Former Rabobank Trader Pleads Guilty for Scheme to Manipulate Yen Libor

Posted on by

A former Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) Japanese Yen derivatives trader pleaded guilty today for his role in a conspiracy to commit wire and bank fraud by manipulating Rabobank’s Yen London InterBank Offered Rate (LIBOR) submissions to benefit his trading positions.
Attorney General Eric H. Holder, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.
Today, a criminal information was filed in the Southern District of New York charging Takayuki Yagami, a Japanese national, with one count of conspiracy to commit wire fraud and bank fraud.   Yagami pleaded guilty to the information before United States District Judge Jed S. Rakoff in the Southern District of New York.
“With this guilty plea, we take another significant step to hold accountable those who fraudulently manipulated the world’s cornerstone benchmark interest rate for financial gain,” said Attorney General Eric Holder.  “This conduct distorted transactions and financial products around the world.  Manipulating LIBOR effectively rigs the global financial system, compromising the fairness of world markets.  This plea demonstrates that the Justice Department will never waver, and we will never rest, in our determination to ensure the integrity of the marketplace and protect it from fraud.
“Today, a former Rabobank trader has pleaded guilty to participating in a scheme to manipulate the global benchmark interest rate LIBOR to benefit Rabobank’s trading positions,” said Assistant Attorney General Caldwell.    “This was the ultimate inside job.    As alleged, traders illegally influenced the very interest rate on which their trades were based, using fraud to gain an unfair advantage.    Takayuki Yagami is the ninth person charged by the Justice Department in connection with the industry-wide LIBOR investigation, and we are determined to pursue other individuals and institutions who engaged in this crime.”
“Today’s guilty plea is a significant step forward in the LIBOR investigation and demonstrates the Department’s firm commitment to individual accountability,” said Deputy Assistant Attorney General Snyder.  “We will continue to pursue aggressively other individuals involved in this or other illegal schemes that undermine free and fair financial markets.”
“Manipulating financial trading markets to create an unfair advantage is against the law,” said Assistant Director in Charge Parlave.  “Today’s guilty plea further underscores the FBI’s ability to investigate complex international financial crimes and bring the perpetrators to justice.  The Washington Field Office has committed significant time and resources including the expertise of Special Agents, forensic accountants and analysts to investigate this case along with our Department of Justice colleagues.  Their efforts send a clear message to anyone contemplating financial crimes: think twice or you will face the consequences.”
According to court documents, LIBOR is an average interest rate, calculated based on submissions from leading banks around the world, reflecting the rates those banks believe they would be charged if borrowing from other banks.    LIBOR serves as the primary benchmark for short-term interest rates globally and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.    The Bank of International Settlements estimated that as of the second half of 2009, outstanding interest rate contracts were valued at approximately $450 trillion.
At the time relevant to the charges, LIBOR was published by the British Bankers’ Association (BBA), a trade association based in London.    LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.    The published LIBOR “fix” for Yen LIBOR at a specific maturity is the result of a calculation based upon submissions from a panel of 16 banks, including Rabobank.
Yagami admitted to conspiring with Paul Robson, of the United Kingdom, Paul Thompson, of Australia, and Tetsuya Motomura, of Japan.  Robson, Thompson and Motomura were charged with conspiracy to commit wire fraud and bank fraud as well as substantive counts of wire fraud in a fifteen-count indictment returned by a federal grand jury in the Southern District of New York on April 28, 2014.    All four are former employees of Rabobank.
Rabobank entered into a deferred prosecution agreement with the Department of Justice on Oct. 29, 2013 and agreed to pay a $325 million penalty to resolve violations arising from Rabobank’s LIBOR submissions.
According to allegations in the information and indictment, the four defendants traded in derivative products that referenced Yen LIBOR.    Robson worked as a senior trader at Rabobank’s Money Markets and Short Term Forwards desk in London; Thompson was Rabobank’s head of Money Market and Derivatives Trading Northeast Asia and worked in Singapore; Motomura was a senior trader at Rabobank’s Tokyo desk who supervised money market and derivative traders; and Yagami worked as a senior trader at Rabobank’s Money Market/FX Forwards desks in Tokyo and elsewhere in Asia.    In addition to trading derivative products that referenced Yen LIBOR, Robson also served as Rabobank’s primary submitter of Yen LIBOR to the BBA.
Robson, Thompson, Motomura and Yagami each entered into derivatives contracts containing Yen LIBOR as a price component .    The profit and loss that flowed from those contracts was directly affected by the relevant Yen LIBOR on certain dates.    If the relevant Yen LIBOR moved in the direction favorable to the defendants’ positions, Rabobank and the defendants benefitted at the expense of the counterparties.    When LIBOR moved in the opposite direction, the defendants and Rabobank stood to lose money to their counterparties.
As alleged in court filings, from about May 2006 to at least January 2011, the four defendants and others agreed to make false and fraudulent Yen LIBOR submissions for the benefit of their trading positions.    According to the allegations, sometimes Robson submitted rates at a specific level requested by a co-defendant, including Yagami, and consistent with the co-defendant’s trading positions.    Other times, Robson made a higher or lower Yen LIBOR submission consistent with the direction requested by a co-defendant and consistent with the co-defendant’s trading positions.    On those occasions, Robson’s manipulated Yen LIBOR submissions were to the detriment of, among others, Rabobank’s counterparties to derivative contracts.    Thompson, Motomura and Yagami (described in the indictment as Trader-R) made requests of Robson for Yen LIBOR submissions through electronic chats and email exchanges.
For example, according to court filings, on Sept. 21, 2007, Yagami asked Robson by email, “wehre do you think today’s libors are?    If you can I would like 1mth higher today.” Robson responded, “bookies reckon .85,” to which Yagami replied, “I have some fixings in 1mth so would appreciate if you can put it higher mate.” Robson answered, “no prob mate let me know your level.” After Yagami asked for “0.90% for 1mth,” Robson confirmed, “sure no prob[ ] I’ll probably get a few phone calls but no worries mate… there’s bigger crooks in the market than us guys!”
The indictment alleges that Robson accommodated the requests of his co-defendants.    For example, on Sept. 21, 2007, after Robson allegedly received a request from Yagami for a high 1-month Yen LIBOR, Rabobank submitted a 1-month Yen LIBOR rate of 0.90, which was 7 basis points higher than the previous day and 5 basis points above where Robson said that “bookies” predicted it, and which moved Rabobank’s submission from the middle to the highest of the panel.
According to court documents, the defendants were also aware that they were making false or fraudulent Yen LIBOR submissions.    For example, on May 10, 2006, Robson admitted in an email to Yagami that “it must be pretty embarrasing to set such a low libor.  I was very embarrased to set my 6 mth – but wanted to help thomo [Thompson].  Tomorrow it will be more like 33 from me.” At times, Robson referred to the submissions that he submitted on behalf of his co-defendants as “ridiculously high” and “obscenely high,” and acknowledged that his submissions would be so out of line with the other Yen LIBOR panel banks that he might receive a phone call about them from the BBA or Thomson Reuters.
The charges in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
The investigation is being conducted by special agents, forensic accountants, and intelligence analysts in the FBI’s Washington Field Office.    The prosecution is being handled by Senior Litigation Counsel Carol L. Sipperly and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section, and Trial Attorney Michael T. Koenig of the Antitrust Division.    The Criminal Division’s Office of International Affairs has provided assistance in this matter.
The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and abroad.    The Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the department and, along with the U.K. Financial Conduct Authority, has played a major role in the LIBOR investigation.  The Securities and Exchange Commission also has played a significant role in the LIBOR series of investigations, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.     The department has worked closely with the Dutch Public Prosecution Service and the Dutch Central Bank in the investigation of Rabobank.    Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.  For more information about the task force visit: www.stopfraud.com.

 

Connolly’s Cartel Capers “Auto Part Investigation Shifts Gears”

Posted on by

Auto Part Investigation Shifts Gears

 by  CartelCapers

In the last several months, the Antitrust Division has obtained indictments of a number of Japanese executives in the auto parts investigation. This is the hallmark of an investigation that is shifting gears. For the most part, but not entirely, the Division has picked the low hanging fruit with amnesty and non-prosecution agreements. It has shaken a few trees and obtained plea agreements with individuals who received substantially reduced 5K sentences in return for the plea and cooperation. Now enters the phase where individuals are indicted, either because the Division believed they were too senior to offer 5K discounts, the Division no longer needed cooperation, or because the individual declined the invitation to come to the United States and submit to US jurisdiction. Now, the investigation enters what could be likened to the “100 Years War,” depending upon the longevity of the fugitive defendant. The hostile parties keep their respective difference, with an occasional battle fought if there is an extradition or voluntary surrender.  

Yesterday Gikou Nakajima, the highest-ranking global sales executive at Takata Corp. was indicted and charged with rigging bids for seat belts sold to various car companies.http://www.justice.gov/atr/public/press_releases/2014/306344.htm  Two weeks earlier, A Japanese executive was indicted on one count of bid rigging and also for obstruction of justice in a second count. http://www.justice.gov/atr/public/press_releases/2014/306153.htm. In April, an indictment was returned against one current executive and two former executives of Bridgestone Corp. for their roles in an international conspiracy to fix prices of automotive anti-vibration rubber parts sold in the United States and elsewhere.http://www.justice.gov/atr/public/press_releases/2014/305205.htm.  The return of indictments signals that the Division has secured sufficient cooperation from witnesses and reviewed enough documents to be confident enough in their facts to seek indictments.  The auto parts investigation has had many facets involving over many different parts. See USDOJ Chart, Auto Parts Targeted by Conspirators:http://www.justice.gov/atr/public/press_releases/2013/300969a.pdf.  As each phase of this investigation wraps up, additional indictments should be forthcoming.

What Happens Next?

Usually, nothing. The Division has foreign fugitives in most of its international cartel cases dating back to ADM. In most cases the indictments, and the defendants’ identity, are public. But, in some cases the indictment of a foreign national may be under seal. (In the 1980’s, the Philadelphia office indicted an Israeli citizen under seal and he was arrested entering the US. That saga of that case is another story.) But, typically, the Division will have a foreign fugitive placed on an Interpol “Red Notice” making travel precarious for that executive for the rest of his life. In most cases, the executives preserved by the Division for indictment are the most senior members of the company involved in the conspiracy. Foreign fugitive defendants will likely retire, fire their travel agent and stay in the home country. The Division will maintain the documents and other evidence needed to try the case should Interpol actually pick up the fugitive. (One Japanese executive was arrested in India and spent some time in an Indian prison before the India authorities decided they would not extradite him on “dual criminality” grounds.). From time to time, Division attorneys may even get false alarms—foreigners with the same or similar name as a fugitive being picked up and held for questioning. The Division will maintain the file on its foreign fugitives indefinitely because unless it is notified, it has no way of knowing if the fugitive is dead or alive.

Sentencing Guidelines Are A Huge Factor

The primary measure of culpability under the US Sentencing Guidelines is volume of commerce.  Not surprisingly, international cartels tend to press the outer boundaries of the maximum ten year prison sentence under the Sherman Act.  A look at the possible Sentencing Guidelines for a fugitive like Mr. Nakajima shows why there is strong incentive for him to say put in Japan. While these figures may be off slightly, if he were convicted of the charged indictment, he would be facing a possible prison sentence under the United States Sentencing Guidelines of 87- 108 months in jail:

 

Base Offense 2R1.1                           +12

Offense involves Bid Rigging           +1

Volume of Commerce                       +12 (based on likely commerce of more than $500,00   but less than 1 billion

Role in the Offense                           +4

Total Offense Level                           29

Guideline Range                                87 – 108 months

If a foreign fugitive voluntarily submitted to US jurisdiction and plead guilty, he would be eligible for a 3-point reduction for acceptance of responsibility with a resulting guideline range of 63-78 months. (The court would likely depart from the sentencing guidelines over the Division’s objections and impose a lesser sentence. There is, however, no guarantee that this would occur.) The longest sentence one of Mr. Nakajima’s subordinates received was 19 months. It is not likely Mr. Nakajima will ever voluntarily submit to US jurisdiction.

Extradition

 Yesterday, at an event in New York, Brent Snyder, Antitrust Division DAAG for Criminal Enforcement noted “More jurisdictions are adopting criminal antitrust statutes and what that will do is that it will make extradition easier to obtain. There are going to be fewer and fewer safe havens.” Also, the Division recently obtained what it called the “first of its kind” extradition on an antitrust charge against Romano Pisciotti, an Italian national who was involved in the marine hose global conspiracy. http://www.justice.gov/atr/public/press_releases/2014/304888.htm.  Once in the U.S., Pisciotti quickly agreed to plead guilty will serve a total of two years in prison with credit for the nine months and 16 days he was held in the custody of the German government pending his extradition.  The Pisciotti extradition has been widely covered.http://www.forbes.com/sites/mergermarket/2014/04/23/doj-flexing-muscle-on-price-fixers-worldwide/. It has been noted that Germany would not have extradited Pisciotti if he were a German citizen. But there are three main takeaways from his extraction journey that are worth repeating:

 

  • Pisciotti was indicted under seal. Foreign executives involved in a cartel who do not have some kind of agreement with the Antitrust Division may never know whether they are a fugitive
  • Pisciotti spent nine and half months in a German prison awaiting word of whether Germany would extradite him. If Interpol picks up a foreign fugitive, even if not ultimately extradited, the process can be a significant penalty in itself.
  • The Division has used the Pisciotti extradition as a platform to express its intention to work with competition agencies worldwide to shrink safe harbors for fugitives from cartel indictments.
  • To the extent that the Division is able to secure the extradition of more foreign executives to face cartel charges, the significant reductions in sentence that cooperating foreign executives receive in 5K downward departures will likely tick upward.

A Look Ahead
The country that leads the league in most executives as fugitives from US antitrust indictments is Japan. This is true overall and in the auto parts investigation. The US has not extradited any Japanese citizens for an antitrust violation. Because Japan also makes price fixing and bid rigging a criminal offense, the issue of dual criminality may not be an obstacle (though there are certain differences in the statutes of the two countries). An extradition of an executive from Japan would be an enormous development. As noted above, a Japanese auto parts executive was recently indicted on both price-fixing and obstruction. Coincidently, the first successful extradition by the Antitrust Division involved an executive indicted on both Sherman Act and obstruction charges. When I was Chief of the Philadelphia office, we indicted a British executive, Ian Norris, on both a price fixing count and three counts of obstruction. Eventually, he was extradited only on the obstruction counts. Norris was convicted on one count and sentenced to 18 months in prison. Will the Division take a page out of the same playbook here? More developments await.

FORMER TOP EXECUTIVE OF JAPANESE AUTOMOTIVE PARTS

Posted on by

WASHINGTON — A Detroit federal grand jury returned a one-count indictment against a former top executive of a Japanese manufacturer of automotive parts for his participation in a conspiracy to fix prices of seatbelts, the Department of Justice announced today.

The indictment, filed today in the U.S. District Court for the Eastern District of Michigan, charges Gikou Nakajima, a former executive at Takata Corp., with participating in a conspiracy to suppress and eliminate competition in the automotive parts industry by agreeing to rig bids for, and to fix, stabilize and maintain the prices of, seatbelts sold to Toyota Motor Corp., Honda Motor Company Ltd., Nissan Motor Co. Ltd., Mazda Motor Corp., Fuji Heavy Industries Ltd. – more commonly known by its brand name, Subaru – and/or certain of their subsidiaries, for installation in vehicles sold in the United States and elsewhere.  Nakajima served as director of customer relations division at Takata, the highest-level global sales executive at the company, from June 2005 until at least June 2009.

“Today’s indictment demonstrates that the Antitrust Division continues to hold accountable executives who collude with their competitors,” said Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program.  “The division will not tolerate executives participating in – and directing their subordinates to participate in – conspiracies to raise the prices on automotive parts that are essential to the safety of U.S. consumers.”

The indictment alleges, among other things, that from at least as early as September 2005 and continuing until June 2009, Nakajima and others attended meetings with co-conspirators and reached collusive agreements to rig bids, allocate the supply and fix the prices of seatbelts sold to the automobile manufacturers. It alleges that Nakajima participated directly in the conspiratorial conduct, and that he directed, authorized and consented to his subordinates’ participation.

Takata is a Tokyo-based manufacturer of automotive parts, including seatbelts.  Takata supplies automotive parts to automobile manufacturers in the United States, in part, through its U.S. subsidiary, TK Holdings Inc., located in Auburn Hills, Michigan.  Takata pleaded guilty on Dec. 5, 2013, for its involvement in the conspiracy, and was sentenced to pay criminal fine of $71.3 million.  Four other executives from Takata have pleaded guilty and have been sentenced to serve time in a U.S. prison and to pay criminal fines for their roles in the conspiracy.

Including Nakajima, 35 individuals have been charged in the government’s ongoing investigation into price fixing and bid rigging in the auto parts industry, 24 of whom have pleaded guilty or agreed to plead guilty.  Of those, 22 have been sentenced to serve prison terms ranging from a year and one day to two years.  Additionally, 27 companies have pleaded guilty or agreed to plead guilty and have agreed to pay a total of more than $2.3 billion in fines.

Nakajima is charged with price fixing in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today’s indictment is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by four of the Antitrust Division’s criminal enforcement sections and the FBI.  Today’s charge was brought by the Antitrust Division’s Washington Criminal I Section and the FBI’s Detroit Field Office, with the assistance of the FBI headquarters’ International Corruption Unit.  Anyone with information on price fixing, bid rigging and other anticompetitive conduct related to other products in the automotive parts industry should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Detroit Field Office at 313-965-2323.

Robert E. Connolly Launches New Blog: “Cartel Capers:” http://cartelcapers.com.

Posted on by

Robert E. ConnollyGeyer Gorey Partner Robert E. Connolly Announces the Debut of A New Blog: “Cartel Capers:” http://cartelcapers.com.

Robert Connolly recently joined GeyerGorey LLP as a partner in its Washington DC office. As with other GeyerGorey “former feds,” Mr. Connolly was a career federal prosecutor in the Antitrust Division. He was Chief of the Middle Atlantic Office of the Antitrust Division from 1994 until early 2013. Mr. Connolly has just launched his blog, Cartel Capers.

While at the Division, and particularly as a senior manager as Chief, Mr. Connolly had a seat at the table as the Division developed and implemented its successful leniency program.   He also had input on all major aspects of policy and procedure in the criminal program such as investigative strategies, charging decisions, trial game plans, sentencing policy issues, and extradition.   Since leaving the Division, Mr. Connolly has been a prolific author writing a number of articles for the ABA Criminal Cartel and Procedure committee, Mlex and Law 360. He has been quoted on cartel issues in Forbes, BusinessWeek, and various trade publications that focus on antitrust. He has decided to try his hand at blogging to provide more real time news, insight and analysis.

The blog, Cartel Capers, will provide current news in the cartel world. The focus will be on matters concerning the Antitrust Division, US Department of Justice, but will also cover major cartel related developments in the civil arena as well as worldwide. Besides reporting current developments, the aim of the blog is to provide insight and perspective from someone who worked at a high level in the Division for most of his career. The blog will analyze what the Division said, and what it did not say; what the Division did, and what it did not do—and what the Division is likely to do in the future. In short, the blog is intended to provide a behind the scenes look at the cartel world based on both personal experience and current contacts in the enforcement and broader antitrust community.

The blog will be enriched by contributions from other career DOJ prosecutors now at GeyerGorey. Hays Gorey, Joan Marshall and Brad Geyer will contribute both as editors and guest bloggers. Each has prosecuted a variety of high profile cartel cases and related violations in their long careers with the Division.

Please give Cartel Capers a try. Hopefully you will benefit form reading the blog and look forward to new entries. Also, any feedback or suggestions to make the blog more useful are most welcome. Cartel Capers: http://cartelcapers.com.

Los Angeles Physician Indicted in $33 Million Medicare Fraud Scheme

Posted on by

A Los Angeles physician was indicted today for a $33 million scheme to defraud Medicare, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney André Birotte Jr. of the Central District of California, Special Agent in Charge Glenn R. Ferry of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) for the Los Angeles Region and Assistant Director in Charge Bill L. Lewis of the FBI’s Los Angeles Field Office.

Robert A. Glazer, 67, of Los Angeles, California, was indicted in the Central District of California and charged with one count of conspiracy to commit health care fraud.

According to court documents, Glazer operated a medical clinic located in Los Angeles.    From approximately January 2006 through May 2014, Glazer allegedly billed Medicare for services that were not medically necessary, and at times were not provided to the Medicare beneficiaries.    In addition, Glazer allegedly signed prescriptions, certifications, and other medical documents for medically unnecessary home health services, hospice services, and power wheelchairs and other durable medical equipment (DME).    Glazer’s co-conspirators then sold the prescriptions and certifications to DME supply companies, home health agencies, and other providers, knowing that the prescriptions and certifications were fraudulent.    Based on these fraudulent prescriptions and certifications, the DME supply companies, home health agencies, and other providers then allegedly submitted false and fraudulent claims to Medicare.
As further alleged in court documents, from approximately January 2006 through May 2014, fraudulent prescriptions and certifications from Glazer were responsible for approximately $33,484,779 in false and fraudulent claims to Medicare, and Medicare paid approximately $22,056,332 on those claims.

The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.    This case is being prosecuted by Trial Attorneys Fred Medick and Blanca Quintero of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 1,900 defendants who have collectively billed the Medicare program for more than $6 billion.  In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov .

King’s Daughters Medical Center to Pay Nearly $41 Million to Resolve Allegations of False Billing for Unnecessary Cardiac Procedures and Kickbacks

Posted on by

Ashland Hospital Corp. d/b/a King’s Daughters Medical Center (KDMC) has agreed to pay $40.9 million to resolve allegations that it submitted false claims to the Medicare and Kentucky Medicaid programs for medically unnecessary coronary stents and diagnostic catheterizations and had prohibited financial relationships with physicians referring patients to the hospital, the Justice Department announced today.
Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division, U.S. Attorney Kerry Harvey for the Eastern District of Kentucky and Special Agent in Charge Derrick L. Jackson at the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Kentucky region made the announcement.
“Hospitals that place their financial interests above the well-being of their patients will be held accountable,” said Assistant Attorney General Delery.    “ The Department of Justice will not tolerate those who abuse federal health care programs and put the beneficiaries of these programs at risk by providing medically unnecessary care.”
The government alleged that, between 2006 and 2011, KDMC billed for numerous unnecessary coronary stents and diagnostic catheterizations performed by KDMC physicians on Medicare and Medicaid patients who did not need them.    The government also alleged that the physicians falsified medical records in order to justify these unnecessary procedures, which allegedly generated millions of dollars in Medicare and Kentucky Medicaid reimbursements for KDMC.
“The conduct alleged in this matter is unacceptable, victimizing both taxpayers and patients,” said U.S. Attorney Harvey.    “Treatment decisions motivated by financial gain undermine public confidence in our health care system and threaten vital federal programs upon which so many of our citizens rely.    We will not relent in our efforts to protect the public from the sort of systematic misconduct alleged in this case.”
The settlement also resolves allegations that KDMC violated the Stark Law by paying certain cardiologists salaries that were unreasonably high and in excess of fair market value.    The Stark Law is designed to limit the influence of money on physicians’ medical decision-making by prohibiting financial relationships between hospitals and referring physicians, unless these relationships meet certain designated exceptions.
In connection with this settlement, KDMC has agreed to enter into a Corporate Integrity Agreement with HHS-OIG, which obligates the hospital to undertake substantial internal compliance reforms and to commit to a third-party review of its claims to federal health care programs for the next five years.
“Medically unnecessary procedures can cause serious health issues, cost the taxpayers millions of dollars each year and drain the Medicare Trust Fund,” said Special Agent in Charge Jackson.    “The OIG will continue to protect beneficiaries and hold health care providers accountable for improper claims.”
“This type of alleged conduct deceives individuals when they are seeking medical treatment and are vulnerable,” said Special Agent in Charge Perrye K. Turner of the FBI’s Louisville Field Division.  “The level of funds involved in this matter is staggering.    This money has been stolen from the patients and the taxpayers.”
The Commonwealth of Kentucky will receive approximately $1,018,380, which represents the state’s share of the recovered Medicaid funds.    The Medicaid program is funded jointly by the federal and state governments.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.
The investigation was conducted by the FBI, the HHS-OIG, the Kentucky Office of Attorney General, Medicaid Fraud and Abuse Control Unit, the Commercial Litigation Branch of the Department of Justice’s Civil Division and the U.S. Attorney’s Office for the Eastern District of Kentucky.    The claims settled by this agreement are allegations only, and there has been no determination of liability.

 

Two Individuals Plead Guilty to Conspiring to Launder Bribes Received in Afghanistan

Posted on by

Two individuals have pleaded guilty for their roles in a scheme to launder approximately $250,000 in bribes received from Afghan contractors in Afghanistan.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, United States Attorney for the Western District of Tennessee Edward L. Stanton III and United States Attorney for the Eastern District of Tennessee William C. Killian made the announcement.
Jimmy W. Dennis, 44, formerly of Clarksville, Tennessee, and a former First Sergeant with the U.S. Army, pleaded guilty before U.S. District Court Judge Samuel H. May Jr. of the Western District of Tennessee to conspiracy to launder approximately $250,000 in bribe payments he received from Afghan contractors in Afghanistan.    Sentencing is scheduled for Sept. 4, 2014.

James C. Pittman, 45, of Rossville, Georgia, pleaded guilty last Thursday before U.S. Magistrate Judge William B. Carter of the Eastern District of Tennessee for his role in this conspiracy.    Sentencing is scheduled for Sept. 8, 2014.

According to pleadings filed at the time of the guilty pleas, from March 2008 through March 2009, Dennis was an Army Sergeant assigned as a paying agent in the Humanitarian Aid Yard (HA Yard) at Bagram Air Field, Afghanistan.    Dennis was a member of the team in the HA Yard that purchased supplies from local Afghan vendors for distribution as part of the Commander’s Emergency Response Program for urgent humanitarian relief requirements in Afghanistan.    Dennis and a partner entered into an agreement to steer contracts to certain Afghan vendors in return for approximately $250,000 in cash bribes.

Further according to court pleadings, Dennis smuggled the bribe money back to the United States hidden in packages addressed to his wife, his father and a former Army friend, Pittman.    Dennis sent $80,000 to $100,000 to his father from Afghanistan in packages that contained toy “jingle trucks,” colorfully decorated trucks or buses in Afghanistan and Pakistan.    Dennis hid the money in the rear compartment of the toy trucks.    Dennis also shipped a hope chest to his father containing approximately $100,000 in cash in a concealed compartment.

Also according to court documents, while on leave, Dennis met with Pittman, advised him that he had obtained money through kickbacks, and asked him for help laundering the funds.    Pittman, owner of a landscaping business, agreed to “run through his company” these bribery proceeds.  After returning to Afghanistan, Dennis sent approximately $60,000 to Pittman contained in toy jingle trucks.    Dennis also arranged for his father to send approximately $20,000 to Pittman, who returned it in the form of purported salary checks from Pittman’s company.

These matters are being investigated by the Special Inspector General for Afghanistan Reconstruction, the FBI, the Army Criminal Investigative Division, the Defense Criminal Investigative Service, and the Air Force Office of Special Investigation.    The prosecution is being handled by Trial Attorney Daniel Butler of the Criminal Division and Assistant U.S. Attorneys Frederick Godwin of the Western District of Tennessee and James Brooks of the Eastern District of Tennessee.

Minnesota-Based Medtronic Inc. to Pay $9.9 Million to Resolve Claims That Company Paid Kickbacks to Physicians

Posted on by

Medtronic Inc., of Fridley, Minnesota, has agreed to pay the United States $9.9 million to resolve allegations under the False Claims Act that the company used various types of payments to induce physicians to implant pacemakers and defibrillators manufactured and sold by Medtronic, the Justice Department announced today.

“Improper financial incentives have the potential to compromise physician medical judgment,” said Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division.    “This case demonstrates the Department of Justice’s commitment to pursue medical device manufacturers that use improper financial relationships to influence physician decision-making.”

The United States alleged that Medtronic caused false claims to be submitted to Medicare and Medicaid by using multiple types of illegal kickbacks to induce physicians to implant Medtronic pacemakers and defibrillators.    Specifically, Medtronic allegedly induced physicians to use its products by: 1) paying implanting physicians to speak at events intended to increase the flow of referral business; 2) developing marketing/business development plans for physicians at no cost; and 3) providing tickets to sporting events.    The United States alleged that Medtronic paid the remuneration to persuade the physicians to continue using Medtronic products or to convert their business from a competitor’s products.

“Decisions about devices used to treat cardiac rhythmic disease should be based on the best interests of the patient, not on whether the manufacturer is going to pay a kickback,” said U.S. Attorney Benjamin Wagner of the Eastern District of California.  “These sorts of improper financial incentives not only undermine the integrity of medical decisions, they also waste taxpayer funds and are unfair to competitors who are trying to play by the rules.”

“As this settlement indicates, health care executives who try to boost profits by paying kickbacks to doctors will instead pay the government for their improper conduct,” said Special Agent in Charge Ivan Negroni of the U.S. Department of Health and Human Services Office of Inspector General’s San Francisco Office.  “We will continue to work with the Department of Justice to root out illegal, wasteful business arrangements.”

The settlement announced today stems from a whistleblower complaint filed by a former employee of Medtronic, Adolfo Schroeder, pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the United States and to share in the proceeds of the suit.    Schroeder will receive approximately $1.73 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $19.2 billion through False Claims Act cases, with more than $13.7 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with Medtronic Inc. was the result of a coordinated effort among the Department of Justice’s Civil Division; the U.S. Attorney’s Office for the Eastern District of California; and the Office of Inspector General of the U.S. Department of Health and Human Services.

The lawsuit is captioned United States ex rel. Schroeder v. Medtronic, Inc., No. 2:09-cv-0279 WBS EJB (E.D. Cal.).    The claims settled by this agreement are allegations only, and there has been no determination of liability.

Former Employee of U.S. Contractor Pleads Guilty to Fraud Scheme

Posted on by

A former employee of a U.S. contractor pleaded guilty today to conspiracy to defraud the United States in connection with a contract to provide reconstruction-related services in Afghanistan.
Acting Assistant Attorney General David O’Neil of the Justice Department’s Criminal Division and United States Attorney for the Middle District of Florida A. Lee Bentley made the announcement.
Alan D. Simmons pleaded guilty today before U.S. Magistrate Judge Patricia D. Barksdale in the Middle District of Florida.
According to court documents, Simmons worked in Afghanistan as a training program coordinator for PAE Inc.  PAE had a contract with the United States Department of State to train and supply uniforms to Afghan correctional officers.    Simmons was responsible for providing information to others at PAE as to the number and types of uniforms that were to be ordered and provided to the Afghan correctional officers upon their completion of the training program.
As alleged in court documents, Simmons and others created a company, Aminzian Logistics Services (Aminzian), ostensibly to provide uniforms to PAE as a subcontractor.    In fact, Aminzian would submit false and fraudulent invoices to PAE seeking payment for goods that were not in fact provided.    After Aminzian was paid, Simmons and his co-conspirators split the proceeds.    The United States reimbursed PAE for its payments to Aminzian and incurred a loss of over $120,000.
The case was investigated by the Department of State Office of Inspector General and the Special Inspector General for Afghanistan Reconstruction (SIGAR).    This case was prosecuted by Special Trial Attorney Mark H. Dubester, on detail from SIGAR, and Assistant U.S. Attorney Kevin C. Frein of the Middle District of Florida.

 

Navy Military Sealift Command Official and Businessman Charged with Bribery

Posted on by

Scott B. Miserendino, Sr., 55, a former government contractor who performed work for the United States Navy Military Sealift Command , and Timothy S. Miller, 57, a businessman whose company sought contracting business from the Military Sealift Command, were indicted today on charges including conspiracy and bribery.
Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, Acting U.S. Attorney Dana J. Boente of the Eastern District of Virginia, Special Agent in Charge Robert Craig of the Defense Criminal Investigative Service Mid-Atlantic Field Office (DCIS), Acting Executive Assistant Director Charles T. May Jr. of the Naval Criminal Investigative Service (NCIS) Atlantic Operations and Special Agent in Charge Royce E. Curtin of the FBI’s Norfolk Field Office made the announcement.
A federal grand jury in the Eastern District of Virginia returned a six-count indictment today that charges Miserendino with one count of conspiracy to commit bribery, one count of bribery, one count of conspiracy to commit obstruction of criminal investigations and to commit tampering with a witness, and one count of obstruction of criminal investigations.    The indictment charges Miller with one count of conspiracy to commit bribery and two counts of bribery of a public official.
According to the indictment, Miserendino was a government contractor at the Military Sealift Command, the leading provider of transportation for the United States Navy.    The indictment alleges that Miserendino worked closely with another Military Sealift Command official, Kenny E. Toy, in managing telecommunications projects and in influencing the award of United States government contracts, subcontracts, and task orders.
The indictment alleges that Miserendino solicited and accepted bribes, in the form of cash, a flat screen plasma television, a wine refrigerator, and other items, in exchange for providing favorable treatment to two companies in connection with United States government contracts.
Between March 2005 and 2007, Miserendino allegedly accepted cash payments of approximately $3,000 per month from agents of Company A, a corporation that sought contracting business from the Military Sealift Command.    In total, Miserendino accepted approximately $100,000 in bribes from Company A’s agents.
In addition, the indictment alleges that, in February 2009, Miller and his business partner Dwayne A. Hardman established Company B, a government contracting corporation located in Chesapeake, Virginia, to provide support to the Military Sealift Command on various telecommunications projects.    Shortly thereafter, in May 2009, Miller and Hardman allegedly paid cash bribes totaling $50,000 to Miserendino and Toy in exchange for favorable treatment in connection with U.S. government contracts, subcontracts, and task orders.
In addition, as alleged in the indictment, Miserendino obstructed justice and tampered with a witness by causing $85,000 to be paid to Hardman in an attempt to prevent or delay him from reporting the bribery scheme to law enforcement authorities.
Prior to this indictment, five other individuals pleaded guilty in connection with the bribery scheme.    On Feb. 12, 2014, Kenny E. Toy, former Afloat Programs Manager for the Military Sealift Command N6 Command, Control, Communication and Computer Systems Directorate, pleaded guilty to bribery and admitted to receiving more than $100,000 in cash bribes in exchange for providing favorable treatment to two companies in connection with U.S. government contracts.    On Feb. 18, 2014, Dwayne A. Hardman, Miller’s business partner, pleaded guilty to bribery and admitted to providing more than $140,000 in cash bribes to Toy and Miserendino.    On Feb. 19, 2014, Michael P. McPhail pleaded guilty to conspiracy to commit bribery and agreed to forfeit $57,000.    On March 5, 2014, Roderic J. Smith pleaded guilty to conspiracy to commit bribery and agreed to forfeit $175,000.    On April 4, 2014, Adam C. White pleaded guilty to conspiracy to commit bribery and agreed to forfeit $57,000.
The case was investigated by the DCIS, NCIS and the FBI.    The case is being prosecuted by Trial Attorney Emily Rae Woods of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Stephen W. Haynie of the Eastern District of Virginia.
The charges in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.