Category Archives: Office of Inspector general

Former Director of Accounting and Outside Auditor of American Mortgage Specialists Inc. Plead Guilty to Roles in Fraud Against BNC National Bank

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(ed. note: Would not want to be in the cross-hairs of this cross-agency group of fraud enforcers.)
Former Director of Accounting and Outside Auditor of American Mortgage Specialists Inc. Plead Guilty to Roles in Fraud Against BNC National Bank

The former director of accounting and the former outside auditor of Arizona-based residential mortgage loan originator American Mortgage Specialists Inc. (AMS) pleaded guilty in Arizona to conspiracy to defraud BNC National Bank and obstruction of justice, respectively, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Timothy Q. Purdon of the District of North Dakota; Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and Steve A. Linick, Inspector General of the Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) announced today.

Lauretta Horton, 45, and David Kaufman, 69, both residents of Arizona, pleaded guilty yesterday before U.S. District Judge Daniel L. Hovland of the District of North Dakota, who took the pleas in Arizona federal court.   Horton and Kaufman were charged in separate criminal informations unsealed on Oct. 2, 2012, for their roles in the fraud scheme against BNC.

“ While the nation was reeling from a financial downturn, Lauetta Horton conspired with AMS executives to deceive BNC Bank about AMS’s true financial stability, and AMS auditor David Kaufman lied to federal investigators to impede their investigation,” said Assistant Attorney General Breuer.  “Horton and Kaufman’s guilty pleas reflect our continued vigilance in investigating and punishing criminal conduct relating to the financial crisis.”

“Banks in North Dakota were not immune from illegal conduct related to the mortgage crisis that impacted banks all across the country,” said U.S. Attorney Purdon. “These guilty pleas are the result of close collaboration with our federal investigative partners and the Justice Department’s Criminal Division and should send the message that the Department of Justice is committed to prosecuting cases such as these wherever they might arise.”

  “As the controller and director of accounting of mortgage originator AMS, Horton sent to TARP-recipient BNC National Bank false financial statements she had prepared so that BNC would continue to fund AMS,” said Special Inspector General Romero.   “In a cover-up and an attempt to impede the federal grand jury investigation, AMS’s external auditor Kaufman lied to SIGTARP agents about his telling an AMS executive that he had changed the financial statements so that BNC would not discover the truth.   Kaufman is the third person convicted of lying to SIGTARP agents, which shows that SIGTARP will aggressively pursue those who fail to tell the truth and impede our investigations.”

“This is a significant case because it holds accountable an individual who participated in a scheme to defraud a member bank of the Federal Home Loan Bank System, and another individual who lied to federal investigators,” said Inspector General Linick.   “This case is a reminder that there are consequences for giving investigators false information and manipulating numbers.”

AMS was in the business of originating residential real estate mortgage loans to borrowers and then selling the loans to institutional investors.   In 2006, AMS entered into a loan participation agreement with BNC whereby BNC provided funding for the loans issued by AMS.  According to court documents, Horton, the director of accounting at AMS, conspired from February 2009 to April 2010 to defraud BNC by making false representations regarding the financial well-being of AMS in order for AMS to continue to obtain funding from BNC.  Specifically, Horton admitted to inflating asset items and altering financial information in the AMS balance sheet provided to BNC to falsely reflect that AMS had substantial liquid assets when, in fact, it did not.

According to court documents, Kaufman, a certified public accountant and the outside auditor of AMS’ annual financial statements, lied to federal agents during the criminal investigation and obstructed the grand jury investigation.   Specifically, Kaufman admitted denying to agents that he had a conversation with an AMS executive in which Kaufman explained to the AMS executive that Kaufman had combined two expenses on AMS’s financial statements in order to conceal the true nature and extent of AMS’s financial condition from BNC.

Although BNC’s holding company had received approximately $20 million under the TARP and had injected approximately $17 million of the TARP funds into BNC, BNC incurred losses exceeding the millions received from TARP.  BNC then did not make its required TARP dividends to the Department of Treasury for nearly two years.

At sentencing, scheduled for May 6, 2013, Kaufman and Horton face a maximum penalty of 10 years and five years in prison, respectively.

The investigation was conducted by agents assigned to the Offices of the Inspector General of SIGTARP and of FHFA.  The case is being prosecuted by Trial Attorney Robert A. Zink and Senior Litigation Counsel Jack B. Patrick of the Criminal Division’s Fraud Section and by Assistant U.S. Attorney Clare Hochhalter of the District of North Dakota, with the assistance of Trial Attorney Jeannette Gunderson of the Criminal Division’s Asset Forfeiture and Money Laundering Section.

This case is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.  For more information on the task force, visit www.stopfraud.gov .

Professor Sentenced to 41 Months for Grant Fraud

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Although we were unable to locate a press release issued by the US Attorney’s Office in M.D. Pa, a professor charged on January 31, 2012 with grant fraud, received a stiff sentence: 3.5 years in prison and $660,000 restitution.  More than 100 letters were received by the court advocating leniency (including from the professor’s thesis adviser and from a current financial backer of his research).  Despite this and powerful testimony from supporters (including his father), the court meted out what must have been seen by the defendant, his family and supporters as very harsh justice.

PennLive.Com article on sentencing

Original US Attorney’s 1-31-12 Press Release below:

Former Penn State Professor Charged In $3 Million Federal Research Grant Fraud

FOR IMMEDIATE RELEASE
January 31, 2012

The United States Attorney’s Office for the Middle District of Pennsylvania announced that a felony Information has been filed in United States District Court in Harrisburg against Craig Grimes, age 55, of Raleigh, North Carolina, charging him with wire fraud, false statements, and money laundering. During the time period alleged in the Information, Grimes resided in Boalsburg, Pennsylvania, and was a Professor of Material Science and Engineering at The Pennsylvania State University.

According to United States Attorney Peter J. Smith, Count I of the Information charges that between June 30, 2006, and February 1, 2011, Grimes defrauded the National Institutes of Health (“NIH”) of federal grant monies. The NIH, a component of the United States Department of Health and Human Services, provides funding for medical research through grants.

Grimes, acting through his solely-owned company, SentechBiomed, State College, PA requested a $1,196,359.00 grant from NIH to perform research related to the measurement of gases in a patient’s blood. The measurement of these gases was purported to be relevant to detecting the presence of a disease in infants known as necrotizing enterocolitis.

In the application, Grimes specifically represented to NIH that he would direct approximately $509,274.00 to the Hershey Medical Center to conduct clinical research on adult and infant subjects. The money was never paid. Instead, the grant funds were misappropriated, in part, by Grimes for his own use. The clinical studies/trials were not performed.

Count II of the Information charges Grimes with allegedly making false statements to the United States Department of Energy in connection with a second federal grant. In August 2009, Grimes, while a PSU professor, completed a grant application seeking a $1,908,732.00 grant from the Advanced Research Projects Agency – Energy(ARPA-E) which was created to foster research and development of energy-related technologies. The ARPA-E grant was funded by the American Recovery and Reinvestment Act.

ARPA-E seeks to avoid funding research already funded by other government and private entities. It requires applicants for grants to disclose other funding sources. In the application Grimes completed and had submitted to ARPA-E, he allegedly stated there was no other funding, when, in fact, he had received a grant from the National Science Foundation.

Count III of the Information charges Grimes with money laundering the proceeds of the fraudulent proceeds he received from the National Institutes of Health.

United States Attorney Smith stated, “Fraud in connection with federally funded university research harms public health and safety and damages our scientific and educational institutions. Such cases will be investigated and prosecuted as vigorously as any other type of serious economic crimes. Anyone with information concerning suspected research fraud should contact the Office of Inspector General for the appropriate federal agency.”

Greg Friedman, Inspector General, U.S. Department of Energy, stated that “The Department of Energy is a major underwriter of energy research in the United States. Cases that impact the integrity of the process are important to us. Abuse of the system is unacceptable. I would like to thank the United States Attorney’s Office and the IG Special Agents who worked tirelessly on this case. This investigation and prosecution demonstrate our commitment to holding those who defraud the Department accountable for their actions.”

“NIH grants billions in taxpayer funds each year to advance vital medical research,” said Nicholas DiGiulio, the Philadelphia Region’s Special Agent in Charge for the Office of Inspector General of the Department of Health and Human Services. “Every dollar is precious, so any misappropriation of these funds – as the government charges Mr. Grimes today – will be investigated aggressively.”

If convicted, Grimes faces up to thirty-five years in prison and a fine of $750,000.

Fraud related to U.S. Department of Energy may be reported to: (800) 541-1625.

Fraud related to U.S. Department of Health and Human Services, including U.S. National Institutes of Health, grants and programs may be reported to: 1-800-HHS-TIPS (1-800-447-8477).

Fraud related to U.S. National Science Foundation grants and programs may be reported to: 703-292-7100.

The investigation is being conducted by special agents of the Department of Energy, Office of Inspector General, the National Science Foundation, the Department of Health and Human Services, and the IRS. Prosecution is assigned to Assistant United States Attorney Joseph J. Terz.

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An Indictment or Information is not evidence of guilt but simply a description of the charge made by the Grand Jury and/or United States Attorney against a defendant. A charged Defendant is presumed innocent until a jury returns a unanimous finding that the United States has proven the defendant’s guilt beyond a reasonable doubt or until the defendant has pled guilty to the charges.

Death Charge Added To Indictment Against Pill Mill Doc/ USAO-EDPA

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Death Charge Added To Indictment Against Pill Mill Doc

FOR IMMEDIATE RELEASE
November 29, 2012

PHILADELPHIA – A third superseding indictment was unsealed today against Dr. Norman Werther, 73, of Horsham, adding nine new defendants and dozens more charges, most notably distribution of a controlled substance resulting in death, announced First Assistant United States Attorney Louis D. Lappen. It is the first such case in the Eastern District of Pennsylvania. Werther was originally indicted on August 10, 2011 with 51 co-defendants. The charges allege a multi-million dollar drug conspiracy involving illegal prescriptions, phony patients, and a drug trafficking organization. At the time, Werther was a Montgomery County physician, running a physical therapy and rehabilitation practice in Willow Grove. According to the third superseding indictment, Werther conspired with six separate groups of drug dealers. In addition to the count of causing a death, he is charged in multiple counts of conspiracy to distribute controlled substances, distribution of controlled substances, maintaining a drug-involved premises, and money laundering. He faces a mandatory 20 years and maximum sentence of life in prison if convicted of all charges.

New defendants charged in the third superseding indictment are: Troy Brinkley, 44; Edward Jackson, 49; Edward Dominick, Sr., 53; Frederick Kelsey, 51; Kyle Jones, 30; Ali Armstead, 31; Terrell Jackson, 27; Bernard Jackson, 33; and Ronald Campbell, 35, all of Philadelphia. Dominick, Sr., is still at-large; all others are in custody.

The charges allege that Werther worked with six alleged drug traffickers who recruited large numbers of pseudo-patients. Werther set aside a specific block of time each business day to see the pseudo-patients recruited by Troy Brinkley, Ronald Campbell, Anthony DiPasquale, Angel DuPrey, Kyle Jones, and William Stukes (charged earlier). With the help of Werther’s office staff, those “patients” were transported to Werther’s medical office, at 301 Davisville Road in Willow Grove, PA, for cursory examinations. The “patients” paid an office visit fee, usually $150, by cash, check, or money order, and Werther would write prescriptions for them to obtain oxycodone-based drugs without there being a legitimate medical purpose for the prescription and outside the usual course of professional practice. The “patients” were then driven to various pharmacies, including Northeast Pharmacy, to have their prescriptions filled. The drugs were then turned over to the alleged drug dealers so their organizations could sell the narcotics to numerous drug dealers, also charged, who would also then resell the drugs on the street.

According to the third superseding indictment, in September 2010, Werther knowingly dispensed approximately 150 pills containing 30 milligrams each of oxycodone, and 30 pills containing 15 milligrams each of oxycodone, to N. B., a person known to the grand jury, for no legitimate medical purpose and N. B.’s death resulted from the use of that substance.

According to the third superseding indictment, Werther’s wife sent a memo to the office staff in July 2011: “When Angel (referring to defendant Angel Duprey) calls… Dr. has told us to tell him that a Consultant was in and reviewed our charts. He and Fernando (referring to defendant Ferdinand Nieves) were arrested… this created a big problem for us. It is a big “red flag” …we don’t want the government reviewing us. The DEA checks on physicians dispensing narcotics. Dr. could lose his license. He has sent away more than 100 people in the last few weeks. He cannot see their people under any circumstances. Be firm… no arguing.”

The alleged drug conspiracy involving Dr. Werther operated between February 2009 and August 2011 and resulted in the alleged illegal distribution of more than 700,000 pills containing oxycodone. At least one of the drug trafficking organizations allegedly working with Werther trafficked pills valued at more than $5 million that Werther is alleged to have illegally prescribed.

A total of 67 defendants have been charged in the case. Additional charges contained in the third superseding indictment include Conspiracy (6 counts), Distribution of Controlled Substances Causing Death, Maintaining a Drug-Involved Premises, Distribution of Controlled Substances (196 counts), Possession with the Intent to Distribute (3 counts), Money Laundering (117 counts), and Health Care Fraud (44 counts).

Other defendants previously charged and awaiting trial are: Kim Carter, 44, Angel Duprey, 33, Ferdinand Nieves, 45, and Anthony DiPasquale, 46, all of Philadelphia.

All others have pleaded guilty.

The crimes of conspiracy, distribution of controlled substance, possession with intent to distribute, and money laundering each carry a maximum possible sentence of 20 years in prison; health care fraud and aggravated structuring each carry a maximum sentence of 10 years in prison; structuring financial transactions carries a maximum possible sentence of five years in prison. Each defendant also faces possible fines, periods of supervised release, and special assessments.

This case was investigated by the Drug Enforcement Administration, the U.S. Department of Health and Human Services Office of Inspector General, the Federal Bureau of Investigation, and the Bureau of Alcohol, Tobacco, Firearms and Explosives, with assistance from the Philadelphia Police Department, the North Coventry Police Department, the Upper Moreland Police Department, and the Montgomery Township Police. It is being prosecuted by Assistant United States Attorneys Michelle Rotella and Nancy Beam Winter.

UNITED STATES ATTORNEY’S OFFICE, EASTERN DISTRICTof PENNSYLVANIA
Suite 1250, 615 Chestnut Street, Philadelphia, PA 19106
PATTY HARTMAN, Media Contact, 215-861-8525

Detroit-Area Nurse Sentenced to 30 Months in Prison for Role in $13.8 Million Home Health Care Fraud Scheme (CRM-FRD and USAO-EDMI)

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Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Monday, November 19, 2012
Detroit-Area Nurse Sentenced to 30 Months in Prison for Role in $13.8 Million Home Health Care Fraud Scheme

WASHINGTON—A Detroit-area registered nurse was sentenced today to serve 30 months in prison for his role in a nearly $13.8 million Medicare fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Robert D. Foley III of the FBI’s Detroit Field Office; and 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.

Anthony Parkman, 41, of Southfield, Mich., was sentenced today by U.S. District Judge Gerald E. Rosen in the Eastern District of Michigan. In addition to his prison term, Parkman was sentenced to three years of supervised release and was ordered to pay $450,988 in restitution, jointly and severally with his co-defendants.

Parkman pleaded guilty on June 26, 2012, to one count of conspiracy to commit health care fraud.

According to Parkman’s plea agreement, beginning in approximately December 2008, Parkman, a registered nurse, was paid to sign medical documentation for Physicians Choice Home Health Care LLC, a home health agency that billed and received payments from Medicare for home health care services that were never rendered.  Parkman admitted to not seeing or treating the beneficiaries for whom he signed medical documentation and admitted he knew that the documents he signed would be used to support false claims to Medicare.  Parkman was paid approximately $150 for each false and fictitious file that he signed.

Parkman was subsequently paid to sign falsified medical documentation and files for First Care Home Health Care LLC, Quantum Home Care Inc. and Moonlite Home Care Inc., which were Detroit-area home health care companies owned by Parkman’s co-conspirators that billed Medicare for services that were never rendered.

The four home health companies for which Parkman worked were paid in total approximately $13.8 million by Medicare.  From approximately December 2008 through September 2011, Medicare paid approximately $450,988 to the four home health care companies for fraudulent skilled nursing claims based on falsified files signed by Parkman.

Nine of Parkman’s co-defendants have pleaded guilty and await sentencing.  Three co-defendants are fugitives, and six co-defendants await trial.

This case was prosecuted by Trial Attorney Catherine K. Dick of the Criminal Division’s Fraud Section.  It was investigated by the FBI and HHS-OIG 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 for 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 more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion.  In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

UTICA, NY Physician Indicted in $12 million Health Care Fraud Scheme

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press release NDNY

Owner of Chantilly Pain Clinic Sentenced to 180 Months for Drug-Trafficking, Fraud Charges

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11/9/2012

ALEXANDRIA, Va. – Paul Boccone, 56, was sentenced today to 180 months in prison, followed by three years of supervised release, for turning his Chantilly-based pain clinic into a haven for drug addicts, servicing thousands of customers traveling hundreds of miles to illegally obtain large amounts of oxycodone and other prescription pain medicine. Charles Brown, Jr., 52, the lead nurse practitioner at Chantilly Specialists, was also sentenced today to 60 months in prison, followed by three years of supervised release, for his role in distributing oxycodone.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Kenneth T. Cuccinelli, Attorney General of Virginia; James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office; Richard A. Raven, Special Agent in Charge of the Washington Field Office of IRS-Criminal Investigation; and Nick DiGuilio, Special Agent in Charge for the Inspector General’s Office of the United States Department of Health and Human Services in Philadelphia, made the announcement after sentencing by United States District Judge Claude M. Hilton.

Boccone was convicted on Aug. 3, 2012, of conspiring to distribute and distributing oxycodone, healthcare fraud, and payroll tax evasion. According to court records and evidence at trial, Boccone was the owner and president of Chantilly Specialists, a pain management clinic in Chantilly, Va. Lacking any medical education, qualifications, or licensing, Boccone hired medical professionals with no background or specialized training in pain management. He treated patients and prescribed narcotics by directing medical practitioners to endorse prescriptions that he wrote.

Over the course of the conspiracy, evidence showed that at least four Chantilly Specialists patients died of overdoses related to the drugs they obtained from the practice. Brown, at Buccone’s direction, altered one of the patient’s files after Chantilly Specialists learned of that patient’s death.

Evidence showed that Brown provided 600 customers more than 800,000 oxycodone-based pills, including 14,400 to a single addict.

This case was investigated by the FBI Washington Field Office; IRS-Criminal Investigation; and the Department of Health and Human Services’ Office of the Inspector General, with assistance from the Fairfax County Police Department.

Assistant United States Attorney Michael P. Ben’Ary and Special Assistant United States Attorney and Virginia Assistant Attorney General Marc J. Birnbaum are prosecuting the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.