Category Archives: Criminal Division FRD

Attorney Convicted in Multimillion-Dollar Stock Fraud

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Attorney Mitchell J. Stein, 53, of Hidden Hills, Calif., was convicted by a jury in the Southern District of Florida for his role in operating a five-year, multimillion-dollar market manipulation and fraud scheme, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.

Stein was charged in a December 2011 indictment and on May 20, 2013, he was convicted on all counts: conspiracy to commit mail and wire fraud and three counts each of mail fraud and wire fraud, each of which carries a maximum penalty of 20 years in prison; three counts of securities fraud, which each carry a maximum penalty of 25 years; three counts of money laundering, which each carry a maximum penalty of 10 years; and one count of conspiracy to obstruct justice, which carries a maximum penalty of five years in prison. Stein is being detained until sentencing, which is scheduled for Aug. 16, 2013.

According to evidence presented at trial, Stein’s wife held a controlling interest in Signalife Inc., a publicly-traded company currently known as Heart Tronics that purportedly sold electronic heart monitoring devices.  Stein engaged in a scheme to artificially inflate the price of Signalife stock by creating the false impression of sales activity for Signalife.  Specifically, the evidence at trial showed that Stein and his co-conspirators created fake purchase orders and related documents from fictitious customers, then caused Signalife to issue press releases and file documents with the U.S. Securities and Exchange Commission (SEC) trumpeting these fictitious sales.  Evidence at trial also proved that in a further effort to create the false appearance of sales activity, Stein arranged to have Signalife products shipped to and temporarily stored with an individual who had not purchased any products.

Evidence at trial further proved that Stein disguised his selling of stock during the conspiracy by placing shares in purportedly blind trusts, and that he had a co-conspirator sell shares of Signalife stock after Stein caused false information to be disseminated to the public.  Stein also caused Signalife to issue shares to third parties so that those third parties could sell the shares and remit the proceeds of those sales to Stein.  From one co-conspirator alone, Stein received illicit gains of over $1.8 million.     In addition, evidence at trial proved that Stein conspired to obstruct the SEC’s investigation into Heart Tronics by testifying falsely and arranging for others to testify falsely in an effort to conceal the scheme described above.

This case was investigated by the U.S. Postal Inspection Service and the Office of the Special Inspector General for the Troubled Asset Relief Program.

This matter was referred to the Department by the SEC, which conducted a parallel investigation and in December 2011 announced the filing of a civil enforcement action against Stein and others.  The Department thanks the SEC for its substantial assistance in this matter.  The Department also acknowledges the substantial assistance of FINRA’s Criminal Prosecution Assistance Group.     This case is being prosecuted by Assistant Chief Albert B. Stieglitz, Jr. and Trial Attorneys Kevin B. Muhlendorf and Andrew H. Warren of the Criminal Division’s Fraud Section.

Michigan Physician Pleads Guilty for Role in Medicare Fraud Scheme

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A Detroit-area physician pleaded guilty today to making fraudulent referrals for home health care as part of a $1.6 million home health care fraud scheme, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade, Special Agent in Charge Robert D. Foley III of the FBI’s Detroit Field Office and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Chicago Regional Office.

Dr. Sonjai Poonpanij, 82, of Rochester, Mich., pleaded guilty before Senior U.S. District Judge Arthur J. Tarnow in the Eastern District of Michigan to one count of conspiracy to commit health care fraud.

According to court documents, Dr. Poonpanij admitted that beginning in approximately July 2010, he conspired with others to commit health care fraud by referring Medicare beneficiaries for home health care that was not medically necessary and causing false and fraudulent claims to be submitted to Medicare.

Dr. Poonpanij admitted that he saw patients at a psychotherapy center in Flint, Mich., known as New Century Adult Day Program Services LLC, and referred Medicare beneficiaries at New Century to home health care companies – including a home health care company known as Angle’s Touch Home Health Care LLC – even though he knew that those beneficiaries did not qualify for home health care.  According to court documents, Dr. Poonpanij wrote prescriptions for narcotics requested by the beneficiaries in exchange for their enrollment with Angle’s Touch for home health care that they did not need or receive.  In addition to referring patients that he saw at New Century, Dr. Poonpanij also referred beneficiaries whom he had never seen or treated to Angle’s Touch and other home health agencies.  Dr. Poonpanij signed plans of care for these beneficiaries that were used to bill Medicare for services that were either never actually performed or were not performed in the beneficiaries’ homes as required.

Court documents allege that between September 2008 and September 2012, Dr. Poonpanij caused Angle’s Touch and two other home health agencies to submit claims to Medicare for services that were not medically necessary and/or not provided, which caused Medicare to pay these companies approximately $1,318,954.

At sentencing, scheduled for Aug. 14, 2013, Dr. Poonpanij faces a maximum penalty of 10 years in prison and a $250,000 fine.

This case is being prosecuted by Trial Attorney Niall M. O’Donnell of the Criminal Division’s Fraud Section.  It 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 Eastern District of Michigan.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Community Health Center Program Coordinator Sentenced to 70 Months for Role in $63 Million Fraud Scheme

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WASHINGTON – A former program coordinator at the defunct health provider Health Care Solutions Network Inc. (HCSN) was sentenced in Miami to 70 months in prison today for her role in a $63 million fraud scheme.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office, made the announcement after sentencing by U.S. District Judge Cecilia M. Altonaga.

Dana Gonzalez, 43, of High Point, N.C., pleaded guilty on March 6, 2013, to conspiracy to commit health care fraud. In addition to the prison sentence, Gonzalez was also sentenced to three years of supervised release and ordered to pay $19,428,120 in restitution.

During the course of the conspiracy, Gonzalez was employed as a therapist and program coordinator of HCSN’s Partial Hospitalization Program (PHP).  A PHP is a form of intensive treatment for severe mental illness.

According to court documents, HCSN of Florida (HCSN-FL) operated community mental health centers at two locations.  Gonzalez was aware that HCSN-FL paid illegal kickbacks to owners and operators of Miami-Dade County Assisted Living Facilities (ALF) in exchange for patient referral information to be used to submit false and fraudulent claims to Medicare and Medicaid.

Gonzalez admitted that she routinely fabricated medical records for purported mental health treatment that were used to support false and fraudulent claims to health care benefit programs, including Medicare and Medicaid.  Gonzalez admitted that she routinely fabricated these medical records, despite knowing that many of the ALF referral patients were ineligible for PHP services because many patients suffered from mental retardation, dementia and Alzheimer’s disease.  Gonzalez, an unlicensed clinical social worker intern at the time, also admitted to providing unlicensed therapy to PHP patients when licensed therapists were absent.

In total, Gonzalez admitted that during her employment at HCSN, she and her co-conspirators submitted approximately $46,959,975 in false and fraudulent claims. According to court documents, from 2004 through 2011, HCSN billed Medicare and the Florida Medicaid program approximately $63 million for purported mental health services.

This 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 Southern District of Florida. The case was prosecuted by Trial Attorney Allan J. Medina and former Special Trial Attorney William J. Parente of the Criminal Division’s Fraud Section. In support of the Medicare Fraud Strike Force, the FBI Criminal Investigative Division’s Financial Crimes Section has funded the Special Trial Attorney position.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Medicare Fraud Strike Force Charges 89 Individuals for Approximately $223 Million in False Billing

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Attorney General Eric Holder and Department of Health and Human Services (HHS) Secretary Kathleen Sebelius announced today that a nationwide takedown by Medicare Fraud Strike Force operations in eight cities has resulted in charges against 89 individuals, including doctors, nurses and other licensed medical professionals, for their alleged participation in Medicare fraud schemes involving approximately $223 million in false billings.

Attorney General Holder and Secretary Sebelius were joined in the announcement by Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, FBI Assistant Director Ron Hosko, Inspector General Daniel R. Levinson of the HHS Office of Inspector General (HHS-OIG) and Deputy Administrator and Director of Centers for Medicare & Medicaid Services (CMS) Center for Program Integrity Peter Budetti.

This coordinated takedown was the sixth national Medicare fraud takedown in Strike Force history.  In total, almost 600 individuals have been charged in connection with schemes involving almost $2 billion in fraudulent billings in these national takedown operations alone. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

Since their inception in March 2007, Strike Force operations in nine locations have charged more than 1,500 defendants who collectively have falsely billed the Medicare program for more than $5 billion.  In addition, CMS, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

The joint Department of Justice and HHS Medicare Fraud Strike Force is a multi-agency team of federal, state and local investigators designed to combat Medicare fraud through the use of Medicare data analysis techniques and an increased focus on community policing.  Approximately 400 law enforcement agents from the FBI, HHS-OIG, multiple Medicaid Fraud Control Units and other state and local law enforcement agencies participated in the takedown.

“Today’s announcement marks the latest step forward in our comprehensive efforts to combat fraud and abuse in our health-care systems,” said Attorney General Holder.  “These significant actions build on the remarkable progress that the HEAT has enabled us to make – alongside key federal, state, and local partners – in identifying and shutting down fraud schemes.  They are helping to deter would-be criminals from engaging in fraudulent activities in the first place. And they underscore our ongoing commitment to protecting the American people from all forms of health-care fraud, safeguarding taxpayer resources and ensuring the integrity of essential health-care programs.”

“The Affordable Care Act has given us additional tools to preserve Medicare and protect the tens of millions of Americans who rely on it each day,” said Secretary Sebelius.  “By expanding our authority to suspend Medicare payments and reimbursements when fraud is suspected, the law allows us to better preserve the system and save taxpayer dollars.  Today we’re sending a strong, clear message to anyone seeking to defraud Medicare: You will get caught and you will pay the price. We will protect a sacred trust and an earned guarantee.”

The defendants charged are accused of various health care fraud-related crimes, including conspiracy to commit health care fraud, violations of the anti-kickback statutes and money laundering.  The charges are based on a variety of alleged fraud schemes involving various medical treatments and services, primarily home health care, but also mental health services, psychotherapy, physical and occupational therapy, durable medical equipment (DME) and ambulance services.

According to court documents, the defendants allegedly participated in schemes to submit claims to Medicare for treatments that were medically unnecessary and often never provided.  In many cases, court documents allege that patient recruiters, Medicare beneficiaries and other co-conspirators were paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent billing to Medicare for services that were medically unnecessary or never performed.  Collectively, the doctors, nurses, licensed medical professionals, health care company owners and others charged are accused of conspiring to submit a total of approximately $223 million in fraudulent billing.

“We have made it part of our core mission at the Department of Justice to hold accountable those who steal from the Medicare program to line their own pockets,” said Acting Assistant Attorney General Raman.  “There are Medicare fraudsters in prisons across the country – some who will be there for decades – who can attest to our determination, and our effectiveness.”

“We all feel the effects of health care fraud,” said FBI Assistant Director Hosko. “It leads to higher health care costs and makes it harder for seniors and those who are ill to get the care they need.  The FBI and our law enforcement partners are committed to preventing and prosecuting health care fraud at all levels.  But we need the public’s help.  Take the time to be aware of fraud and call law enforcement if you see anything suspicious included in the billings to your insurance, Medicare, or Medicaid or have any unusual encounters with health care providers.  We can work together to ensure your hard-earned dollars are used to care for the sick and not to line the pockets of criminals.”

“Taxpayers expect us to work harder and smarter, and that is exactly what happened across the nation today,” said HHS Inspector General Levinson. “In addition to the work of my agents and other federal, state, and local law enforcement officials, investigators from nine other IG offices joined us today.  Working together we can break down silos, pool expertise, reduce costs, and the successful result speaks for itself.”

“Today’s takedown is the result of dedicated commitment to working with our law enforcement partners to root out fraud in the Medicare program,” said CMS Program Integrity Deputy Administrator Budetti.  “This collaboration has been strengthened by the Affordable Care Act, which provided CMS with the tools it needs to stop the flow of money while working to rid our programs of fraud, waste and abuse.”

In Miami, a total of 25 defendants, including two nurses, a paramedic and a radiographer, were charged today and yesterday for their participation in various fraud schemes involving a total of $44 million in false billings for home health care, mental health services, occupational and physical therapy, DME and HIV infusion.  In one case, three defendants were charged for participating in a $20 million home health fraud scheme involving a home health agency, Trust Care Health Services.  Court documents allege that the defendants bribed Medicare beneficiaries for their Medicare information, which was used to bill for home health services that were not rendered or that were not medically necessary.  According to court documents, the lead defendant spent much of the money from the scheme, and purchased multiple luxury vehicles, including two Lamborghinis, a Ferrari and a Bentley.

Eleven individuals were charged by the Baton Rouge Strike Force.  Five individuals were charged today, including two doctors, in New Orleans by the Baton Rouge Strike force for participating in a different $51 million home health fraud scheme.  According to court documents, the defendants recruited beneficiaries, offering cash and other incentives in exchange for their Medicare information, which was used to bill medically unnecessary home health services. The Baton Rouge Strike Force also announced a superseding indictment and an information charging six individuals, including another doctor, with over $30 million in fraud in connection with a community mental health center called Shifa Texas.  These charges come on top of charges brought against the owners and operators of Shifa Baton Rouge, a related community mental health center which is at the center of an alleged $225 million scheme charged in an earlier indictment.

In Houston, two individuals, including a nurse and a social worker, were charged today with fraud schemes involving at total of $8.1 million in false billings for home health care.  The defendants, who are brother and sister, allegedly used patient recruiters to obtain Medicare beneficiary information that they then used to bill for services that were not medically necessary and not provided.

Thirteen defendants were charged in Los Angeles for their roles in schemes to defraud Medicare of approximately $23 million.  In one case, three individuals allegedly billed Medicare for more than $8.7 million in fraudulent billing for DME. According to the indictment, the defendants allegedly paid illicit kickbacks to patient recruiters to bribe beneficiaries to participate in the scheme. Once the individuals provided their Medicare information to recruiters, doctors and medical clinics conspiring with the defendants allegedly wrote prescriptions for medically unnecessary power wheelchairs, which they sold to the defendants for illegal kickbacks.

In Detroit, 18 defendants, including two doctors, a physician’s assistant and two therapists, were charged for their roles in fraud schemes involving approximately $49 million in false claims for medically unnecessary services, including home health, psychotherapy and infusion therapy.  In one case, three individuals were charged in a $12 million scheme where they allegedly held themselves out to be licensed physicians – which they were not – and signed prescriptions for drugs and documents about purported psychotherapy they provided.

In Tampa, nine individuals were charged in a variety of schemes, ranging from pharmacy fraud health care-related money laundering. In one case, four individuals were charged for their alleged roles in establishing and operating four supposed healthcare clinics in Tampa, Fl. – Palmetto General Health Care Inc., United Healthcare Center Inc., New Imaging Center Inc. and Lord Physical Rehabilitation Center Inc. – which they allegedly used to steal more than $2.5 million from Medicare for surgical procedures that were never performed.  The defendants allegedly billed Medicare for surgical procedures used to treat patients with high blood pressure by collapsing veins in the legs, but they did not actually perform the procedures.

In Chicago, seven individuals were charged, including two doctors, with a variety of health care fraud schemes.

In Brooklyn, N.Y., four individuals, including two doctors, were charged in fraud schemes involving $9.1 million in false claims. In one case, three additional individuals were allegedly involved in what is now alleged to be a $15 million scheme where massages by unlicensed therapists were billed to Medicare as physical therapy.  Six defendants were previously charged in the scheme. The cases announced today are being prosecuted and investigated by Medicare Fraud Strike Force teams comprised of attorneys from the Fraud Section of the Justice Department’s Criminal Division and from the U.S. Attorney’s Offices for the Southern District of Florida, the Eastern District of Michigan, the Eastern District of New York, the Southern District of Texas, the Central District of California, the Middle District of Louisiana; the Northern District of Illinois, and the Middle District of Florida; and agents from the FBI, HHS-OIG and state Medicaid Fraud Control Units.

Former Senior Executive of Arthrocare Corp. Pleads Guilty in $400 Million Securities Fraud Scheme

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A former senior executive of Texas-based ArthroCare Corp., a publicly traded medical device company, pleaded guilty today for his role in a scheme to defraud the company’s shareholders and members of the investing public by falsely inflating ArthroCare’s earnings, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Robert Pitman for the Western District of Texas.

David Applegate, 54, pleaded guilty before U.S. Magistrate Judge Mark Lane in Austin, Texas, to two counts of a superseding information which charges him with conspiracy to commit securities, mail and wire fraud and with a false statements violation. Applegate was the senior vice president in charge of ArthroCare’s Spine Division.  Applegate admitted that he and other co-conspirators inflated falsely ArthroCare’s sales and revenue through a series of end-of-quarter transactions involving ArthroCare’s distributors and that he and other co-conspirators caused ArthroCare to file a Form 10-K for 2007 with the U.S. Securities and Exchange Commission that materially misrepresented ArthroCare’s quarterly and annual sales, revenues, expenses and earnings.

According to court documents, Applegate and others determined the type and amount of product to be shipped to distributors, notably ArthroCare’s largest distributor, DiscoCare Inc.,  based on ArthroCare’s need to meet sales forecasts, rather than the distributors’ actual orders. Applegate and others then caused ArthroCare to “park” millions of dollars’ worth of ArthroCare’s medical devices at its distributors at the end of each relevant quarter. ArthroCare would then report these shipments as sales in its quarterly and annual filings at the time of the shipment, enabling the company to meet or exceed internal and external earnings forecasts.

According to the superseding information, DiscoCare agreed to accept shipment of approximately $37 million of product in exchange for substantial, upfront cash commissions, extended payment terms and the ability to return product, as well as other special conditions, allowing ArthroCare to inflate falsely its revenue by tens of millions of dollars.  To conceal the fact that DiscoCare owed ArthroCare a substantial amount of money on the unused inventory, ArthroCare, with Applegate’s knowledge, caused ArthroCare to acquire DiscoCare on Dec. 31, 2007.

According to court documents, between December 2005 and December 2008, ArthroCare’s shareholders held more than 25 million shares of ArthroCare stock. On July 21, 2008, after ArthroCare announced publicly that it would be restating its previously reported financial results from the third quarter 2006 through the first quarter 2008 to reflect the results of an internal investigation, the price of ArthroCare shares dropped from $40.03 to $23.21 per share. The drop in ArthroCare’s share price caused an immediate loss in shareholder value of more than $400 million.

Applegate faces a maximum prison sentence of five years in prison for each charge. A sentencing date has yet to be scheduled.

David Applegate’s co-defendant John Raffle is scheduled for trial on July 15, 2013. Defendants are presumed innocent unless and until proven guilty at trial.

This case was investigated by the FBI’s Austin Field Office. The case is being prosecuted by Deputy Chief Benjamin D. Singer and Trial Attorney Henry P. Van Dyck of the Criminal Division’s Fraud Section. The Department recognizes the substantial assistance of the U.S. Securities and Exchange Commission.

Two U.S. Broker-dealer Employees and Venezuelan Government Official Charged for Massive International Bribery Scheme

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Senior Venezuelan Banking Official Allegedly Received at Least $5 Million in Bribes in Exchange for Directing Business to U.S. Defendants

Two employees of a U.S. broker-dealer and a senior official in Venezuela’s state economic development bank have been charged in New York’s federal court for their alleged roles in a massive international bribery scheme.

Mythili Raman, Acting Assistant Attorney General for the Justice Department’s Criminal Division; Preet Bharara, the U.S. Attorney for the Southern District of New York; and George Venizelos, the Assistant Director-in-Charge of the New York Office of the FBI, made the announcement.

According to the criminal complaint unsealed today, Tomas Alberto Clarke Bethancourt (Clarke) and Jose Alejandro Hurtado – who were both employees of a U.S. broker-dealer (Broker-Dealer) – and Maria de los Angeles Gonzalez de Hernandez (Gonzalez) – who is a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (BANDES) – are accused of conspiring to pay bribes to Gonzalez in exchange for her directing BANDES’s financial trading business to the Broker-Dealer.  Gonzalez, 54, a resident of Caracas, Venezuela, was arrested in Miami on May 3, 2013.  Clarke, 43, and Hurtado, 38, were also arrested Friday in Miami, where they reside.  All three defendants were presented yesterday in federal court in Miami and remain in custody.

“Today’s announcement is a wake-up call to anyone in the financial services industry who thinks bribery is the way to get ahead,” said Acting Assistant Attorney General Raman. “The defendants in this case allegedly paid huge bribes so that foreign business would flow to their firm.  Their return on investment now comes in the form of criminal charges carrying the prospect of prison time.  We will not stand by while brokers or others try rig the system to line their pockets, and will continue to vigorously enforce the FCPA and money laundering statutes across all industries.”

“The defendants’ arrests lay bare a web of bribery and corruption in which employees of a U.S. broker-dealer allegedly generated tens of millions of dollars through transactions in order to fund kickbacks to a Venezuelan government official in exchange for her directing the Venezuelan economic development bank’s financial trading business to their employer,” said U.S. Attorney Bharara. “As alleged, the defendants also engaged in international money laundering to carry out their corrupt scheme.  This Office, along with all of our federal partners, is committed to holding individuals who violate the Foreign Corrupt Practices Act to account.”

“As alleged, the defendants conspired to use Venezuela’s economic development bank as their personal piggy bank,” said FBI Assistant Director-in-Charge Venizelos. “Clarke and Hurtado reaped huge commissions from their trading of the bank’s assets, and kicked back significant sums to Gonzalez.  The brazenness of the alleged scheme was exemplified in their buying bank bonds and selling them back on the same day.”

In a separate action, the U.S. Securities and Exchange Commission (SEC) announced
civil charges against Clarke, Hurtado, and two others.

According to the allegations in the criminal complaint unsealed today, the forfeiture complaint, and other documents filed in Manhattan federal court, Clarke and Hurtado worked or were associated with the Broker-Dealer, based in New York City, principally through its Miami offices.  In 2008, the Broker-Dealer established a group called the Global Markets Group, which included Clarke and later Hurtado, and which offered fixed income trading services to institutional clients.  One of the Broker-Dealer’s clients was BANDES.  Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity.  At her direction, BANDES conducted substantial trading through the Broker-Dealer.  Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged the bank a mark-up on purchases and a mark-down on sales.

From April 2009 through June 2010, Clarke, Hurtado, and Gonzalez participated in a bribery scheme in which Gonzalez directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez.  During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES.  Agents and employees of the Broker-Dealer, including Clarke and Hurtado, devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer.  Emails, account records, and other documents collected from the Broker-Dealer and other sources reveal that Gonzalez received a substantial share of the revenue generated by the Broker-Dealer for BANDES -related trades.  Specifically, Gonzalez received monthly kickbacks from Broker-Dealer agents and employees that were frequently in six-figure amounts.

Some of the trades the Broker-Dealer executed for BANDES had no discernible business purpose.  For instance, in January 2010, the Broker-Dealer executed at least two round-trip trades between itself and BANDES for the same bonds on the same day.  In other words, the Broker-Dealer bought certain bonds from BANDES and then immediately sold those same bonds back to the bank.  The result of the trades was that BANDES was left with the same bond holdings as before the trades, except that it had paid the Broker-Dealer approximately $10.5 million in mark-ups in the course of the two round-trip transactions.

Certain payments to Gonzalez directly from Hurtado and an entity controlled by Clarke totaled at least $3.6 million. When added together with other payments referenced in the Complaint, Gonzalez received a total of at least $5 million.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places.  For instance, Clarke used an account he controlled in Switzerland to transfer funds to an account Gonzalez controlled in Switzerland.  Gonzalez then transferred some of this money to an account she held in the United States.  Additionally, Hurtado and his spouse received substantial compensation from the Broker-Dealer, portions of which Hurtado transferred to an account held by Gonzalez in Miami and to an account held by an associate of Gonzalez in Switzerland.  Hurtado also sought and received reimbursement from Gonzalez for the payment of U.S. income taxes related to the money that he used to make kickback payments to Gonzalez.

In addition to the criminal complaint, on May 6, 2013, the government filed a civil forfeiture action in Manhattan federal court, seeking the forfeiture of assets held in a number of bank accounts associated with the scheme, including several bank accounts located in Switzerland.  The forfeiture complaint also seeks the forfeiture of several properties in the Miami area related to Hurtado that were purchased with his proceeds from the scheme.  As set forth in the forfeiture complaint, in addition to Gonzalez, another BANDES official, identified as CC-1 in the forfeiture complaint, also received kickback payments as part of the scheme.  Also on May 6, 2013, the Court issued seizure warrants for multiple bank accounts and a restraining order relating to the Miami properties.

This ongoing investigation is being conducted by the FBI, with assistance from the SEC and the Justice Department’s Office of International Affairs. Assistant Chief James Koukios and Trial Attorneys Maria Gonzalez Calvet and Aisling O’Shea of the Criminal Division’s Fraud Section and Assistant United States Attorneys Harry A. Chernoff and Jason H. Cowley of the Southern District of New York’s Securities and Commodities Fraud Task Force are in charge of the prosecution.  Assistant United States Attorney Carolina Fornos is also responsible for the forfeiture aspects of the case.

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

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

Health Care Clinic Director Pleads Guilty in Miami for Role in $63 Million Fraud Scheme

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A former health care clinic director and licensed clinical psychologist pleaded guilty today in connection with a health care fraud scheme involving defunct health provider Health Care Solutions Network Inc. (HCSN), announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office.

Alina Feas, 53, of Miami, pleaded guilty before U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida to one count of conspiracy to commit health care fraud and one substantive count of health care fraud.

During the course of the conspiracy, Feas was employed as a therapist and clinical director of HCSN’s Partial Hospitalization Program (PHP).  A PHP is a form of intensive treatment for severe mental illness.  HCSN operated two community mental health centers in Florida and one community mental health center in North Carolina.

In her capacity as clinical director, Feas oversaw the entire clinical program and supervised therapists and other personnel at HCSN in Florida (HCSN-FL).  Feas also conducted group therapy sessions when therapists were absent.

According to court documents, Feas was aware that HCSN-FL paid illegal kickbacks to owners and operators of assisted living facilities (ALF) in Miami-Dade County in exchange for patient referral information to be used to submit false and fraudulent claims to Medicare and Medicaid.  Feas knew that many of the ALF referral patients were ineligible for PHP services because they suffered from either mental retardation, dementia or Alzheimer’s disease, which are not effectively treated by PHP services.

Court documents reveal that Feas submitted claims to Medicare for individual therapy she purportedly provided to HCSN-FL patients using her personal Medicare provider number, knowing that HCSN-FL was simultaneously billing the same patients for PHP services.  Feas continued to bill Medicare under her personal provider number while HCSN in North Carolina (HCSN-NC) simultaneously submitted false and fraudulent PHP claims.

Feas was aware that HCSN-FL personnel were fabricating patient medical records, according to court documents. Many of these medical records were created weeks or months after the patients were admitted to HCSN-FL for purported PHP treatment and were utilized to support false and fraudulent billing to government sponsored health care benefit programs, including Medicare and Florida Medicaid.  During her employment at HCSN-FL, Feas signed fabricated PHP therapy notes and other medical records used to support false claims to government sponsored health care programs.

At HCSN-NC, Feas was aware that her co-conspirators were fabricating medical records to support the fraudulent claims she was causing to be submitted to Medicare.  Feas was aware that a majority of the fabricated notes were created at the HCSN-FL facility for patients admitted to HCSN-NC.  In some instances, Feas signed therapy notes and other medical records even though she never provided services at HCSN-NC.

According to court documents, from 2004 through 2011, HCSN billed Medicare and the Florida Medicaid program approximately $63 million for purported mental health services.

Fifteen defendants have been charged for their alleged roles in the HCSN health care fraud scheme, and 13 defendants have pleaded guilty.  On April 25, 2013, Wondera Eason was convicted, following a five-day jury trial, on one count of conspiracy to commit health care fraud for her role in the scheme at HCSN.  Alleged co-conspirator Lisset Palmero is scheduled for trial on June 3, 2013.  Defendants are presumed innocent until proven guilty at trial.

This case was prosecuted by Trial Attorney Allan J. Medina and former Special Trial Attorney William J. Parente.  This case is being 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 Southern District of Florida.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion.  In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is 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.

Las Vegas Mortgage Agent Sentenced to 15 Months in Prison for Role in Mortgage Fraud Scheme

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A Las Vegas mortgage agent was sentenced late yesterday to serve 15 months in prison for her participation in a mortgage fraud scheme that netted more than $1.2 million in fraudulent mortgage loans, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Acting Special Agent in Charge William C. Woerner of the FBI’s Las Vegas Field Office announced today.

Heidi Haischer, 44, was sentenced by U.S. District Judge Miranda M. Du in the District of Nevada.  In addition to her prison term, Haischer was sentenced to serve three years of supervised release.

In November 2012, after a four-day trial, a federal jury in Las Vegas found Haischer guilty of one count of wire fraud and one count of conspiracy to commit wire fraud for submitting fraudulent loan documents to purchase two homes.

According to court documents and evidence presented at trial, Haischer participated in a mortgage fraud scheme while employed as a mortgage broker in Nevada.  From December 2006 to January 2007, Haischer and her co-conspirators fraudulently secured loans totaling over $1 million to obtain properties with the intent to flip and sell them for profit.  Evidence at trial showed that Haischer and her co-conspirators subsequently enriched themselves by collecting brokerage commissions generated by the sales of the properties.

The court documents and trial evidence demonstrated that Haischer submitted multiple loan applications in which she overstated her income, submitted false verification of employment and misrepresented her intent to reside in one of the properties as her primary residence.  Additionally, Haischer presented inflated bank account balances supported by forged bank statements to make it appear that she had assets she did not have, in order to help qualify for mortgage loans for which she otherwise would not have been eligible.

Co-conspirator Kelly Nunes was convicted in a related case in Las Vegas on Feb. 2, 2012, of one count of bank fraud and one count of conspiracy to commit wire and bank fraud.  On July 11, 2012, Nunes was sentenced to 51 months in prison.

This case was investigated by the FBI.  Trial Attorneys Thomas B.W. Hall and Brian R. Young of the Criminal Division’s Fraud Section prosecuted the case, with assistance from the U.S. Attorney’s Office for the District of Nevada.

This case was a result of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.StopFraud.gov.

Patient Recruiter of Miami Home Health Company Sentenced to 37 Months in Prison for Role in $20 Million Health Care Fraud Scheme

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A patient recruiter for a Miami health care company was sentenced today to serve 37 months in prison for his participation in a $20 million Medicare fraud scheme, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami Office.

Manuel Lozano, 65, was sentenced by U.S. District Judge Joan A. Lenard in the Southern District of Florida.  In addition to his prison term, Lozano was sentenced to serve two years of supervised release and ordered to pay $1,851,000 in restitution, jointly and severally with co-conspirators.

In February 2013, Lozano pleaded guilty to one count of conspiracy to receive health care kickbacks.

According to court documents, Lozano was a patient recruiter who worked for Serendipity Home Health, a Miami home health care agency that purported to provide home health and therapy services to Medicare beneficiaries.

According to court documents, from approximately April 2007 through March 2009, Lozano recruited patients for Serendipity, and in doing so he solicited and received kickbacks and bribes from the owners and operators of Serendipity in return for allowing the company to bill the Medicare program on behalf of the patients he recruited.  These Medicare beneficiaries were billed for home health care and therapy services that were medically unnecessary and/or not provided.

From approximately January 2006 through March 2009, Serendipity submitted approximately $20 million in claims for home health services that were not medically necessary and/or not provided, and Medicare paid approximately $14 million for these fraudulent claims. As a result of Lozano’s participation in the illegal scheme, the Medicare program was fraudulently billed more than $1 million but less than $2.5 million for purported home health care services.

In a related case, on June 21, 2012, Ariel Rodriguez and Reynaldo Navarro, the owners and operators of Serendipity, were sentenced to 73 and 74 months in prison, respectively, and ordered to pay $14 million in restitution and severally with each other and their co-defendants, Melissa Rodriguez and Ysel Salado. Ariel and Melissa Rodriguez, Navarro and Salada each pleaded guilty in March 2012 to one count conspiracy to commit health care fraud.

This case is being prosecuted by Assistant Chief Joseph S. Beemsterboer of the Criminal Division’s Fraud Section.  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 Southern District of Florida.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is 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.

Former Consultant for Willbros International Sentenced in Connection with Foreign Bribery Scheme

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A former consultant for Willbros International Inc. (Willbros International), a subsidiary of Houston-based Willbros Group Inc. (Willbros), was sentenced today for his role in a conspiracy to pay more than $6 million in bribes to government officials of the Federal Republic of Nigeria and officials from a Nigerian political party, Acting Assistant Attorney General Mythili Raman of the Criminal Division and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office announced today.

Paul G. Novak, 46, was sentenced today to serve 15 months in prison by U.S. District Judge Simeon T. Lake III of the Southern District of Texas.  The court took into consideration Novak’s cooperation, and the sentence was consistent with the government’s recommendation. In addition to the prison sentence, Novak was ordered to pay a $1 million fine and to serve two years of supervised release following his release from prison.  In sentencing Novak, the court took into consideration the assistance Novak provided the government in ongoing investigations.

Novak pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and one substantive count of violating the FCPA. Novak admitted that from approximately late-2003 to March 2005, he conspired with others to make a series of corrupt payments totaling more than $6 million to various Nigerian government officials and officials from a Nigerian political party to assist Willbros and its joint venture partner, a construction company based in Mannheim, Germany, in obtaining and retaining the Eastern Gas Gathering System (EGGS) Project, which was valued at approximately $387 million. The EGGS project was a natural gas pipeline system in the Niger Delta designed to relieve existing pipeline capacity constraints.

According to court records, Novak and his alleged co-conspirators Kenneth Tillery, Jason Steph, Jim Bob Brown, three employees from Willbros’s joint venture partner and others agreed to make the corrupt payments to, among others, government officials from the Nigerian National Petroleum Corporation, the National Petroleum Investment Management Services, a senior official in the executive branch of the federal government of Nigeria, and members of a Nigerian political party.  Court documents state the bribes were paid to assist in obtaining and retaining the EGGS contract and additional optional scopes of work.

According to information contained in plea documents, to secure the funds for those corrupt payments, Novak and his alleged conspirators caused Willbros West Africa Inc., a subsidiary of Willbros International, to enter into so-called “consultancy agreements” with two consulting companies Novak represented in exchange for purportedly legitimate consultancy services. In reality, those consulting companies were used to facilitate the payment of bribes.

In addition to Novak, to date, two Willbros employees have pleaded guilty for their roles in the EGGS bribery scheme, and Willbros has entered into a deferred prosecution agreement with the government:

  • On May 14, 2008, Willbros Group Inc. and Willbros International entered into a deferred prosecution agreement with the government and agreed to pay a $22 million penalty, in connection with the company’s payment of bribes to government officials in Nigeria and Ecuador.  On March 30, 2012, the government moved to dismiss the charges following Willbros’s satisfaction of its obligations under the deferred prosecution agreement, and on April 2, 2012, the Court granted the United States’ motion.
  • On Sept. 14, 2006, Jim Bob Brown, a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, in connection with his role in making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract and in connection with his role in making corrupt payments in Ecuador. After a reduction for cooperation, Brown was sentenced on Jan. 28, 2010, to 12 months and one day in prison, two years of supervised release and a $17,500 fine.
  • On Nov. 5, 2007, Jason Steph, also a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, in connection with his role in making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract. After a reduction for cooperation, Steph was sentenced on Jan. 28, 2010, to 15 months in prison, two years of supervised release and a $2,000 fine.

Kenneth Tillery was charged, along with Novak, for his alleged role in the bribery scheme in an indictment unsealed on Dec. 19, 2008. According to the indictment, Tillery was a Willbros International employee and executive from the 1980s through January 2005. From 2002 until January 2005, Tillery served as executive vice president and, later, as president of Willbros International. Tillery remains a fugitive. The charges against Tillery are merely accusations, and he is presumed innocent unless and until proven guilty.

The case is being investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad.  Significant assistance was provided by the Criminal Division’s Office of International Affairs. This case is being prosecuted by Senior Trial Attorney Laura N. Perkins of the Criminal Division’s Fraud Section.

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