Category Archives: Criminal Division FRD

Ralph Lauren Corporation Resolves Foreign Corrupt Practices Act Investigation and Agrees to Pay $882,000 Monetary Penalty

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Ralph Lauren Corporation (RLC), a New York based apparel company, has agreed to pay an $882,000 penalty to resolve allegations that it violated the Foreign Corrupt Practices Act (FCPA) by bribing government officials in Argentina to obtain improper customs clearance of merchandise, announced Mythili Raman, the Acting Assistant Attorney General for the Criminal Division, and Loretta E. Lynch, the United States Attorney for the Eastern District of New York.

According to the agreement, the manager of RLC’s subsidiary in Argentina bribed customs officials in Argentina over the span of five years to improperly obtain paperwork necessary for goods to clear customs; permit clearance of items without the necessary paperwork and/or the clearance of prohibited items; and on occasion, to avoid inspection entirely.  RLC’s employee disguised the payments by funneling them through a customs clearance agency, which created fake invoices to justify the improper payments.  During these five years, RLC did not have an anti-corruption program and did not provide any anti-corruption training or oversight with respect to its subsidiary in Argentina.

In addition to the monetary penalty, RLC agreed to cooperate with the Department of Justice, to report periodically to the department concerning RLC’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.  If RLC abides by the terms of the agreement, the Department will not prosecute RLC in connection with the conduct.

The agreement acknowledges RLC’s extensive, thorough, and timely cooperation, including self-disclosure of the misconduct, voluntarily making employees available for interviews, making voluntary document disclosures, conducting a worldwide risk assessment, and making multiple presentations to the Department on the status and findings of the internal investigation and the risk assessment.  In addition, RLC has engaged in early and extensive remediation, including conducting extensive FCPA training for employees worldwide, enhancing the company’s existing FCPA policy, implementing an enhanced gift policy and other enhanced compliance, control and anti-corruption policies and procedures, enhancing its due diligence protocol for third-party agents, terminating culpable employees and a third-party agent, instituting a whistleblower hotline, and hiring a designated corporate compliance attorney.

In a related matter, the U.S. Securities and Exchange Commission today announced a non-prosecution agreement with RLC , in which RLC agreed to pay $$734,846 in disgorgement and prejudgment interest.

The case is being prosecuted by Trial Attorney Daniel S. Kahn of the Criminal Division’s Fraud Section and Sarah Coyne, Chief of the Business and Securities Fraud Section of the Eastern District of New York.  The case was investigated by the FBI’s New York Field Office.  The department acknowledges and expresses its appreciation for the assistance provided by the SEC’s Division of Enforcement.

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

Foreign Bribery Charges Unsealed Against Current and Former Executives of French Power Company

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Charges have been unsealed against one current and one former executive of the U.S. subsidiary of a French power and transportation company for their alleged participation in a scheme to pay bribes to foreign government officials, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney for the District of Connecticut David Fein and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office announced today.

Frederic Pierucci, 45, a current company executive who previously held the position of vice president of global sales for the Connecticut-based U.S. subsidiary, was charged in an indictment unsealed yesterday in the District of Connecticut with conspiring to violate the Foreign Corrupt Practices Act (FCPA) and to launder money, as well as substantive charges of violating the FCPA and money laundering.  Pierucci, a French national, was arrested Sunday night at John F. Kennedy International Airport.

David Rothschild, 67, of Massachusetts, a former vice president of sales for the Connecticut-based U.S. subsidiary, pleaded guilty on Nov. 2, 2012, to a criminal information charging one count of conspiracy to violate the FCPA.  The charges against Rothschild and his guilty plea were unsealed today.

“Frederic Pierucci and David Rothschild allegedly used outside consultants to bribe foreign officials in Indonesia in exchange for lucrative power contracts,” said Acting Assistant Attorney General Raman.  “Stamping out foreign bribery is a Justice Department priority, and we are determined to continue our vigorous enforcement of the Foreign Corrupt Practices Act.”

“As alleged, this investigation has revealed a corrupt scheme to secure valuable contracts by bribing government officials in Indonesia,” said U.S. Attorney Fein.  “Corrupt payments to government officials erode public confidence in the global marketplace, and these charges demonstrate our commitment to hold people responsible for violating the FCPA.”

“Anyone who still believes that foreign bribery is an acceptable business practice should take a hard look at the charges against these executives.  There is no place for bribery in any business model or corporate culture,” said Assistant Director in Charge Parlave.  “Along with the Department of Justice, international law enforcement partners, and other U.S. federal agencies, the FBI is committed to investigating corrupt backroom deals that threaten our global commerce.”

According to the charges, Pierucci and Rothschild, together with others, paid bribes to officials in Indonesia, including a member of Indonesian Parliament and high-ranking members of Perusahaan Listrik Negara (PLN), the state-owned and state-controlled electricity company in Indonesia, in exchange for those officials’ assistance in securing a contract for the company to provide power-related services for the citizens of Indonesia, known as the Tarahan project.  The charges allege that, in order to conceal the bribes, the defendants retained two consultants purportedly to provide legitimate consulting services on behalf of the power company and its subsidiaries in connection with the Tarahan project.  In reality, however, the primary purpose for hiring the consultants was allegedly to use the consultants to pay bribes to Indonesian officials.

The first consultant retained by the defendants allegedly received hundreds of thousands of dollars into his Maryland bank account to be used to bribe the member of Parliament, according to the charges.  The consultant then allegedly transferred the bribe money to a bank account in Indonesia for the benefit of the official.  According to court documents, emails between Pierucci, Rothschild and their co-conspirators discuss in detail the use of the first consultant to funnel bribes to the member of Parliament and the influence that the member of Parliament could exert over the Tarahan project.  However, when Pierucci and others determined that the first consultant was not effectively bribing key officials at PLN, they allegedly retained the second consultant to accomplish that purpose.  The charges allege that the power company deviated from its usual practice of paying consultants on a pro-rata basis in order to make a much larger up-front payment to the second consultant so that the consultant could “get the right influence.”  An employee at the power company’s subsidiary in Indonesia sent an e-mail to Pierucci and others asking them to finalize the consultancy agreement with the front-loaded payments but stated that in the meantime the employee would give his word to a high-level official at PLN, according to the charges.

The conspiracy to commit violations of the FCPA count carries a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost.  The substantive FCPA counts each carry a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost.  The conspiracy to commit money laundering count carries a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.  The substantive money laundering counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.

An indictment is merely an accusation, and defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

The case is being prosecuted by Trial Attorney Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David E. Novick of the District of Connecticut.  The case is being investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad, with assistance from the Meriden, Conn., Resident Agency of the FBI.  Significant assistance was provided by the Criminal Division’s Office of International Affairs, and the department has also worked closely with its law enforcement counterparts in Indonesia at the Komisi Pemberantasan Korupsi (Corruption Eradication Commission) and deeply appreciates KPK’s assistance in this matter.

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

Parker Drilling Company Resolves FCPA Investigation and Agrees to Pay $11.76 Million Penalty

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Parker Drilling Company Resolves FCPA Investigation and Agrees to Pay $11.76 Million Penalty
 Parker Drilling Company, a publicly listed drilling-services company, headquartered in Houston, has agreed to pay an $11.76 million penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for authorizing payment to an intermediary, knowing that the payment would be used to corruptly influence the decisions of a Nigerian government panel reviewing Parker Drilling’s adherence to Nigerian customs and tax laws.  Acting Assistant Attorney General Mythili Raman of the Criminal Division and U.S. Attorney Neil H. MacBride for the Eastern District of Virginia announced the charges.

The investigation of Parker Drilling stemmed from the Justice Department’s Panalpina-related investigations, which previously yielded criminal resolutions with Panalpina and five oil and gas service companies and subsidiaries and resulted in more than $156 million in criminal penalties.

Today, the department filed a deferred prosecution agreement and a criminal information against Parker Drilling in U.S. District Court for the Eastern District of Virginia.  The one-count information charges Parker Drilling with violating the FCPA’s anti-bribery provisions.

According to court documents, in  2001 and 2002, Panalpina World Transport (Nigeria) Limited, working on Parker Drilling’s behalf, avoided certain costs associated with complying with Nigeria’s customs laws by fraudulently claiming that Parker Drilling’s rigs had been exported and then re-imported into Nigeria.  In late 2002, Nigeria formed a government commission, commonly called the Temporary Import (TI) Panel, to examine whether Nigeria’s Customs Service had collected certain duties and tariffs that Nigeria was due. In December 2002, the TI Panel commenced proceedings against Parker Drilling.  The TI Panel later determined that Parker Drilling had violated Nigeria’s customs laws and assessed a $3.8 million fine against Parker Drilling.

According to court documents, rather than pay the assessed fine, Parker Drilling contracted indirectly with an intermediary agent to resolve its customs issues.  From January to May 2004, Parker Drilling transferred $1.25 million to the agent, who reported spending a portion of the money on various things including entertaining government officials.  Emails in which the agent requested additional money from Parker Drilling referenced the agent’s interactions with Nigeria’s Ministry of Finance, State Security Service, and a delegation from the president’s office.  Two senior executives within Parker Drilling at the time reviewed and approved the agent’s invoices, knowing that the invoices arbitrarily attributed portions of the money that Parker Drilling transferred to the agent to various fees and expenses.  The agent succeeded in reducing Parker Drilling’s TI Panel fines from $3.8 million to just $750,000.

Under the terms of the agreement, the Justice Department agreed to defer prosecution of Parker Drilling for three years.  Parker Drilling agreed, among other things, to implement an enhanced compliance program and internal controls capable of preventing and detecting FCPA violations, to report periodically to the department concerning Parker Drilling’s compliance efforts, and to cooperate with the department in ongoing investigations.  If Parker Drilling abides by the terms of the deferred prosecution agreement, the department will dismiss the criminal information when the term of the agreement expires.

In entering into the deferred prosecution agreement with Parker Drilling, the Justice Department took into account a number of considerations.  Parker Drilling conducted an extensive, multi-year investigation into the charged conduct; engaged in widespread remediation, including ending its business relationships with officers, employees, or agents primarily responsible for the corrupt payments, enhancing scrutiny of high-risk third-party agents and transactions, increasing training and testing requirements, and instituting heightened review of proposals and other transactional documents for all the company’s contracts; otherwise significantly enhanced its compliance program and internal controls; and agreed to continue to cooperate with the department in any ongoing investigation of the conduct.

Parker Drilling also reached a settlement of a related civil complaint filed by the U.S. Securities and Exchange Commission (SEC) charging Parker Drilling with violating the FCPA’s anti-bribery, books and records, and internal controls provisions.  As part of that settlement, Parker Drilling agreed to pay $3.05 million in disgorgement and $1.04 million in prejudgment interest relating to those violations.

The criminal case is being prosecuted by Trial Attorney Stephen J. Spiegelhalter of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jasmine Yoon of the U.S. Attorney’s Office for the Eastern District of Virginia, and is being investigated by the FBI. The department’s Office of International Affairs assisted in the investigation.  The department also acknowledges and is grateful for the assistance of the Crown Prosecution Service, the United Kingdom’s Metropolitan Police Service, and SEC.

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

Obstruction Charges Filed in Ongoing Fcpa Investigation into Alleged Guinean Mining Rights Bribe Scheme

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Frederic Cilins, 50, a French citizen, has been arrested and accused of attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.

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 FBI’s New York Field Office, made the announcement.

“Mr. Cilins is charged with scheming to destroy documents and induce a witness to give false testimony to a grand jury investigating potential violations of the Foreign Corrupt Practices Act,” said Acting Assistant Attorney General Raman.  “The Justice Department is committed to rooting out foreign bribery, and we will not tolerate criminal attempts to thwart our efforts.”

“A grand jury can never learn the truth, and justice cannot prevail, where documents are intentionally destroyed and testimony is tainted by lies,” said U.S. Attorney Bharara.  “As alleged, Frederic Cilins attempted to obstruct a significant investigation by corrupting evidence and testimony in precisely those ways.  With today’s arrest, he now begins his own path to justice for his alleged conduct.”

“As alleged, Cilins attempted to buy evidence he sought to destroy,” said FBI Assistant Director in Charge Venizelos.  “The destruction of evidence was in furtherance of Cilins’s alleged effort to obstruct an investigation into a bribery scheme. In effect, he was allegedly willing to commit bribery in an effort to cover up a bribery.”

Cilins was arrested in Jacksonville, Fla., on April 14, 2013, and a criminal complaint was filed in the Southern District of New York today charging Cilins with tampering with a witness, victim or informant; obstructing a criminal investigation; and destroying, altering or falsifying records in a federal investigation.  The obstruction charge carries a maximum penalty of five years in prison, and the tampering and record-destruction charges each carry a maximum penalty of 20 years in prison. Cilins made an initial appearance in the Middle District of Florida and was detained pending a detention hearing scheduled for April 18, 2013.

According to the complaint, Cilins allegedly attempted to obstruct an ongoing federal grand jury investigation concerning potential violations of the Foreign Corrupt Practices Act and laws proscribing money laundering.  The complaint states the federal grand jury is investigating whether a particular mining company and its affiliates – on whose behalf Cilins has been working – transferred into the United States funds in furtherance of a scheme to obtain and retain valuable mining concessions in the Republic of Guinea’s Simandou region.  During monitored and recorded phone calls and face-to-face meetings, Cilins allegedly agreed to pay substantial sums of money to induce a witness to the bribery scheme to turn over documents to Cilins for destruction, which Cilins knew had been requested by the FBI and needed to be produced before a federal grand jury.  The complaint also alleges that Cilins sought to induce the witness to sign an affidavit containing numerous false statements regarding matters under investigation by the grand jury.

The complaint alleges that the documents Cilins sought to destroy included original copies of contracts between the mining company and its affiliates and the former wife of a now-deceased Guinean government official, who at the relevant time held an office in Guinea that allowed him to influence the award of mining concessions.  The contracts allegedly related to a scheme by which the mining company and its affiliates offered the wife of the Guinean official millions of dollars, which were to be distributed to the official’s wife as well as ministers or senior officials of Guinea’s government whose authority might be needed to secure the mining rights.

According to the complaint, the official’s wife incorporated a company in 2008 that agreed to take all necessary steps to secure the valuable mining rights for the mining company’s subsidiary.  That same contract stipulated that $2 million was to be transferred to the official’s wife’s company and an additional sum was to be “distributed among persons of good will who may have contributed to facilitating the granting of” the valuable mining rights.  According to the complaint, in 2008, the mining company and its affiliates also “commit to giving 5% of the shares of stock” in particular mining areas in Guinea to the official’s wife.

A complaint is merely an accusation, and the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

The case is being prosecuted by Trial Attorney Stephen J. Spiegelhalter of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Elisha J. Kobre of the Southern District of New York.  The case is being investigated by the FBI.  The Justice Department’s Office of International Affairs and Office of Enforcement Operations have also assisted in the investigation.

Four Former Executives of Lufthansa Subsidiary Bizjet Charged with Foreign Bribery

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Charges were unsealed today against four former executives of BizJet International Sales and Support Inc., the U.S.-based subsidiary of Lufthansa Tech nikAG, which provides aircraft maintenance, repair and overhaul (MRO) services, for their alleged participation in a scheme to pay bribes to government officials in Latin America, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office.

According to the charges, Bernd Kowalewski, the former president and chief executive officer of BizJet, Jald Jensen, the former sales manager at BizJet, Peter DuBois, the former vice president of sales and marketing at BizJet, and Neal Uhl, the former vice president of finance at BizJet, paid bribes to officials employed by the Mexican Policia Federal Preventiva, the Mexican Coordinacion General de Transportes Aereos Presidenciales, the air fleet for the Gobierno del Estado de Sinaloa in Mexico, the air fleet for the Estado De Roraima in Brazil, and the Republica de Panama Autoridad Aeronautica Civil in exchange for those officials’ assistance in securing contracts for BizJet to perform MRO services.

Kowalewski and Jensen were charged by indictment filed in U.S. District Court for the Northern District of Oklahoma on Jan. 5, 2012, with conspiring to violate the Foreign Corrupt Practices Act (FCPA) and to launder money, as well as substantive charges of violating the FCPA and money laundering.  The two defendants are believed to remain abroad.

DuBois and Uhl pleaded guilty on Jan. 5, 2012, to criminal informations, and their pleas were unsealed today.  DuBois pleaded guilty to one count of conspiracy to violate the FCPA and one count of violating the FCPA.  Uhl pleaded guilty to one count of conspiracy to violate the FCPA.  Both defendants were sentenced today by U.S. District Judge Gregory K. Frizzell in the Northern District of Oklahoma.  DuBois’s sentence was reduced from a sentencing guidelines range of 108 to 120 months in prison to probation and eight months home detention based on his cooperation in the government’s investigation.  Uhl’s sentence was similarly reduced for cooperation from a guidelines range of 60 months in prison to probation and eight months home detention.

“The charges announced today allege a conspiracy by senior executives at BizJet to win contracts in Latin American countries through bribery and illegal tactics,” said Acting Assistant Attorney General Raman.  “Former BizJet executives, including the former president and chief executive officer, allegedly authorized and caused hundreds of thousands of dollars to be paid directly and indirectly to ranking military officials in various foreign countries, and two former executives have pleaded guilty for their roles in the conspiracy.  These charges reflect our continued commitment to holding individuals accountable for violations of the FCPA, including, as in this instance, after entering into a deferred prosecution agreement with their employer.”

“Business executives have a responsibility to act appropriately in order to maintain a fair and competitive international market,” said FBI Assistant Director in Charge Parlave.  “The unsealing of these bribery charges, and today’s sentencing, demonstrate that the FBI is committed to curbing corruption and will pursue all those who try to advance their businesses through bribery.”

The charges allege that the defendants, in many instances, paid bribes directly to foreign officials in Mexico, Panama and Brazil for assistance in securing contracts.  In other instances, the defendants allegedly funneled bribes through a shell company owned and operated by Jensen.  The shell company, Avionica International & Associates Inc., allegedly operated under the pretense of providing aircraft maintenance brokerage services but in reality laundered money related to BizJet’s bribery scheme.  Avionica was located at Jensen’s personal residence in Van Nuys, Calif., and Jensen was the only officer, director and employee.

The charges announced today follow the announcement on March 14, 2012, of a deferred prosecution agreement with BizJet and an $11.8 million monetary penalty to resolve charges related to the corrupt conduct.  That agreement acknowledged BizJet’s voluntary disclosure, extraordinary cooperation and extensive remediation in this case.

The conspiracy to commit violations of the FCPA count carries a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost.  The FCPA counts each carry a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost.  The conspiracy to commit money laundering count carries a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.  The money laundering counts each carry a maximum penalty of 10 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.

An indictment is merely an accusation, and defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

The case is being prosecuted by Trial Attorneys Daniel S. Kahn and Stephen J. Spiegelhalter of the Criminal Division’s Fraud Section.  Assistant U.S. Attorney Kevin Leitch from the Northern District of Oklahoma has provided assistance in the case.  The department has also worked closely with its law enforcement counterparts in Mexico and Panama in this matter and is grateful for their assistance.  The case is being investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad.

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

Security Contractors Plead Guilty in Virginia to Illegally Obtaining $31 Million from Contracts Intended for Disadvantaged Small Businesses

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Executives at two Arlington, Va.-based businesses have pleaded guilty to fraudulently obtaining more than $31 million in government contract payments that should have gone to disadvantaged small businesses.

 The guilty pleas were announced today by U.S. Attorney for the Eastern District of Virginia Neil H. MacBride, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and NASA Inspector General Paul K. Martin.

“These executives used their knowledge and experience to abuse a program created to ensure minority small business owners could compete for government contracts,” said U.S. Attorney MacBride. “They not only illegally obtained millions from the United States, they also victimized legitimate minority owners who didn’t get the bids.”

“Keith Hedman and his co-conspirators fraudulently obtained valuable government contracts intended for minority-owned small businesses, and pocketed millions of dollars for themselves,” said Acting Assistant Attorney General Raman.  “They abused an important government program, and will now face the consequences.”

“This investigation confirmed that these executives repeatedly took actions that gave them a fraudulent advantage in the contracting process,” said NASA Inspector General Martin.  “I commend the outstanding efforts of our agents and our law enforcement partners involved in this case in protecting the integrity of the 8(a) program.”

According to court documents, Keith Hedman, 53, of Arlington, formed an Arlington-based security service consulting company in approximately 2001.  Hedman formed the company, listed as Company A in court filings, with an African-American woman who was listed as its president and CEO to enable the company to participate in the Small Business Administration’s (SBA) Section 8(a) program, which enables certain small businesses to receive sole-source and competitive-bid contracts set aside for minority-owned and disadvantaged small businesses.  In 2001, Hedman’s company received approval to participate in the 8(a) program on the basis of the African-American president and CEO’s listed role, but when she left the company in 2003, Hedman became its sole owner and the company was no longer 8(a)-eligible.

Hedman admitted that in 2003 he created a shell company, listed as Company B in court records, to ensure he could continue to gain access to 8(a) contracting preferences for which Company A was not qualified.  Prior to applying for the shell company’s 8(a) status, Hedman selected an employee, Dawn Hamilton, 48, of Brownsville, Md., to serve as a figurehead owner based on her Portuguese heritage and history of social disadvantage, when in reality the new company would be managed by Hedman and senior leadership at Company A.  To deceive the SBA, they falsely claimed that Hamilton formed and founded the company and that she was the only member of the company’s management.  They continued to mislead the SBA through 2012, even lying to the SBA to overcome a protest filed by another company accusing Hedman’s former company and the shell company of being inappropriately affiliated.

From Company B’s creation through February 2012, Hedman – not Hamilton – exercised ultimate decision-making authority and control over the company by controlling its finances, allocation of personnel and government contracting activities.  Hedman nonetheless maintained the impression that Hamilton was leading the company, including through forgeries of signatures by Hamilton to documents she had not seen or drafted.  Hedman also retained ultimate control over the shell business’s bank accounts throughout its existence.  In 2011, Hedman withdrew $1 million in cash from Company B’s accounts and gave the funds in cash to Hamilton and three other co-conspirators. In total, Hedman and Hamilton secured through the shell company more than $31 million in government contract payments, which generated more than $6 million in salary and payments for the conspirators that they were not entitled to receive.

In addition, Hedman admitted that he agreed to pay a $50,000 bribe through the shell business to a U.S. government contracting official for the official’s help in securing contracts for Company B.

Hedman and Hamilton pleaded guilty on March 13 and March 15, 2013, respectively, in U.S. District Court for the Eastern District of Virginia to major government fraud and face a maximum penalty of 10 years in prison and a multimillion-dollar fine for that charge. Hedman also pleaded guilty to conspiracy to commit bribery, which carries a maximum penalty of five years in prison.  Hedman agreed to forfeit more than $6.3 million, and Hamilton agreed to forfeit more than $1.2 million.  Hedman is scheduled to be sentenced on June 21, 2013, before U.S. District Judge Gerald Bruce Lee.  Hamilton’s sentencing is scheduled for June 21, 2013, before U.S. District Judge T. S. Ellis, III.

In addition, the following individuals have also pleaded guilty to major fraud or conspiracy to commit major fraud:

• David George Lux, 62, of Springfield, Va., pleaded guilty today before U.S. District Judge Leonie M. Brinkema.  Lux served as the chief financial officer at Company A from 2007 through February 2012 and performed work for Company B throughout that time while officially on Company A’s payroll.  He is scheduled to be sentenced on June 14, 2013, by Judge Brinkema.

• Joseph Richards, 51, of Arlington, pleaded guilty on March 14, 2013, before U.S. District Judge Brinkema in the Eastern District of Virginia.  Richards served as the chief operating officer and chief of staff for Company A from 2005 through 2008 and then vice president from 2010 through February 2012.  He also served as Company B’s chief of staff from 2008 through 2010.  According to court documents, Richards performed work for Company B throughout his time at both companies. He is scheduled to be sentenced on June 14, 2013, by Judge Brinkema.

• David Sanborn, 60, of Lexington, S.C., pleaded guilty on March 13, 2013, before U.S. District Judge Claude M. Hilton in the Eastern District of Virginia.  Sanborn served as vice president at Company A from 2001 through 2009 and the company’s president from 2010 through February 2012.  According to court documents, Sanborn performed work for Company B from its inception while on Company A’s payroll.  He is scheduled to be sentenced on June 28, 2013, by Judge Hilton.

This case was investigated by the NASA Office of the Inspector General (OIG), the SBA OIG, the Defense Criminal Investigative Service, the General Services Administration OIG and the Department of Homeland Security OIG.  Assistant U.S. Attorneys Chad Golder and Ryan Faulconer, a former Trial Attorney for the Criminal Division’s Fraud Section, are prosecuting the case on behalf of the United States.

Owners of Miami Home Health Companies Sentenced to Prison in $48 Million Health Care Fraud Scheme

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Wednesday, February 27, 2013

The owners and operators of two Miami health care agencies were sentenced to nine years and more than four years in prison today, respectively, and ordered to pay millions in restitution for their participation in a $48 million home health Medicare fraud scheme that billed for unnecessary home health care and therapy services.

The sentences, imposed in federal court in the Southern District of Florida, were announced by Assistant Attorney General Lanny A. Breuer 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.

U.S. District Judge Frederico A. Moreno sentenced Rogelio Rodriguez, 43, and Raymond Aday, 48, both of the Miami-Dade area, to 108 months and 51 months in prison, respectively.  In addition to the prison term, Judge Moreno sentenced Rodriguez to pay $33 million in restitution, and Aday to pay $2.1 million in restitution.  Both defendants were also sentenced to serve three years of supervised release and pay a $100,000 fine.  In December 2012, each pleaded guilty to one count of conspiracy to commit health care fraud.

According to court documents, Rodriguez was the owner of both Caring Nurse Home Health Corp. and Good Quality Home Health Inc., and Aday was a manager at Caring Nurse and owner of Good Quality.

According to plea documents, Rodriguez and Aday conspired with patient recruiters for the purpose of billing the Medicare program for unnecessary home health care and therapy services.  Rodriguez, Aday and their co-conspirators paid kickbacks and bribes to patient recruiters.  In return, recruiters provided patients to Caring Nurse and Good Quality, as well as prescriptions, plans of care (POCs) and certifications for medically unnecessary therapy and home health services for Medicare beneficiaries.  Rodriguez and Aday used these prescriptions, POCs and medical certifications to fraudulently bill the Medicare program for home health care services, which both Rodriguez and Aday knew was in violation of federal criminal laws.

According to court documents, nurses and office staff at Caring Nurse and Good Quality falsified patient files to make it appear the Medicare beneficiaries qualified for services they did not.  Rodriguez admitted to knowing that these files were falsified so the Medicare program could be billed for medically unnecessary therapy and home health related services.

From approximately January 2006 through June 2011, Caring Nurse and Good Quality submitted approximately $48 million in claims for home health services that were not medically necessary and/or were not provided.  According to court documents, Medicare paid approximately $33 million for these fraudulent claims.

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 Owners of Los Angeles-Area Medical Equipment Wholesaler Plead Guilty to Conspiring with Customers to Defraud Medicare

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Tuesday, February 26, 2013

Two former owners of a Los Angeles-area medical equipment wholesale supply company pleaded guilty today to conspiring with their customers to defraud Medicare.

The pleas were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney André Birotte Jr. of the Central District of California; Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG); Bill L. Lewis, Assistant Director in Charge of the FBI’s Los Angeles Field Office; and Joseph Fendrick, Special Agent in Charge of the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse (Cal-DOJ).

Rajinder Singh Paul, 69, and Baljit Kaur Paul, 65, of Redlands, Calif., each pleaded guilty before U.S. District Judge Percy Anderson in the Central District of California to one count of conspiracy to commit health care fraud.

In court documents, Rajinder and Baljit Paul admitted that they were the president and vice president, respectively, and shareholders of AHPK Inc., a medical equipment wholesale supply company located in Redlands and Ontario, Calif., and formally known as Major’s Wholesale Medical Supply Inc.  The Pauls later sold Major’s Wholesale Medical Supply Inc. to Major’s Wholesale Medical Supply LLC (collectively, “Major’s”) and, according to court documents, remained employed at Major’s Wholesale Medical Supply LLC as consultants until they were terminated in February 2009.

During the time the Pauls either owned or worked as consultants for Major’s, Major’s sold durable medical equipment (DME) almost exclusively to customers who owned and operated DME supply companies, according to court documents.  A majority of Major’s customers were Medicare providers and relied on Medicare to make money, which they did by billing Medicare for the DME that they purchased from Major’s.

One of the more popular items of DME that the Pauls sold at Major’s were power wheelchairs.  Court documents indicate that to attract customers, the Pauls sold power wheelchairs to Major’s customers wholesale for between $850 to $1,000 each.  Major’s customers, however, billed these power wheelchairs to Medicare at a rate of between $3,000 to $6,000 per wheelchair.

The Pauls admitted they knew that Major’s customers were dependent on Medicare for their revenue, and that Major’s customers could not pay Major’s unless Medicare paid the customers first.  To foster customer loyalty, the Pauls engaged in a variety of conduct over a period of six years that helped Major’s customers defraud Medicare, including by providing Major’s customers with false inventory purchase agreements that showed they had higher credit limits than they really did.  Major’s customers submitted these false inventory purchase agreements to Medicare to prove, as required by Medicare, the ability to purchase the volume of DME they billed.

The Pauls also admitted they provided Major’s customers with backdated invoices, knowing customers were billing Medicare for power wheelchairs and DME before the customers actually purchased or delivered the equipment.  The Pauls admitted that by backdating these invoices, they provided Major’s customers with the paper trail the customers needed to prove to Medicare that they had both purchased the DME and purchased it before they submitted their claims to Medicare.  According to court documents, the Pauls backdated or falsified invoices for more than 100 different customers.

Court documents indicate that two of many customers who conspired with the Pauls to defraud Medicare owned and operated a number of fraudulent DME supply companies in the Los Angeles area, including one customer who used “straw” or nominee owners to operate the customer’s companies.  The Pauls admitted they provided these two customers with false inventory purchase agreements and backdated invoices that the customers used to defraud Medicare.  The Pauls admitted that as a result of their conduct, these two customers were able to use their fraudulent DME supply companies to submit approximately $16,662,143 in false claims to, and receive approximately $9,743,609.42 in ill-gotten reimbursement payments from, Medicare.

At sentencing, scheduled for July 8, 2013, the Pauls each face a maximum penalty of 10 years in prison and a $250,000 fine.

This case is being prosecuted by Jonathan T. Baum of the Criminal Division’s Fraud Section.  The case was investigated by the FBI, HHS-OIG, and Cal DOJ 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.

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, 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.

 

Miami Pharmacy Owner Sentenced to 14 Years in Prison in $23 Million Health Care Fraud Scheme

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Monday, February 25, 2013
A co-owner and operator of three Miami discount pharmacies was sentenced today to 168 months in prison for his role in a health care fraud scheme that submitted more than $23 million in false claims to Medicare.

The sentence was announced by Assistant Attorney General Lanny A. Breuer 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.

Jose Carlos Morales, 55, of Miami, was sentenced by U.S. District Judge Joan A. Lenard in the Southern District of Florida.  In addition to his prison term, Morales was sentenced to serve three years of supervised release and to pay a $100,000 fine.  A hearing to determine the amount of restitution Morales will pay has been scheduled for April 29, 2013.

On Dec. 6, 2012, Morales pleaded guilty in the Southern District of Florida to one count of conspiracy to commit health care fraud and one count of conspiracy to defraud the United States and pay illegal health care kickbacks.

According to court documents, Morales was the co-owner of Pharmovisa Inc. and PharmovisaMD Inc., which operated a total of three pharmacies in Miami.  Morales paid illegal health care kickbacks to co-conspirators in return for a stream of beneficiary information to be used to submit claims to Medicare and Medicaid.  The beneficiaries who were referred to the pharmacies in exchange for kickback payments resided at assisted living facilities (ALFs) located in Miami.  Morales and his alleged co-conspirators also paid illegal health care kickbacks to physicians in exchange for prescription referrals, which the pharmacies ultimately billed to Medicare.

Court documents also reveal that beginning in approximately 2007, drivers working for Morales’ pharmacies, at his direction, delivered “bingo cards” containing pop out medications to ALFs located throughout the Southern District of Florida.  Morales instructed the drivers to pick up any unused “bingo cards” so that Morales pharmacy personnel could put the medications back into pill bottles.  Unused and partially used medications were eventually re-billed to Medicare and Medicaid, and a majority of the previously submitted claims to Medicare and Medicaid were never reversed.  Morales also instructed Morales pharmacy personnel to place unused and partially used medications into bottles to be sold directly to the general public from the “community” pharmacy shelves.

Morales and his alleged co-conspirators also engaged in sham financial transactions to facilitate and conceal the fraud schemes and the flow of fraud proceeds, according to court documents.  In most instances, the sham transactions involved shell entities owned and/or controlled by Morales or his alleged co-conspirators.

According to court documents, Morales and his co-conspirators submitted and caused to be submitted approximately $23,367,755 in false and fraudulent claims to the Medicare and Florida Medicaid programs.

The case is being prosecuted by Trial Attorney Allan J. Medina and Special Trial Attorney William Parente of the Criminal Division’s Fraud Section.  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.

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, 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.

Illegal Marketer of Medicare Information Admits Role in Detroit-area Home Health Care Fraud Scheme

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Friday, February 22, 2013
A health care worker who sold Medicare beneficiary information to Detroit-area home health agency operators as part of a $24.7 million home health care fraud conspiracy pleaded guilty today for his role in the scheme, which sought to profit by billing for home healthcare services that were medically unnecessary and not provided.

The guilty plea was announced by Assistant Attorney General Lanny A. Breuer 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.

Clarence Cooper, 54, of Detroit, pleaded guilty before U.S. District Judge Victoria A. Roberts in the Eastern District of Michigan to one count of conspiracy to commit health care fraud.

According to court documents, Cooper and others conspired to defraud Medicare through purported home health care companies operating in the Detroit area, including now-defunct First Choice Home Health Care Services Inc. and Reliance Home Care, LLC.  Cooper admitted that he sold Medicare information he obtained from Detroit-area Medicare beneficiaries to other conspirators at these and other health care companies, knowing that it was to be used to submit claims to Medicare for home health services that were not medically necessary and/or not provided.  According to court documents, from 2008 through May 2012, Cooper sold co-conspirators the Medicare information of hundreds of Medicare beneficiaries, at $200 to $300 per beneficiary, and this Medicare information was used at these companies to bill Medicare for nearly $1 million in home health care services.

Court documents show that the larger scheme in which Cooper participated resulted in more than $24.7 million in claims to Medicare for the cost of home health services, psychotherapy and other medical services.

Cooper faces a maximum potential penalty of 10 years in prison and a $250,000 fine.  Sentencing is currently scheduled for July 23, 2013.

This case is being prosecuted by Trial Attorney William G. Kanellis and Assistant Chief Gejaa Gobena 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.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.