NEWARK, N.J. – A North Bergen, New Jersey, man today admitted paying cash bribes to a West New York, New Jersey, fire official to eliminate millions of dollars in outstanding fines and penalties on buildings with fire code violations, U.S. Attorney Paul J. Fishman announced.
Victor Coca, 48, pleaded guilty before U.S. District Judge Esther Salas to Count One and Count Two of an indictment charging him with paying bribes to a local government employee.
According to documents filed in this case and statements made in court:
Coca was the owner and president of a general contracting company in West New York. Two buildings in West New York had outstanding fines for fire code violations. The first building, located on Bergenline Avenue and owned by a friend of his, had approximately $14,500 in fines and penalties for outstanding fire code violations. Coca agreed to pay a fire official for the West New York Bureau of Fire Prevention, a witness who was voluntarily cooperating with federal authorities, a $2,000 cash bribe to eliminate the outstanding fire code fines and penalties. On March 27, 2014, Coca handed the fire official a $2,000 cash bribe.
The second building, located on Hudson Avenue and partly-owned by Coca, had more than $8.7 million in fines and penalties for outstanding fire code violations. Coca paid a $5,000 cash bribe to the fire official in return for the fire official purportedly reducing the amount due to the West New York Bureau of Fire Prevention to the initial fine amount of $5,000.
The two bribery counts to which Coca pleaded guilty each carry a maximum potential penalty of 10 years in prison and a $250,000 fine, or twice the gain or loss from the offense. Sentencing is scheduled for Oct. 20, 2015.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Richard M. Frankel in Newark, with the investigation leading to today’s plea.
The government is represented by Assistant U.S. Attorney Rahul Agarwal of the U.S. Attorney’s Office Special Prosecutions Division in Newark.
Defense counsel:
Howard Brownstein Esq., Union City, New Jersey
Nelson Gonzalez Esq., Dover, New Jersey
A Detroit-area neurosurgeon pleaded guilty today in two separate criminal cases that resulted in serious bodily injury to his patients and more than $11 million in Medicare, Medicaid and private insurance companies.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office, Assistant Director in Charge David L. Bowdich of the FBI’s Los Angeles Field Office, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Service Office of Inspector General (HHS-OIG), Special Agent in Charge Glenn R. Ferry of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Los Angeles Region and Special Agent in Charge Marlon Miller of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations’ (ICE-HSI) Detroit Field Office made the announcement.
“Disregarding his Hippocratic oath to do no harm, Dr. Sabit enriched himself by performing unnecessary, invasive spinal surgeries and implanting costly and unnecessary medical devices, all at the expense of his patients’ health and welfare,” said Assistant Attorney General Caldwell. “Doctors who sell their medical judgment and ethics for personal profit endanger the lives and safety of vulnerable patients who count on their advice to make life-altering decisions. The Criminal Division of the Department of Justice will continue to prioritize the prosecution of doctors whose criminal behavior puts patients at risk.”
“This case of health care fraud is particularly egregious because Dr. Sabit caused serious bodily injury to his patients by acting out of his own greed instead of the best interests of his patients,” said U.S. Attorney McQuade. “Not only did he steal $11 million in insurance proceeds, but he also betrayed his trust to patients by lying to them about the procedures that were medically necessary and that were actually performed.”
Aria O. Sabit, M.D., 39, of Birmingham, Michigan, entered his guilty pleas in both criminal cases at a hearing before U.S. District Judge Paul D. Borman of the Eastern District of Michigan. Sabit pleaded guilty to four counts of health care fraud, one count of conspiracy to commit health care fraud and one count of unlawful distribution of a controlled substance, resulting in losses to Medicare, Medicaid and various private insurance companies. A sentencing hearing is scheduled for Sept. 15, 2015.
According to court documents, Sabit was a licensed neurosurgeon who owned and operated the Michigan Brain and Spine Physicians Group with various locations in the Eastern District of Michigan, including Southfield, Michigan, Clinton Township, Michigan, and Dearborn, Michigan, which opened in approximately April 2011.
During his guilty plea today, Sabit admitted that he derived significant profits by convincing patients to undergo spinal fusion surgeries with instrumentation (meaning specific medical devices designed to stabilize and strengthen the spine), which he never rendered, and subsequently billing public and private healthcare benefit programs for those fraudulent services.
Sabit further admitted he operated on patients and dictated in his operative reports—that he knew would later be used to support his fraudulent insurance claims—that he had performed spinal fusion with instrumentation, which he never performed. This invasive surgery caused serious bodily injury to the patients. Sabit admitted that his operative reports and treatment records contained false statements about the procedures performed, and the instrumentation used in the procedures. Sabit also admitted that, on occasion, he would implant cortical bone dowels and falsely dictate in his operative reports that he had implanted instrumentation. Sabit, then fraudulently billed public and private health care programs for instrumentation, when in fact the implants were tissue. Sabit admitted he failed to render services in relation to lumbar and thoracic fusion surgeries, including in certain instances, billing for implants that were not provided.
Sabit also admitted that, prior to moving to Michigan, he was a resident of Ventura, California, and a licensed neurosurgeon in California. He admitted that in approximately February 2010, he became involved with Apex Medical Technologies LLC (Apex) while he was on the staff of a California hospital.
Apex was owned by another neurosurgeon and three non-physicians who operated Apex as a physician-owned distributorship and paid neurosurgeons lucrative illegal kickbacks tied directly to the volume and complexity of the surgeries that the surgeons performed, and the number of Apex spinal implant devices the surgeons used in their spine surgeries.
In exchange for the opportunity to invest in Apex and share in its profits, Sabit admitted that he agreed to convince his hospital to buy spinal implant devices from Apex and use a sufficient number of Apex spinal implant devices in his spine surgeries. Sabit further admitted that he and Apex’s co-owners used Apex to operate an illegal kickback scheme. In doing so, they concealed Sabit’s involvement in Apex from outsiders. Sabit then required the hospitals and surgical centers where he and his fellow neurosurgeon performed surgeries to purchase spinal implant devices from Apex.
Sabit admitted that his involvement in Apex, and the financial incentives provided to him by Apex and his co-conspirators, caused him to compromise his medical judgment and cause serious bodily injury to his patients by performing medically unnecessary spine surgeries on some of the patients in whom he implanted Apex spinal implant devices. Sabit admitted that on a few occasions, the money he made from using Apex spinal implant devices motivated him either to refer patients in for spine surgery who did not medically need surgery or refer his patients for more complex surgeries, such as multi-level spine fusions, that they did not need.
Sabit also admitted that the financial incentives provided to him by Apex and his co-conspirators caused him to “over instrument” his patients (meaning Sabit used more spinal implant devices than were medically necessary to treat his patients) in order to generate more sales revenue for Apex, which resulted in serious bodily injury to his patients.
The Michigan case was investigated by the FBI, HHS-OIG and ICE. The California case—which was subsequently transferred to the Eastern District of Michigan—was investigated by the FBI and HHS-OIG. The Michigan case is being prosecuted by Assistant U.S. Attorneys Regina R. McCullough and Philip A. Ross of the Eastern District of Michigan. The California case 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 of the Eastern District of Michigan, and is being prosecuted by Senior Trial Attorney Jonathan T. Baum and Trial Attorneys Dustin Davis and Blanca Quintero of the Criminal Division’s Fraud Section.
Sabit is also a defendant in two civil False Claims Act cases brought by the Department of Justice in the U.S. District Court of 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 nearly 2,100 defendants who have collectively billed the Medicare program for more than $6.5 billion. In addition, the HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
The Department of Justice announced today that the United States has settled a False Claims Act lawsuit with Health Management Associates (HMA) and Clearview Regional Medical Center for $595,155. The lawsuit filed in the Middle District of Georgia alleged that from 2008 to 2009 the hospital paid kickbacks to an obstetric clinic that served primarily undocumented Hispanic women, in return for referral of those patients for labor and delivery at the hospital. The hospital then billed the Medicaid program in Georgia for the services provided to the referred patients. Clearview, located in Monroe, Georgia, was named Walton Regional Medical Center and was owned by hospital operator HMA during the time period relevant to the lawsuit. Clearview is now owned by Community Health Systems (CHS), which purchased HMA in January 2014.
“This resolution illustrates our commitment to ensuring that health care providers who pay kickbacks in return for patient referrals are held accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. “Schemes such as this one corrupt the health care system and take advantage of vulnerable patients.”
“The Medicaid program is a vital part of the government’s efforts to make sure that everyone has access to health care,” said U.S. Attorney Georgia Michael J. Moore of the Middle District of Georgia. “Instead of providing health care services to expectant mothers in its area and receiving payment for those services from Medicaid, the hospital participated in a scheme to pay kickbacks in exchange for having pregnant women from outside its market funneled to its facility with the goal of increasing the amount of Medicaid money the hospital could claim.”
The United States’ complaint alleges that HMA’s Walton Regional Medical Center paid kickbacks to Hispanic Medical Management doing business as Clinica de la Mama (Clinica) and related entities, in return for Clinica’s agreement to send pregnant women to Walton Regional for deliveries paid for by Medicaid, in violation of the federal Anti-Kickback Statute. The kickbacks were disguised as payments for a variety of services allegedly provided by Clinica.
The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and other federally funded programs. The Anti-Kickback Statute is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.
“Hospitals that pay kickbacks to clinics for referrals of undocumented pregnant patients are taking advantage of both these vulnerable women and the taxpayer-funded Medicaid program,” said Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG) Atlanta Regional Office. “Our agency is dedicated to investigating such corrosive kickback schemes, which undermine the public’s trust in medical institutions and the financial health of government health care programs.”
“The FBI is proud of the role it played in bringing forward today’s settlement, said Special Agent in Charge J. Britt Johnson of the FBI Atlanta Field Office. “The FBI will continue to provide significant investigative assets and resources to ensure that the integrity of federally funded health care programs such as Medicaid are protected from providers who would abuse them.”
As part of the settlement, HMA and Clearview will pay the State of Georgia an additional $396,770 to settle Georgia’s claims under the Georgia False Medicaid Claims Act. The Medicaid program is a jointly funded federal-state program that provides health care to the poor and disabled. Although undocumented aliens are not eligible for regular Medicaid coverage, the Medicaid program provides coverage for emergency conditions, including childbirth, for undocumented aliens.
The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act. The Act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. The False Claims Act also permits the government to intervene in such lawsuits, as it did in this case against Walton Regional, as well as several other defendants, including Clinica de la Mama and four hospitals owned by Tenet Healthcare Corporation. The litigation against the non-settling defendants is ongoing. The relator, Ralph D. Williams, the chief financial officer of Walton Regional from April 2009 to October 2009, will receive $119,031 from the United States’ portion of the settlement.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs.
This matter was investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Offices for the Middle and Northern Districts of Georgia, HHS-OIG, FBI and the Office of the Attorney General for the State of Georgia.
The case is captioned United States ex rel. Williams v. Health Mgmt. Assocs. Inc., et al., No. 3:09-CV-130 (M.D. Ga.).
The claims resolved by this settlement are allegations only and there has been no determination of liability.
The owner and operator of a stock trading operation and three of his associates were arrested today on charges arising from their alleged participation in a multi-year insider trading scheme that netted more than $3.2 million in illicit profits, announced today by U.S. Attorney Paul J. Fishman for the District of New Jersey.
Steven Fishoff, 58, of Westlake Village, California, Ronald Chernin, 66, of Oak Park, California, Steven Costantin aka Steven Constantin, 54, of Farmingdale, New Jersey, and Paul Petrello, 53, of Boca Raton, Florida, are each charged by complaint with one count of conspiracy to commit securities fraud. Fishoff is charged with four substantive counts of securities fraud, Chernin and Petrello are each charged with two counts of securities fraud and Costantin is charged with one count of securities fraud.
The defendants were arrested by FBI agents this morning at their respective residences. Costantin is scheduled to appear this afternoon before U.S. Magistrate Judge Joseph A. Dickson in Newark, New Jersey, federal court. Fishoff is scheduled to appear before U.S. Magistrate Judge Kenly Kiya Kato in Riverside, California, federal court, Chernin is scheduled to appear before U.S. Magistrate Judge Carla Woehrle in Los Angeles, Californina, federal court, and Petrello is expected to appear before U.S. Magistrate Judge Dave Lee Brannon in West Palm Beach, Florida, federal court.
“The defendants and their associates were entrusted with confidential, nonpublic information about companies and time and time again, they allegedly violated that trust by illegally trading the companies’ stock for substantial profits,” said U.S. Attorney Fishman. “They allegedly rigged the game so they would always win, and their profits came at the expense of legitimate investors, who were not privy to this inside information.”
“Insider trading is an investigative priority of the FBI,” said Special Agent in Charge Richard M. Frankel for the FBI in Newark, New Jersey. “The FBI is committed to stopping insider trading and will hold those who perpetrate these schemes accountable because their illegal activities undermine the integrity of the U.S. financial markets and weaken investor confidence.”
“We allege an insider trading scheme based on a short-selling business model designed to systematically profit on confidential information obtained under false pretenses,” said Senior Associate Director Sanjay Wadhwa for Enforcement in the SEC’s Regional Office in New York. “But the defendants’ short selling proved to be short-sighted as they overlooked the fact that their trading patterns would be detected and they would be caught by law enforcement.”
According to the complaint unsealed today, Fishoff, Chernin, Costantin, Petrello and others, acting individually and through their associated trading entities, engaged in an insider trading scheme in which they netted more than $3.2 million in illicit profits over three years by executing illegal trades through trading entities that they controlled.
Fishoff is the president and sole owner of Featherwood Capital Inc. (Featherwood), a trading entity that he operates out of his home. Featherwood maintained numerous stock trading accounts in its own name and in various additional names under which Featherwood did business (DBAs), including Gold Coast Total Return Inc. (Gold Coast), Seaside Capital Inc. (Seaside) and Data Complete Inc. (Data Complete).
Chernin, an attorney who was disbarred in California for misappropriation of client assets, is a friend and longtime business associate of Fishoff. Corporate documents list Chernin as the president of Gold Coast and Fishoff as an officer. Chernin is president of the trading entity Cedar Lane Enterprises Inc. (Cedar Lane) and an officer of Data Complete.
Costantin, a former pipefitter by trade, is Fishoff’s brother-in-law and a friend and business associate of Chernin. Corporate documents list Costanstin as president of Seaside. In brokerage account documents, Fishoff identifies himself as Seaside’s owner. Costanstin is also the vice president and secretary of Cedar Lane.
Petrello is the president and owner of two trading entities, Brielle Properties Inc. and Oceanview Property Management LLC and a friend and longtime business associate of Fishoff.
On numerous occasions, the conspirators obtained material, nonpublic information related to publicly traded companies and traded on that information before it became public. Between June 2010 and July 2013, Fishoff, Chernin, Costantin and a business associate referred to in the complaint as “Trader A” expressed interest in participating in at least 14 stock offerings by publicly traded companies. Before providing these individuals with confidential information concerning the companies or the terms of the proposed sales, the investment bankers first required that Fishoff, Chernin, Costantin, Trader A and their associated trading entities, agree to be “brought over the wall,” or “wall-crossed,” standard industry terms which meant that they were required to keep the information disclosed to them confidential and could not buy or sell the stock based on the information.
Fishoff, Chernin, Costantin and Trader A agreed to these disclosure and trading restrictions and then flagrantly breached the agreements. In instances where Fishoff was not personally wall-crossed in an offering, Chernin and Costantin tipped Fishoff telephonically or by email about the offering prior to the public announcement. Even where Fishoff ostensibly was a party to the confidentiality agreement, through his affiliation with the wall-crossed trading entity, Fishoff himself breached the agreement by trading on the confidential information and by providing the information to Petrello so that Petrello could engage in parallel trading. There were also instances where Chernin and Costantin violated the terms of the confidentiality agreements by trading themselves before the offering. The conspirators traded through the accounts of the trading entities or through related accounts that they controlled. The conspirators shared the proceeds of the insider trading scheme, with Fishoff wiring money to Chernin and Costantin for their services and Fishoff receiving compensation from Petrello for the offering-related tips that Fishoff provided to him.
The conspiracy count with which each defendant is charged carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the aggregate loss to victims or gain to the defendants. Each of the substantive securities fraud charges carry a maximum penalty of 20 years in prison and a $5 million fine.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Frankel, for the investigation leading to today’s arrests and complaint. He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office under the direction of Andrew Calamari. He also thanked special agents of the FBI, Los Angeles (Ventura Resident Agency and Riverside Resident Agency) and FBI, Miami (West Palm Beach Resident Agency) for their assistance.
The government is represented by Assistant U.S. Attorneys Shirley U. Emehelu of the Economic Crimes Unit of the U.S. Attorney’s Office in Newark, New Jersey and Acting Chief Barbara Ward for the of the Office’s Asset Forfeiture and Money Laundering Unit.
The charges and allegations contained in the complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established 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 nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov
WASHINGTON — A Georgia real estate investor pleaded guilty today for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia, the Department of Justice announced.
Felony charges against Eric Hulsman were filed on March 27, 2015, in the U.S. District Court of the Northern District of Georgia in Atlanta. According to court documents, from at least as early March 6, 2007, and continuing at least until Dec. 6, 2011, in Fulton County, Georgia, and from at least as early as Jan. 2, 2007, and continuing at least until Jan. 1, 2008, in DeKalb County, Georgia, Hulsman conspired with others not to bid against one another, but instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions. Hulsman was also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Fulton and DeKalb properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions.
“Homeowners and lenders in Fulton and DeKalb counties deserved free and fair public real estate foreclosure auctions,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “The defendant conspired with others to keep for themselves money that should have gone to those homeowners and lenders. The division remains committed to rooting out this kind of anticompetitive conduct at foreclosure auctions.”
The primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Fulton and DeKalb county public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and in some cases, the defaulting homeowner.
“Today’s guilty plea of another real estate investor engaged in unfair bidding practices is further evidence of the FBI’s support for the U.S. Department of Justice’s Antitrust Division in ensuring that public foreclosure auctions remain a level playing field for all,” said Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Field Office. “Anyone with information regarding such criminal activities as seen in this case should promptly call their nearest FBI field office.”
A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. A count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine in an amount equal to the greatest of $250,000, twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.
Including Hulsman, eight cases have been filed as a result of the ongoing investigation being conducted by Antitrust Division’s Washington Criminal II Section and the FBI’s Atlanta Division, and the U.S. Attorney’s Office of the Northern District of Georgia. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions in Georgia should contact Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or visit www.justice.gov/atr/contact/newcase.htm.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established 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. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth A. Polite of the Eastern District of Louisiana, Special Agent in Charge Michael J. Anderson of the FBI’s New Orleans Field Office, Special Agent in Charge Mike Fields of the Department of Health and Human Services’ Office of the Inspector General (HHS-OIG) Dallas Regional Office and Louisiana Attorney General James D. “Buddy” Caldwell made the announcement.
Barbara Smith, M.D., 66, of Metairie, Louisiana; Roy Berkowitz, M.D., 69, of Slidell, Louisiana; Beverly Breaux, 67, of New Orleans; and Joe Ann Murthil, 57, of New Orleans, were convicted on all counts after a five-day jury trial before Chief U.S. District Court Judge Sarah S. Vance of the Eastern District of Louisiana.
Evidence introduced at trial showed that the defendants and others carried out a home health care fraud scheme in and around New Orleans through multiple companies over the course of more than 10 years. Smith and Berkowitz falsely claimed that thousands of Medicare recipients were homebound and required nursing or therapy services to be provided in their homes. Breaux was a registered nurse who falsely certified that these patients were homebound, and falsely claimed to have treated patients that she had not seen. Murthil was an office manager and biller at one home health company who assisted with the payment of illegal kickbacks to patient recruiters. Murthil also submitted false claims to Medicare stating that patients were homebound when some of these patients had jobs, had not received services or did not want services. From 2007 through 2014, the companies in this scheme submitted more than $56 million in claims to Medicare, the vast majority of which were fraudulent. Medicare paid approximately $50.7 million on these claims.
Sentencing for the defendants is scheduled for Aug. 26, 2015. In total, 13 defendants have been charged for their roles in this scheme. Nine other defendants previously pleaded guilty.
This case was investigated by the FBI, HHS-OIG and the Louisiana Attorney General’s Medicaid Fraud Control Unit, and 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 of the Eastern District of Louisiana. This case was prosecuted by Trial Attorneys William Kanellis and Antonio Pozos and Assistant Chief Ben Curtis of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,100 defendants who have collectively billed the Medicare program for more than $6.5 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.
After a three-week trial, Thomas Farmer, a former Crowley Liner Services Vice-President was acquitted of price-fixing and bid rigging charges by a jury in Puerto Rico. The trial was before Federal District Court Judge Daniel Dominguez. The jury was composed of six men and six women. They deliberated for three hours before returning their verdict. Framer had been indicted on March 21, 2013 on a charge of conspiracy to fix and rig Puerto Rico freight surcharges with counterparts from Horizon Lines and Sea Star Line in the U.S. mainland-Puerto Rico trade.
The acquittal marks the end of the Antitrust Division’s otherwise successful investigation into price-fixing on ocean shipping route between Puerto Rico and the United States. Farmer was the second executive to go to trial. Frank Peake, the former President of Sea Star, was convicted in 2013 on a similar charge (here). Peake’s case was noteworthy in that he was sentenced to five years in prison, a record sentence for a Sherman Act conviction (here). The Peake trial came after subordinates of his and co-conspirators from other companies had pled guilty and cooperated with the government. Peak’s direct subordinate at Sea Star, Peter Baci, was sentenced to 48 months in prison and fined $20,000. Peake’s counterpart at Horizon, Gabriel Serra, was sentenced to 34 months in prison. Other executives at Sea Star and Horizon had pled guilty, and received prison terms ranging from seven months to 29 months. Three companies have paid more than $46 million in fines for their involvement in a conspiracy that included setting rates, bid rigging and other practices.
Farmer faced a maximum sentence of ten years in prison. Farmer was represented by Joseph C. Laws, Melanie Matos Gilroy Cardona and Terrance Reed. Farmer was facing a maximum of ten years in prison if convicted and his legal team deserves great credit for the best outcome Farmer could have hoped for. But, there are great difficulties that the Antitrust Division faces in a “last man standing trial.” I am not familiar with the specifics of the Farmer trial but some of these inherent difficulties are:
Congratulations to Farmer’s defense team and also to the Antitrust Division for an otherwise very successful investigation.
Thanks for reading.
Thirty-two people were arrested yesterday after being charged variously with racketeering conspiracy, conspiracy to commit identity theft, conspiracy to commit access device fraud, conspiracy to commit mail, wire and bank fraud, conspiracy to commit money laundering, conspiracy to use a facility of interstate commerce to commit murder-for-hire and conspiracy to engage in the unlicensed wholesale distribution of drugs, announced U.S. Attorney Melinda Haag of the Northern District of California, Special Agent in Charge David J. Johnson of the Federal Bureau of Investigation, and Special Agent in Charge José M. Martinez of Internal Revenue Service (IRS) Criminal Investigation. A thirty-third defendant remains at large and is subject to an active arrest warrant.
According to an indictment that was unsealed yesterday, Ara Karapedyan, 45, Mihran Stepanyan, 29, and Artur Stepanyan, 38, were at the center of a nationwide conspiracy—with at least 18 other person—to conduct the affairs of a wide-ranging criminal enterprise through a pattern of racketeering. This enterprise was fueled by a broad range of criminal activity including unlicensed wholesale drug distribution, money laundering and fraud. The indictment names 33 defendants in all and describes an enterprise that spanned throughout California as well as in Minnesota, Ohio and Puerto Rico.
One key aspect of the alleged criminal activity described in the indictment was a multi-million dollar prescription drug diversion scheme. Members and associates of the enterprise are alleged to have procured prescription drugs from unlicensed sources and to have resold the drugs to unknowing customers. A central figure to these allegations is David Miller, 50. Miller is alleged to be the owner and operator of a drug wholesaler called Minnesota Independent Cooperative (MIC) that, between 2010 and 2014, bought approximately $157 million of drugs from Mihran Stepanyan and Artur Stepanyan. Miller and his employees allegedly knew the Stepanyans were not licensed to sell drugs and knew the Stepanyans procured their drugs through unlicensed sources. Miller and his employees nevertheless purchased the drugs from the Stepanyans’ various companies, including Panda Capital Group, Red Rock Capital, Trans Atlantic Capital, GC National Wholesale, Sky Atlantic Capital and Nationwide Payment Solutions and resold the drugs as legitimate products.
A separate investigation has resulted in another indictment in the Southern District of Ohio charging David Miller, Mihran Stepanyan, Artur Stepanyan and MIC with various crimes arising from their sale of millions of dollars of illicitly-procured drugs.
The indictment also charges Karapedyan and his associates with engaging in the fraudulent unlicensed distribution of drugs. For instance, from 2013 through 2015, Karapedyan, either personally or through an associate, sold several hundred thousand dollars’ worth of drugs such as Abilify, Liboderm, Cymbalta and Namenda, as well as HIV drugs such as Atripla, Truvada and Isentress and the cancer drug Gleevec. Likewise, from roughly the latter part of 2014 through early 2015, Karapdyan and his racketeer co-conspirator Maxwell Starsky, 36, sold to another complicit wholesaler more than $1 million in illicitly procured drugs. Karapedyan also supplied the Stepanyans with drugs.
Hugo Marquez, 41, Eric Figueroa, 29, Arman Zagaryan, 32, and their associates are likewise charged with procuring drugs from unlicensed sources and distributing the drugs to buyers. According to the indictment, Alexander Soliman, 46, was one of their principal customers. Between roughly 2012 and 2014, Soliman, through his companies Apex Pharmaceuticals and Maroon Pharma, knowingly purchased illicitly-procured drugs from Marquez, Figueroa and Zagaryan and then re-sold them as legitimate drugs. During this time period, Marquez, Figueroa, Zargaryan and Soliman engaged in the distribution of more than $20 million worth of drugs.
Another aspect of the alleged criminal activity is a massive check and bank fraud operation. As part of the enterprise, Karapedyan and his associates, including Asatour Magzanyan, 53, Tigran Sarkisyan, 38, and Hripsime Khachtryan, 41, allegedly used fraudulent identification information to prepare fraudulent tax returns, which were then filed with the government in order to induce the U.S. Treasury to issue tax refund checks. Karapedyan associate Khachig Geuydjian, 74, allegedly used his unlicensed mail-box business to provide addresses for these fraudulent tax filings. They and other members and associates of the enterprise then negotiated the tax refund checks using fraudulent identities or through a complicit check cashing business operated by Jean Dukmajian, 61, Karine Dukmajian, 33, and Angela Dukmajian, 26. In addition to the tax refund scheme, members and associates of the enterprise also engaged in negotiating counterfeit and stolen checks. In all, from roughly late 2012 to late 2014, Karapedyan and his associates negotiated more than 500 fraudulent checks worth more than $5 million.
In addition to the fraudulent unlicensed distribution of drugs and negotiating fraudulent checks, Karapedyan, the Stepanyans, Miller and others are charged with conspiring to launder money in an effort to promote their criminal activities and to conceal proceeds collected from their criminal activities. For example, a description of Miller’s activity between 2012 through 2014, wherein he attempted to hide the fact he was paying the Stepanyans for drugs is alleged in the indictment. The indictment further alleges Miller made the payments to the Stepanyans’ company GC National Wholesale through companies in Puerto Rico he controlled, such as B&Y Wholesalers and FMC Distributors. The payments were for sales of drugs that the Stepanyans actually delivered to Miller’s company MIC. Similarly, the indictment includes allegations Karapedyan and Starsky also arranged payments for more than $1 million of illicitly-procured drugs through a shell company. In addition, Karapedyan also allegedly laundered money for the Stepanyans. According to the indictment, in 2013, the Stepanyans transferred more than $1 million in proceeds derived from MIC to Karapedyan, who caused the money to be withdrawn as cash.
Furthermore, in addition to the foregoing, defendants Karapedyan and Gevork Ter-Mkrtchyan are charged with conspiring to use a facility of interstate commerce to commit murder-for-hire. According to the indictment, these defendants made several attempts to find a person who would be willing to kill someone who had angered Ter-Mkrtchyan. Although the defendants paid $1,500 for the hit, it was never carried out.
According to the indictment, a significant portion of the criminal activity took place in the Northern District of California. For example, one delivery of drugs took place in the Northern District of California and many of the checks were negotiated in the Northern District as well. In addition, much of the proceeds from the check and the drug schemes were laundered through the Northern District of California, where Karapedyan and his associates regularly picked up large amounts of cash. In addition, Miller’s company, MIC, posted fraudulent information relating to the origins of the drugs he sold via a website. The website was maintained by an Internet service provider in the Northern District of California. Furthermore, Karapedyan made numerous calls to the Northern District of California in order to find individuals willing to perform the hit he sought.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. All the defendants except Miller were arrested yesterday. Miller remains at large and is the subject of an active arrest warrant.
In sum, the indictment includes seven counts as follows: count One, RICO conspiracy, in violation of 18 U.S.C. § 1962(d) (maximum term of imprisonment, life or 20 years); Count Two, conspiracy to commit identity theft, in violation of 18 U.S.C. § 1028(f) (maximum term of imprisonment, 15 years); Count Three, conspiracy to commit access device fraud, 18 U.S.C. § 1029(b)(2) (maximum term of imprisonment, 5 years); Count Four, conspiracy to commit mail, wire, and bank fraud, in violation of 18 U.S.C. § 1349; Count Five, conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h) (maximum term of imprisonment, 20 years); Count Six, conspiracy to use interstate facility to commit murder-for-hire, in violation of 18 U.S.C. § 1958); Count Seven, conspiracy to engage in unlicensed wholesale distribution of drugs, in violation of 18 U.S.C. § 371 (maximum term of imprisonment, 5 years).
The following charges apply as against the following defendants are: Ara Karapedyan on Counts one through seven, Mihran Stepanyan on counts one through five and seven, Artur Stepanyan on counts one through five and seven, Gevork Ter-Mkrtchyan on counts 1-7, Khachig Geuydjian on counts one through five, Arman Petrosyan on counts one through five, Lanna Karapedyan on counts one through five, Maxwell Starsky on counts one through five and seven, Sevak Gharghani on counts one through five and seven, Jean Dukmajian, on counts one through five, Karine Dukmajian on counts one through five, Angela Dukmajian on counts one through five, Arman Danielian count one, four, five and seven, Asatour Magzanyan conts one through five, Tigran Sarkisyan counts one through five, Hripsime Khachtryan counts one through five, Loui Artin on counts one through five, Hugo Marquez on counts one through five and seven, Arman Zargaryan on counts one through five and seven, Dmitriy Kustov on counts two through four, Michael Inman on counts two through four, Araxia Nazaryian on counts two five and seven, Alexander Soliman on counts four, five and seven, Cheryl Barndt on counts four, five and seven, Eric Figueroa on counts four, five and seven, Marc Asheghian on counts four, five and seven, Michael Asheghian on counts four, five and seven, David Milleron cunts one through five and seven, James Russoon on counts four, five and seven, Jeannette Couch counts four, five and seven, Marie Polichetti counts four, five and seven, Bernardo Guillen counts four, five and seven, Javier Ramirez on counts four and seven.
Additional periods of supervised release, fines and special assessments also could be imposed. Any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Thirty-one defendants appeared before the Honorable Victor B. Kenton and Michael R. Wilner in the Central District of California on Wednesday, May 6, 2015, to be advised of the charges against them and to determine conditions of release. Some of those hearings have been continued at the request of the defendants. Specifically, the bail hearing for Eric Figueroa has been continued to Friday, May 8, 2015, and the hearings for Hugo Marquez and Michael Inman have been continued to Monday, May 11, 2015, before the Honorable Michael R. Wilner. In addition, Karapedyan will appear on Friday, May 8, 2015, before the Honorable Victor B. Kenton.
Further, Ter-Mkrtchyan has requested a hearing in which the government will be required to prove his identity, i.e., that he is the individual named in the indictment. That hearing will occur on Friday, May 8, 2015, before the Honorable Victor B. Kenton.
The remaining 26 defendants have been ordered to appear before the Honorable Jacqueline Scott Corley in the Northern District of California. Alexander Soliman, Araxia Nazaryian and Asatour Magzanyan will appear on May 12, 2015. Cheryl Barndt, Marc Asheghian, Michael Asheghian, Hripsime Khachtryan, Bernardo Guillen, Javier Ramirez, Jean Dukmajian, Karine Dukmajian, Angela Dukmajian, Khachig Geuydjian and Arman Zargaryan will appear on May 20, 2015. Jeannette Couch, Loui Artin, Dmitriy Kustov, Marie Polichetti, Arman Danielian, Lanna Karapedyan, Sevak Gharghani, Arman Petrosyan and Maxwell Starsky will appear on May 22, 2015.
Mihran Stepanyan, Artur Stepanyan and Tigran Sarkisyan are being transported to the Northern District of California by the U.S. Marshal Service and will make court appearances after their arrival.
Assistant U.S. Attorneys Damali A. Taylor, David Countryman and W.S. Wilson Leung are prosecuting the case with the assistance of Lance Libatique, Ponly Tu, Daniel Charlier-Smith. The prosecution is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service.
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A former loan officer at the Export-Import Bank of the United States (Ex-Im Bank) pleaded guilty in federal court today for accepting more than $78,000 in bribes in return for recommending the approval of unqualified loan applications to the bank, among other misconduct.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting Inspector General Michael T. McCarthy of the Export-Import Bank of the United States and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office made the announcement.
Johnny Gutierrez, 50, of Stafford, Virginia, pleaded guilty before U.S. District Judge Gladys Kessler of the District of Columbia to one count of bribery of a public official. A sentencing hearing is scheduled for July 20, 2015.
“Gutierrez risked both taxpayer dollars and the integrity of the Ex-Im Bank for his personal financial gain,” said Assistant Attorney General Caldwell. “Those charged with serving the public will be held accountable when they seek personal enrichment at the public’s expense.”
“Gutierrez betrayed the trust and confidence of the hardworking Ex-Im Bank employees and the U.S. taxpayers,” said Acting Inspector General McCarthy. “The Office of Inspector General will continue to aggressively and diligently investigate all allegations of waste, fraud, and abuse related to Ex-Im Bank programs.”
“In his role as a loan officer, Gutierrez betrayed the trust that was placed in him by fellow citizens and took bribes in exchange for providing favorable action on loan applicants,” said Assistant Director in Charge McCabe. “The FBI, with our partners, will continue to investigate and expose fraudulent schemes that tarnish the good and ethical work of the U.S. government.”
According to his plea agreement, Gutierrez was a loan officer for the Ex-Im Bank based in Washington, D.C. The Ex-Im Bank is the federal agency responsible for promoting the export of U.S. goods to foreign countries through the guarantee of domestic loans to foreign buyers. As an Ex-Im Bank loan officer, Gutierrez was responsible for conducting credit underwriting reviews for companies and lenders submitting financing applications to the Ex-Im Bank.
As part of his guilty plea, Gutierrez admitted that on 19 separate occasions between June 2006 and December 2013, he accepted bribes totaling more than $78,000 in return for recommending the approval of unqualified loan applications and improperly expediting other applications.
Specifically, Gutierrez admitted that he intentionally ignored the fact that one company had previously defaulted in 10 previous transactions guaranteed by the bank, causing the Ex-Im Bank to lose almost $20 million. Despite these defaults, Gutierrez accepted bribes to continue to recommend the approval of the company’s loan applications. Additionally, Gutierrez admitted that he accepted bribes from a financing broker to expedite applications submitted by the broker, and that he privately assisted the broker to improve its applications before submission to the bank. In exchange, Gutierrez was to receive half of the broker’s profit on the transactions financed by the bank. Further, Gutierrez disclosed to the broker inside information about financing applications submitted to the Ex-Im Bank, so that the broker could solicit the applicants as clients.
The case was investigated by the Inspector General of the Export-Import Bank of the United States and the FBI, with significant assistance provided by the Internal Revenue Service-Criminal Investigation’s (IRS-CI) Washington Field Office. The case is being prosecuted by Senior Litigation Counsel Patrick M. Donley and Trial Attorney William H. Bowne of the Criminal Division’s Fraud Section.