Category Archives: Fraud

Eight Indicted in Fraud Case That Alleges $50 Million in Bogus Claims for Student Substance Abuse Counseling

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Six Linked to Long Beach Treatment Program Taken into Custody Today

Eight people have been indicted for allegedly participating in a scheme that submitted more than $50 million in fraudulent bills to a California state program for alcohol and drug treatment services for high school and middle school students that, in many instances, were not provided or were provided to students who did not have substance abuse problems.

Six of the defendants who worked at the Long Beach-based Atlantic Health Services, formerly known as Atlantic Recovery Services (ARS), were arrested this morning by federal authorities.

The indictment, which charges the defendants with health care fraud and aggravated identity theft, alleges that ARS received more than $46 million from California’s Drug Medi-Cal program after ARS submitted false and fraudulent claims for group and individual substance abuse counseling services.

“The defendants named in the indictment are accused of exploiting a program that was set up to help a particularly vulnerable population – young people who are confronting drug and alcohol abuse,” said U.S. Attorney Eileen M. Decker for the Central District of California.  “According to the indictment, ARS and its employees engaged in a long-running fraud scheme to steal tens of millions of dollars from a program with limited resources that was designed to help underprivileged youth in recovery.  In the process, the defendants and ARS branded many innocent young people as substance abusers and addicts in order to boost enrollment numbers and billings.”

The defendants named in the indictment are:

  • Lori Renee Miller, 54, of Lakewood, California, the program manager at ARS who supervised substance abuse recovery managers and counselors;
  • Nguyet Galaz, 41, of Montclair, California, who oversaw services provided at approximately 11 schools in Los Angeles County;
  • Angela Frances Micklo, 56, of Palmdale, California, who managed counselors at approximately nine schools in Los Angeles County, including several in the Antelope Valley;
  • Maribel Navarro, 48, of Pico Rivera, California, who managed counselors at approximately ten schools in Los Angeles County;
  • Carrenda Jeffery, 64, of the Mid-City District of Los Angeles, who managed counselors at approximately three schools;
  • LaLonnie Egans, 57, of Bellflower, California, who managed counselors at three schools;
  • Tina Lynn St. Julian, 51, of Compton, California, who worked as a counselor at two schools; and
  • Shyrie Womack, 33, Egans’ daughter, also of Bellflower, who worked as a counselor at three schools.

Galaz and Micklo are expected to self-surrender in the coming weeks.  The six other defendants were taken into custody without incident this morning and are scheduled to be arraigned on the indictment this afternoon in U.S. District Court.

Today’s arrests are the result of a 40-count indictment that was returned by a federal grand jury on August 26 and unsealed this morning.

The eight defendants are all former employees of ARS, which received contracts to provide substance abuse treatment services through the Drug Medi-Cal program to students in schools in Los Angeles County.  The schools included various sites operated by Soledad Enrichment Action and public schools in Montebello, California, Bell Gardens,
Californina, Lakewood, and the Antelope Valley.

ARS allegedly submitted bogus claims for payment to the Drug Medi-Cal program for a decade, according to the indictment.  ARS shut down in April 2013, when California suspended payments to the company.

According to the indictment, the claims submitted to the Drug Medi-Cal program were false and fraudulent for a number of reasons, including:

  • ARS billed for services provided to students who did not have substance abuse disorders or addictions and therefore did not qualify to receive Drug Medi-Cal services;
  • ARS billed for counseling sessions that were not conducted at all;
  • ARS billed for counseling services that were not conducted in accordance with Drug Medi-Cal regulations regarding length, number of students, content and setting;
  • ARS personnel falsified documents, including treatment plans, group counseling sign-in sheets, progress notes and update logs (which listed the dates and times of counseling sessions); and
  • ARS personnel forged student signatures on documents.

“For counselors and supervisors to risk stigmatizing students as substance abusers, as alleged in this case, just to enrich themselves at taxpayer expense is outrageous,” said Special Agent in Charge Christian Schrank for the Office of the Inspector General of the Department of Health and Human Services. “This decade-long conspiracy to defraud Medi-Cal while disregarding the true health care needs of children will not be tolerated.”

Previously, 11 other defendants pleaded guilty to health care fraud charges stemming from the ARS scheme.  Those defendants are former ARS managers Cathy Fernandez, 53, of Downey, California; Erin Hoover, 37, of Long Beach, California; Elizabeth Black, 51, of Long Beach; Helsa Casillas, 44, of El Sereno, California; and Sandra Lopez, 41, of Huntington Park, California; and former ARS counselors Tamara Diaz, 45 of East Los Angeles, California; Margarita Lopez, 40, of Paramount, California; Irma Talavera, 27, of Paramount; Laura Vasquez, 52, of Pico Rivera; Cindy Leticia Ortiz, 29, of Norwalk, California; and Arthur Dominguez, 63, of Glendale, California.

Another defendant, Dr. Leland Whitson, 75, of Redondo Beach, California, the former Medical/Clinical Director of ARS, previously pleaded guilty to making a false statement affecting a health care program.

The dozen defendants who have already pleaded guilty are pending sentencing by U.S. District Judge Philip S. Gutierrez.

Each of the eight defendants named in the indictment unsealed today potentially faces decades in federal prison if convicted.  For example, if convicted, Miller faces a statutory maximum sentence of 324 years in federal prison.

An indictment contains allegations that a defendant has committed a crime.  Every defendant is presumed innocent until and unless proven guilty in court.

The cases against the 20 defendants are the result of an investigation by the Office of Inspector General of the Department of Health and Human Services; the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse; and IRS – Criminal Investigation.

Florida Businessman Sentenced to 17 Years in Prison for Conspiring to Defraud Investors

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Dozens of Investors Lost More Than $13 Million in Scheme

A Florida businessman was sentenced today to 17 years in prison for his role in an investment fraud scheme resulting in over $13 million in losses to dozens of investors.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia and Special Agent in Charge Kimberly A. Lappin of the IRS-Criminal Investigation’s Tampa Field Office made the announcement.

Donovan G. Davis Jr., 34, of Palm Bay, Florida, was found guilty by a jury on May 14, 2015, of one count of conspiracy to commit mail/wire fraud, one count of mail fraud, six counts of wire fraud and eight counts of money laundering.  He was sentenced by U.S. District Judge Carlos E. Mendoza of the Middle District of Florida, who ordered him to pay $10,520,005 in restitution jointly and severally with his co-defendants.

“Donovan Davis Jr. and his co-conspirators lied to persuade victims to invest their retirement savings and children’s college funds, and then concealed the investment fund’s extreme losses so that the victims would stay invested,” said Assistant Attorney General Caldwell.  “The investors lost everything, while Davis and others running the scam looted the fund to pay their own six-figure salaries, purchase luxury cars and travel in private planes.  This sentence will help hold Davis accountable for his crimes, but the investors he deceived will suffer for decades because of his greed and deceit.”

“Dozens of investors and their families lost millions of dollars because they put their trust in an investment firm that lied about its performance,” said Acting U.S. Attorney Cohen.  “The deception of Donovan Davis Jr. and the others involved in this scheme caused great personal and financial harm to people, including many who lost their retirement savings.  Today’s sentence reflects the seriousness of the defendant’s greedy, deceptive conduct and underscores our commitment to prosecuting those who commit financial crimes.  I commend the prosecutors from here in D.C. who held these criminals accountable for their deception in a Florida courthouse.”

“Today’s sentencing demonstrates how federal law enforcement will band together to help put an end to the criminal behavior of those who prey on investors to unjustly enrich themselves,” said Special Agent in Charge Lappin.  “IRS Criminal investigation and our law enforcement partners will relentlessly pursue those who mastermind and perpetrate investment fraud schemes.”

According to evidence presented at trial, Davis was the managing member of Capital Blu Management LLC, a Florida-based corporation that purported to offer investment and managed account services for investors in the off-exchange foreign currency, or “forex,” marketplace.  In 2007 and 2008, Davis solicited relatives, friends and associates to invest in Capital Blu.

In or about September 2007, according to evidence presented at trial, Davis and his co-conspirators formed the CBM FX Fund LP, which pooled investors’ money into a common fund to be traded by Capital Blu Management.  Many of Capital Blu’s managed-account investors transferred their investments into the CBM FX Fund.

According to the evidence presented at trial, CBM FX Fund had sustained significant trading losses, resulting in large losses for its investors.  Nevertheless, the evidence demonstrated that Davis and his co-conspirators made a series of misrepresentations to the investors about Capital Blu’s trading performance, the value of the fund and the risks of the fund.

For example, according to the evidence presented at trial, the Davis and his co-conspirators informed CBM FX Fund’s investors of positive monthly returns from January through August of 2008, even though the fund and its investors had sustained net losses of millions of dollars.  In addition, they diverted investors’ money from the fund to pay for Capital Blu’s operational expenses and personal expenses, including their own six-figure salaries and payments for the use of private airplanes and luxury cars.

In or about September 2008, the National Futures Association, an independent self-regulatory organization that oversees commodities and futures trading in the United States, conducted a surprise audit of Capital Blu and suspended its operations.  As of September 2008, investors had invested over $16.9 million into the CBM FX Fund and lost over $13 million.

Co-defendant  Blayne S. Davis (no relation to Donovan Davis Jr.), 34, formerly of Naples, Florida, pleaded guilty in July 2014 to conspiracy to commit mail and wire fraud, and was sentenced to nine years in prison and ordered to pay $13,215,874 in restitution.  Co-defendant Damien L. Bromfield, 39, of Ocoee, Florida, pleaded guilty in November 2013 to conspiracy to commit wire fraud and is awaiting sentencing.

The case was investigated by a task force consisting of agents from the Internal Revenue Service-Criminal Investigation; U.S. Secret Service; Florida Department of Law Enforcement; and Brevard County, Florida, Sherriff’s Office.  Attorneys, agents and accountants from the U.S. Commodity Futures Trading Commission (CFTC), National Futures Association, Bureau of Prisons and U.S. Immigration and Customs Enforcement also provided assistance to the investigation.  A related civil litigation was pursued by the CFTC, which resulted in a civil judgment against the defendants after a trial in 2011.

The case was prosecuted by Trial Attorneys David M. Fuhr and Ephraim Wernick of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jonathan P. Hooks of the District of Columbia.  Assistant U.S. Attorneys Catherine K. Connelly and Anthony Saler of the District of Columbia provided invaluable assistance on asset forfeiture matters.

Four Individuals Sentenced for Biodiesel Production Fraud

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Dean Daniels, 52, Richard Smith, 57, Brenda Daniels, 45 and William Bradley, 58, all of Florida, pleaded guilty and were sentenced today in U.S. district court for charges related to a scheme involving the false production of biodiesel.

Dean Daniels was sentenced to 63 months incarceration, Bradley was sentenced to 51 months incarceration, Smith was sentenced to 41 months incarceration and Brenda Daniels was sentenced to 366 days incarceration. In addition, the court sentenced the defendants to pay $23 million in restitution.

Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division, U.S. Attorney Carter M. Stewart for the Southern District of Ohio, Acting Special Agent in Charge Troy N. Stemen for the Internal Revenue Service Criminal Investigation (IRS) and Acting Special Agent in Charge Jeffrey Martinez of  the Environmental Protection Agency’s (EPA) Criminal Enforcement Program in Ohio and Regional Special Agent in Charge Max D. Smith of the Department of Transportation’s Office of Inspector General announced the sentences handed down today by Senior U.S. District Court Judge James L. Graham.

According to court documents, the defendants profited by unjustly generating and selling biodiesel credits (RINs) and unjustly claiming biodiesel tax credits for the production and blending of fuel that was not actually biodiesel.

“Congress enacted incentives for the production of biofuels to make the United States stronger and more energy independent and to move our energy economy into the 21st century,” said Assistant Attorney General Cruden.  “The fraud perpetrated by the defendants threatens these important public policies.  The Justice Department will vigorously prosecute those seeking to line their pockets using scams like this one.”

The defendants were all employees and officers of New Energy Fuels LLC, a business in Waller, Texas, that claimed to process animal fats and vegetable oils into biodiesel.  The defendants subsequently relocated, operating a similar scheme at Chieftain Biofuels LLC in Logan, Ohio.

The defendants would purchase low-grade feedstock and perform minimal processing to produce a low-grade fuel.  The fuel was not biodiesel, however, the defendants would represent to the EPA that they had produced biodiesel.  They would generate fraudulent biodiesel RINs and sell them to various third parties.  Biodiesel RINs cannot be generated unless the biodiesel produced meets industry standards.  In total, the defendants sold over $15 million worth of fraudulent biodiesel RINs.

The defendants also made false claims to the IRS in order to obtain the biodiesel tax credit that they were not eligible to receive.  Throughout 2009, 2010 and 2011, refundable tax credits were available for renewable fuel producers.  If companies complied with IRS regulations, they could earn one dollar per gallon of biodiesel.  It was illegal to claim this tax credit unless the biodiesel was produced, blended and sold in compliance with rules and regulations.  Among other requirements, the biodiesel had to meet industry standards, which the defendant’s fuel did not.  In total, the defendants claimed over $7 million in false biodiesel tax credits.

In addition, New Energy Fuels’ production process generated substantial hazardous by-products.  Defendant Dean Daniels arranged for an employee of New Energy Fuels to transport the wastes off-site at night.  That employee, Lonnie Perkins, previously pleaded no-contest in Texas to several charges related to the dumping of hazardous waste in and around the city of Houston.

“The Renewable Fuel Standard helps reduce the climate impact of transportation fuel sold in this country,” said Acting Special Agent in Charge Martinez.  “The criminal activity by these defendants has real consequences.  The defendants manipulated and utilized federal governmental programs to line their pockets by fraud.  These guilty pleas demonstrate EPA’s commitment, working closely with our partners at the Department of Justice, to pursue these criminal cases vigorously.  Companies and their managers need to understand there are serious consequences to skirting the rules and undermining the integrity of an EPA program.”

“Today’s sentencings mark the successful end of an investigation that uncovered a complicated fraudulent scheme that generated millions of dollars through false biodiesel tax credits,” said Acting Special Agent in Charge Stemen.  “We want everyone to take advantage of the deductions and credits to which they are entitled by law; however, no one is entitled to defraud the government.”

“The Office of Inspector General is committed to investigating and seeking prosecution of those who choose to endanger the public by illegally transporting, distributing, or disposing of hazardous materials,” said Regional Special Agent in Charge Smith.  “Today’s sentencing should send a clear warning that these fraudulent actions and illegal hazmat violations will not be tolerated.”

Each of the defendants pleaded guilty to conspiracy to commit wire fraud and to defraud the United States.  Dean Daniels also pleaded guilty to offering a hazardous material for transport without providing or affixing proper placards.

Assistant Attorney General Cruden and U.S. Attorney Stewart commended the cooperative investigation by law enforcement, including the Houston Police Department, as well as Department of Justice Trial Attorney Adam Cullman and Assistant U.S. Attorney J. Michael Marous, who represented the United States in this case.

Ambulance Company Owner, Operator and Managers Found Guilty in Medicare Fraud Conspiracy

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A federal jury in Los Angeles late yesterday convicted the former owner, operator and managers of a Southern California ambulance company of health care fraud charges in connection with a Medicare fraud scheme of at least $2.4 million.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, Acting Special Agent in Charge Steve Ryan of the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG) Los Angeles Region and Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Division made the announcement.

Yaroslav Proshak, aka Steven Proshak, 47, of Valley Village, California; Emilia Zverev, 58, of Van Nuys, California; and Sharetta Michelle Wallace, 37, of Inglewood, California, each were convicted of one count of conspiracy to commit health care fraud and five counts of health care fraud following a two-week trial.  Proshak’s sentencing is scheduled for Nov. 24, 2015, and Zverev’s and Wallace’s sentencing is scheduled for Nov. 30, 2015, all before U.S. District Judge S. James Otero of the Central District of California, who presided over the trial.

Proshak owned and operated ProMed Medical Transportation, an ambulance transportation company in the greater Los Angeles area that provided non-emergency ambulance transportation services to Medicare beneficiaries, many of whom were dialysis patients.  Zverev was the billing manager, and Wallace supervised ProMed’s emergency medical technicians (EMTs).

The evidence at trial demonstrated that, between May 2008, and October 2010, the defendants conspired to bill Medicare for ambulance transportation services for individuals whom the defendants knew did not need such services.  In addition, the evidence showed that the defendants instructed EMTs who worked at ProMed to conceal the true medical conditions of patients they were transporting by altering requisite paperwork and creating fraudulent documents to justify the transportation services.

According to evidence admitted at trial, during the course of the conspiracy, ProMed submitted at least $2.4 million in false and fraudulent claims to Medicare for medically unnecessary transportation services.  Medicare paid at least $1.2 million of those claims.

The case 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.  The case was investigated by the FBI and HHS-OIG.  The case was prosecuted by Trial Attorneys Blanca Quintero, Fred Medick and Ritesh Srivastava 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 more than 2,300 defendants who have collectively billed the Medicare program for more than $7 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

U.S. CITIZEN SENTENCED IN CONNECTION WITH COSTA RICA-BASED BUSINESS OPPORTUNITY FRAUD VENTURES

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A U.S. citizen charged in connection with the operation of a series of fraudulent business opportunities based in Costa Rica was sentenced to prison today in Miami, the Justice Department announced.

John White, aka Gregory Garrett, was sentenced by U.S. District Court Judge Patricia A. Seitz of the Southern District of Florida to serve 70 months in prison and five years of supervised release.  White was also ordered to pay $6,412,006.19 in restitution.  White is one of 12 defendants charged in connection with a series of business opportunity fraud ventures that operated in Costa Rica.  Nine of those other defendants have been convicted in the United States with sentences ranging from three to 16 years in prison and the two remaining defendants are not yet in the custody of the United States.

“The defendants in this scheme promised victims the American dream while knowing they in fact were being ripped off,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will continue to prosecute those who would deprive Americans of their savings just so they can make a quick buck.”

White was indicted by a federal grand jury in Miami on Nov. 29, 2011, arrested in Costa Rica in 2012, extradited to the United States in 2015 and pleaded guilty on April 29, 2015, to one count of conspiracy to commit mail and wire fraud in connection with the business opportunity scheme.

As part of his guilty plea, White admitted that from 2005 to 2008, he and his co-conspirators fraudulently induced individuals in the United States to buy business opportunities in USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., Cards-R-Us Inc., Premier Cards Inc. and The Coffee Man Inc.  White and his co-conspirators claimed that these opportunities would allow purchasers to sell coffee or greeting cards from display racks located at other retail establishments.  The business opportunities cost thousands of dollars each, with most purchasers paying at least $10,000.  Each company operated for several months and after one company closed, the next opened.

White admitted that the conspiracy used various means to make it appear to potential purchasers that the businesses were located entirely in the United States.  The companies used bank accounts, office space and other services in the Southern District of Florida and elsewhere.  In reality, White and his co-conspirators operated out of call centers in Costa Rica.

White admitted that he and his co-conspirators made numerous false statements to potential purchasers of the business opportunities, including that purchasers likely would earn substantial profits; that prior purchasers of the business opportunities were earning substantial profits; that purchasers would sell a guaranteed minimum amount of merchandise, such as greeting cards and beverages; and that the business opportunity worked with locators familiar with the potential purchaser’s area who would secure or had already secured high-traffic locations for the potential purchaser’s merchandise stands.  Potential purchasers also were falsely told that the profits of the companies were based in part on the profits of the business opportunity purchasers, thus creating the false impression that the companies had a stake in the purchasers’ success and in finding good locations.

As alleged in the indictment against White and others, the companies employed various types of sales representatives, including fronters, closers and references.  A fronter spoke to potential purchasers when the prospective purchasers initially contacted the company in response to an advertisement.  A closer subsequently spoke to potential purchasers to close deals and references spoke to potential purchasers about the financial success they had purportedly experienced since purchasing one of the business opportunities.  The companies also employed locators, who were typically characterized by the sales representatives as third parties who worked with the companies to find high-traffic locations for the prospective purchaser’s merchandise display racks.  White admitted that he worked as a fronter and reference using aliases.

“This international and domestic investigation shows the Postal Inspection Service’s resolve to protect Americans from business opportunity scams,” said Postal Inspector in Charge Ronald Verrochio of the U.S. Postal Inspection Service (USPIS) Miami Division.

Principal Deputy Assistant Attorney General Mizer commended the investigative efforts of USPIS.  The case is being prosecuted by Trial Attorney Alan Phelps of the Civil Division’s Consumer Protection Branch.

Leader of Coupon Counterfeiting Ring on Silk Road Websites Pleads Guilty

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A leader of a coupon counterfeiting ring pleaded guilty today to participating in a conspiracy to sell counterfeit coupons using the “Silk Road” online marketplace, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth A. Polite of the Eastern District of Louisiana.

Beau Wattigney, 30, New Orleans, pleaded guilty before U.S. District Judge Ivan L.R. Lemelle of the Eastern District of Louisiana to conspiracy to commit wire fraud and conspiracy to commit trademark counterfeiting.  Sentencing has been scheduled for Oct. 28, 2015.

In connection with his plea, Wattigney admitted that, between May 2012 and November 2014, he used the online monikers “PurpleLotus” and “GoldenLotus” to sell counterfeit coupons for various goods and services on Silk Road 1.0, which was a hidden website through which users around the world bought and sold illegal drugs, goods and services.  Wattigney further admitted that he engaged in the same conduct on Silk Road 2.0, a successor to Silk Road 1.0, using the monikers “PurpleLotus” and “CouponKing.”

The coupons allowed purchasers to obtain significant discounts on a variety of goods and services offered by the victim companies, including Hopster, Veri-fi, SmartSource, RedPlum and Visa.  For example, Wattigney sold a counterfeit coupon that allowed users to purchase $50.00 Visa Gift Cards for $0.01 each.

Wattigney admitted that he created and manufactured the fraudulent coupons with the assistance of several co-conspirators, and that they designed the coupons to look like original print-at-home manufacturers’ coupons by using the companies’ trademarks.  He also admitted that the scheme affected more than 50 U.S.-based businesses, and caused or attempted to cause more than one million dollars in intended losses.

The investigation is being conducted by the FBI Philadelphia Division, with assistance from the FBI New Orleans Field Office.  The case is being prosecuted by Senior Counsel Marie-Flore Johnson, Gavin Corn and Robert Wallace of the Criminal Division’s Computer Crime and Intellectual Property Section, and Assistant U.S. Attorney Jordan Ginsberg of the Eastern District of Louisiana.

After Nearly 20 Years, International Fugitive in Multi-Million Dollar Fraud Scheme Apprehended in Greece and Extradited to United States to Serve Prison Sentence

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WASHINGTON – A former New York businessman, who disappeared the same day a federal jury sitting in the U.S. District Court in Newark, New Jersey, began deliberating in his tax evasion and fraud trial, was caught while in Greece more than 18 years after his conviction, and appeared in federal court in the District of New Jersey on Friday, July 17, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Gideon Misulovin, 58, whose last known address was in New York City, was extradited from Greece to the United States to serve his 10-year prison sentence.  He has been incarcerated in the United States since his return on July 16.

On March 7, 1996, a jury convicted Misulovin of conspiracy to impede and impair the Internal Revenue Service (IRS) in the ascertainment and collection of more than $6.5 million in federal motor fuel excise taxes, wire fraud and money laundering stemming from a scheme to conceal the unpaid diesel fuel excise taxes from state and federal tax authorities.

During trial, Misulovin was free on $500,000 bail and attended each day of the trial.  He failed to appear in court March 4, 1996, for the parties’ closing arguments.  U.S. Senior District Judge Dickinson R. Debevoise of the District of New Jersey in Newark issued a warrant for his arrest.  On June 25, 1997, Judge Debevoise sentenced Misulovin in absentia to serve 10 years in prison and a three-year term of supervised release, and to pay a $150,000 fine.  The court also ordered Misulovin to pay restitution in the amount of $200,000 to the United States and $100,000 to the state of New Jersey.

The evidence at trial established that from 1988 through Jan. 31, 1993, Misulovin and his co-conspirators sold untaxed diesel fuel in a series of paper transactions using wholesale companies.  Some of the companies were shams and called “burn” or “butterfly” companies.  As part of the scheme, the sham company would assume the federal and state tax liability and then vanish, allowing the conspirators to keep the excise taxes they collected from truck stops and service stations.

The case, part of a then-nationwide motor fuel excise tax enforcement effort, was investigated jointly by the Motor Fuel Task Force and the U.S. Attorney’s Office of the District of New Jersey.  In an effort to infiltrate the bootleg gasoline industry, task force agents set up an undercover business called RLJ Management that competed directly with the defendants’ operation.

At the conclusion of the undercover operation, in November 1992, federal agents seized Misulovin’s assets, including approximately $70,000 in cash from his residence and $277,000 from his business bank account.

Misulovin’s co-defendant and co-conspirator, Arnold Zeidenfeld, of Brooklyn, New York, pleaded guilty prior to trial and testified for the government.  Gurmit Singh and Manbir Singh, of Matawan, New Jersey, who operated truck stops in southern New Jersey, also pleaded guilty for their roles in the scheme.

In August 2014, based on an Interpol Red Notice, Misulovin was detained in a Greek airport using an alias and traveling with an Israeli passport.  He was subsequently arrested pursuant to a U.S. request for a provisional arrest, and after contested extradition proceedings, was found extraditable in 2015.

The task force included attorneys from the Tax Division and agents from the IRS Criminal Investigation and Examination Divisions, the FBI, the U.S. Department of Transportation and the New Jersey State Department of Taxation and Finance.  Seth D. Uram, formerly a Trial Attorney in the Tax Division and now an Assistant U.S. Attorney in Portland, Oregon, and Trial Attorney Charles A. O’Reilly of the Tax Division prosecuted the case.

Acting Assistant Attorney General Ciraolo thanked the Department of Justice’s Office of International Affairs, the FBI’s New Jersey Field Office and the Greek Ministry of Justice for their assistance in apprehending and extraditing Misulovin.  Ciraolo also thanked the U.S. Attorney’s Office of the District of New Jersey for their substantial assistance.

Owner of Detroit Home Health Care Companies Sentenced to 80 Months in Prison for Role in $12.6 Million Fraud Scheme

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A Michigan resident was sentenced to 80 months in prison late yesterday for his leading role in a $12.6 million Medicare fraud and tax fraud scheme.  Eleven other individuals have been convicted in this case.

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, 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 and Special Agent in Charge Jarod Koopman of the Internal Revenue Service-Criminal Investigation (IRS-CI) Detroit Field Office made the announcement.

Mohammed Sadiq, 67, of Oakland County, Michigan, pleaded guilty on March 13, 2015, to one count of health care fraud and one count of filing a false tax return.  In addition to imposing the prison term, U.S. District Judge Denise Page Hood of the Eastern District of Michigan ordered Sadiq to pay $14.1 million in restitution and entered a forfeiture judgment for the same amount, which represents the proceeds traceable to his criminal conduct.

Sadiq owned and directed operations at two home health care companies in Detroit.  In connection with his guilty plea, Sadiq admitted that, working with co-conspirators, he billed Medicare for home health services that were not provided.  Sadiq also admitted to paying kickbacks to patient recruiters in order to obtain the information of Medicare beneficiaries, which he then used to bill Medicare for services that were not medically necessary or were not provided at all.  Sadiq further admitted that he created fake patient files to fool a Medicare auditor by making it appear as if home health services were provided and medically necessary.  Medicare paid $12.6 million for these services.

In connection with his guilty plea, Sadiq also admitted that he received proceeds of the fraud through bank accounts that he controlled, that he withdrew substantial sums for his personal use and that he failed to report these amounts on his individual federal income tax return in 2008.  In total, Sadiq admitted that he owes approximately $1.5 million in taxes, interest and penalties for tax years 2008 through 2010.

This case was investigated by the FBI, HHS-OIG and IRS-CI, 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 of the Eastern District of Michigan.  The case is being prosecuted by Trial Attorneys William Kanellis, Christopher Cestaro, Brooke Harper and Elizabeth Young of the Criminal Division’s Fraud Section, as well as Assistant U.S. Attorney Patrick Hurford of 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 nearly 2,300 defendants who have collectively billed the Medicare program for more than $7 billion.  In addition, HHS’ Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Six Nigerian Nationals Extradited from South Africa to Mississippi to Face Fraud Charges

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Six Nigerian nationals were extradited from South Africa to Gulfport, Mississippi, to face a nine-count federal indictment in the Southern District of Mississippi alleging various Internet fraud schemes.  A total of 20 defendants are charged in this case.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Gregory K. Davis of the Southern District of Mississippi made the announcement.

Oladimeji Seun Ayelotan, 30; Rasaq Aderoju Raheem, 31; Olusegun Seyi Shonekan, 33; Taofeeq Olamilekan Oyelade, 30; Olufemi Obaro Omoraka, 26; and Anuoluwapo Segun Adegbemigun, 39, are charged along with 15 others in an Oct. 7, 2014, indictment with conspiracy to commit mail fraud, wire fraud, bank fraud, conspiracy to commit identity theft, use of unauthorized account access devices, theft of U.S. government funds and conspiracy to commit money laundering.  The charges stem from the defendants alleged participation in numerous Internet-based complex financial fraud schemes, including romance scams, re-shipping scams, fraudulent check scams and work-at-home scams, as well as bank, financial and credit card account takeovers.

According to the allegations in the indictment, from as early as 2001, the defendants identified and solicited potential victims through online dating websites and work-at-home opportunities.  In some instances, the defendants allegedly carried on fictitious online romantic relationships with victims for the purpose of using the victims to further certain objectives of the conspiracy.  For example, the indictment alleges that the defendants convinced victims to ship and receive merchandise purchased with stolen personal identifying information (PII) and compromised credit card and banking information, to deposit counterfeit checks, and to transfer proceeds of the conspiracy via wire, U.S. mail or express delivery services.

To date, defendants Teslim Olarewaju Kiriji, 30; Olutoyin Ogunlade, 41; and Dennis Brian Ladden, 75, have been convicted of offenses relating to their roles in the schemes.  Defendants Susan Anne Villeneuve, 49; and Genoveva Farfan, 45; Sesan Olumide Farin, 40; Femi Alexander Mewase, 44; Rhulane Fionah Hlungwane, 24; and Adekunle Adefila, 40, are awaiting trial.  The United States is seeking extradition from Nigeria of defendants Kayode Bamidele, Ajayi Oluwaseyi Stephen and Emmanuel Adeniyi Osokomaiya.  Defendants Gabriel Oludare Adeniran and Oduntan Sikiru Lawani remain fugitives.

The charges and allegations in the indictment are merely accusations.  A defendant is presumed innocent until and unless proven guilty.

This case is being investigated by Homeland Security Investigations (HSI) and the U.S. Postal Inspection Service.  Significant assistance was also provided by the Criminal Division’s Office of International Affairs, the HSI Cyber Crimes Center, HSI Attachés in Pretoria and Dakar, U.S. Marshals Service’s International Investigations Branch and the Southern District of Mississippi, the South African Police Service (SAPS) Directorate of Priority Crimes Investigation (DPCI) Electronic Crimes Unit, the SAPS Interpol Extradition Unit, the South African National Prosecution Authority, and the South African Department of Justice and Constitutional Development.  The case is being prosecuted by Trial Attorney Robert Tully of the Criminal Division’s Organized Crime Gang Section and Assistant U.S. Attorneys Annette Williams and Scott Gilbert of the Southern District of Mississippi.

 

Investment Company Executives Indicted for $1.5 Billion Ponzi Scheme

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The president and chief executive officer and two former Asia-based executives of a Las Vegas investment company were indicted today for their roles in an alleged $1.5 billion Ponzi scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Special Agent in Charge Laura A. Bucheit of the FBI’s Las Vegas Division made the announcement.

“The defendants allegedly preyed on thousands of unsuspecting Japanese victims to enrich themselves by operating a billion-plus dollar Ponzi scheme,” said Assistant Attorney General Caldwell.  “This prosecution shows that the Criminal Division will pursue not only those who victimize American citizens, but also those who use the U.S. as a home base to defraud victims abroad.”

“Investment fraud and other financial fraud cases are a high priority for the U.S. Attorney’s Office in Nevada,” said U.S. Attorney Bogden.  “These defendants are accused of using a Nevada corporation to conduct their $1.5 billion fraud scheme and falsely telling thousands of overseas victims that their investments would be safely held and managed by an independent, third-party escrow agent in Nevada.  Fraudulent ruses and schemes perpetrated by Nevadans using Nevada corporations and entities will continue to be addressed by this office.”

“These indictments are a reminder of the FBI’s determination to identify, investigate and bring to justice those who are committing financial crimes against innocent consumers,” said Special Agent in Charge Bucheit.  “We are appreciative of the continued support we receive from our international, federal, state and local law enforcement partners.”

Edwin Fujinaga, 68, of Las Vegas; Junzo Suzuki, 66, of Tokyo; and Paul Suzuki, 36, of Tokyo, were charged in an indictment with eight counts of mail fraud and nine counts of wire fraud.  Fujinaga also is charged with three counts of money laundering.  The indictment seeks from all three defendants forfeiture of the proceeds from the alleged crimes.

Fujinaga was the president and CEO of Las Vegas-based MRI International Inc. (MRI).  Junzo Suzuki previously was MRI’s executive vice president for Asia Pacific, and Paul Suzuki previously was the company’s general manager for Japan operations.  MRI purportedly specialized in “factoring,” whereby the company purchased accounts receivable from medical providers at a discount, and then attempted to recover the entire amount, or at least more than the discounted amount, from the debtor.

According to allegations in the indictment, from at least 2009 to 2013, Fujinaga and the Suzukis fraudulently solicited investments from thousands of Japanese residents, and MRI currently owes investors over $1.5 billion.  Specifically, the indictment alleges that Fujinaga and the Suzukis promised investors a series of interest payments that would accrue over the life of the investment and that would be paid out along with the face value of the investment at the conclusion of the investments’ duration.  The defendants allegedly solicited investments by, among other things, promising investors that their investments would be used only for the purchase of medical accounts receivable (MARS) and by representing that investors funds would be managed and safeguarded by an independent third-party escrow company.

The indictment further alleges that MRI operated as a Ponzi scheme, wherein the defendants used new investors’ money to pay prior investors’ maturing investments.  According to the indictment, the defendants also allegedly used investors’ funds for purposes other than the purchase of MARS, including paying themselves sales commissions, subsidizing gambling habits, funding personal travel by private jet, and other personal expenses.

The charges contained in an indictment are merely accusations.  A defendant is presumed innocent until and unless proven guilty.

This case is being investigated by the FBI’s Las Vegas Division.  Significant assistance was provided by the U.S. Securities and Exchange Commission, the Criminal Division’s Office of International Affairs and Japanese authorities.  This case is being prosecuted by Assistant Chief Albert B. Stieglitz Jr. and Trial Attorney Melissa Aoyagi of the Criminal Division’s Fraud Section and First Assistant U.S. Attorney Steven W. Myhre of the District of Nevada.

If you believe you are a victim of this offense, please click on the following link for more information: justice.gov/usao-nv/united-states-v-edwin-fujinaga-junzo-suzuki-and-paul-suzuki-mri.