Category Archives: Important Legal Filings

PAE Government Services and RM Asia (HK) Limited to Pay $1.45 Million to Settle Claims in Alleged Bid-Rigging Scheme

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AE Government Services Inc. (PAE) and RM Asia (HK) Limited (RM Asia) have agreed to pay the United States $1.45 million to resolve allegations that they engaged in a bid-rigging scheme that resulted in false claims for payment under a U.S. Army contract for services in Afghanistan, the Justice Department announced today. PAE, headquartered in Arlington, Virginia, provides integrated global mission services. RM Asia, located in Hong Kong, provides motor vehicle parts and supplies.

“Our national security and those of our allies depend on quality goods and services delivered at a fair price,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Today’s settlement demonstrates our continuing vigilance to ensure that those doing business with the government do not engage in bidrigging or other anticompetitive conduct.”

In 2007, the Army awarded PAE a contract to provide vehicle maintenance capabilities and training services for the Afghanistan National Army at multiple sites across Afghanistan. PAE partnered with RM Asia to supply and warehouse vehicle parts. The government alleged that former managers of PAE and RM Asia funneled subcontracts paid for by the government to companies owned by the former managers and their relatives by using confidential bid information to ensure that their companies would beat out other, honest competitors.

In a related criminal investigation, the U.S. Attorney’s Office of the Eastern District of Virginia previously obtained guilty pleas from former PAE program manager Keith Johnson; Johnson’s wife, Angela Gregory Johnson; and RM Asia’s former project manager, John Eisner, and deputy project manager, Jerry Kieffer, for their roles in the scheme.

“This resolution, following criminal charges that were also brought against the individuals involved, represents the government’s efforts to use all of the criminal and civil tools available to the government to remedy fraudulent conduct,” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

The allegations resolved by this settlement arose from a lawsuit filed by Steven D. Walker, a former employee of PAE, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and share in the recovery. Mr. Walker will receive $261,000.

This case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Virginia, the Defense Criminal Investigative Service, the U.S. Department of the Army Criminal Investigation Command-Major Procurement Fraud Unit and the Defense Contract Audit Agency.

The lawsuit is captioned United States ex rel. Walker v. PAE, et al., 1:11CV382-LO/TCB (E.D. Va.). The claims resolved by the settlement are allegations only; there has been no determination of liability.

SEC Charges Three RMBS Traders With Defrauding Investors

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FOR IMMEDIATE RELEASE

2015-181

Washington D.C., Sept. 8, 2015 —The Securities and Exchange Commission today announced fraud charges against three traders accused of repeatedly lying to customers relying on them for honest and accurate pricing information about residential mortgage-backed securities (RMBS).

The SEC alleges that Ross Shapiro, Michael Gramins, and Tyler Peters defrauded customers to illicitly generate millions of dollars in additional revenue for Nomura Securities International, the New York-based brokerage firm where they worked.  They misrepresented the bids and offers being provided to Nomura for RMBS as well as the prices at which Nomura bought and sold RMBS and the spreads the firm earned intermediating RMBS trades.  They also trained, coached, and directed junior traders at the firm to engage in the same misconduct.

In a parallel action, the U.S. Attorney’s Office for the District of Connecticut announced criminal charges against Shapiro, Gramins, and Peters, who no longer work at Nomura.

“The alleged misconduct reflects a callous disregard for the integrity and obligations expected of registered securities professionals,” said Andrew Ceresney, Director of the SEC’s Enforcement Division. “Not only did these traders lie to their customers, but they created a corrupt culture on Nomura’s trading desk by coaching more junior traders to employ the same deceptive and dishonest trading practices we allege in our complaint.”

According to the SEC’s complaint filed in federal court in Manhattan:

  • The lies and omissions to customers by Shapiro, Gramins, and Peters generated at least $5 million in additional revenue for Nomura, and lies and omissions by the subordinates they trained and coached generated at least $2 million in additional profits for the firm.
  • Nomura determined bonuses for Shapiro, Gramins, and Peters based on several factors including revenue generation.  Nomura paid total compensation of $13.3 million to Shapiro, $5.8 million to Gramins, and $2.9 million to Peters during the years this misconduct was occurring.
  • Customers sought and relied on market price information from these traders because the market for this type of RMBS is opaque and accurate price information is difficult for a customer to determine.  Therefore it was particularly important for the traders to provide honest and accurate information.
  • Shapiro, Gramins, and Peters went so far as to invent phantom third-party sellers and fictional offers when Nomura already owned the bonds the traders were pretending to obtain for potential buyers.

The SEC’s complaint charges Shapiro, Gramins, and Peters with violating Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 as well as Section 17(a) of the Securities Act of 1933.

The SEC separately entered into deferred prosecution agreements (DPAs) with three other individuals who have extensively cooperated with the SEC’s investigation and provided enforcement staff with access to critical evidence that otherwise would not have been available.

“The SEC is open to deferring charges based on certain factors, including when cooperators come forward with timely and credible information while candidly acknowledging their own misconduct,” said Michael Osnato, Chief of the SEC’s Complex Financial Instruments Unit.  “The decision to defer charges in this matter reflects the early and sustained assistance provided by these individuals.”

The SEC’s continuing investigation is being conducted by James R. Drabick, Susan Curtin, Rua Kelly, and Celia Moore.  The SEC’s litigation will be led by Ms. Kelly.

Indictment Charges Three People with Running $54 Million “Green Energy” Ponzi Scheme

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An indictment was unsealed today charging three people in an investment scheme, involving a Bala Cynwyd, Pennsylvania-based company, that defrauded more than 300 investors from around the country.  Troy Wragg, 34, a former resident of Philadelphia, Pennsylvania, Amanda Knorr, 32, of Hellertown, Pennsylvania, and Wayde McKelvy, 52, of Colorado, are charged with conspiracy to commit wire fraud, conspiracy to commit securities fraud, securities fraud and seven counts of wire fraud, announced U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania and Special Agent in Charge William F. Sweeney Jr of the FBI’s Philadelphia Division.

As the founders of the Mantria Corporation, Wragg and Knorr allegedly promised investors huge returns for investments in supposedly profitable business ventures in real estate and “green energy.”  According to the indictment, Mantria was a Ponzi scheme in which new investor money was used to pay “earnings” to prior investors since the businesses actually generated meager revenues and no profits.  To induce investors to invest funds, it is alleged that Wragg and Knorr repeatedly made false representations and material omissions about the economic state of their businesses.

Between 2005 and 2009, Wragg, Knorr and McKelvy, through Mantria, intended to raise over $100 million from investors through Private Placement Memorandums (PPMs).  In actuality, they raised $54.5 million.  Wragg and Knorr were allegedly able to raise such a large sum of money through the efforts of McKelvy.  McKelvy operated what he called “Speed of Wealth” clubs which advertised on television, radio and the internet, held seminars for prospective investors and promised to make them rich.  According to the indictment, McKelvy taught investors to liquidate all their assets such as mutual funds and 401k plans, to take out as many loans out as possible, such as home mortgages and credit card debt and invest all those funds in Mantria.  During those seminars and other programs, Wragg, Knorr and McKelvy allegedly lied to prospective investors to dupe them into investing in Mantria and promised investment returns as high as 484 percent.

It is further alleged that Wragg, Knorr and McKelvy spent a considerable amount of the investor money on projects to give investors the impression that they were operating wildly profitable businesses.  Wragg, Knorr and McKelvy allegedly used the remainder of the funds raised for their own personal enrichment.  Wragg, Knorr and McKelvy allegedly continued to defraud investors until November 2009 when the SEC initiated civil securities fraud proceedings against Mantria in Colorado, shut down the company, and obtained an injunction to prevent them from raising any new funds.  A receiver was appointed by the court to liquidate what few assets Mantria owned.

In order to lure prospective investors, it is alleged that Wragg, Knorr and McKelvy lied and omitted material facts to mislead investors as to the true financial status of Mantria, including grossly overstating the financial success of Mantria and promising excessive returns.

“The scheme alleged in this indictment offered investors the best of both worlds – investing in sustainable and clean energy products while also making a profit,” said U.S. Attorney Memeger.  “Unfortunately for the investors, it was all a hoax and they lost precious savings.  These defendants preyed on the emotions of their victims and sold them a scam.  This office will continue to make every effort to deter criminals from engaging in these incredibly damaging financial crimes.”

“As alleged, these defendants lied about their intentions regarding investors’ money, pocketing a substantial portion for personal use,” said Special Agent in Charge Sweeney Jr.  “So long as there are people with money to invest, there will likely be investment swindlers eager to take their money under false pretenses.  The FBI will continue to work with its law enforcement and private sector partners to investigate those whose greed-based schemes rob individuals of their hard-earned money.”

If convicted of all charges, the defendants each face possible prison terms, fines, up to five years of supervised release and a $1,000 special assessment.

The criminal case was investigated by the FBI and is being prosecuted by Assistant U.S. Attorney Robert J. Livermore.  The SEC in Colorado investigated and litigated the civil securities fraud charges which formed the basis of the criminal prosecution.

An indictment is an accusation.  A defendant is presumed innocent unless and until proven guilty.

Schroder & Co. Bank AG Reaches Resolution under Justice Department’s Swiss Bank Program and Agrees to Pay $10.3 Million Penalty

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The Department of Justice announced today that Schroder & Co. Bank AG has reached a resolution under the department’s Swiss Bank Program.

“As today’s agreement reflects, Swiss banks continue to lift the veil of secrecy surrounding bank accounts opened and maintained for U.S. individuals in the names of sham structures such as trusts, foundations and foreign corporations,” said Acting Deputy Assistant Attorney General Larry J. Wszalek of the Department of Justice’s Tax Division.  “The department’s prosecutors and the IRS are actively following these leads to criminally investigate and prosecute those individuals who willfully evaded or assisted in the evasion of U.S. income tax obligations.”

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

  • Make a complete disclosure of their cross-border activities;
  • Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
  • Cooperate in treaty requests for account information;
  • Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
  • Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
  • Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreement signed today, Schroder Bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute the bank for tax-related criminal offenses.

Schroder Bank was founded in 1967 and received its Swiss banking license in 1970.  Since 1984, Schroder Bank has had a branch in Geneva.  The bank has two wholly owned subsidiaries, Schroder Trust AG (domiciled in Geneva) and Schroder Cayman Bank & Trust Company Ltd. (domiciled in George Town, Grand Cayman).  Schroder Cayman Bank & Trust Company Ltd. provides services to clients such as the creation and support of trusts, foundations and other corporate bodies.  Both subsidiaries also acted in some cases as an account signatory for entities holding an account with the bank.  Schroder Bank is in the process of closing the operations of Schroder Trust AG and Schroder Cayman Bank & Trust Company Ltd.

Schroder Bank opened accounts for trusts and companies owned by trusts, foundations and other corporate bodies established and incorporated under the laws of the British Virgin Islands, the Cayman Islands, Panama, Liechtenstein and other non-U.S. jurisdictions, where the beneficiary or beneficial owner named on the Form A was a U.S. citizen or resident.  In addition, a small number of accounts were opened for U.S. limited liability companies (LLCs) with U.S. citizens or residents as members, as well as for U.S. LLCs with non-U.S. persons as members.  Schroder Bank communicated directly with the beneficial owners of some accounts of trusts, foundations or corporate bodies, and it arranged for the issuance of credit cards to the beneficial owners of some such accounts that appear in some cases to have been used for personal expenses.

Schroder Bank also processed cash withdrawals in amounts exceeding $100,000 or the Swiss franc equivalent.  For at least three U.S.-related accounts, a series of withdrawals that in aggregate exceeded $1 million were made.  In addition, at least 26 U.S.-related accountholders received cash or checks in amounts exceeding $100,000 on closure of their accounts, including in at least three cases cash or checks in excess of $1 million.

Between 2004 and 2008, four Schroder Bank employees traveled to the U.S. in connection with the bank’s business with respect to U.S.-related accounts.  In 2008, Swiss bank UBS AG publicly announced that it was the target of a criminal investigation by the Internal Revenue Service (IRS) and the department, and that it would be exiting and no longer accepting certain U.S. clients.  In a later deferred prosecution agreement, UBS admitted that its cross-border banking business used Swiss privacy law to aid and assist U.S. clients in opening accounts and maintaining undeclared assets and income from the IRS.  Between Aug. 1, 2008, and June 30, 2009, Schroder Bank opened eight U.S.-related accounts with funds received from UBS, which was then under investigation by the U.S. government.

Since Aug. 1, 2008, Schroder Bank had 243 U.S.-related accounts with approximately $506 million in assets under management.  Schroder Bank will pay a $10.354 million penalty.

In accordance with the terms of the Swiss Bank Program, Schroder Bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at Schroder Bank who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at Schroder Bank must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

“The cumulative penalties the Swiss Bank Program has generated to date are extraordinary,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “However, a significant element of the program is the highly-detailed account and transactional data that has been provided to IRS specifically for law enforcement purposes.  We will continue to use this information to vigorously pursue U.S. taxpayers who may still be trying to illegally conceal offshore accounts, ensuring we are all playing by the same rules.”

Acting Deputy Assistant Attorney General Wszalek thanked the IRS, and in particular, IRS-CI and the IRS Large Business and International Division for their substantial assistance.  Wszalek also thanked Sean P. Beaty and Gregory S. Seador, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

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.

Detroit-Area Physician Pleads Guilty for Role in $5.7 Million Fraud Scheme

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A Detroit-area medical doctor who prescribed unnecessary controlled substances and billed for unperformed office visits and diagnostic testing pleaded guilty today for his role in a $5.7 million health care fraud scheme.

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 J. Koopman of Internal Revenue Service-Criminal Investigation (IRS-CI) made the announcement.

Laran Lerner, 59, of Northville, Michigan, pleaded guilty before U.S. District Judge Victoria A. Roberts of the Eastern District of Michigan to one count of health care fraud and one count of structuring cash transactions to avoid bank reporting requirements, as charged in a two-count information filed on Aug. 21, 2015.  Sentencing is set for Jan. 24, 2015.

According to admissions made as part of his plea agreement, Lerner lured patients into his clinic with prescriptions for unnecessary controlled substances.  Lerner admitted that he billed and caused Medicare to be billed for a variety of unnecessary prescriptions, tests and office visits to make it appear as though he was providing legitimate medical services instead of medically unnecessary controlled substances.  According to admissions made as part of his plea agreement, Medicare was billed $5,748,237.31, as a result of Lerner’s unnecessary prescriptions, office visits and diagnostic testing.

As part of the plea agreement, Lerner agreed to permanently surrender his Drug Enforcement Administration controlled substance registration and agreed not to re-apply in the future.

Lerner also pleaded guilty to structuring cash deposits he received as a result of his scheme to avoid triggering the requirement under federal law that domestic banks file a report – called a Currency Transaction Report – with the Secretary of Treasury for all transactions in currency over $10,000.  Lerner admitted that he knew about this requirement and caused his cash deposits to be structured in $5,000 increments on consecutive days at various branch locations in the Detroit area to avoid detection.  According to court documents, Lerner deposited $70,000 in cash in April 2013 alone by making deposits of $5,000 on fourteen different days.

The 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 Attorney Elizabeth Young of the Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged over 2,300 defendants who collectively have billed the Medicare program for over $7 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.

Justice Department Settles Housing Discrimination Lawsuit Against Owners of Marion, Illinois, Mobile Home Park

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The Justice Department announced today that the owners and operators of the Williams Trailer Court mobile home park in Marion, Illinois, had agreed to pay $75,000 to settle allegations that they discriminated against African Americans and families with children, in violation of the federal Fair Housing Act.  The settlement was approved today by the U. S. District Court for the Southern District of Illinois.

The settlement agreement resolves a lawsuit alleging that the owners and operators of the park, located at 200 East Patrick Street in Marion, Illinois, violated the Fair Housing Act by refusing to rent mobile homes to African Americans and families with children.  The lawsuit is based on the results of testing conducted by the department’s fair housing testing program.  Testing is a simulation of a housing transaction that compares responses given by housing providers to different types of home-seekers to determine whether illegal discrimination is occurring.  The testing conducted by the department revealed that the manager and part owner of the park, Lyle Williams, falsely told African Americans inquiring about renting mobile homes that no homes were available, while telling white home-seekers that such mobile homes were available.  The testing also revealed that Williams unlawfully discouraged families with children from living there.  In addition to Lyle Williams, the lawsuit also names as defendants the park’s other two owners, Kyle Williams and David Williams.

“The right of people to live in the housing of their choice regardless of their race or whether they have children is fundamental,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “The Justice Department will continue its vigorous enforcement of the Fair Housing Act, which seeks to protect that right.”

“It is both shocking and sad that in this day and age any person would try to discriminate against a fellow citizen on the basis of race,” said U.S. Attorney Stephen R. Wigginton of the Southern District of Illinois.  “Neither the Department of Justice nor my office will tolerate such behavior.  Opportunity and justice must remain equal for all.”

Under the terms of the settlement, defendants will establish a settlement fund in the amount of $45,000 to compensate victims of the discriminatory practices.  Defendants also will pay $30,000 in civil penalties to the United States.  In addition, the agreement requires defendants to implement a nondiscrimination policy, establish new nondiscriminatory application and rental procedures, and undergo training on the Fair Housing Act.  Persons who believe they may have been discriminated against at Williams Trailer Court should contact the department at 1-800-896-7743, extension 3, or by email at [email protected]

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The federal Fair Housing Act prohibits discrimination in housing on the basis of race, color, religion, sex, familial status, national origin and disability.  More information about the Civil Rights Division and the laws it enforces is available at www.usdoj.gov/crt.  Individuals who believe that they have been victims of housing discrimination can call the Housing Discrimination Tip Line at 1-800-896-7743, e-mail the Justice Department at [email protected]

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or contact HUD at 1-800-669-9777.

Russian Nuclear Energy Official Pleads Guilty to Money Laundering Conspiracy Involving Violations of the Foreign Corrupt Practices Act

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U.S. Conspirators Paid Over $2 Million to Influence Russian Nuclear Energy Official and to Secure Business with State-Owned Russian Nuclear Energy Company

A Russian official residing in Maryland pleaded guilty today to conspiracy to commit money laundering in connection with his role in arranging over $2 million in corrupt payments to influence the awarding of contracts with the Russian state-owned nuclear energy corporation.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Rod J. Rosenstein of the District of Maryland, Deputy Inspector General John R. Hartman of the U.S. Department of Energy-Office of Inspector General (DOE-OIG) and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington, D.C., Field Office made the announcement.

Vadim Mikerin, 56, of Chevy Chase, Maryland, pleaded guilty before U.S. District Judge Theodore D. Chuang of the District of Maryland.  Sentencing is scheduled before Judge Chuang on Dec. 8, 2015.

According to court documents, Mikerin was the president of TENAM Corporation and a director of the Pan American Department of JSC Techsnabexport (TENEX).  TENAM, based in Bethesda, Maryland, is a wholly-owned subsidiary and the official representative of TENEX in the United States.  TENEX, based in Moscow, acts as the sole supplier and exporter of Russian Federation uranium and uranium enrichment services to nuclear power companies worldwide.  TENEX is a subsidiary of Russia’s State Atomic Energy Corporation.

In connection with the scheme, Daren Condrey, 50, of Glenwood, Maryland, pleaded guilty on June 17, 2015, to conspiring to violate the Foreign Corrupt Practices Act (FCPA) and conspiring to commit wire fraud, and will be sentenced on Nov. 2, 2015.  Boris Rubizhevsky, 64, of Closter, New Jersey, pleaded guilty on June 15, 2015, to conspiracy to commit money laundering and will be sentenced on Oct. 19, 2015.

According to court documents, between 2004 and October 2014, Mikerin conspired with Condrey, Rubizhevsky and others to transmit funds from Maryland and elsewhere in the United States to offshore shell company bank accounts located in Cyprus, Latvia and Switzerland.  Mikerin admitted the funds were transmitted with the intent to promote a corrupt payment scheme that violated the FCPA.  Specifically, he admitted that the corrupt payments were made by conspirators to influence Mikerin and to secure improper business advantages for U.S. companies that did business with TENEX.  Mikerin further admitted that he and others used consulting agreements and code words such as “lucky figure,” “LF,” “cake” and “remuneration” to disguise the corrupt payments.

According to court documents, over the course of the scheme, Mikerin conspired with Condrey, Rubizhevsky and others to transfer approximately $2,126,622 from the United States to offshore shell company bank accounts.  As part of his plea agreement, Mikerin has agreed to the entry of a forfeiture money judgment in that amount.

The case was investigated by DOE-OIG and the FBI.  The case is being prosecuted by Trial Attorneys Christopher Cestaro, Ephraim Wernick and Derek Ettinger of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys David I. Salem and Michael T. Packard of the District of Maryland.

Joint Statement by the Department of Justice and the Office of the Director of National Intelligence on the Declassification of the Renewal of Collection Under Section 215 of the USA Patriot Act as Amended by the USA Freedom Act

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On Aug. 27, 2015, the Foreign Intelligence Surveillance Court (FISC) issued a primary order approving the government’s application to renew the Section 215 bulk telephony program.  The USA FREEDOM Act of 2015 banned bulk collection under Section 215 of the USA PATRIOT Act, but provided a new mechanism to allow the government to obtain data held by the providers.  To ensure an orderly transition to this new mechanism, the USA FREEDOM Act provided for a 180-day transition period during which the existing National Security Agency (NSA) bulk telephony metadata program may continue.  After considering an application filed shortly after the passage of the USA FREEDOM Act, on June 29, 2015, the court held that the continuation of the NSA’s bulk telephony metadata program during the transition period remains consistent with both the statute and the Fourth Amendment.  The authority under the court’s June 29 order was set to expire today, Aug. 28, 2015.

The government recently filed an application to renew the authority to collect bulk telephony metadata.  On Aug. 27, 2015, the court authorized the continued collection of telephony metadata through Nov. 28, 2015, the end of the 180-day transition period contemplated by the USA FREEDOM Act.  As of Nov. 29, 2015, both the 180-day transition period and the court’s authorization will have expired and the bulk collection of telephony metadata pursuant to Section 215 will cease.

As previously stated in a July 27, 2015, Joint Statement, the NSA has determined that analytic access to the historical metadata collected under Section 215 (any data collected before Nov. 29, 2015) will also cease on Nov. 29, 2015.  However, solely for data integrity purposes to verify the records produced under the new targeted production mechanism authorized by the USA FREEDOM Act, the NSA, subject to court approval, plans to allow technical personnel to continue to have access to the historical metadata for an additional three months.  Separately, the NSA remains under a continuing legal obligation to preserve its bulk 215 telephony metadata collection until civil litigation regarding the program is resolved, or the relevant courts relieve NSA of such obligations.  The telephony metadata preserved solely because of preservation obligations in pending civil litigation will not be used or accessed for any other purpose, and, as soon as possible, the NSA will destroy the Section 215 bulk telephony metadata upon expiration of its litigation preservation obligations.

As background, in January 2014, early last year in a speech at the Department of Justice, President Obama announced that the intelligence community would end the Section 215 bulk telephony metadata program as it previously existed.  The President directed the intelligence community and the Attorney General to develop options for a new approach to match the capabilities and fill gaps that the Section 215 program was designed to address without the government holding this metadata.  After carefully considering the available options, the President announced in March 2014 that the government should not hold this data in bulk, and that the data should remain at the telephone companies with a legal mechanism in place that would allow the government to obtain data pursuant to individual orders from the FISC approving the use of specific numbers for such queries.

The President also noted, however, that legislation would be required to implement this new approach and the administration worked closely with Congress to enact the President’s proposal.  On June 2, 2015, Congress passed and President Obama signed the USA FREEDOM Act of 2015, which reauthorized several important national security authorities; banned bulk collection under Section 215 of the USA PATRIOT Act, under the pen register and trap and trace provisions found in Title IV of FISA, and pursuant to National Security Letters; and adopted the new legal mechanism proposed by the President.

As in past primary orders in effect since February 2014, and consistent with the President’s direction, the court’s new primary order requires that during the transition period, absent a true emergency, telephony metadata can only be queried after a judicial finding that there is a reasonable, articulable suspicion that the selection term is associated with an approved international terrorist organization.  In addition, the query results must be limited to metadata within two hops of the selection term instead of three.

The Office of the Director of National Intelligence will post the new primary order to its website and icontherecord.tumblr.com after it has undergone a classification review.

EDF Resources Capital Inc. and CEO Pay $6 Million for Alleged Violations Related to Small Business Administration Loan Program

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EDF Resource Capital Inc. and its CEO, Frank Dinsmore, have agreed to resolve allegations that they violated the False Claims Act and otherwise failed to remit payments owed to the Small Business Administration (SBA) under the 504 loan program, the Department of Justice announced today.  Under the settlement agreement, EDF and Dinsmore have agreed to make payments and turn over certain assets to the United States for a total settlement of approximately $6 million.

“Today’s settlement demonstrates our commitment to ensure that companies and individuals who elect to participate in federal programs live up to their statutory and contractual commitments, play by the rules, and deal honestly and openly with the federal government,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to work side-by-side with the Small Business Administration to ensure that fraud committed by SBA program participants is thoroughly investigated and, where appropriate, vigorously prosecuted.”

The SBA 504 loan program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.  Under the program, local lenders like EDF are responsible for arranging, servicing and collecting on these small business loans, which are guaranteed, in part, by the SBA.  In return for the authority to make determinations on 504 loans without prior SBA approval, EDF was required to bear a share of any losses suffered by the SBA on such loans and to maintain a loan loss reserve fund (LLRF) to help ensure payment of its loss-sharing obligations.

Today’s settlement resolves claims that EDF and Dinsmore violated the False Claims Act in connection with EDF’s failure to maintain adequate reserves in its LLRF.  EDF allegedly was required to fund its LLRF at a level determined by the riskiness of its 504 loan program portfolio yet knowingly concealed from the SBA hundreds of troubled loans to avoid its obligation to fully fund its LLRF.

The settlement also resolves a lawsuit filed by the United States against EDF and a related entity, Redemption Reliance LLC, alleging that EDF failed to remit required payments to the SBA to satisfy its loss-sharing obligations.  The lawsuit also alleges that the SBA agreed to advance funds to EDF in connection with certain defaulted 504 loans but that, after EDF assigned the loan documents for these loans to Redemption Reliance, neither EDF nor Redemption Reliance remitted the monies owed on these loans to the SBA.

“The 504 Loan Program provides small businesses with access to the capital they need to start, grow and succeed,” said General Counsel Melvin F. Williams Jr. of the SBA.  “SBA has no tolerance for fraud, waste, or abuse by participants in the 504 Loan Program.  Working with the attorneys at the Department of Justice and SBA’s Office of Inspector General, this settlement marks the successful conclusion of a major enforcement action.”

“The defendants’ misrepresentations to SBA knowingly put the taxpayer’s money at risk,” said Inspector General Peggy E. Gustafson of the SBA.  “As stewards of the taxpayers’ money, the SBA must guard against losses within its loan portfolios.  In this instance, the actions of the defendants did not allow SBA to protect taxpayers from such losses.  I want to thank the Department of Justice and our investigative partners for achieving this settlement.”

The settlements were the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the SBA’s Office of General Counsel and the SBA’s Office of Inspector General Los Angeles Field Office’s Counsel Division and Investigations Division.

The lawsuit is captioned United States v. EDF Resource Capital, Inc., et al., Case No. 13‑cv-389 (E.D. Cal.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.