Category Archives: Department of Justice

Defunct Philly Hospice’s Owners/Operators to Pay Millions to Settle Civil False Claims Suit

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Thursday, July 6, 2017

PHILADELPHIA – Acting United States Attorney Louis D. Lappen announced today that Matthew Kolodesh, Alex Pugman, Svetlana Ganetsky, and Malvina Yakobashvili have agreed to pay millions of dollars to settle False Claims Act allegations that they and their now-defunct company, Home Care Hospice, Inc. (HCH), falsely claimed and received taxpayer dollars for hospice services that were either unnecessary or never provided. Previously, a federal jury found Kolodesh guilty on, and Pugman and Ganetsky pleaded guilty to, related criminal charges.

Kolodesh was HCH’s de facto co-owner; Pugman was HCH’s Executive Director and co-owner; Ganetsky was HCH’s Development Executive; and Yakobashvili was HCH’s CEO and President. Kolodesh and Yakobashvili are husband and wife, as are Pugman and Ganetsky.

The civil settlements with Kolodesh, Pugman, and Ganetsky specifically resolve False Claims Act allegations that HCH and they, between January 2003 and September 2008: knowingly submitted false claims and records (including fabricated records) to Medicare for purported hospice care for patients who were not terminally ill and thus not eligible for the Medicare hospice benefit; and/or knowingly submitted or caused the submission of false claims and records (including fabricated records) to Medicare for crisis care services that were not necessary or not actually provided; and, as a result of this conduct, violated the False Claims Act and cost the Medicare Program millions of dollars. The settlements with these defendants, as well as Yakobashvili, also resolve federal common law allegations that all five defendants were unjustly enriched as a result of such conduct.

As part of the settlements, the United States will retain the full value of multiple financial accounts that were restrained in a related civil injunction action filed by the United States in the Eastern District of Pennsylvania. The estimated current value of those interests is approximately $8.8 million. The defendants have further agreed: (1) to make cash payments to the government ($400,000 from Pugman and Ganetsky, and $425,000 from Kolodesh and Yakobashvili); and (2) to transfer to the United States various assets, including Pugman’s and Kolodesh’s interests in condominium properties that they co-own.

Under qui tam (whistleblower) provisions of the federal False Claims Act, certain private citizens may bring civil actions on behalf of the United States and may share in any recovery. This suit was originally filed on behalf of the United States by Maureen Fox and Cathy Gonzales, former HCH employees who discovered the alleged fraud. The settlements announced today include False Claims Act whistleblower awards for Ms. Gonzales and for the Estate of Ms. Fox, who passed away after filing suit.

As the result of the United States’ related criminal investigation, 22 persons employed by or associated with HCH were criminally convicted in the Eastern District of Pennsylvania.

“The Medicare hospice benefit is intended to provide patients nearing the end of life with pain management and other palliative care to make them as comfortable as possible,” Lappen said. “Too often, however, we hear reports of companies that abuse this critical service by enrolling patients who do not qualify for the hospice benefit, do not provide claimed services, or who push patients into services they don’t need in order to get higher government reimbursements. The Department of Justice, including this office, will take swift action to protect the public welfare and taxpayer dollars and to make sure that Medicare benefits are available to those truly in need.”

“Medicare, a crucial component of our nation’s health care system, draws from a finite pool of funds,” said Michael Harpster, Special Agent in Charge of the FBI’s Philadelphia Division. “The defendants siphoned money earmarked for dying patients’ hospice care, and built their bank accounts on taxpayers’ backs. The FBI will continue to investigate and hold accountable those defrauding the U.S. government.”

“Today’s settlement returns over $8 million to our nation’s Medicare program. This money was wrongfully paid as a result of fraudulent billings and part of a massive criminal conspiracy that preyed on a program that comforts beneficiaries at the end of their lives,” said Nick DiGiulio, Special Agent in Charge of the Inspector General’s Office of the United Stated Department of Health and Human Services in Philadelphia. “In addition to this civil settlement, this investigation resulted in the criminal prosecution of 22 individuals for health care fraud or other charges. We will continue to work with our law enforcement partners and the dedicated federal prosecutors in the Eastern District of Pennsylvania to use every available tool to jail those who steal from federal health care programs and recoup cash and assets illegally acquired.”

The case was investigated by the Office of Inspector General of the U.S. Department of Health and Human Services (HHS), and the Organized Crime Section of the Federal Bureau of Investigation. The civil case was handled at the U.S. Attorney’s Office by Assistant United States Attorneys Eric D. Gill, Gerald B. Sullivan, and Colin C. Cherico. Assistance was provided by the HHS Office of Counsel to the Inspector General and the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division.

The civil claims asserted against HCH, Kolodesh, Pugman, Ganetsky, and Yakobashvili are allegations only, and there has been no determination of civil liability. The civil qui tam suit is docketed in the Eastern District of Pennsylvania as U.S.A. et al. ex rel. Fox and Gonzales v. Home Care Hospice, Inc, et al., No. 06-cv-4679.

The Eastern District of Pennsylvania is one of 10 federal districts that formed an Elder Justice Task Force as a part of the U.S. Department of Justice’s Elder Justice Initiative. (The office announced its task force here in March 2016, and maintains a publicly accessible website here.) The task force seeks to enhance government protection of vulnerable, elderly Pennsylvanians from harm and to ensure the integrity of government health care spending.

Two More Defendants Plead Guilty in Multimillion Dollar India-Based Call Center Scam Targeting U.S. Victims

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Friday, July 7, 2017

An Arizona man and an Illinois woman each pleaded guilty to conspiracy charges today for their respective roles in liquidating and laundering victim payments generated through a massive telephone impersonation fraud and money laundering scheme perpetrated by India-based call centers.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Abe Martinez of the Southern District of Texas, Executive Associate Director Peter T. Edge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), Inspector General J. Russell George of the U.S. Treasury Inspector General for Tax Administration (TIGTA) and Inspector General John Roth of the U.S. Department of Homeland Security Office of Inspector General (DHS-OIG) made the announcement.

Bhavesh Patel, 47, most recently residing in Gilbert, Arizona, pleaded guilty to money laundering conspiracy, in violation of Title 18, U.S. Code, Section 1956(h). Asmitaben Patel, 34, most recently residing in Willowbrook, Illinois, pleaded guilty to a conspiracy to commit fraud and money laundering offenses, in violation of Title 18, U.S. Code, Section 371.  The pleas were entered before U.S. District Court Judge David Hittner of the Southern District of Texas. Sentencing dates are pending.

According to admissions made in connection with their respective pleas, Bhavesh Patel, Asmitaben Patel, and their co-conspirators perpetrated a complex scheme in which individuals from call centers located in Ahmedabad, India, impersonated officials from the IRS and U.S. Citizenship and Immigration Services (USCIS), and engaged in other telephone call scams, in a ruse designed to defraud victims located throughout the U.S. Using information obtained from data brokers and other sources, call center operators targeted U.S. victims who were threatened with arrest, imprisonment, fines or deportation if they did not pay alleged monies owed to the government. Victims who agreed to pay the scammers were instructed how to provide payment, including by purchasing stored value cards or wiring money. Upon payment, the call centers would immediately turn to a network of “runners” based in the U.S. to liquidate and launder the fraudulently-obtained funds.

According to Bhavesh Patel’s guilty plea, beginning in or around January 2014, Bhavesh Patel managed the activities of a crew of runners, directing them to liquidate victim scam funds in areas in and around south and central Arizona per the instructions of conspirators from India-based call centers. Patel communicated via telephone about the liquidation of scam funds with both domestic and India-based co-defendants, and he and his crew used reloadable cards containing funds derived from victims by scam callers to purchase money orders and deposit them into various bank accounts as directed, in return for percentage-based commissions from his India-based co-defendants. Patel also admitted to receiving and using fake identification documents, including phony driver’s licenses, to retrieve victim scam payments in the form of wire transfers, and providing those fake documents to persons he managed for the same purpose.

Based on admissions in Asmitaben Patel’s guilty plea, beginning in or around July 2013, Asmitaben Patel served as a runner liquidating victim scam funds as part of a group of conspirators operating in and around the Chicago area. At the direction of a co-defendant, Patel used stored value cards that had been loaded with victim funds to buy money orders and deposit them into various bank accounts, including the account of a lead generating business in order to pay the company for leads it provided to co-conspirators that were ultimately used to facilitate the scam.

To date, Bhavesh Patel, Asmitaben Patel, 54 other individuals and five India-based call centers have been charged for their roles in the fraud and money laundering scheme in an indictment returned by a federal grand jury in the Southern District of Texas on Oct. 19, 2016. Including today’s pleas, a total of eleven defendants have pleaded guilty thus far in this case. Co-defendants Bharatkumar Patel, Ashvinbhai Chaudhari, Harsh Patel, Nilam Parikh, Hardik Patel, Rajubhai Patel, Viraj Patel, Dilipkumar A. Patel, and Fahad Ali previously pleaded guilty on various dates between April and June 2017.

The remaining defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

HSI, DHS-OIG and TIGTA led the investigation of this case. Also providing significant support were: the Criminal Division’s Office of International Affairs; Ft. Bend County, Texas, Sheriff’s Office; police departments in Hoffman Estates and Naperville, Illinois, and Leonia, New Jersey; San Diego County District Attorney’s Office Family Protection and Elder Abuse Unit; U.S. Secret Service; U.S. Small Business Administration, Office of Inspector General; IOC-2; INTERPOL Washington; USCIS; U.S. State Department’s Diplomatic Security Service; and U.S. Attorneys’ Offices in the Middle District of Alabama, Northern District of Alabama, District of Arizona, Central District of California, Northern District of California, District of Colorado, Northern District of Florida, Middle District of Florida, Northern District of Illinois, Northern District of Indiana, District of Nevada and District of New Jersey. The Federal Communications Commission’s Enforcement Bureau also provided assistance in TIGTA’s investigation.

Senior Trial Attorney Michael Sheckels and Trial Attorney Mona Sahaf of the Criminal Division’s Human Rights and Special Prosecutions Section, Trial Attorney Robert Stapleton of the Criminal Division’s Money Laundering and Asset Recovery Section and Assistant U.S. Attorneys S. Mark McIntyre and Craig M. Feazel of the Southern District of Texas are prosecuting the case.

A  Department of Justice website has been established to provide information about the case to already identified and potential victims and the public. Anyone who believes they may be a victim of fraud or identity theft in relation to this investigation or other telefraud scam phone calls may contact the Federal Trade Commission (FTC) via this website.

Anyone who wants additional information about telefraud scams generally, or preventing identity theft or fraudulent use of their identity information, may obtain helpful information on the IRS tax scams website, the FTC phone scam website and the FTC identity theft website.

Detroit Area Medical Biller Sentenced to 50 Months in Prison for Her Role in a $7.3 Million Dollar Healthcare Fraud Scheme

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Friday, June 30, 2017

A Detroit-area medical biller was sentenced today to 50 months in prison for  her role in a $7.3 million Medicare and Medicaid fraud scheme involving medical services that were billed to Medicare and Medicaid but not rendered as billed.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Daniel L. Lemisch of the Eastern District of Michigan, Special Agent in Charge David P. Gelios of the FBI’s Detroit Division, and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Chicago Regional Office, made the announcement.

Dawn Bentley, 56, of Oakland County, Michigan, was sentenced by U.S. District Judge Sean F. Cox of the Eastern District of Michigan, who also ordered Bentley to pay $3,253,107 in restitution jointly and severally with her co-defendants. After a one-week jury trial in January 2017, Bentley was convicted of one count of conspiracy to commit health care fraud, wire fraud and mail fraud, as well as one count of mail fraud. Bentley was sentenced to 50 months in prison on each of the two counts, to run concurrently, followed by one year of supervised release.

According to the evidence presented at trial, from June 2014 through June 2015, Bentley knowingly submitted fraudulent bills on behalf of a co-conspirator physician for services she knew could not have been rendered, and for services she knew had not been rendered as billed. In exchange, Bentley was paid 6% of the total billings paid to the physician from Medicare, the evidence showed. Bentley’s largest client was Waseem Alam, who pleaded guilty to a $33 million Medicare fraud scheme in March 2016. Bentley billed $1.9 million of this fraud from June 2014 to June 2015, and was paid 6% of Alam’s receipts for the fraudulent billings, the evidence showed. Bentley’s company received over $100,000 from Alam’s practices between June 2014 and June 2015, the evidence showed.

The FBI and HHS-OIG investigated the case, which was brought as part of the Medicare Fraud Strike Force under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan. Fraud Section Trial Attorneys Tom Tynan and Jessica Collins prosecuted the case.

The Fraud Section leads the Medicare Fraud Strike Force. Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 3,000 defendants who have collectively billed the Medicare program for more than $11 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Former Audi Manager Charged in Connection With Conspiracy to Cheat U.S. Emissions Tests

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Thursday, July 6, 2017

A former Audi manager has been charged via criminal complaint for his role in the long-running conspiracy to defraud U.S. regulators and customers by implementing software specifically designed to cheat U.S. emissions tests in thousands of Audi “clean diesel” vehicles.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Jean E. Williams of the Department of Justice’s Environment and Natural Resources Division, and Acting U.S. Attorney Daniel L. Lemisch of the Eastern District of Michigan made the announcement.

Giovanni Pamio, 60, an Italian citizen, is charged with conspiracy to defraud the U.S., wire fraud, and violation of the Clean Air Act. Pamio was formerly head of Thermodynamics within Audi’s Diesel Engine Development Department in Neckarsulm, Germany. According to the complaint, from in or about 2006 until in or about November 2015, Pamio led a team of engineers responsible for designing emissions control systems to meet emissions standards, including for nitrogen oxides (“NOx”), for diesel vehicles in the U.S.

According to the complaint, after Pamio and coconspirators realized that it was impossible to calibrate a diesel engine that would meet NOx emissions standards within the design constraints imposed by other departments at the company, Pamio directed Audi employees to design and implement software functions to cheat the standard U.S. emissions tests. Pamio and coconspirators deliberately failed to disclose the software functions, and they knowingly misrepresented that the vehicles complied with U.S. NOx emissions standards, the complaint alleges.

Audi’s parent company, Volkswagen AG (VW), previously pleaded guilty to three felony counts connected to cheating U.S. emissions standards. The company was ordered to pay a $2.8 billion criminal fine at its sentencing on April 21, 2017.

A complaint is merely an allegation and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The FBI and EPA-CID investigated the case. This case is being prosecuted by Securities and Financial Fraud Chief Benjamin D. Singer and Trial Attorneys David Fuhr and Christopher Fenton of the Criminal Division’s Fraud Section, Senior Trial Attorney Jennifer Blackwell and Trial Attorney Joel La Bissonniere of the Environment and Natural Resources Division’s Environmental Crime Section, and White Collar Crime Unit Chief John K. Neal and Assistant United States Attorney Timothy J. Wyse of the U.S. Attorney’s Office for the Eastern District of Michigan. The Criminal Division’s Office of International Affairs also assisted in the case.

CCC’s: Where’s Makan?

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In case you’ve forgotten, on June 8, 2017  the Senate Judiciary Committee voted overwhelmingly in favor of the nomination of Makan Delrahim, President Donald Trump’s pick to be the Assistant Attorney General in charge of the Antitrust Division of the USDOJ.   The committee approved Mr. Delrahim’s nomination by a vote of 19-1. Once approved by the committee, the nomination should go before the full Senate.  But, Mr. Delrahim still has not been brought up for a confirmation vote in the Senate.  Sad.

This is a very unfortunate situation for the nations’ top competition law enforcement body.   The work of the Division goes on as staffs continue investigations and time sensitive decisions are still made. But, it is an added stress and drain on morale to lack leadership; especially when the leadership will likely be enthusiastically received by at least most staff members.  And, not just Mr. Delrahim awaits getting on board; the new Assistant Attorney General will bring in his team to fill out the “front office.”

The delay in confirming Mr. Delrahim has been lamented in two recent articles.  In a June 25, 2017 opinion article in The Hill, DC attorney David Balto wrote:

Delrahim is not controversial and is regarded by both Republicans and Democrats to be perfect for the job. He has a strong reputation as a pragmatist with real world experience to guide the tough enforcement decisions the division faces. Time to get Trump’s new Antitrust Cop on the Beat

Another article referred to the fact that until Mr. Delrahim is appointed and able to fill out his staff, the direction and priorities of the Antitrust Division under Trump are not known.  In a June 30, 2017 BNA Law article Liz Crampton notes:

The long-term agenda of the Justice Department remains unknown as Makan Delrahim, nominee to lead the division, is still awaiting Senate confirmation three months after President Donald Trump named him.   Justice Dept. Antitrust Division Treads Lightly Absent Leader  

Mr. Delrahim can provide the kind of guidance the business community counts on, but is currently lacking.

Here’s hoping something as non-controversial but important as Mr. Delrahim’s confirmation vote can dodge through the dysfunction in DC and get taken care of very soon.

Thanks for reading.

Orlando Doctor and Infusion Clinic Owner Sentenced to 64 Months and 90 Months in Prison for Role in Medicare Fraud

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Monday, June 26, 2017

An Orlando medical doctor and an infusion clinic owner were sentenced to 64 months in prison and two years supervised release, and 90 months and two years supervised release, respectively, today for their roles in a $13.7 million Medicare fraud conspiracy that involved submitting claims for expensive infusion-therapy drugs that were never purchased, never provided and not medically necessary.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Stephen Muldrow of the Middle District of Florida and Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services-Office of Inspector General’s (HHS-OIG) Miami Regional Office made the announcement.

Dr. Miguel Burgos, 60, of Gotha, Florida, and Yosbel Marimon, 40, of Winter Park, Florida, were sentenced by U.S. District Judge Roy B. Dalton, Jr. of the Middle District of Florida. Judge Dalton also ordered the defendants to pay $9.8 million in restitution and to forfeit the same amount. As part of his plea, Marimon also consented to the forfeiture of real property valued at approximately $1.7 million. Burgos and Marimon each pleaded guilty to one count of conspiracy to commit health care fraud: Burgos on February 9, Marimon on February 16.

As part of his guilty plea, Burgos admitted that between July 2008 and September 2011, he was the medical director of four Orlando-area infusion clinics that received Medicare funds. Marimon admitted that he was one of the owners of the four clinics. Burgos and Marimon further admitted that they billed Medicare and private insurance companies for, among other things, expensive infusion therapy medications, including anticancer chemotherapeutic medications, despite never administering the drugs. Burgos and Marimon also admitted to submitted false claims to Medicare and private insurance companies for physical therapy conducted at the clinics, even though there was no licensed physical therapist on staff at the clinics, they admitted. In connection with the scheme, the defendants admitted that they billed Medicare and private insurers approximately $13.7 million, of which approximately $9.8 million was paid on the fraudulent claims.

This case was investigated by HHS-OIG. Fraud Section Trial Attorney Timothy Loper prosecuted the case. Assistant U.S. Attorney Nicole Andrejko also provided assistance regarding asset forfeiture issues in this case.

The Criminal Division’s Fraud Section leads the Medicare Fraud Strike Force. Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 3,200 defendants who have collectively billed the Medicare program for more than $12 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Cardiac Monitoring Companies and Executive Agree to Pay $13.45 Million to Resolve False Claims Act Allegations

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Monday, June 26, 2017

AMI Monitoring Inc. aka Spectocor, its owner, Joseph Bogdan, Medi-Lynx Cardiac Monitoring LLC, and Medicalgorithmics SA, the current majority owner of Medi-Lynx Cardiac Monitoring LLC, have agreed to resolve allegations that they violated the False Claims Act by billing Medicare for higher and more expensive levels of cardiac monitoring services than requested by the ordering physicians, the Department of Justice announced today. Spectocor and Bogdan have agreed to pay $10.56 million, and Medi-Lynx and Medicalgorithmics have agreed to pay $2.89 million.

“Independent diagnostic testing facilities that improperly steer physicians to order higher levels of service will be held accountable,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “We will vigilantly ensure the appropriate use of our country’s limited Medicare funds.”

From 2011 through 2016, Spectocor, headquartered in McKinney, Texas, and Joseph Bogdan, allegedly marketed the Pocket ECG as capable of performing three separate types of cardiac monitoring services—holter, event, and telemetry. When a physician sought to enroll a patient for Pocket ECG, however, the enrollment process allegedly only allowed the physician to enroll in Pocket ECG for the service which provided the highest rate of reimbursement provided by a patient’s insurance, thus steering the ordering physician to a more costly level of service. In 2013, Medi-Lynx, a related company headquartered in Plano, Texas, began selling the Pocket ECG and allegedly adopted this same enrollment procedure. Medicalgorithmics SA, a limited liability company based in Warsaw, Poland, acquired a controlling interest in Medi-Lynx in September 2016.

“Sophisticated medical technology can be used to help doctors dramatically improve the lives of their patients, but it can also be misused to fraudulently increase medical bills,” said Acting U.S. Attorney William E. Fitzpatrick for the District of New Jersey. “Today’s settlement demonstrates that the federal government is committed to preserving the integrity of the Medicare system and ensuring that Medicare funds are spent only for patient care.”

“Billing for unneeded services, as the government alleged, takes unfair advantage of Medicare patients and steals from taxpayers,” said Special Agent in Charge Scott J. Lampert for the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “OIG, along with our law enforcement partners, will aggressively investigate these crimes.”

The settlements resolve allegations filed in a lawsuit by Eben Steele, a former sales manager at Spectocor. The lawsuit was filed in a federal court in Newark, New Jersey, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The Act also allows the government to intervene and take over the action, as it did in this case. Mr. Steele will receive approximately $2.4 million from the two settlements.

The government’s resolution of this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services at 900-HHS-TIPS (800-447-8477).

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

The case is captioned United States ex rel. John Doe v. Spectocor Enterprise Services, LLC, et al., Case No. 14-1387 (KSH) (D. N.J.). The claims resolved by the settlements are allegations only and there has been no determination of liability.

Former U.S. Naval Attaché and Military Advisor to the U.S. Ambassador in the Philippines Sentenced for Taking Bribes

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Friday, June 16, 2017

A Retired U.S. Navy Captain was sentenced in federal court today to 41 months in prison for his role in a massive bribery and fraud scheme involving foreign defense contractor Leonard Glenn Francis and his firm, Singapore-based, Glenn Defense Marine Asia (GDMA).

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Alana W. Robinson Southern District of California, Director Dermot O’Reilly of the Defense Criminal Investigative Service and Director Andrew Traver of the NCIS made the announcement.

In addition to the 41-month prison sentence, U.S. District Judge Janis L. Sammartino ordered Michael Brooks, 59, of Fairfax Station, Virginia, to pay a $41,000 fine and $31,000 in restitution to the U.S. Navy.  Brooks pleaded guilty in November 2016 to one count of conspiracy to commit bribery.

Brooks, who served as the U.S. Naval Attaché at the U.S. Embassy in Manila, Philippines, from 2006 to 2008, has admitted accepting bribes of travel and entertainment expenses, hotel rooms and the services of prostitutes. In return, Brooks admitted that he used his power and influence to benefit GDMA and Francis, including by securing quarterly clearances for GDMA vessels, which allowed GDMA vessels to transit into and out of the Philippines under the diplomatic imprimatur of the U.S. Embassy. Neither GDMA nor any other defense contractor has ever been granted such unfettered clearances.

Brooks admitted that he also allowed Francis to ghostwrite official U.S. Navy documents and correspondence, which Brooks submitted as his own. For example, Brooks admitted allowing GDMA to complete its own contractor performance evaluations. A November 2007 evaluation, drafted by GDMA and submitted by Brooks, described the company’s performance as “phenomenal,” “unsurpassed,” “exceptional” and “world class.” Brooks also admitted providing Francis with sensitive, internal U.S. Navy information, including U.S. Navy ship schedules and billing information belonging to a GDMA competitor, at times using a private Yahoo! e-mail account to mask his illicit acts.

Twenty-one current and former Navy officials have been charged so far in the fraud and bribery investigation; 10 have pleaded guilty and 10 cases are pending. In addition, five GDMA executives and GDMA the corporation have pleaded guilty.

NCIS, DCIS and DCAA are conducting the ongoing investigation. Assistant U.S. Attorneys Mark W. Pletcher and Patrick Hovakimian of the Southern District of California and Assistant Chief Brian R. Young of the Criminal Division’s Fraud Section are prosecuting the case.

Anyone with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DOD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.

Georgia Real Estate Investor Convicted of Bid Rigging and Bank Fraud at Public Foreclosure Auctions

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Friday, June 16, 2017

A federal jury convicted a real estate investor of bid rigging and bank fraud related to public foreclosure auctions held in Georgia, the Department of Justice announced today.

Douglas L. Purdy was convicted today following a two-week trial before the Honorable Richard W. Story in Gainesville, Georgia.  The jury convicted Purdy on one count of bid rigging and two counts of bank fraud for participating in the charged conspiracy and scheme at Forsyth County, Georgia, foreclosure auctions from 2008 to 2011.

The evidence at trial showed that Purdy and his co-conspirators agreed not to compete for real estate at foreclosure auctions in Forsyth County and defrauded lender banks and homeowners.  Among other methods, the conspirators held secret “second auctions” of properties they had obtained through rigged bids, dividing among themselves the auction proceeds that should have gone to pay off debts against the properties and, in some cases, to homeowners.

A federal grand jury in the Northern District of Georgia returned an indictment against Purdy on Feb. 3, 2016.  Including Purdy’s conviction, 23 real estate investors have either pleaded guilty or been convicted after trial as a result of the Department’s ongoing antitrust investigations into bid rigging at public foreclosure auctions in the Atlanta area.

The Antitrust Division’s Washington Criminal II Section and the FBI’s Atlanta Division conducted the investigation, with assistance from the U.S. Attorney’s Office of the Northern District of Georgia.  Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Washington Criminal II Section of the Antitrust Division at 202-598-4000 or call the FBI tip line at 415-553-7400.