Tag Archives: whistleblower

Noted Antitrust and Disaster Fraud Prosecutor Joan E. Marshall Joins GeyerGorey LLP

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Joan Marshall who prosecuted the worldwide vitamins cartel and brought a series of fraud cases in the aftermath of Hurricane Katrina, has joined the firm as a partner. Previously, Ms. Marshall was with the US DOJ Antitrust Division in the Dallas Field Office. She is the tenth former DOJ prosecutor to join the new boutique law firm in less than a year.Joan Marshall_4small

FOR IMMEDIATE RELEASE

 

PRLog (Press Release) – Aug. 6, 2013 – WASHINGTON, D.C. — GeyerGorey LLP is pleased to announce that Joan E. Marshall, a former Department of Justice prosecutor, has joined the firm as partner. Ms. Marshall will open a new office for the firm, in Dallas, where she will be resident.

Ms. Marshall comes to GeyerGorey from the Antitrust Division of the Department of Justice, where she also served as a prosecutor on the Department’s Disaster Fraud Task Force and its predecessor, the Hurricane Katrina Fraud Task Force. While with the Department of Justice, Ms. Marshall supervised numerous multi-agency investigations of bid rigging, price fixing, mail fraud, wire fraud, bank fraud, bribery, perjury and obstruction of justice.

Ms. Marshall had the distinction of breaking the Dallas Field Office’s acclaimed vitamins cartel case and helped to devise, structure and carry out what became one of the most comprehensive international investigations and prosecutions of all time, resulting in more than $1 billion in collected criminal fines. She led the Antitrust Division’s bribery prosecutions involving construction of the levees surrounding New Orleans after the devastation of Hurricane Katrina. Her experience spans investigations and prosecutions involving numerous industries including wholesale groceries, milk, seafood, medical equipment, oilfield supplies, military moving and storage, road and building construction, and municipal finance.

“We are thrilled that Joan has decided to join us,” said Hays Gorey. “She adds deep experience with numerous enforcement agencies and compliments our experience in key industries like oil and gas exploration, not to mention the fraud piece. Our corporate compliance and competition expertise is a perfect fit in the Dallas-Ft. Worth market, which has the largest concentration of corporate headquarters in the United States.”

Ms. Marshall is a frequent speaker on antitrust enforcement and fraud prevention and detection and has developed numerous training programs. She is a recipient of the United States Department of Justice, Assistant Attorney General’s Award and certificates of appreciation from the United States Department of Homeland Security, Office of Inspector General, and the United States Army Criminal Investigation Command, Major Procurement Fraud Unit.

Robert Zastrow, who was Verizon’s Assistant General Counsel for 15 years before co-founding the firm in October 2012, added, “Joan’s extensive background and expertise nicely complements our firm’s unique philosophy and enriches our solid bench in the White Collar world.” Co-founder, Brad Geyer added: “We are very involved in servicing the government contractor and the non-profit and non-governmental organization community and we are excited to roll in Joan’s disaster fraud experience into our overall product offerings. It is also unusual to have career prosecutors in one firm that worked on the highest profile matters on both the criminal and civil worlds. Joan will give us a strategic presence in the Dallas market, which is home to companies in the airline, technology, energy, banking, medical and defense contracting sectors.”

Headquartered in Washington, D.C., GeyerGorey LLP specializes in white collar criminal defense, particularly investigations and cases involving allegations of economic crimes, such as violations of the federal antitrust laws (price fixing, bid rigging, territorial and customer allocation agreements), procurement fraud, securities fraud, foreign bribery (Foreign Corrupt Practices Act) and qui tam (False Claims Act) and other whistleblower actions. The firm also conducts internal investigations of possible criminal conduct and provides advice regarding compliance with U.S. antitrust, anti-bribery and other laws.

 

 

 

 

 

   

Phillip Zane’s Game Theory: Ten Years On

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Ten years ago this spring, Zane published his definitive work on game theory which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, when, and how corporations and executive management teams should disclose white collar criminal conduct.

Phillip Zane be the only attorney whose colleagues and clients might expect to see an open book on games and strategy on his desk.

Ten years ago this spring, Zane published The Price Fixer’s Dilemma:  Applying Game Theory to the Decision of Whether to Plead Guilty to Antitrust Crimes, 48 Antitrust Bull. 1 (2003), which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, and when, to settle high-stakes antitrust cases.

Zane’s article strongly suggested that in a number of common situations, pleading guilty (or even seeking the protections of the corporate leniency program) is not always justified.  Zane’s article used a repeated, or iterative, version of the prisoner’s dilemma to demonstrate that pleading guilty was not always the best strategy for antitrust defendants facing criminal prosecution and civil liability in multiple proceedings or jurisdictions.

At the time, a few of the brainier Antitrust Division prosecutors breathed a sigh of relief when the defense bar did not seem to notice and they failed to incorporate Zane’s research into their negotiating strategies.

In 2007, Zane published “An Introduction to Game Theory for Antitrust Lawyers,” which he used in a unit of an antitrust class he taught at George Mason University School of Law. That paper was another milestone on the way to making game theory concepts accessible and useful to the antitrust defense bar.

Zane’s work, which now used game theory to criticize the settlement of the second Microsoft case and the Government’s approach to conscious parallelism, as well as the leniency program, was met with official grumblings within the Antitrust Division.

GeyerGorey LLP was founded on the principle that the chances for achieving the best possible outcome are maximized by having access to multiple, top-notch, cross-disciplinary legal minds that are synced together by an organizational and compensation structure that encourages sharing of ideas and information in client relationships.

As international enforcement agencies sprouted and developed criminal capabilities and as more hybrid matters included prosecutors from US enforcement agency components with sometimes overlapping jurisdictions, such as the Antitrust, Criminal, Civil and Tax Divisions of the Department of Justice, and the alphabet soup of regulatory agencies, particularly the Securities and Exchange Commission, it became apparent that Zane’s game-theoretic approach has application in almost every significant decision we could be called upon to make.  Since Zane has joined us we have been working to factor in the increased risks associated with what we call hybrid conduct (conduct that violates more than a single statute).  Our tools of analysis for identifying risks for violations of competition laws, anti-corruption laws, anti-money-laundering laws, and other prohibitions, include sophisticated game-theoretic techniques, as well as, of course, the noses of former seasoned prosecutors, taking into account, each particular client’s tolerance for risk.

To take one example, an internal investigation might show both possible price fixing and bribery of foreign government officials.  How, given the potential for multiple prosecutions, should decisions to defend or cooperate be assessed?  And how might such decisions trigger interest by the Tax Division, the SEC, the Commodities Futures Trading Commission, the Federal Energy Regulatory Commission or other regulators.  When should a corporation launch an internal investigation?  When should it make a mandatory disclosure?  What should it disclose and to which agency, in what order?  When should it seek leniency and when should it instead stand silent?  These tools are valuable in the civil context as well:  When should it abandon a proposed merger or instead oppose an enforcement agency’s challenge to a proposed deal?

These are truly the most difficult questions a lawyer advising large corporations is required to address.  We are well positioned to help answer these questions.

DLA Piper’s Robert Connolly pens MLEX article regarding “The DOJ Antitrust Division’s policy on independent compliance monitors: is it misguided?”

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Friend of the Firm, Robert Connolly, former Chief of the Philadelphia Field Office of the Antitrust Division of the US Department of Justice, now resident in DLA Piper’s Philadelphia Office last week penned an important contribution for MLEX regarding DOJ’s evolving policy regarding compliance monitors:  “The DOJ Antitrust Divsion’s policy on independent compliance monitors: is it misguided?”

 

Wyeth Pharmaceuticals Agrees to Pay $490.9 Million for Marketing the Prescription Drug Rapamune for Unapproved Uses

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Wyeth Pharmaceuticals Inc., a pharmaceutical company acquired by Pfizer, Inc. in 2009, has agreed to pay $490.9 million to resolve its criminal and civil liability arising from the unlawful marketing of the prescription drug Rapamune for uses not approved as safe and effective by the U.S. Food and Drug Administration (FDA), the Justice Department announced today.  Rapamune is an “immunosuppressive” drug that prevents the body’s immune system from rejecting a transplanted organ.

 “FDA’s drug approval process ensures companies market their products for uses proven safe and effective,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.  “We will hold accountable those who put patients’ health at risk in pursuit of financial gain.”

The Federal Food, Drug and Cosmetic Act (FDCA) requires a company such as Wyeth to specify the intended uses of a product in its new drug application to the FDA.  Once approved, a drug may not be introduced into interstate commerce for unapproved or “off-label” uses until the company receives FDA approval for the new intended uses.  In 1999, Wyeth received approval from the FDA for Rapamune use in renal (kidney) transplant patients.  However, the information alleges, Wyeth trained its national Rapamune sales force to promote the use of the drug in non-renal transplant patients.  Wyeth provided the sales force with training materials regarding non-renal transplant use and trained them on how to use these materials in presentations to transplant physicians.  Then, Wyeth encouraged sales force members, through financial incentives, to target all transplant patient populations to increase Rapamune sales.

“The FDA approves drugs for certain uses after lengthy clinical trials,” said Sanford Coats, U.S. Attorney for the Western District of Oklahoma.  “Compliance with these approved uses is important to protect patient safety, and drug companies must only market and promote their drugs for FDA-approved uses.  The FDA approved Rapamune for limited use in renal transplants and required the label to include a warning against certain uses.  Yet, Wyeth trained its sales force to promote Rapamune for off-label uses not approved by the FDA, including ex-renal uses, and even paid bonuses to incentivize those sales.  This was a systemic, corporate effort to seek profit over safety.  Companies that ignore compliance with FDA regulations will face criminal prosecution and stiff penalties.”

Wyeth has pleaded guilty to a criminal information charging it with a misbranding violation under the FDCA.  The resolution includes a criminal fine and forfeiture totaling $233.5 million.  Under a plea agreement, which has been accepted by the U.S. District Court in Oklahoma City, Wyeth has agreed to pay a criminal fine of $157.58 million and forfeit assets of $76 million.

The resolution also includes civil settlements with the federal government and the states totaling $257.4 million.  Wyeth has agreed to settle its potential civil liability in connection with its off-label marketing of Rapamune.  The government alleged that Wyeth violated the False Claims Act, from 1998 through 2009, by promoting Rapamune for unapproved uses, some of which were not medically accepted indications and, therefore, were not covered by Medicare, Medicaid and other federal health care programs.  These unapproved uses included non-renal transplants, conversion use (switching a patient from another immunosuppressant to Rapamune) and using Rapamune in combination with other immunosuppressive agents not listed on the label.  The government alleged that this conduct resulted in the submission of false claims to government health care programs.  Of the amounts to resolve the civil claims, Wyeth will pay $230,112,596 to the federal government and $27,287,404 to the states.

“Wyeth’s conduct put profits ahead of the health and safety of a highly vulnerable patient population dependent on life-sustaining therapy,” said Antoinette V. Henry, Special Agent in Charge, Metro-Washington Field Office, FDA Office of Criminal Investigations.  “FDA OCI is committed to working with the Department of Justice and our law enforcement counterparts to protect public health.”

Pfizer is currently subject to a Corporate Integrity Agreement (CIA) with the Department of Health and Human Services’ Office of Inspector General that it entered in connection with another matter in 2009, shortly before acquiring Wyeth.  The CIA covers former Wyeth employees who now perform sales and marketing functions at Pfizer.  Under the CIA, Pfizer is subject to exclusion from federal health care programs, including Medicare and Medicaid, for a material breach of the CIA, and the company is subject to monetary penalties for less significant breaches.

“We are committed to enforcing the laws protecting public health, taxpayers and government health programs, and to promoting effective compliance programs,” said Daniel R. Levinson, Inspector General, Department of Health and Human Services.  “Our integrity agreement with Pfizer, which acquired Wyeth, includes required risk assessments, a confidential disclosure program, and auditing and monitoring to help prospectively identify improper marketing.”

The civil settlement resolves two lawsuits pending in federal court in the Western District of Oklahoma under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the government and share in any recovery.  The first action was filed by a former Rapamune sales representative, Marlene Sandler, and a pharmacist, Scott Paris.  The second action was filed by a former Rapamune sales representative, Mark Campbell.  The whistleblowers’ share of the civil settlement has not been resolved.

“The success obtained in this case is an excellent example of how we address the threats to our nation’s health care system; the importance of the public reporting of fraud, waste, or abuse; and the significant results that can be obtained through multiple agencies cooperating in investigations,” said James E. Finch, Special Agent in Charge of the Oklahoma City Division of the FBI.

The criminal case was handled by the U.S. Attorney’s Office for the Western District of Oklahoma (USAO) and the Justice Department’s Civil Division, Consumer Protection Branch.  The civil settlement was handled by USAO and the Justice Department’s Civil Division, Commercial Litigation Branch.  The Department of Health and Human Services’ (HHS) Office of Counsel to the Inspector General; the HHS Office of General Counsel, Center for Medicare and Medicaid Services; the FDA’s Office of Chief Counsel; and the National Association of Medicaid Fraud Control Units.  These matters were investigated by the FBI; the FDA’s Office of Criminal Investigation; HHS’ Office of Inspector General, Office of Investigations and Office of Audit Services; the Defense Criminal Investigative Service; the Office of Personnel Management’s Office of Inspector General and Office of Audit Services; the Department of Veterans’ Affairs’ Office of Inspector General; and TRICARE Program Integrity.

Except for conduct admitted in connection with the criminal plea, the claims settled by the civil agreement are allegations only, and there has been no determination of civil liability.  The civil lawsuits are captioned United States ex rel. Sandler et al v. Wyeth Pharmaceuticals, Inc., Case No. 05-6609 (E.D. Pa.) and United States ex rel. Campbell v. Wyeth, Inc., Case No. 07-00051 (W.D. Okla.).

IRS Criminal Cases Filed

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Examples of Employment Tax Investigations – Fiscal Year 2013

The following examples of employment tax investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

Pennsylvania Businessman Sentenced for Tax Evasion
On July 24, 2013, in Pittsburgh, Pa., Richard D. Edwards, of Monroeville, Pa., was sentenced to 18 months in prison and three years of supervised release.  Edwards pleaded guilty to three counts of failure to pay over tax.  According to court documents, Edwards was the sole owner of the home improvement company Custom Patio Rooms.  In 2006, 2007, and 2008, Edwards failed to pay over to the IRS the federal income taxes withheld from his employees and the Federal Insurance Contributions Act taxes due and owing.

Former Owner of Employee Leasing Company Sentenced for Failing to Pay Payroll Taxes to the IRS
On July 18, 2013, Salt Lake City, Utah, Richard R. Whatley, a former owner of Alliance Staffing Management Inc. (ASM), was sentenced to 51 months in prison and ordered to pay $541,513 in restitution to the IRS. Whatley pleaded guilty in January 2013 to willfully failing to account for and pay over employment taxes. In January 2010, a federal grand jury charged Whatley with five counts of willfully failing to account for and pay over employment taxes, relating to three different employee leasing companies that he allegedly operated and controlled between the years 2001 and 2006.  The tax loss associated with Whatley’s criminal conduct during these years totaled more than $2.3 million. According to the plea agreement, during the 2002 through 2004 tax years, Whatley held an ownership interest in and had the ability to control the finances of ASM, an employee leasing company. Whatley’s control included determining the amount of employment taxes that had to be paid over to the IRS and the authority to decide which bills would be paid and which bills would not be paid. As charged in the superseding indictment, in the fourth tax quarter of 2003, Whatley caused the collection of employment taxes from ASM’s employees’ wages and then willfully failed to pay over $541,513 for the employees’ portion of employment taxes to the IRS.

Pennsylvania Man Sentenced for Theft from Employee Benefit Plan and Tax Fraud
On July 17, 2013, in Scranton, Pa., Charles Yaskulski, of Nicholson, Pa., was sentenced to 17 months in prison, two years of supervised release, and ordered to pay $548,768 in restitution. Yaskulski was convicted of theft from an employee benefit plan and failure to file an income tax return.  According to court documents, Yaskulski was the former president and majority shareholder of Eagle Warranty Corporation which marketed and sold used car warranty policies to customers in twelve states nationwide. Eagle Warranty also established a profit sharing plan, whereby company employees could make payroll-funded contributions to a company-sponsored 401(k) retirement plan. Yaskulski previously admitted to the theft of approximately $16,000 from the retirement plan in 2008 and 2009. Yaskulski also failed to file employer’s quarterly federal tax returns for Eagle Warranty for each tax quarter in 2009.

Arkansas Businessman Sentenced for Failing to Pay Federal Income Taxes
On July 1, 2013, in Fort Smith, Ark., George Avlos was sentenced to 30 months in prison, three years of supervised release and ordered to pay $291,760 in restitution to the IRS. Avlos pleaded guilty on February 27, 2013 to failing to file a federal tax return and failing to pay employment taxes. According to court documents, Avlos was the sole owner and president of LinLex Inc., a company that provided consulting services concerning Department of Transportation regulations.  Avlos was responsible for collecting, accounting for, and paying over LinLex’s payroll taxes. During 2007 and 2008, LinLex withheld payroll taxes from its employees’ paychecks but failed to make payments to the IRS. LinLex failed to account for and pay over a total of approximately $109,543 in payroll taxes. In addition, Avlos failed to file a personal income tax return for 2006, a year in which he had an income of approximately $199,489.

South Carolina Man Sentenced for Tax Evasion and Employing Illegal Aliens
On June 24, 2013 in Columbia, S.C., Ji Duan Fang, of Hanahan, S.C., was sentenced to 12 months in prison, six months in a community corrections center, and three years of supervised release for failure to pay employment taxes and harboring illegal aliens. According to court documents, Fang owned and operated Jade China Buffet, a restaurant in North Charleston, and he knowingly hired at least 14 illegal aliens to work at the restaurant.  From 2008 through 2011, Fang paid the illegal alien employees in cash and did not collect or pay employment taxes for these employees. Fang’s failure to collect and pay the employment taxes for the illegal alien employees resulted in $212,225 in unpaid taxes.

California Resident Sentenced for Employment Tax Evasion Scheme
On June 24, 2013, in Los Angeles, Calif., Jason M. Harvey, formerly of Yorba Linda, Calif., was sentenced to 24 months in prison, three years of supervised release and ordered to pay $11,738,000 in restitution for aiding in the evasion of payment of federal payroll taxes.  According to his plea agreement, Harvey, was identified as the legal owner of several payroll processing companies including Advanced Business Payroll, Inc., Global Business Outsource Solutions, Inc., and Global Consulting, Inc.  He was responsible for filing correct payroll tax returns, collecting payroll tax and remitting payroll tax withheld from employees of the client’s businesses to the IRS and State of California. During the period January 1, 2004 through December 31, 2006, Harvey failed to pay over $10 million in payroll taxes that were actually due by the Global companies for the wages paid to employees, and failed to file some of the payroll tax returns required to be filed with the IRS. On February 4, 2013 Michael Harvey, Jason Harvey’s father, was sentenced to 30 months in prison, three years of supervised release and ordered to pay $15,177,106 in restitution. Michael Harvey, pleaded guilty to evading payment of over $15 million to the IRS, admitting that he caused the companies to not honor the levies, and aided Jason Harvey to cause those companies to not honor the IRS levies.  Another co-defendant Denise Browning was sentenced to 42 months in prison and one year of supervised release after being found guilty of two counts of aiding and assisting in the preparation of false payroll tax returns.

Payroll Company Owner Sentenced in Tax Case
On June 21, 2013, in Cincinnati, Ohio, Robert Sacco was sentenced to 78 months in prison, three years of supervised release and ordered to pay $26,729,098 in restitution jointly with another defendant. Sacco pleaded guilty on October 26, 2012 to one count each of conspiracy to defraud the United States by impeding the IRS, money laundering and tax evasion.  According to court documents, Sacco was the owner and chairman of the board of Paysource, a Dayton-based professional employer organization which provided services that enabled business owners to cost-effectively outsource the management of human resources, employee benefits, payroll and workers’ compensation and other strategic services. Sacco and others conspired to avoid the payment of federal employment taxes owed by Paysource for 2007 through 2009 and concealed from the IRS the legitimate tax liabilities the company owed. Sacco directed co-conspirators to prepare fraudulent IRS forms claiming that the wages paid by the company and the resulting tax liabilities were significantly lower than the wages the company actually paid.

Former Toy Company Owner Sentenced for Failure to Pay Employment Taxes
On June 12, 2013, in St. Paul, Minn., Kim Robert Calkins, of Eden Prairie, Minn., was sentenced to 12 months and one day in prison for failure to pay federal employment taxes. Calkins pleaded guilty on September 26, 2012. In his plea agreement, Calkins admitted that from the third quarter of 2008 to the final quarter of 2010, he failed to pay to the IRS the employment taxes withheld from employees of Princess Soft Toys. Despite receiving regular notices that the employment taxes were still due, Calkins neglected to pay the amount owed. The total tax loss in this case is $852,361.

Tennessee Man Sentenced on Tax Evasion Charges
On June 3, 2013, in Greeneville, Tenn., Paul Adams, of Kingsport, Tenn., was sentenced to 36 months in prison, three years of supervised release and ordered to pay $2,535,745 in restitution. According to court documents, Adams formed a professional employer organization, employing 500 employees for 23 client companies. Adams performed clerical services for the 23 companies, including withholding federal payroll taxes and filing federal payroll tax returns. During a 17-month period, Adams calculated and collected the correct amount of withholding and payroll taxes, but reported and paid a much smaller number to the Internal Revenue Service and the Social Security Administration. Adams pocketed more than $2.5 million paid by his client companies and the employees.

Former Owner of Oklahoma Pool Company Sentenced for Tax Fraud
On May 28, 2013, in Oklahoma City, Okla., Theodore Michael Zachritz, of Nichols Hills, Okla., was sentenced to 18 months in prison, three years of supervised release and ordered to pay $461,363 in restitution to the IRS. Zachritz pleaded guilty in January 2013 to one count of willfully failing to collect and pay over to the IRS federal income taxes.  According to court documents, Zachritz and his wife owned and operated Lifestyle Pools, LLC in Oklahoma City. As owner of the company, Zachritz deducted and withheld more than $290,000 in federal income taxes, Social Security taxes, and Medicare taxes from the wages of Lifestyle Pools employees. Zachritz failed to pay those taxes to the IRS.

Oklahoma Bookkeeper Sentenced for Embezzlement and Tax Evasion
On May 6, 2013, in Oklahoma City, Okla., Carolyn Dawson was sentenced to 24 months in prison, three years of supervised release and ordered to pay $1,843,674 in restitution for embezzlement and evading federal payroll taxes. According to court documents, Dawson worked as a bookkeeper for a wholesaler of greenhouse supplies where she maintained payroll, prepared payroll tax returns, and paid withheld taxes to the IRS. From January 2007 through November 2011, Dawson defrauded the business by paying personal credit card expenses from the business bank account. Dawson also evaded federal payroll taxes by failing to file a 2010 payroll tax return for the company, failing to make payroll withholding payments to the IRS, and altering the books and records of the company to conceal her failure to make withholding payments.

Comptroller of New York Payroll Services Company Sentenced for $20 Million Fraud
On April 12, 2013, in Sacramento, Calif., Kerry Seaman, of Lake Ronkonkoma, N.Y., was sentenced to 44 months in prison and ordered to pay $19,141,618 in restitution. Seaman pleaded guilty on November 19, 2010 to wire fraud. According to court documents, Seaman was the comptroller for Ingentra HR Services Inc., a payroll services corporation in Hauppauge, N.Y.  Ingentra, then known as Humanic Solutions Inc, was hired by Sacramento County in late 2004 to process the payrolls for Sacramento County’s Special Districts. As part of the payroll services, Ingentra calculated the tax payments for the clients and the clients’ employees and then transmitted the payments to the state and federal tax authorities. Ingentra was responsible for paying the income tax withholdings to the IRS and to file the Employer’s Quarterly Federal Tax Form (Form 941) with the IRS on behalf of the clients. From 2005 until April 2010, Seaman and co-defendant Albert Cipoletti defrauded the County of Sacramento Special Districts and two other companies of the tax withholdings intended to be paid to the IRS. Ingentra collected the correct amount from the clients but underreported to the IRS the amount owed, and diverted the difference to Ingentra’s operating account for Ingentra’s own use. Cipoletti and Seaman sent funding letters to the clients that correctly calculated payroll and federal tax withholdings for the clients’ employees, and the clients wire transferred funds to Ingentra to pay both the payroll and taxes. Cipoletti and Seaman then filed false Forms 941 with the IRS, understating the true employee tax withholdings for these clients. Cipoletti and Seaman wrongfully diverted in excess of $20 million in tax withholdings from the clients that should have been remitted to the IRS on behalf of the clients and the clients’ employees. Cipoletti was sentenced in May 2011 to 78 months in prison and ordered to pay $19,141,618 in restitution.

Kentucky Man Sentenced for Attempting to Evade Paying Taxes and Wire Fraud
On April 12, 2013, in Lexington, Ky., David Byron was sentenced to 41 months in prison and ordered to pay $688,530 in restitution for wire fraud and attempting to evade paying taxes. According to court documents, Byron admitted that from 2006 through April 2010 he devised a scheme to defraud at least seven clients of his bookkeeping business. Byron told the clients he would facilitate payment of their taxes owed to the IRS and other state and federal government agencies. In reality, Byron wired money from their bank accounts to his bank account and used the money to supplement his lifestyle.

Missouri Business Owner Sentenced for Failing to Pay Taxes
On April 11, 2013, in Springfield, Mo., Paul Ray Rose Jr., of Highlandville, Mo., was sentenced to 27 months in prison and ordered to pay $586,739 in restitution to the IRS. On November 26, 2012, Rose pleaded guilty to two counts of failing to pay taxes. Rose owned and operated Highlandville-based Newby Enterprises, dba J.B. Enterprises, Inc. According to court documents, from 2006 to 2009, Rose withheld a total of $37,521 in employment taxes from his employees’ paychecks, but willfully failed to pay over the taxes to the IRS. Rose also failed to file individual income tax returns from 2006 to 2009, thereby failing to report income earned from his business. Based on more than $3.2 million in gross revenues and more than $1.7 million in gross profit for the years 2006 through 2009, Rose owed the IRS $375,631 in unpaid income tax.

North Carolina Couple Sentenced for Tax Fraud Conspiracy and Health Care Fraud 
On April 10, 2013, in Greenville, N.C., John Curtis Alspaugh was sentenced to 40 months in prison, three years of supervised release and ordered to pay $1,614,003 in restitution. Helen Blue Alspaugh was sentenced to 18 months in prison, three years of supervised release and ordered to pay $1,392,115 in restitution. On January 8, 2013, the Alspaughs pleaded guilty to one count of tax fraud conspiracy and John Alspaugh also pleaded guilty to one count of health care fraud. According to court documents, John and Helen Alspaugh formed Basic Home Health Care, Inc., a home health care business located in Dunn, N.C. Basic Home Health Care, Inc. provided personal care services to people who were homebound and needed assistance with their activities of daily living and instrumental activities of daily living.  The Alspaughs collected employment taxes from employees and failed to pay over the taxes to the IRS, resulting in a tax liability in excess of one million dollars for the tax periods beginning in March 2003 and ending in December 2010.

Businessman Sentenced for Failure to Pay Payroll Taxes and Bank Fraud
On April 4, 2013, in Columbus, Ohio, Robert Jeffrey Johnson was sentenced to 15 months in prison, three years of supervised release and ordered to pay $1,334,052 in restitution to the IRS and $252,500 in restitution to the victim financial institution. Johnson pleaded guilty on September 27, 2012 to failure to pay employee payroll taxes, bank fraud and concealing documents in a bankruptcy proceeding. According to court documents, Johnson, president of Smith & Johnson Construction Company, borrowed $20 million from lenders in 2004 and 2005 to fund company operations. However, during 2004 and 2005, Johnson used his position at Smith & Johnson to have about $7 million transferred to him and to business entities controlled by him. Part of Johnson’s scheme included securing a line of credit to pay off any outstanding accounts and the end of the fiscal year to make it appear that he, or business entities he controlled, owed no money to Smith & Johnson. Johnson also purchased vehicles with funds provided by Smith & Johnson, then sold the vehicles and had the proceeds sent to himself or his representative. When the construction company filed for bankruptcy in 2006, Johnson filed false documents, failed to submit all financial records and hid assets from the bankruptcy trustee. In addition, Johnson defrauded the IRS in the amount of $156,008 in the first quarter of 2006 by withholding funds from employees’ paychecks for taxes and failing to pay the funds to the IRS.

Ohio Business Owner Sentenced for Employment Tax Fraud
On April 3, 2013, in Columbus, Ohio, Charles E. Watts Jr., of Jeffersonville, Ohio, was sentenced to 12 months and one day in prison, three years of supervised release and ordered to pay $1,443,048 in restitution to the IRS. Watts pleaded guilty on November 2, 2011 to attempting to evade and defeat the payment of employment taxes. According to court documents, from 1998 through 2008, Watts was the owner and operator of Dimensional Construction, T&R Electric Works, Watts Electric Co., and Watts Electric Company of Ohio, LLC. Beginning in the fourth quarter of 2004, Watts evaded $1,443,048 in employment taxes for 12 tax periods. Watts used a substantial portion of the funds to purchase numerous assets and pay other personal expenses. During 2004, Watts evaded paying employment taxes by establishing a business name, operating under that name, incurring employment tax obligations, then terminating the business only to establish another one under a different name and Employer Identification Number. Watts opened several business bank accounts utilizing these various business names, and used those accounts to funnel employees’ withholdings from account to account in order to elude IRS Collections’ efforts. In addition, Watts established a shell company, Valley Construction & Property, Inc., and used the company bank account to pay personal living expenses and to purchase major assets. Watts placed multiple assets in the name of Valley Construction & Property, Inc. in order to disguise the fact that he was the true owner of these assets. Watts also recruited several individuals who helped him conceal various assets from the IRS by placing them in their own name. These assets included real estate, luxury vehicles, and a pleasure boat.

Husband and Wife Sentenced for Various Tax Crimes
On March 25, 2013, in Houston, Texas, James R. Dixon was sentenced to 33 months in prison, three years of supervised release and ordered to pay $1,397,511 in restitution. On February 27, 2013, Sharon C. Dixon was sentenced to 11 months in prison and ordered to pay $183,801 in restitution. The Dixons both pleaded guilty in October 2012. James Dixon pleaded guilty to one count of tax evasion. Sharon Dixon pleaded guilty to two counts of willfully failing to file tax returns. According to court documents, the Dixons owe $890,000 in individual income taxes from their 2005 through 2008 income tax years, plus more than $700,000 in unpaid employment taxes of a company for which James Dixon had the duty to pay over to the IRS.

New York Tax Preparer Sentenced for Tax Evasion and Bank Fraud
On February 13, 2013, in Buffalo, N.Y, Vincent P. Mangione, of North Tonawanda, N.Y., was sentenced to 30 months in prison and three years of supervised release for tax evasion and bank fraud. He was also ordered to pay more than $800,000 in restitution. According to court documents, Mangione operated MTS Payroll and Mil-Sher Tax Services, Inc. The companies provided payroll services and bookkeeping and tax preparation for individuals and businesses. Between December 2002 and April 2007, Mangione, without the knowledge of the businesses he represented, filed fraudulent quarterly federal tax returns. In order to avoid detection, the defendant obtained the actual amount of withholding tax the businesses owed to the IRS. Mangione then filed a false quarterly tax return that under-represented the amount owed to the IRS and kept the difference for his own benefit.

Owner of Japanese Restaurant Sentenced for Tax Crimes
On January 30, 2013, in San Francisco, Calif., Michael Chen, the owner of Fune Ya Japanese Restaurant, was sentenced to 33 months in prison, three years of supervised release and ordered to pay $459,105 in restitution. Chen was convicted by a jury on March 27, 2012, on filing false tax returns, failure to file tax returns, and mail fraud. A federal jury found that Chen filed a false 2004 U.S. income tax return for an S Corporation (Form 1120S) for his restaurant, failed to file corporate income tax returns for the restaurant for 2005 and 2006 and filed nine false employer’s quarterly federal tax returns (Forms 941) with the IRS. He used the U.S. mail to file nine false quarterly sales and use tax returns with the California Board of Equalization. Evidence at trial showed that Chen maintained detailed records of Fune Ya’s daily receipts in twenty-six boxes marked “Seasoned Octopus.”  The boxes were stored in a crawl space beneath the restaurant floor. The cash sales shown on Fune Ya’s receipts were not reported to the IRS. The evidence also showed that Chen maintained an encrypted Excel spreadsheet documenting $1,910,803 in sales, while he reported $450,165 in sales to the California Board of Equalization, and $65,738 in sales to the IRS. Chen also paid Fune Ya employees cash wages totaling $548,919 for the 2004 through 2006 tax years. Employees received cash wages in white envelopes each payday. Chen failed to include these cash wages on the quarterly payroll tax returns (Forms 941) filed with the IRS.

Owner of Maryland Business Sentenced for Failing to Pay Employment Taxes
On January 23, 2013, in Greenbelt, Md., Alphonso Tillman, of Fort Washington, Maryland, was sentenced to 24 months in prison and three years of supervised release, for failing to account for and pay over employment taxes. Tillman was also ordered to pay restitution of $2,205,991. According to his plea agreement, Tillman was the president and sole owner of Remote Surveillance Technology Solutions, Inc. (RSTS), and its successor, Remote Surveillance Technology Services, LLC, (RSTServ). The companies were headquartered in Landover, Maryland, and provided security guards to protect commercial and residential properties in Maryland, Virginia, Pennsylvania and the District of Columbia. RSTS and RSTServ withheld taxes from their employees’ paychecks, which the companies were required to pay over to the IRS on a periodic basis. Tillman failed to file the required forms or pay the payroll taxes due for RSTS and RSTServ, with the exception of payments made by RSTS to the IRS because of IRS collection efforts.  The total amount of tax loss resulting from Tillman’s failure to pay taxes owed by RSTS and RSTServ is $2,205,991.

CEO and CFO of Assisted Living Facility Chain Sentenced for Tax Fraud
On January 16, 2013, in Wilmington, N.C., Ronald E. Burrell, former chief executive officer (CEO) of Caremerica Inc., and Michael R. Elliott, former chief financial officer (CFO) of Caremerica Inc., were each sentenced to 60 months in prison and ordered to pay over $4.8 million in restitution. Burrell, of Wilmington, N.C., pleaded guilty to conspiracy to defraud the IRS on January 3, 2012.  Elliott, of Loris, S.C., pleaded guilty to conspiracy to defraud the IRS on July 18, 2012. According to court documents, Burrell and Elliott co-owned and operated a chain of assisted living facilities in North and South Carolina. Burrell and Elliott were the corporate officers responsible for ensuring that the Caremerica companies collected, reported and paid over federal employment taxes to the IRS. The Caremerica companies accrued more than $4.5 million in employment tax liabilities between approximately 2003 and 2006. Burrell and Elliott filed, or caused to be filed, false IRS forms that reported full payment of the employment taxes due, when in fact only a small fraction of the taxes, or none at all, were paid. Additionally, Burrell and Elliott took active steps to conceal information from the IRS, specifically, the sale proceeds of a company in which they owned a majority interest. As a result of his concealment efforts, Burrell deceived the IRS into accepting a $29,000 settlement on a $300,000 personal tax liability and opened another assisted living facility with the proceeds. Burrell and Elliott then filed false 2005 federal income tax returns that failed to report the proceeds. Elliott and Burrell also obstructed justice by making false statements under oath in bankruptcy proceedings and in IRS disclosure forms.

Former Owner of Xpress Flex, Inc. and Payroll America, Inc. Sentenced for Fraud and Filing a False Tax Return
On January 9, 2013, in Boise, Idaho, Michael Wayne Davis, II, of Raleigh, North Carolina, formerly of Eagle, Idaho, was sentenced to 51 months in prison, three years of supervised release and ordered to pay $954,640 in restitution to Xpress Flex victims and $45,290 to the IRS for the tax loss. Davis pleaded guilty on September 10, 2012 to wire fraud and filing a false tax return. According to court documents, in 2009 and 2010, Davis owned and operated Xpress Flex, Inc., a Boise, Idaho, company that administered, on behalf of employer-clients, flexible benefits plans for tax-free, qualified benefits, such as health care and dependent care. Xpress Flex received monetary contributions from its employer-clients of pre-tax withholdings from their employees’ paychecks. According to court documents, Davis misappropriated $954,640 of Xpress Flex client funds and used them to pay personal credit card charges and the business expenses of his other company, Payroll America, Inc. Court documents also showed that from 1994 through 2009, Davis owned and operated Payroll America in Boise, Idaho. Payroll America provided payroll administration and payroll tax filing services to its employer-clients. Pursuant to contract documents, employer-clients would deposit sufficient funds with Payroll America to meet their payroll and payroll tax obligations, which Payroll America would pay when they came due. According to court documents, in March and April 2007, Davis misappropriated $2 million of Payroll America employer-client funds, wired them into his E*Trade brokerage account, and then invested the funds in the stock market. Davis’ E*Trade investments generated approximately $192,436 in capital gains income. According to court documents, Davis wired this money into his and his wife’s personal checking account. The wire transfer was annotated “E-Trade Gains.” However, Davis intentionally failed to report capital gains income from E*Trade investments on his 2007 or 2008 tax returns, causing a tax loss of $45,290.

Wisconsin Woman Sentenced for Failure to Pay Federal Payroll Taxes
On January 4, 2013, Lisa Bartz Vanden Elzen, of DePere, Wis., was sentenced to 12 months and one day in prison for failing to pay federal payroll taxes over to the Internal Revenue Service. According to court records, during the period from July 2005 through December 2010, Bartz Vanden Elzen failed to pay more than $193,000 in payroll taxes withheld from the wages of employees of Dairy Transport and also failed to pay to the IRS the employer’s matching share of these payroll taxes, which totaled $81,000. Bartz Vanden Elzen is required to make full restitution to the IRS in the amount of approximately $274,000.

Operator of Payroll Companies Sentenced for Fraud and Money Laundering Crimes 
On January 3, 2013, in Greensboro, N.C., Arthur S. Weiss, of Winston-Salem, N.C., was sentenced to 185 months in prison for employment tax fraud and other crimes.  Weiss was also ordered to pay more than $7 million in restitution to numerous victims, including the IRS, the North Carolina Department of Revenue, and former clients. Weiss pleaded guilty to charges of wire fraud, bank fraud, money laundering, and tax obstruction on October 5, 2012. According to court documents, Weiss operated professional employer organizations, which provided payroll-related services to client companies. For his client companies, Weiss agreed to pay the employees, withhold and remit federal and state taxes, prepare and file the federal and state employment tax returns, and provide workers compensation insurance (WCI). Weiss did pay the employees and withheld the employment taxes, but he failed to remit the employment taxes, keeping them for his personal use. From 2004 to 2012, Weiss failed to file employment tax returns and failed to pay over to the IRS employment taxes in excess of $4 million. According to court documents, Weiss used a portion of his fraud proceeds to purchase expensive jewelry and cars.

World Health Alternatives CEO Sentenced for $41 Million Fraud Scheme
On December 4, 2012, in Pittsburgh, Pa., Richard E. McDonald was sentenced to 130 months in prison and three years of supervised release. McDonald pleaded guilty in April 2012 to charges of wire fraud, securities fraud, willful certification of false statements to SEC, failure to pay over payroll taxes, and income tax evasion. According to information presented to the court, in 2003, McDonald became the President, Principal Financial Officer, Principal Accounting Officer and Chairman of the Board of Directors of World Health Alternatives, Inc. (WHA). Around June 2004, McDonald also became the Chief Executive Officer (CEO) of WHA. Between February 2003 through August 15, 2005, McDonald defrauded WHA and its investors. He transferred funds from WHA to his personal bank account and other accounts under his control. McDonald also manipulated the financial records and statements of WHA by understating the amount of unpaid payroll taxes of WHA and its subsidiaries, and by overstating the amount of loans purportedly made by him to WHA. In addition, McDonald stole money from WHA by directing purchasers of newly issued shares to transfer the funds for the shares to accounts under McDonald’s control. McDonald stole approximately $6 million, and then spent the money on himself. In his capacity as CEO of WHA, in WHA’s financial statements, McDonald understated the actual number of outstanding WHA shares.  This was a false representation to the SEC, WHA shareholders, and prospective purchasers of WHA stock. The fraudulent understatements of the number of outstanding WHA shares falsely overstated WHA’s earnings per share, and thereby inflated the apparent market value of WHA stock. As a result of McDonald’s fraudulent conduct, WHA shareholders lost $41 million. McDonald also failed to report the funds he had fraudulently obtained from WHA and its shareholders on his personal tax returns. Finally, McDonald failed to pay over to the IRS the payroll taxes which WHA had withheld from its employees.

Ohio Businessman Sentenced for Employment Tax Fraud
On November 30, 2012, in Cincinnati, Ohio, Charles C. Painter, of Dayton, Ohio, was sentenced to 15 months in prison and ordered to pay $11,802,748 in restitution.  On February 17, 2012, Painter pleaded guilty to tax fraud. According to court documents, Painter was employed as the Chief Executive Officer and President of Paysource, Inc., a payroll company. Painter willfully aided and assisted in the preparation and filing of a false corporate income tax return with the IRS for the third quarter of 2007. The tax return fraudulently stated that the total wages Paysource II, Inc. paid to employees was $2,441,566 and as a result, Paysource II, Inc. incurred an employment tax liability of $603,532. Paysource II, Inc. actually paid $6,630,667 in total wages to its employees and incurred an actual employment tax liability of $1,710,688.

Owner of Washington Roofing Company Sentenced for Employment Tax Evasion
On November 29, 2012, in Seattle, Wash., Bruce H. Sprague, owner of Bruce’s Roofing in Enumclaw, Washington, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $1,179,761 to the IRS.  In July 2012, Sprague pleaded guilty to paying a portion of his employees’ wages in cash from 2005 through 2008 and to not collecting employment taxes including Social Security, Medicare and income tax withholding from the cash wages. According to his plea agreement, Sprague informed his employees in early 2005 that they would receive a portion of their wages in cash. The cash payroll was about fifty percent of each employee’s pay. No payroll taxes were collected on the cash portion of the employees’ pay. By paying in cash and not reporting the wages, Sprague avoided approximately $1,179,761 in employment taxes for 2006 through 2008. Even as he was failing to collect and pay over the employment taxes, Sprague was taking more than $3.9 million in wages and profits from the business for 2005 through 2008.

Former CEO Pennsylvania Business Sentenced on Tax Charges
On November 27, 2012, in Erie, Pa., Frederick Zurn was sentenced to 54 months in prison and ordered to pay $278,323 in restitution to the IRS on his conviction of conspiracy to commit wire fraud and violations of federal income tax laws. According to information presented in court, Zurn was the CEO and President of Erie Copy Products, an office equipment company based in Erie, Pennsylvania. He conspired with the Vice President of Finance and others to submit forged lease documents to banks and financing companies which listed new copy equipment. They would then either deliver used copy equipment to the customer, no equipment at all or deliver equipment that the customer never agreed to lease. The conspiracy resulted in victim losses of more than $2.5 million. In addition, from 2008 through 2011, Zurn failed to make payroll tax payments to the Internal Revenue Service on behalf of his employees at Erie Copy Products.

Maryland Contractor Sentenced for Tax Evasion
On November 27, 2012, in Baltimore, Md.. Randy Benjamin Wells, of Reisterstown, Maryland, was sentenced to 13 months in prison and three years of supervised release for tax evasion. Wells was also ordered to pay restitution of $349,588. Wells paid $74,404 to the IRS prior to sentencing. According to his guilty plea, from 2005 through 2009, Wells operated Wells Contracting and Demolition Company, Inc., Triple R Contractors, Inc., and Gryphon Contracting, Inc. Although Wells hired a tax preparer to prepare his individual tax returns for 2005 through 2009, Wells failed to file the income tax return with the IRS resulting in approximately $196,200 in taxes owed. Wells used several methods in an effort to conceal his income such as purchasing personal items using funds held in a company account.  During this same time, Wells failed to pay employment taxes for the employees working for his companies. The tax loss as a result of Wells’ actions resulted in a total of $227,792 in employment taxes owed.

Massachusetts Businessman Sentenced for Tax Evasion and Conspiracy to Obstruct and Impede the IRS
On October 17, 2012, in Boston, Mass., Gary Alcock, of Westborough, Mass., was sentenced to 14 months in prison and ordered to pay $515,518 in restitution. Alcock pleaded guilty on December 9, 2011, to charges of tax evasion, conspiring to defraud the United States and willfully failing to file tax returns. On April 2, 2012, Charles Adams, Catherine Floyd and William Scott Dion were convicted by a jury of conspiracy to defraud the IRS by promoting an “under the table” payroll scheme doing business as Contract America. Dion and Floyd were also convicted for conspiracy to defraud the IRS through the use of an “underground warehouse banking” scheme designed to conceal subscriber income and assets from the IRS. According to information presented in court, Alcock owned and operated a trash hauling business called G&K Trucking, as well as a landscaping business called Bark, Mulch and Loam. Between 2001 and 2004, Alcock set up a nominee company called “Alex Management” to divert and hide business receipts and help his businesses fraudulently “disappear” on paper to evade IRS assessments and collection activity. Alcock also used Contract America to pay his employees “under the table” without withholding or paying Social Security, Medicare and income taxes. Dion was previously sentenced to 84 months in prison, Floyd to 60 months in prison, and Adams to 48 months.

Former Owner of Paving Business Sentenced for Failure to Pay Payroll Taxes
On October 12, 2012, in Boston, Mass., William E. Belleville, of Groton, was sentenced to 18 months in prison, one year of supervised release and ordered to pay $460,000 in restitution for failing to pay payroll taxes collected from his employees. On April 10, 2012, Belleville pleaded guilty to conspiracy and tax evasion charges. According to court documents, Belleville was the former owner of a paving and plowing company, Mass. Paving. From 1993 to 2006, he withheld payroll and income taxes from his employees’ wages, but failed to remit those sums, totaling approximately $460,000, to the Internal Revenue Service.

Former Owner of Sewing Company Sentenced for Payroll Tax Violations
On October 12, 2012, in New York, N.Y., Dong Sun Mun, the former owner and operator of Match Fashions Inc., was sentenced to 36 months in prison and three years of supervised release for his role in a scheme to evade payroll taxes and for jumping bail. Mun was also ordered to pay more than $304,000 in restitution to the IRS. According to the court documents, Mun owned and operated Match Fashions, a Manhattan company that did sewing work for couture companies. From 2004 through 2006, Mun cashed many of the checks he received from customers at check-cashing establishments rather that depositing them into bank accounts. Mun used the cash to pay Match Fashions’ employees off the books to evade IRS reporting requirements. He also did not withhold or remit to the IRS payroll taxes for his employees. Mun paid nearly $2 million in cash wages and did not pay over $304,000 in payroll taxes. Mun was originally scheduled to be sentenced on the tax charges in January 2011. Shortly before that sentencing date, Mun fled to Vietnam and Korea. He was subsequently arrested when he attempted to enter Canada.

Father and Son Sentenced on Tax Charges
On October 3, 2012, in Columbus, Ohio, Eric J. McEvoy was sentenced to three years probation and ordered to pay $16,677 in restitution to the IRS. Robert McEvoy was sentenced on September 27, 2012, to 18 months in prison, three years of supervised release and ordered to pay $702,429 in restitution to the IRS. On June 13, 2012, Eric McEvoy pleaded guilty to three counts of income tax evasion and Robert McEvoy pleaded guilty to one count of conspiracy to impede and impair the lawful functions of the IRS. According to court documents, Robert McEvoy, an un-enrolled tax preparer, owned and operated Capital City Accounting, a payroll servicing company. As a payroll company, Capital City Accounting issued payroll checks, prepared payroll tax returns and made federal tax deposits on behalf of its clients.  Beginning in 2006, Eric McEvoy was employed by Capital City Accounting and assisted his father with the payroll process. Capital City Accounting billed its clients for the gross amount of their payroll, payroll taxes and fees. When clients made payments to Capital City Accounting, the payments were deposited into a Capital City Accounting bank account. Robert and Eric McEvoy failed to forward all employment taxes received from clients to the IRS. They diverted funds from the payroll account and used those funds to pay Capital City business expenses, Eric McEvoy’s personal living expenses, and for cash withdrawals. The McEvoys then either prepared and filed false Employer’s Quarterly Federal Tax Returns (IRS Forms 941) or failed to file the forms on behalf of its clients. Eric McEvoy intentionally failed to report over $66,000 income on his federal income tax returns for the 2006, 2007 and 2008 tax years.

Florida Lawn Service Owner Sentenced for Employment Tax Fraud and Filing a False Tax Return
On October 2, 2012, in Miami, Fla., Michael J. Cioffi, of Loxahatchee, Florida, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $537,809 in restitution to the IRS. According to the criminal information and plea documents, Cioffi was the sole owner and operator of Mike Cioffi Lawn Service, in Loxahatchee.  Cioffi’s business specialized in large commercial contracts and employed approximately thirty employees per quarter between January 2005 and December 2006. Documents filed with the court show that for each quarter during 2005 and 2006, Cioffi paid wages to his employees by check, but knowingly failed to collect and truthfully account for or pay to the IRS any FICA or income taxes due and owing to the United States on these wages. Cioffi also did not file any of the required Employer Quarterly Tax Returns, Forms 941, for this period with the IRS. Additionally, for tax year 2006, Cioffi willfully filed a United States Individual Income Tax Return, Form 1040, on behalf of himself and his spouse which falsely reported that the gross receipts for Mike Cioffi’s Lawn Service were $782,437, when Cioffi knew that gross receipts were actually more than $2 million.

North Carolina-Based Trans1 to Pay U.S. $6 Million to Settle False Claims Act Allegations

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Medical device manufacturer TranS1 Inc., now known as Baxano Surgical Inc., has agreed to pay the United States $6 million to resolve allegations under the False Claims Act that the company caused health care providers to submit false claims to Medicare and other federal health care programs for minimally-invasive spine surgeries, the Justice Department announced today.
“The Justice Department is committed to ensuring that medical device manufacturers follow the law when providing devices to beneficiaries of federal health care programs,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.  “It is critical that health care providers bill federal health care programs accurately and honestly for the work they perform, and it is imperative that they base their selection of medical devices on the best interests of their patients.”
The United States alleged that TranS1 knowingly caused health care providers to submit claims with incorrect diagnosis or procedure codes for minimally-invasive spine fusion surgeries using Trans1’s AxiaLIF System.  That device was developed as alternative to invasive spine fusion surgeries.  The United States alleges that TranS1 improperly counseled physicians and hospitals to bill for the AxiaLIF System by using incorrect and inaccurate codes intended for more invasive spine fusion surgeries.  The United States alleged that, as a result, health care providers received greater reimbursement than they were entitled to for performing the minimally-invasive AxiaLIF procedures.
The United States further alleged that TranS1 knowingly paid illegal remuneration to certain physicians for participating in speaker programs and consultant meetings intended to induce them to use TranS1 products, in violation of the Federal Anti-Kickback Statute, 42 U.S.C.  § 1320a-7b(b), and thereby caused false claims to be submitted to federal health care programs.  The Anti-Kickback Statute prohibits offering or paying remuneration to induce referrals of items or services covered by federally-funded programs and is intended to ensure that a physician’s medical judgments are not compromised by improper financial incentives and are based solely on the best interests of the patient.
In addition, the United States alleged that TranS1 promoted the sale and use of its AxiaLIF System for uses that were not approved or cleared by the U.S. Food and Drug Administration, including use in certain procedures to treat complex spine deformity, and which were thus not covered by federal health care programs.     

               
“A medical device manufacturer violates the law when it advises physicians and hospitals to report the wrong codes to federal health insurance programs in order to increase reimbursement rates,” said Rod J. Rosenstein, U.S. Attorney for the District of Maryland.  “Health care providers are required to bill federal health care programs truthfully for the work they perform.”
As part of the settlement, TranS1 has agreed to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services.  That agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter.
“Using kickbacks to encourage health providers to make false payment claims will not be tolerated,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services.  “TranS1’s agreement to now comply with government health laws is an important step.”
The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The civil lawsuit was filed in the District of Maryland and is captioned United States ex rel. Kevin Ryan v. TranS1, Inc.  As part of today’s resolution, Mr. Ryan will receive $1,020,000 from the settlement.
This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $10.7 billion since January 2009 in cases involving fraud against federal health care programs.  The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.7 billion.
The settlement with TranS1 was the result of a coordinated effort among the U.S. Attorney’s Office for the District of Maryland; the Commercial Litigation Branch of the Justice Department’s Civil Division; the Department of Health and Human Services’ Office of Inspector General; the Department of Defense, Office of the Inspector General; and the Office of Personnel Management, Office of Inspector General.

 

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

Maurice E. Stucke Curriculum Vitae

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Maurice E. Stucke Curriculum Vitae (pdf)

Leading Antitrust Lawyers and DOJ Alumni Allen P. Grunes and Maurice E. Stucke Join GeyerGorey LLP

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GeyerGorey LLP is pleased to announce that two veteran Department of Justice prosecutors, Allen P. Grunes and Maurice E. Stucke, have joined the firm.  Grunes, recently named as a “Washington D.C. Super Lawyer for 2013” in antitrust litigation, government relations, and mergers & acquisitions, joins as a partner.  Stucke, a widely-published professor with numerous honors including a Fulbright fellowship, joins as of counsel.  Stucke will continue to teach at the University of Tennessee College of Law.

“We are delighted that Allen and Maurice have decided to join us,” said Brad Geyer.  “They add considerable fire power to our already impressive antitrust, compliance and white collar roster and give us more capabilities and capacity, particularly on the civil side.”

Robert Zastrow, who was Verizon’s Assistant General Counsel for 15 years before co-founding the firm in October 2012, added, “Allen’s and Maurice’s extensive background and expertise nicely complement our firm’s unique philosophy and enrich our competition and merger practices.  We are thrilled they are joining our innovative effort in delivering legal services.”

GeyerGorey LLP presents a new way to practice law.  It may be the only law firm in the country where prior federal prosecutorial experience is a prerequisite for partnership.  Given its lawyers’ extensive legal expertise, GeyerGorey can handle trials involving the most complex legal and factual issues, and, when advantageous, work with other law firms, economists and specialists, particularly former federal prosecutors and agents, who bolster existing resources, expertise and constantly freshen perspective.  As founding partner Hays Gorey added, “We seek to avoid the traditional hierarchal partner-associate pyramid, hourly billing fee structure, and practice fiefdoms.  We want to attract entrepreneurial lawyers, like Allen and Maurice, who love competition policy and practicing law.  Having worked with them at DOJ, I am excited about the expertise and enthusiasm they bring to our clients.”

Consistent with GeyerGorey’s philosophy, both Grunes and Stucke are alumni of the U.S. Department of Justice, Antitrust Division, in Washington, D.C.  At DOJ, they led numerous civil investigations, worked on high-profile trials, and negotiated consent decrees involving significant divestitures across many different industries.  In their last case together at the Division, In re Visa Check/MasterMoney Antitrust Litigation, they successfully sought, as a matter of equity and the first time in the Division’s history, for the government’s share of damages in a private class action settlement.

Grunes and Stucke are regarded as leading authorities on competition policy in the media.  Their scholarship on media and telecommunications policy has been published in the Antitrust Law Journal, the Northwestern University Law Review, the Connecticut Law Review, the Journal of European Competition Law & Practice, and the Federal Communications Law Journal.  They have spoken at numerous conferences on competition policy and the media, including the U.S. Federal Trade Commission’s workshop, How Will Journalism Survive the Internet Age?  Both are frequently quoted in the press on mergers and anticompetitive conduct.  In addition, both serve on the advisory boards of the American Antitrust Institute and the Loyola Institute for Consumer Antitrust Studies in Chicago.

Allen Grunes joins GeyerGorey from another Washington, D.C. firm, where he was a shareholder.  His recent matters include acting as class counsel in litigation against several hospitals and an association in Arizona that allegedly artificially depressed the rates paid to temporary nurses, opposing the merger of AT&T and T-Mobile for a coalition of companies including DISH Network, and representing Warner Music Group in connection with the merger of Universal and EMI.  He has counseled dozens of companies and associations on antitrust issues and corporate mergers.  He also serves as chair of the antitrust committee of the Bar Association of the District of Columbia.

Maurice Stucke is a tenured professor at the University of Tennessee and a leading competition law scholar.  With over 30 articles and book chapters, Stucke has been invited by competition authorities from around the world and the OECD to speak about behavioral economics and competition policy.  He currently is one of the United States’ non-governmental advisors to the International Competition Network, the only international body devoted exclusively to competition law enforcement.  His scholarship has been cited by the U.S. federal courts, the OECD, competition agencies and policymakers.

Headquartered in Washington, D.C., GeyerGorey specializes in white collar criminal defense, particularly investigations and cases involving allegations of economic crimes, such as violations of the federal antitrust laws (price fixing, bid rigging, territorial and customer allocation agreements), procurement fraud, securities fraud, foreign bribery (Foreign Corrupt Practices Act) and qui tam (False Claims Act) and whistleblower actions.  The firm also conducts internal investigations of possible criminal conduct and provides advice regarding compliance with U.S. antitrust and other laws.

The Department of Justice Files Suit Against Louisiana Pharmaceutical Company for Distributing Unapproved and Misbranded Prescription and Over-the-counter Drugs

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Acting Assistant Attorney General Stuart F. Delery announced today that the Department of Justice, on behalf of the Food and Drug Administration (FDA), has filed suit in the U.S. District Court for the Western District of Louisiana against Sage Pharmaceuticals, Inc. (Sage), its president Dr. Jivn-Ren Chen, and its Director of Corporate Quality, Charles L. Thomas, all of Shreveport, Louisiana.  According to the Complaint, the defendants violated the Federal Food, Drug, and Cosmetic Act (FDCA) by manufacturing and distributing unapproved and misbranded drug products.  Under the FDCA, before a company can sell a new drug product to consumers, it must submit and receive approval of a new drug application from the FDA.  The purpose of this approval process is to ensure that drugs manufactured and distributed to consumers are safe and effective for their intended uses.  Furthermore, the FDA requires all drug labeling to have adequate directions for use.

“Today’s action furthers the FDA’s mission of ensuring that all drugs sold to the public are safe and effective, and those companies that undermine this mission will be held accountable,” said Stuart Delery, Acting Assistant Attorney General for the Civil Division.

U.S. Attorney for the Western District of Louisiana Stephanie A. Finley said, “This lawsuit demonstrates that this office will make every effort to protect public health by filing enforcement actions against companies that are identified as violating federal law.”

This is the second injunctive case that the government has brought against Sage alleging the distribution of unapproved new drugs.  In 2000, the government obtained an injunction against the company banning the manufacture and distribution of two unapproved new drugs.  Since that time, FDA inspections revealed that defendants continue to manufacture and distribute other drug products—including prescription pain relievers, over-the-counter (OTC) cough and cold remedies, and OTC wound cleansers—without first obtaining the requisite FDA approvals.  As a result, the defendants’ products are unapproved new drugs and misbranded drugs under the FDCA, and potentially unsafe and ineffective.

Despite numerous warnings from FDA, the defendants have failed to bring their operations into compliance with the law. The Justice Department will seek a permanent injunction requiring the defendants to cease all receiving, processing, manufacturing, preparing, packaging, labeling, holding, and distributing activities until they comply with applicable FDA regulations.

The FDA referred this matter to the Department of Justice.  The Consumer Protection Branch of the Justice Department’s Civil Division together with the U.S. Attorney’s Office for the Western District of Louisiana brought this case on behalf of the United States.

Statement of the Department of Justice Antitrust Division on Its Decision to Close Its Investigation of Delta Air Lines’ Acquisition of an Equity Interest in Virgin Atlantic Airways

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The Department of Justice’s Antitrust Division issued the following statement today after announcing the closing of its investigation into Delta Air Lines’ proposed equity investment in Virgin Atlantic Airways Ltd. and their related trans-Atlantic joint venture:

“After a thorough investigation of the competitive effects of the proposed equity investment and joint venture, the Antitrust Division concluded that the facts and circumstances did not warrant further investigation or action.

“In December 2012, Delta Air Lines and Virgin Atlantic reached an agreement to establish a joint venture on flights between North America and the United Kingdom.  At the same time, Delta entered an agreement to acquire the 49 percent stake in Virgin Atlantic currently held by Singapore Airlines for $360 million.  Virgin Group will retain the majority 51 percent stake.

“The proposed equity investment and joint venture also were subject to review by the European Commission.  The division and the European Commission cooperated closely throughout the course of their respective investigations, with frequent contact between the agencies.  This cooperation, facilitated by the parties, made for a more efficient review process.

“Delta and Virgin Atlantic also have filed an application with the U.S. Department of Transportation seeking antitrust immunity for their joint venture.  The division will continue to consult, as appropriate, with the Department of Transportation as it reviews the request for immunity.”