Category Archives: Fraud

Nurse Practitioner and Physician Indicted in Compounding Pharmacy Fraud Schemes

Posted on by

Tuesday, October 24, 2017

A Mississippi-based nurse practitioner was charged in an indictment unsealed today for her role in a multi-million dollar scheme to defraud TRICARE, the health care benefit program serving U.S. military, veterans and their respective family members.  A Mississippi-based physician was charged in a separate indictment filed last week for his role in a similar scheme.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, U.S. Attorney Mike Hurst of the Southern District of Mississippi, Special Agent in Charge Christopher Freeze of the FBI’s Jackson, Mississippi Field Division and Special Agent in Charge Jerome R. McDuffie of the Internal Revenue Service Criminal Investigation (IRS-CI) New Orleans Field Office made the announcement.

Susan Perry N.P., 58, of Grand Bay, Alabama, and Albert Diaz M.D., 78, of Ocean Springs, Mississippi, were charged in separate indictments returned on Oct. 18, in the Southern District of Mississippi, in Hattiesburg.  Perry’s indictment was unsealed upon her arrest and initial appearance today before U.S. Magistrate Judge John Gargiulo of the Southern District of Mississippi.  Perry is scheduled to be arraigned on Oct. 25, at 10:30 a.m., and Diaz is scheduled to be arraigned on Nov. 1, at 10:30 a.m., both before Judge Gargiulo.

Perry was charged in a 13-count indictment with one count of conspiracy to commit health care fraud and wire fraud, four counts of wire fraud, one count of conspiracy to distribute and dispense a controlled substance, one count of distributing and dispensing of a controlled substance, one count of conspiracy to solicit and receive healthcare kickbacks, four counts of soliciting and receiving healthcare kickbacks and one count of making false statements.  Diaz was charged in a 16-count indictment with one count of conspiracy to commit health care fraud and wire fraud, four counts of wire fraud, one count of conspiracy to distribute and dispense a controlled substance, four counts of distributing and dispensing a controlled substance, one count of conspiracy to falsify records in a federal investigation and five counts of falsification of records in a federal investigation.

The indictments allege that both Perry and Diaz participated in schemes to defraud TRICARE by prescribing medically unnecessary compounded medications, some of which included Ketamine, a controlled substance, to individuals they had not examined, for the purpose of having a Hattiesburg-based compounding pharmacy dispense these medically unnecessary compounded medications and to seek reimbursement from TRICARE.  According to the indictments, between February 2013 and October 2016, TRICARE reimbursed the compounding pharmacy more than $3.3 million for compounded medications prescribed by Perry, and between October 2014 and December 2015, TRICARE reimbursed the compounding pharmacy more than $2.3 million for compounded medications prescribed by Diaz.  Additionally, Perry is alleged to have received more than $50,000 in kickback payments from a marketer for the compounding pharmacy in return for prescribing the compounded medications, as well as having made false statements to the FBI.   Diaz is alleged to have submitted falsified patient records in response to an audit conducted by TRICARE to make it appear as though he had examined patients before prescribing the compounding medications.

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

The FBI, IRS-CI, the Defense Criminal Investigative Service, the U.S. Department of Health and Human Services Office of Inspector General, the Mississippi Bureau of Narcotics and other government agencies investigated the case.  Trial Attorneys Dustin M. Davis, Katherine Payerle and Jared Hasten of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mary Helen Wall of the Southern District of Mississippi are prosecuting the case.

The Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.  The Medicare Fraud Strike Force operates in nine locations nationwide.  Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

Former Global Head of HSBC’s Foreign Exchange Cash-Trading Found Guilty of Orchestrating Multimillion-Dollar Front-Running Scheme

Posted on by

Monday, October 23, 2017

The former head of global foreign exchange cash trading at HSBC Bank plc, a subsidiary of HSBC Holdings plc (collectively HSBC), was found guilty today for his role in a scheme to defraud an HSBC client through a multimillion-dollar scheme commonly referred to as “front running.”

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Bridget M. Rohde of the Eastern District of New York, Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation (FDIC) and Assistant Director in Charge Andrew Vale of the FBI’s Washington Field Office made the announcement.

Mark Johnson, 51, a United Kingdom citizen with residences both in the U.K. and the United States, was found guilty after a four-week jury trial of one count of conspiracy to commit wire fraud and eight counts of wire fraud.  Sentencing date has not been scheduled.  U.S. District Judge Nicholas G. Garaufis of the Eastern District of New York presided over the trial.  Johnson was arrested on a criminal complaint in July 2016 and indicted in August 2016.

“This verdict makes clear that the defendant corruptly manipulated the foreign exchange market for the benefit of his bank and his bonus pool, to the detriment of the bank’s client,” said Acting Assistant Attorney General Blanco.  “This case demonstrates the Criminal Division’s commitment to protecting the financial system from harm, and holding corporate executives, including at the world’s largest and most sophisticated financial institutions, responsible for their crimes.”

“The jury found that former HSBC banker Mark Johnson exploited confidential information provided by a client of the bank to execute trades that were intended to generate millions of dollars in profits for him and the bank at the expense of their client,” said Acting U.S. Attorney Rohde.  “This Office, together with its law enforcement partners, will continue to vigorously investigate and prosecute those who would so abuse their client relationships and, more generally, undermine public confidence in the operation of the financial markets by engaging in fraudulent schemes.”

“This case involved a complex fraud scheme to ‘front run’ a foreign exchange transaction in order to generate millions of dollars in illicit profits for HSBC, which also indirectly benefited individual traders,” said Inspector General Lerner. “Such cases are challenging, but important, to bring against bank insiders who misuse their positions and undermine the integrity of a major international financial institution.”

“Mark Johnson misused confidential information to manipulate currency prices and defrauded a client out of more than $7 million,” said Assistant Director in Charge Vale.  “The American people need to be assured that we are working vigorously to ensure integrity is upheld in financial services industries.  We will continue to work with our law enforcement partners to investigate and prosecute those who engage in illegal business practices.”

According to the evidence presented at trial, in November and December 2011, Johnson cheated an HSBC client out of millions of dollars by misusing information provided to him by a client that hired HSBC to execute a foreign exchange transaction related to a planned sale of one of the client’s foreign subsidiaries.  HSBC was selected to execute the foreign exchange transaction – which was going to require converting approximately $3.5 billion in sales proceeds into British Pound Sterling – in October 2011.  HSBC’s agreement with the client required the bank to keep the details of the client’s planned transaction confidential.  Instead, Johnson misused confidential information he received about the client’s transaction to cheat the client out of millions of dollars, the evidence showed.

Shortly before the transaction, which occurred in December 2011, Johnson and other traders acting under his direction purchased Pound Sterling for their own benefit in their HSBC “proprietary” accounts.  Johnson then caused the $3.5 billion foreign exchange transaction to be executed in a manner that was designed to “ramp,” or drive up, the price of the Pound Sterling, benefiting their proprietary positions and HSBC at the expense of their client.

As part of their scheme, Johnson and his co-conspirators made misrepresentations to the client about the transaction that concealed the self-serving nature of their actions.  In total, Johnson and the traders he supervised generated HSBC profits of roughly $7.5 million from the execution of the FX  transaction for the victim company.

The investigation was conducted by the FDIC’s Office of Inspector General and the FBI’s Washington Field Office.  The Criminal Division’s Office of International Affairs provided significant support.  Assistant Chiefs Carol Sipperly and Brian Young and Trial Attorney Blake Goebel of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Lauren Elbert of the Eastern District of New York’s Business and Securities Fraud Section are prosecuting the case.

The Fraud Section plays a pivotal role in the Department of Justice’s fight against white collar crime around the country, focusing on cases of national significance and international scope.  Fraud Section prosecutors have vast experience in investigating and prosecuting securities and financial fraud, health care fraud and foreign corruption.  The Section is routinely the national leader in large, sophisticated white collar investigations and prosecutions, frequently in partnership with U.S. Attorneys’ Offices and in coordination with foreign law enforcement agencies.  Learn more about the Criminal Division’s Fraud Section at: https://www.justice.gov/criminal-fraud.

Roofing Company Owner and Former Facilities Manager at Sierra Army Depot Indicted for Conspiracy to Defraud the United States

Posted on by

Friday, October 20, 2017

Government Seeks Forfeiture of Proceeds Resulting From Conspiracy

A federal grand jury in the Eastern District of California returned an indictment yesterday against two individuals for allegedly conspiring to defraud the United States, the Department of Justice announced.

The indictment alleges that Kenneth Keyes, a former facility manager at Sierra Army Depot (SIAD), and Leroy Weber, the owner of a roofing company, participated in a conspiracy to defraud the United States from as early as February 2012, and continuing through at least July 23, 2013, by obstructing the lawful functions of the United States Army through deceitful or dishonest means.

“Yesterday’s indictment demonstrates the Antitrust Division’s commitment to pursuing individuals who seek to enrich themselves by misusing federal programs at the expense of taxpayers,” said Assistant Attorney Makan Delrahim of the Justice Department’s Antitrust Division.

SIAD is a United States Army facility located in Northern California.  In 2012, SIAD earmarked $40 million for construction and renovation projects at its site using contractors who qualified under the Small Business Administration’s 8(a) Development Program.  The program provides assistance and benefits to small businesses owned and controlled by socially and economically disadvantaged individuals.

The indictment alleges that Keyes, Weber, and other unidentified co-conspirators:

  • Recruited eligible 8(a) contractors to work as primary contractors at SIAD;
  • Represented to those contractors that Weber controlled the work and allocation of SIAD contract awards;
  • Caused prime contracts to be assigned to selected 8(a) contractors;
  • Used proprietary government pricing information to inflate contract prices for the SIAD contracts;
  • Required selected 8(a) contractors to award work to companies owned or controlled by Weber; and
  • Required a contractor to pay Weber in exchange for being awarded certain subcontracts by 8(a) contractors.

The indictment also alleges that Weber caused a company under his control to issue weekly paychecks to a relative of Keyes, and himself caused $10,000 to be paid directly to Keyes.

The purpose of this conspiracy was to enable Keyes and Weber to unjustly enrich themselves and their family members by diverting government funds intended to rebuild and repair the SIAD Army facility to themselves and their companies.

An indictment merely alleges that crimes have been committed and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.  Weber and Keyes each face a maximum penalty of 5 years in prison and a fine of $250,000.

The charges are the result of an ongoing federal antitrust investigation handled by the Department of Justice Antitrust Division’s San Francisco Office with assistance from the U.S. Small Business Administration Office of Inspector General, the U.S. Army Criminal Investigation Command, and the General Services Administration Office of Inspector General.  Anyone with information concerning the conspiracy should contact the Antitrust Division’s San Francisco Office at 415-934-5300.

New York Businessman Charged in Telemarketing-Related Fraud and Identity Theft Scheme

Posted on by

Thursday, October 5, 2017

A New York businessman was arrested today for overseeing a scheme to forge hundreds of thousands of counterfeit documents containing improperly obtained personal information, which he allegedly sold to his clients, who then allegedly provided this information to telemarketers.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Bridget M. Rohde of the Eastern District of New York, Special Agent in Charge Richard T. Thornton of the FBI’s Minneapolis Field Office, Special Agent in Charge Christopher Combs of the FBI’s San Antonio Field Office and FBI Assistant Director in Charge William F. Sweeney, Jr. of the New York Field Office made the announcement.

William Patrick Nanry, 55, of Pearl River, New York, was charged on Tuesday, October 3, in an indictment filed in the Eastern District of New York with one count of conspiracy to commit wire and mail fraud, one count of mail fraud, one count of identity theft and one count of aggravated identity theft.

According to the indictment, Nanry operated a business selling “sweepstakes leads,” which are documents listing the phone numbers and personal information of individuals who have responded to mass mailings notifying recipients that they may have won, or were likely to win, expensive prizes and enormous cash payouts.  Such information is highly valued by fraudulent telemarketers, who seek to identify individuals who may be susceptible to questionable pitches.

The indictment alleges that beginning in approximately 2009, Nanry acquired lists of names and contact information for hundreds of thousands of people—primarily senior citizens— and used this information to create fake sweepstakes leads, which he then sold to his clients as authentic.  The indictment further alleges that Nanry directed a team of employees and associates to write the personal information of the victims onto the counterfeit sweepstakes forms, even though the victims had not agreed to this use, and even though many of the victims had never responded to a sweepstakes mailing.  Nanry allegedly directed these employees and associates to vary their handwriting, to use a large number of pens in varying colors, and to take other actions to make the fake leads appear authentic.  According to the indictment, the counterfeit sweepstakes leads were then sold to Nanry’s clients, who provided them to telemarketers, who then contacted the people named in the leads.  Many of these fake sweepstakes leads allegedly ended up in the hands of telemarketers who attempted to defraud the victims.  Some of the individuals who had their information misused by Nanry were ultimately defrauded by scam telemarketers.

Over the duration of the scheme, Nanry earned over $1.7 million by selling fake sweepstakes leads to his clients, the indictment alleges.

An indictment is merely an allegation and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The FBI is investigating this matter.  Timothy A. Duree and Tracee Plowell of the Criminal Division’s Fraud Section are prosecuting the case

Former Congressional Staffer Pleads Guilty to Extensive Fraud and Money Laundering Scheme

Posted on by

Wednesday, October 11, 2017

A former congressional staffer pleaded guilty today for his role in  orchestrating a scheme to steal hundreds of thousands of dollars from charitable foundations and the individuals who ran those foundations to pay for personal expenses and to illegally finance a former congressman’s campaigns for public office, announced Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division and Acting U.S. Attorney Abe Martinez of the Southern District of Texas.

Jason T. Posey, 46, formerly of Houston, and currently residing in Mississippi, pleaded guilty to one count of mail fraud, one count of wire fraud and one count of money laundering before Chief U.S. District Judge Lee H. Rosenthal of the Southern District of Texas.  Sentencing is set for March 29, 2018.

According to admissions made in connection with Posey’s plea, Posey served as director of special projects and treasurer of the congressional campaign committee for former U.S. Congressman Stephen E. Stockman, 60, of the Houston, Texas area, from in or around January 2013 until in or around November 2013.  Posey admitted that, at Stockman’s direction, he and another congressional staffer, Thomas Dodd, 38, of the Houston, Texas area, illegally funneled $15,000 of charitable proceeds into Stockman’s campaign bank account and caused the campaign to file reports with the Federal Election Commission (FEC) that falsely stated that the money was a contribution from their parents and from the staffers themselves.  According to Posey’s admissions, Stockman also directed Posey to send a letter to a charitable donor that falsely stated that the donor’s $350,000 donation had been used to support a charitable endeavor, when in fact the funds were actually used for other purposes, including Stockman’s campaigns for public office.

In connection with his plea, Posey also admitted that he and Stockman raised $450,571.65 to support Stockman’s 2014 Senate campaign by falsely representing to a donor that the funds would be used to support a legitimate independent expenditure by an independent advocacy group Posey created.  In fact, Posey admitted that Stockman personally directed and supervised the activities of the purportedly independent group, including the printing and mailing of hundreds of thousands of copies of a pro-Stockman publication to Texas voters.  Posey also admitted that he submitted a false affidavit to the FEC in order to conceal the scheme.

Dodd pleaded guilty on March 20 to conspiracy to commit mail and wire fraud and conspiracy to make illegal conduit contributions and false statements to the FEC.  Stockman’s trial is scheduled to begin on Jan. 29, 2018.  The charges and allegations in this case are merely accusations.  Stockman is presumed innocent until proven guilty.

The FBI and IRS-CI are investigating the case.  Trial Attorneys Ryan J. Ellersick and Robert J. Heberle of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Melissa Annis of the Southern District of Texas are prosecuting the case.

Chief Executive Officer of Armored Vehicle Company Convicted of Defrauding the United States

Posted on by

Tuesday, October 10, 2017

A federal jury convicted the owner and chief executive officer of an armored vehicle company for his role in a scheme to provide the U.S. Department of Defense with armored gun trucks that did not meet ballistic and blast protection requirements set out in the company’s contracts with the United States.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division; Acting U.S. Attorney Rick A. Mountcastle of the Western District of Virginia; Special Agent in Charge Adam S. Lee of the FBI’s Richmond, Virginia Field Office and Special Agent in Charge Robert E. Craig Jr. of the Defense Criminal Investigative Service’s (DCIS) Mid-Atlantic Field Office, made the announcement.

William Whyte, 72, of King City, Ontario, the owner and CEO of Armet Armored Vehicles of Danville, Virginia, was found guilty after a two-week trial of three counts of major fraud against the United States, three counts of wire fraud and three counts of criminal false claims.  Whyte was charged by an indictment in July 2012.  Following the verdict, Senior U.S. District Judge Jackson L. Kiser of the Western District of Virginia, who presided over the trial, remanded Whyte into custody pending a full bond hearing.  A sentencing date has not yet been scheduled.

Evidence at trial demonstrated that Whyte executed a scheme to defraud the United States by providing armored gun trucks that were deliberately underarmored.  According to the trial evidence, Armet contracted to provide armored gun trucks for use by the United States and its allies as part of the efforts to rebuild Iraq in 2005.  Despite providing armored gun trucks that did not meet contractual specifications, Whyte and his employees represented that the armored gun trucks were adequately armored in accordance with the contract, the evidence showed.  Armet was paid over $2 million over the course of the scheme, including an $824,000 advance payment that the United States made after Whyte personally promised the United States that he would use the money in furtherance of the contract, the evidence showed.

The case was investigated by DCIS and the FBI.  The case is being prosecuted by Trial Attorney Caitlin Cottingham of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Heather Carlton of the Western District of Virginia.  

Real Estate Investor Pleads Guilty to Bid Rigging in Northern California Public Foreclosure Auctions

Posted on by

Friday, October 6, 2017

Investigations Have Yielded 63 Plea Agreements to Date

A real estate investor pleaded guilty for his role in a conspiracy to rig bids at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

Jim Appenrodt pleaded guilty to two counts of bid rigging in U.S. District Court for the Northern District of California in San Francisco. Appenrodt was charged in an indictment returned by a federal grand jury on October 22, 2014.

According to court documents, Appenrodt participated in a conspiracy to rig bids by agreeing to refrain from bidding against other coconspirators at public real estate foreclosure auctions in San Francisco County and San Mateo County from as early as August 2008 until January 2011.

“The Antitrust Division has prosecuted scores of real estate investors who, for their own benefit and profit, conspired to corrupt the bidding process at foreclosure auctions,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division.  “Today’s guilty plea demonstrates the Division’s continued commitment to bringing to justice the individuals who committed these crimes.”

Today’s guilty plea is the result of the Department’s ongoing investigation into bid rigging at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties, California. To date, 63 individuals have agreed to plead or have pleaded guilty.

These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco. Anyone with information concerning bid rigging or fraud related to real-estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-934-5300 or call the FBI tip line at 415-553-7400.

Middleman Who Lied About Being an Agent of a Foreign Official Sentenced to 3 ½ Years in Prison for Role in Foreign Bribery Scheme Involving $800 Million International Real Estate Deal

Posted on by

Thursday, October 5, 2017

The middleman in a foreign bribery scheme who falsely held himself out as an agent of a foreign official was sentenced today to 42 months in prison for each count, to run concurrently, for his role in a scheme to bribe a foreign official in the Middle East to land a real estate deal, and to defrauding his co-schemers.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Joon H. Kim of the Southern District of New York and Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office made the announcement.

Malcom Harris, 53, of New York City, was sentenced by U.S. District Judge Edgardo Ramos of the Southern District of New York.  Harris pleaded guilty to one count of wire fraud and one count of money laundering on June 21.

According to admissions made in connection with Harris’s plea, Harris participated in a corrupt scheme to pay bribes to a foreign official in a country in the Middle East in order to facilitate the sale by South Korean construction company Keangnam Enterprises Co., Ltd., (Keangnam) of a commercial building known as Landmark 72 in Hanoi, Vietnam, to the Middle Eastern country’s sovereign wealth fund.  According to the indictment, the building sale was valued at $800 million, and purported bribe would total $2.5 million.

In connection with his guilty plea, Harris admitted that, from on or about March 2013 to on or about March 2015, he wrongfully obtained $500,000 from his co-defendants by falsely holding himself out as an agent of a foreign official in text messages and emails.  Harris admitted directing the $500,000 to be deposited into an account in the name of Muse Creative Consulting, but which Harris actually controlled.  Thereafter, Harris used the illegally obtained money to engage in transactions exceeding $10,000, he admitted.

Harris was charged in a December 2016 indictment along with codefendants Joo Hyun Bahn aka Dennis Bahn (Bahn) and Ban Ki Sang (Ban).  According to the indictment, during this time, Ban was a senior executive at Keangnam, and allegedly convinced Keangnam to hire his son Bahn, who worked as a broker at a commercial real estate firm in Manhattan, to secure an investor for Landmark 72.

Bahn and Ban are awaiting trial.  The charges and allegations contained in an indictment are only accusations.  The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The FBI’s International Corruption Squad in New York City investigated the case.  In 2015, the FBI formed International Corruption Squads across the country to address national and international implications of foreign corruption.  Trial Attorney Dennis R. Kihm of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Daniel S. Noble of the Southern District of New York are prosecuting the case.  The Criminal Division’s Office of International Affairs also provided substantial assistance in this matter.

The Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal-fraud/foreign-corrupt-practices-act.

Doctor Pleads Guilty to Health Care Fraud Conspiracy for Role in $19 Million Detroit Area Medicare Fraud Scheme

Posted on by

Tuesday, October 3, 2017

A physician pleaded guilty today to conspiracy to commit health care fraud for his role in an approximately $19 million Medicare fraud scheme involving three Detroit area providers.

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

Abdul Haq, 72, of Ypsilanti, Michigan, pleaded guilty to one count of conspiracy to commit health care fraud before U.S. District Judge Denise Page Hood of the Eastern District of Michigan.  Sentencing has been scheduled for May 29, 2018 before Judge Hood.

As part of his guilty plea, Haq admitted that he conspired with the owner of the Tri-County Network, Mashiyat Rashid, and his co-defendants and others to prescribe medically unnecessary controlled substances, including Oxycodone, Hydrocodone and Opana, to Medicare beneficiaries, many of whom were addicted to narcotics.  He further admitted that in furtherance of the conspiracy, Rashid and others also directed physicians, including Haq and others, to require Medicare beneficiaries to undergo medically unnecessary facet joint injections if the beneficiary wished to obtain prescriptions for controlled substances.

In furtherance of the conspiracy, Haq and others referred Medicare beneficiaries to specific third party home health agencies, laboratories and diagnostic providers even though those referrals were medically unnecessary, he admitted.  Haq also served as the straw owner of various pain clinics owned and/or controlled by Rashid, and submitted false and fraudulent enrollment materials to Medicare that failed to disclose the ownership interest of Rashid, as it was illegal for Rashid – a non-physician – to own medical clinics under Michigan law.  In total, Haq admitted that he submitted or caused the submission of approximately $19,322,846.60 in false and fraudulent claims to Medicare.

Haq was charged along with Mashiyat Rashid, 37, of West Bloomfield, Michigan; Yasser Mozeb, 35, of Madison Heights, Michigan; Spilios Pappas, 61, of Monclova, Ohio; Joseph Betro, 57, of Novi, Michigan; Tariq Omar, 61, of West Bloomfield, Michigan; and Mohammed Zahoor, 51 of Novi, Michigan, in an indictment unsealed on July 6.  Rashid, Mozeb, Pappas, Betro, Omar and Zahoor are awaiting trial.

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

This case was investigated by the FBI, HHS-OIG and IRS-CI.  Trial Attorney Jacob Foster of the Criminal Division’s Fraud Section is prosecuting the case.

The Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.  The Medicare Fraud Strike Force operates in nine locations nationwide.  Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

Western New York Contractors and Two Owners to Pay More Than $3 Million to Settle False Claims Act Allegations

Posted on by

Tuesday, October 3, 2017

Alden, New York-based contractors, Zoladz Construction Company Inc. (ZCCI), Arsenal Contracting LLC (Arsenal), and Alliance Contracting LLC (Alliance), along with two owners, John Zoladz of Darien, New York, and David Lyons of Grand Island, New York, have agreed to pay the United States more than $3 million to settle allegations that they violated the False Claims Act by improperly obtaining federal set-aside contracts designated for service-disabled veteran-owned (SDVO) small businesses, the Justice Department announced today.    

“Contracts are set aside for service-disabled veteran-owned small businesses so to afford veterans with service-connected disabilities the opportunity to participate in federal contracting and gain valuable experience to help them compete for future economic opportunities,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.  “Every time an ineligible contractor knowingly pursues and obtains such set-aside contracts, they are cheating American taxpayers at the expense of service-disabled veterans.”

To qualify as a SDVO small business, a service-disabled veteran must own and control the company.  The United States alleged that Zoladz recruited a service-disabled veteran to serve as a figurehead for Arsenal, which purported to be a legitimate SDVO small business but which was, in fact, managed and controlled by Zoladz and Lyons, neither of whom is a service-disabled veteran.  The United States alleged that Arsenal was a sham company that had scant employees of its own and instead relied on Alliance and ZCCI employees to function.  After receiving numerous SDVO small business contracts, Arsenal is alleged to have subcontracted nearly all of the work under the contracts to Alliance, which was owned by Zoladz and Lyons, and ZCCI, which was owned by Zoladz.  Neither Alliance nor ZCCI were eligible to participate in SDVO small business contracting programs.  Zoladz and Lyons are alleged to have carried out their scheme by, among other things, making or causing false statements to be made to the U.S. Department of Veterans’ Affairs (VA) regarding Arsenal’s eligibility to participate in the SDVO small business contracting program and the company’s compliance with SDVO small business requirements.

“Detecting and discontinuing fraud, waste, and abuse committed by those who do business with the government remains a core function performed in this Office,” said Acting U.S. Attorney James P. Kennedy, Jr. for the Western District of New York. “That function, however, takes on additional significance when the target of the fraud is a program designed for the benefit of the heroes among us—our disabled veterans.  Although this investigation did not uncover sufficient evidence to establish criminal liability by these entities and individuals, the multi-million dollar civil judgment ensures that those involved pay a heavy price for their decision to divert to themselves resources intended for the benefit of those who have made supreme sacrifices on behalf of all.”

“This settlement demonstrates the commitment of the Department of Veterans Affairs, Office of Inspector General, the Department of Justice, and other law enforcement agencies to aggressively pursue individuals and companies that misrepresent themselves as service-disabled veteran-owned small businesses and deny legitimate disabled veterans the opportunity to obtain VA set-aside contracts,” said Inspector General, Michael J. Missal of U.S. Department of Veterans Affairs, Office of Inspector General (OIG).  “The VA OIG will continue to work diligently to protect the integrity of this important program, which is designed to aid disabled veterans.  I also want to thank the U.S. Attorney’s Office and our law enforcement partners in this effort.”

“The contracting companies and principals allowed greed to corrupt a federal process intended to benefit service-disabled, veteran-owned small businesses,” said Special Agent in Charge Adam S. Cohen of FBI Buffalo Field Office. “The FBI and our partners will continue to identify and investigate companies and individuals who target these types of programs for personal gain.”

The settlement resolves a lawsuit filed under the whistleblower provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The civil lawsuit was filed in the Western District of New York and is captioned United States ex rel. Western New York Foundation for Fair Contracting, Inc. v. Arsenal Contracting, LLC, et al., Case No. 11-CV-0821(S) (W.D.N.Y.).  As part of today’s resolution, the whistleblower will receive $450,000.

“This case is yet another example of the tremendous results achieved through the joint efforts of the Small Business Administration (SBA), the Department of Justice, and partner agencies to uncover and forcefully respond to fraud in Federal Government contracting programs, such as the Service Disabled Veteran-Owned Program in this case,” said Christopher M. Pilkerton, General Counsel of the SBA.  “Identifying and aggressively pursuing instances of civil fraud by participants in these procurement programs is one of SBA’s top priorities.”

“Providing false statements to gain access to federal contracts set aside for service-disabled veterans denies the government opportunities to meet its abiding commitment to our nation’s veterans,” said Acting SBA Inspector General Hannibal “Mike” Ware.  “The SBA’s Office of the Inspector General is committed to bringing those that lie to gain access to SBA’s preferential contracting programs to justice.  I want to thank the Department of Justice for its leadership and dedication to serving justice.”

“There is an obvious need and reason for service-disabled, veteran-owned small businesses in the government contracting process,” said Director Frank Robey of the Army Criminal Investigation Command (CID), Major Procurement Fraud Unit.  “Special Agents from Army CID will continue to work closely with our law enforcement partners to make every contribution possible to bring persons to justice who violate that process.”

This matter was investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of New York, the FBI, the VA’s Office of Inspector General, the SBA’s Office of Inspector General, and Army CID.

The claims resolved by the settlement are allegations only, and there has been no determination of liability.