of conspiracy and one count of bribery and was sentenced to three years probation.
  • Zaunmine “Orlando” Duncan, 39, of Douglasville, Georgia, pleaded guilty to one count of conspiracy, one count of bribery and one count of aggravated identity theft.  He was sentenced to serve 70 months in prison.
  • Annika Chambers, 29, of Houston, and Lashae Hawkins, 29, of San Antonio, pleaded guilty to one count of conspiracy and one count of bribery.  Chambers was sentenced to serve six months in prison.  Hawkins received one year and one day in prison.
  • Christopher Renfro, 27, of Houston, pleaded guilty to one count of conspiracy, one count of bribery, one count of aggravated identity theft and two counts of wire fraud.  He was sentenced to serve 36 months in prison.

In June, six other members of the Texas Guard were sentenced for their roles in the scheme.

  • Michael Rambaran, 52, of Pearland, Texas, pleaded guilty to one count of conspiracy, one count of bribery and one count of aggravated identity theft.  He was sentenced to serve 60 months in prison.
  • Edia Antoine, 29, and Ernest A. Millien III, 51, both of Houston, and Melanie Moraida, 35, of Pearland, pleaded guilty to one count of conspiracy and one count of bribery.  Each received 12 months and one day in prison.

Elisha Ceja, 28, of Barboursville, West Virginia, and Kimberly Hartgraves, 30, of League City, Texas, pleaded guilty to one count of conspiracy and one count of bribery.  Ceja was sentenced to serve nine months in prison and Hartgraves received probation.

U.S. District Judge Lee H. Rosenthal in the Southern District of Texas imposed the prison terms and also ordered all 13 defendants to pay restitution.  One remaining defendant, Danielle Applin 29, of Harker Heights, Texas, who previously pleaded guilty to one count of conspiracy and one count of bribery, is scheduled to be sentenced on Sept. 2, 2015, in Houston.

In approximately September 2005, the National Guard Bureau entered into a contract with Document and Packaging Broker Inc. to administer the Guard Recruiting Assistance Program (G-RAP).  Through this program, a participating soldier, known as a recruiting assistant, could receive bonus payments for referring another individual to join the National Guard.  Based on certain milestones achieved by the referred soldier, a participating soldier would receive payment through direct deposit into the participating soldier’s designated bank account.  To participate in the program, recruiting assistants were required to create online accounts.

According to the evidence presented at trial and in connection with various guilty pleas, Phillips and Davis, both of whom participated in the G-RAP as recruiting assistants, conspired with Martin, a recruiter, to defraud the program by falsely claiming that they were responsible for referring potential soldiers to join the National Guard.  The trial evidence showed that Martin used his position to obtain the names and Social Security numbers of potential soldiers which he provided to recruiting assistants so that they could use the information to obtain fraudulent recruiting referral bonuses.  The evidence at trial showed that, in exchange for the information, Martin, who organized and led the scheme, personally received approximately $15,000 in payments from the recruiting assistants.  This scheme resulted in more than $30,000 in losses to the National Guard Bureau.

In a separate scheme that resulted in an additional $70,000 in losses, recruiting assistants Antoine, Millien, Moraida and Renfro admitted to paying Rambaran, a recruiter who organized and led the scheme, for the personal information of potential soldiers.  They then used that information to obtain fraudulent bonuses by falsely claiming they referred those individuals to join the National Guard.  Rambaran admitted that, in exchange for the recruit information, he personally received a total of approximately $29,000 in payments from the recruiting assistants.

In connection with his guilty plea in a scheme he organized and led, Duncan, a recruiter, admitted he personally received approximately $24,000 in payments from recruiting assistants in exchange for personal information of potential soldiers.  Those recruiting assistants – Ceja, Chambers, Hartgraves and Hawkins – admitted to paying Duncan for the information and using it to obtain fraudulent bonuses by falsely claiming they referred those individuals to join the National Guard.  This scheme resulted in another $70,000 in losses to the National Guard Bureau.

The cases were investigated by the San Antonio Fraud Resident Agency of Army Criminal Investigation Command’s Major Procurement Fraud Unit.  These cases are being prosecuted by Trial Attorneys Sean F. Mulryne, Heidi Boutros Gesch and Mark J. Cipolletti of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney John Pearson of the Southern District of Texas.