FORMER POLICE OFFICER TO SERVE 12 MONTHS FOR MAKING FALSE STATEMENTS TO FBI DURING CIVIL RIGHTS INVESTIGATION

FROM:  U.S. JUSTICE DEPARTMENT
Friday, April 17, 2015
Former Puerto Rico Police Officer Sentenced for Making False Statements to FBI During Civil Rights Investigation

Former Puerto Rico Police Officer Miguel Negron Vazquez was sentenced today to serve 12 months and one day in prison for making a false statement to a Special Agent of the Federal Bureau of Investigation (FBI) during a federal investigation into civil rights violations related to the fatal beating of Jose Luis Irizarry Perez, 19, announced Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division, U.S. Attorney Rosa Emilia Rodriguez-Velez of the District of Puerto Rico and Special Agent in Charge Carlos Cases of the FBI San Juan Field Office.

Negron Vazquez pleaded guilty to falsely telling the FBI that two officers, who later pleaded guilty to unnecessarily striking Irizarry Perez with their batons, never approached or interacted with the victim during the incident.  In total, six Puerto Rico police officers have pleaded guilty for their roles in the beating and subsequent obstruction of the civil rights investigation, and two of those officers are still awaiting sentencing.  According to documents filed in connection with the guilty pleas, two former Puerto Rico police officers violated the constitutional rights of Irizarry Perez by striking him with their police batons while another former police officer physically restrained Irizarry Perez during an election evening celebration at the Las Colinas housing development in Yauco, Puerto Rico, on Nov. 5, 2008.  

U.S. District Court Judge Juan M. Perez Gimenez issued the sentence, which will be followed by two years of supervised release.  During the two-year term, the defendant will be under federal supervision, and risks additional prison time should he violate any terms of his supervised release.

“Lying to the FBI or concealing information during the course of a federal civil rights investigation undermines the public’s trust in the criminal justice system and will not be tolerated,” said Principal Deputy Assistant Attorney General Gupta.  “The department will aggressively investigate and prosecute those who seek to cover up or obstruct a federal investigation.”

“Today's sentence affirms that law enforcement officers are not above the very laws they are sworn to uphold,” said U.S. Attorney Rodriguez-Vélez.  “The defendant’s conduct undermined law enforcement’s expectation of honesty from public officials and those who desire to serve.”

This case was investigated by the FBI’s San Juan Division and is being prosecuted by Senior Litigation Counsel Gerard Hogan and Trial Attorneys Shan Patel and Olimpia E. Michel of the Civil Rights Division and Assistant U.S. Attorney Jose A. Contreras of the District of Puerto Rico.

PHYSICIAN SENTENCED TO PRISON FOR ROLE IN $200 MILLION MEDICARE FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, October 21, 2014

Miami-Area Physician Assistant Sentenced to 15 Years in Prison for $200 Million Medicare Fraud Scheme

A Miami licensed physician assistant was sentenced today to serve 15 years in prison for participating in a Medicare fraud scheme involving approximately $200 million in fraudulent billings by American Therapeutic Corporation (ATC), a mental health company that was headquartered in Miami.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office and Special Agent in Charge Derrick Jackson of the Health and Human Services Office of Inspector General’s (HHS-OIG) Florida region made the announcement.

Robert Bergman, 65, of Miami, was sentenced by U.S. District Judge Jose E. Martinez in the Southern District of Florida.  In addition to the prison sentence, Bergman was ordered to pay more than $85.3 million in restitution, both jointly and severally with his co-conspirators.

After a six-day trial, on July 18, 2014, a federal jury in the Southern District of Florida found Bergman guilty of one count of conspiracy to commit health care fraud and wire fraud, and one count of conspiracy to make false statements relating to health care matters.

Evidence at trial demonstrated that Bergman and his co-conspirators submitted false and fraudulent claims to Medicare through ATC, which operated purported partial hospitalization programs (PHPs) in seven different locations throughout South Florida and Orlando.  A PHP is a form of intensive treatment for severe mental illness.

Evidence at trial also demonstrated that Bergman and other medical professionals at ATC fabricated and signed fraudulent medical documentation and patient files in order to justify ATC’s fraudulent billings to Medicare.  Included in these false submissions to Medicare were claims for patients who were ineligible for PHP treatment because they were in neuro-vegetative states, in the late stages of diseases causing permanent cognitive memory loss, or had substance abuse issues and were living in halfway houses.  Many of these patients were forced by assisted living facility owners and halfway house owners to attend ATC, and they did not receive treatment for their actual medical conditions.  

ATC, an associated management company, and more than 20 individuals, including ATC’s owners, have all previously pleaded guilty or been convicted at trial.  Bergman has been in federal custody since his conviction.

The case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.  The case is being prosecuted by Assistant Chief Robert A. Zink and Trial Attorneys Nicholas E. Surmacz and Kelly Graves of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 1,900 defendants who have collectively billed the Medicare program for more than $6 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

FORMER CONTRACTING OFFICIALS SENTENCED FOR FALSE TAX RETURNS, ETHICS DISCLOSURE FORM FILINGS

FROM:  U.S. DEFENSE DEPARTMENT 

FORMER ARMY CONTRACTING OFFICIALS SENTENCED FOR FILING FALSE TAX RETURNS AND FILING FALSE FINANCIAL ETHICS DISCLOSURE FORMS

WASHINGTON — Velma I. Salinas-Nix and Kenneth H. Nix, of Boerne, Texas, were sentenced today to serve 20 months in prison and 30 months in prison, respectively, for filing false tax returns and making false statements to the U.S. Army by filing false financial ethics disclosure forms, the Justice Department announced. On Jan. 22, 2014, Kenneth Nix pleaded guilty to one count of filing a false federal income tax return. The next day, Velma Salinas-Nix pleaded guilty to one count of filing a false tax return and one count of making false statements. The Nixes were each ordered to pay $153,248 in restitution.

According to court documents, Velma Salinas-Nix was a senior civilian official of the U.S. Department of the Army. During the relevant period, she was the Deputy Director and Alternate Principal Assistant Responsible for Contracting (Deputy PARC) for ACA - Americas (also known as the 410th Contracting Support Brigade) in San Antonio with influence over and responsibility for the disbursement of millions of dollars in Army funds for the procurement of goods and services. Previously, she was the Chief of Contracting for the Chicago District for the U.S. Army Corps of Engineers. During parts of 2004 and 2005, Kenneth Nix also worked for the Army as the Chief of Contracting for the U.S. Military Group in Bogota, Colombia, and during parts of 2008 and 2009, as Chief of Staff of the Mission and Installation Contracting Command in San Antonio.

According to court documents, from 2000 through at least 2009, Kenneth Nix had a working relationship with Person A, the president and CEO of Company A, a federal contractor. During this period, Kenneth Nix received at least $500,000 in gross income for federal contracting related work he performed. Kenneth Nix directed that he be kept off Company A’s books and he received payment in multiple forms, including cash, blank money orders, checks, home improvements of the couple’s residences, paid housing and parking, plumbing supplies and use of a debit card. Most of the income was deposited into joint bank accounts the Nixes controlled. In at least two instances, Velma Salinas-Nix deposited blank money orders that her husband received from Company A for $25,000 each into her bank account. In order to conceal the true source of the money orders, she falsely wrote the name and initials of her mother in the remitter field.

According to court documents, the Nixes also received gifts of substantial value from Person A between 2000 and 2009, knowing that Person A and Company A had received and were seeking Army contracts and that Kenneth Nix worked for Company A. These gifts included, among other things, a Rolex watch, a pearl bracelet, a trip for the Nixes to Panama with Person A, custom architectural drawings and a $5,000 Home Depot gift card. In October 2009, Velma Salinas-Nix participated in a voluntary interview with federal agents, during which she knowingly provided false information by denying her husband’s receipt of income from Company A, the existence of large money orders provided by Company A and her receipt of gifts from Person A during the relevant period.

According to court documents, from 2004 through 2009, Velma Salinas-Nix also willfully signed and submitted materially false financial ethics disclosure forms, known as Office of Government Ethics Forms 450 (OGE-450 Form), to the Army. She knowingly omitted all of the income and gifts from Company A and Person A on these forms.  In 2004 and 2009, Kenneth Nix willfully signed and submitted materially false OGE-450 Forms to the Army on which he knowingly omitted all income from Company A. Both Nixes provided non-public Army contracting information to Company A and awarded Company A with contracts from their Army positions. For tax years 2000 through 2004, and 2006 through 2008, the Nixes willfully filed false joint federal income tax returns omitting all income Kenneth Nix received from Company A.

The case was investigated by the Department of the Army-Criminal Investigation Division, IRS-Criminal Investigation, the FBI and the Defense Criminal Investigative Service. Trial Attorney Rebecca Perlmutter for the Tax Division and Trial Attorneys Mary Strimel and Richard A. Hellings for the Antitrust Division are prosecuting the case.

RUSSIAN BANK PRESIDENT ORDERED BY CFTC TO PAY $250,000 TO SETTLE FALSE STATEMENT CHARGES

FROM:   COMMODITY FUTURES TRADING COMMISSION 

January 2, 2014

CFTC Orders President of a Russian Bank, Artem Obolensky, to Pay $250,000 Penalty to Settle Charges of Making False Statements to the CFTC During an Investigation

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today entered an Order requiring foreign national Artem Obolensky of Moscow, Russia, to pay a $250,000 civil monetary penalty for making false and misleading statements of material fact to CFTC staff in an interview during a CFTC Division of Enforcement investigation. The Order enforces the false statements provision of the Commodity Exchange Act (CEA), which was added by the Dodd-Frank Act.

Obolensky is President of a Russian bank and co-owner of a private investment fund located in Cyprus that both trade foreign currency futures and options on the Chicago Mercantile Exchange, according to the Order. The CFTC Order finds that Obolensky knowingly made false and misleading statements to CFTC staff on October 13, 2011, regarding a trade in March 2012 Japanese Yen call options contracts between these entities.

According to the Order, Obolensky said: “The two entities pursue different strategies. Pure coincidence that the trades crossed. Very isolated when viewed in the context of all of the trades the bank has placed in markets over the years.”

However, the Order finds that the two entities traded opposite each other more than 182 times and modified their orders repeatedly to ensure that they would match. The Order also finds that Obolensky made the trading decisions for the accounts that traded opposite each other so he knew that the trade CFTC staff asked him about was not a “pure coincidence” or “very isolated.”

CFTC Division of Enforcement Acting Director Gretchen Lowe commented: “Witnesses in CFTC investigations must tell the truth. If they do not, the CFTC will not hesitate to take action to enforce the Dodd-Frank’s prohibition against providing false or misleading information and impose sanctions.”

In addition to the $250,000 civil monetary penalty, the CFTC Order requires Obolenksy to cease and desist from violating the relevant provision of the CEA.

The CFTC Division of Enforcement staff members responsible for this matter are Susan Gradman, Joseph Patrick, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.

SEC CHARGES TD BANK & FORMER EXEC WITH VIOLATION OF SECURITIES LAWS IN FLORIDA-BASED PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission today charged TD Bank and a former executive with violating securities laws in connection with a massive South Florida-based Ponzi scheme conducted by Scott Rothstein, who is now serving a 50-year prison sentence.

The SEC alleges that TD Bank and its then-regional vice president Frank A. Spinosa defrauded investors by producing a series of misleading documents and making false statements about accounts that Rothstein held at the bank and used to perpetuate his scheme.  Spinosa falsely represented to several investors that TD Bank had restricted the movement of the funds in these accounts when, in fact, Rothstein could transfer investor money however he desired.  Spinosa also orally assured investors that certain accounts held balances totaling millions of dollars, but each account actually held zero to $100.

TD Bank agreed to settle the SEC’s charges in an administrative proceeding and pay $15 million.  The SEC filed a complaint against Spinosa in U.S. District Court for the Southern District of Florida.

“Financial institutions are key gatekeepers in the transactions and investments they facilitate and will be held to a high standard of accountability when their officers enable fraud,” said Andrew J. Ceresney, Co-Director of the SEC's Division of Enforcement.  “TD Bank through a regional vice president produced false documents on bank letterhead and told outright lies to investors, failing in its gatekeeper role.”

Eric I. Bustillo, Director of the SEC’s Miami Regional Office, added, “Spinosa played a key supporting role in Rothstein’s Ponzi scheme by providing false comfort to investors that their money was safe and secure in the accounts at TD Bank.  He enabled Rothstein to con investors into believing he couldn’t move their money when he could, and that the bank was holding money that it wasn’t.”

In previous enforcement actions, the SEC has charged two feeder funds to the Rothstein Ponzi scheme.

According to the SEC’s order and complaint, Rothstein claimed to represent plaintiffs who had reached purported legal settlements that were confidential and payable over time by large corporate defendants.  He claimed that the purported plaintiffs were willing to sell their periodic payments to investors at a discount in exchange for one lump-sum payment.  The legal settlements were fake and the plaintiffs and defendants were not real.  Rothstein told investors that the purported defendants had deposited the entire settlement amounts into attorney trust accounts.  Rothstein opened 22 such accounts at Commerce Bank and TD Bank (the two merged in 2008) from November 2007 to October 2009.

The SEC alleges that as Rothstein’s scheme began to unravel in the fall of 2009, Spinosa made false statements to investors about the safety of their investments that enabled Rothstein to continue raising funds for the scheme.  Spinosa executed so-called “lock letters” from TD Bank purporting to irrevocably restrict Rothstein’s trust accounts.  Under these conditions, TD Bank could only distribute funds in the accounts to the investor’s bank account designated in the lock letter.  However, the representations were purely false as Spinosa did not apply any procedures to block the accounts or implement any system to restrict Rothstein from moving money out of the trust accounts.  Spinosa also misrepresented to Rothstein’s investors that the lock letters were commonplace at TD Bank when, in fact, they were never previously used by the bank.  In fact, when Spinosa instructed his assistant to prepare the letters on TD Bank letterhead, she questioned whether it was even permissible because she had never seen such a letter before.  Spinosa confirmed that she should prepare the letter for his signature anyway.  Later, a vice president and branch manager who reported to Spinosa noted to him shortly after the first lock letter went out in August 2009 that the “lock” instructions put onto an account would have no practical effect because Rothstein could still transfer the money without bank officials being alerted.  Spinosa dismissed those concerns.

The SEC further alleges that Spinosa provided false assurances to two different groups of investors that certain trust accounts held the multi-million dollar balances claimed by Rothstein.  On Aug. 17, 2009, Spinosa participated in a conference call with Rothstein and representatives of an investor group who asked how much money was in a particular account.  Spinosa responded that it held $22 million – the amount the investor was expecting to hear.  Spinosa had full access to the account information to know the actual account balance was no more than $100.  The following month, Spinosa met with the same group after it made additional investments with Rothstein, and falsely assured the investors that their money was safe because the provisions of the lock letter restricted the movement of their money.  Also in September 2009, a different investor group bought a purported $20 million settlement from Rothstein, and one of the investor group’s representatives obtained a TD Bank deposit slip that indicated a $0 balance as of that morning for the account that purportedly held the investor’s $20 million.  Rothstein falsely stated that the funds were indeed in the account, but the funds would not appear “available” on the deposit slip because they were in TD Bank’s “federal wire queue.”  Rothstein and representatives from the investor group met with Spinosa on Sept. 14, 2009, and Spinosa falsely represented that the $20 million did not appear as available funds for the same reason provided by Rothstein.  Spinosa falsely represented that the lock letter restricted the movement of their money.  In reality, TD Bank was not holding the money in such a queue, and the account didn’t contain the $20 million.

TD Bank consented to the entry of an administrative order finding that it violated Sections 17(a)(2) and (3) of the Securities Act of 1933.  Without admitting or denying the SEC’s findings, TD Bank agreed to pay $15 million and cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and (3) of the Securities Act.

The SEC’s complaint against Spinosa charges him with violating Sections 17(a)(1), 17(a)(2), and 17(a)(3) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.  Spinosa also is charged with aiding and abetting Scott Rothstein’s violations of Section 10(b) of the Exchange Act and Rule 10b-5.  The complaint seeks disgorgement plus prejudgment interest, financial penalties, and a permanent injunction.

The SEC coordinated the filing of its cases with the Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network, which today announced their own actions against TD Bank.

The SEC’s investigation was conducted by Steven J. Meiner, D. Corey Lawson, and Tonya E. Tullis under the supervision of Chad Alan Earnst in the Miami Regional Office.  The SEC’s litigation against Spinosa will be led by Amie Riggle Berlin.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of Florida, the Federal Bureau of Investigation, and the Internal Revenue Service.

PEST CONTROL COMPANY CHARGED WITH UNLAWFUL APPLICATION OF PESTICIDES

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, September 11, 2013
Pest Control Company and Its Owner Charged with Unlawful Application of Pesticides and Falsification

A pest control services company and its owner have been charged today in the U.S. District Court for the Middle District of Georgia with conspiracy, unlawful use of pesticides, false statements, falsification of records and mail fraud, announced Robert G. Dreher, Acting Assistant Attorney General of the Justice Department’s Environment and Natural Resources Division and Michael J. Moore, U.S. Attorney for the Middle District of Georgia.

Steven A. Murray, 54, of Pelham, Ala., and his company, Bio-Tech Management Inc., were charged in a felony indictment with one count of conspiracy, 10 counts of making false statements, 20 counts of falsifying records, 10 counts of mail fraud and 10 counts of unlawful use of a pesticide.

The indictment alleges that from October 2005 to June 2009, Steven Murray and Bio-Tech repeatedly misapplied the registered pesticide Termidor SC in nursing homes in the state of Georgia and falsified documents to conceal the unlawful use.  The indictment further alleges that Murray and Bio-Tech sent invoices through the U.S. Mail to their nursing home clients to solicit payment for the unlawful pesticide applications.  

According to the indictment, Steve Murray and Bio-Tech provided monthly pest control services to nursing homes in Georgia by spraying pesticides in and around their clients’ facilities.  The indictment alleges that, at the direction of Murray, Bio-Tech employees routinely applied the pesticide Termidor indoors more than twice a year, contrary to the manufacturer’s label instructions.  The indictment further alleges that after the Georgia Department of Agriculture made inquiries regarding Bio-Tech’s misuse of Termidor and other pesticides, Murray directed several of his Bio-Tech employees to alter company service reports with the intent to obstruct an investigation.        

U.S. Environmental Protection Agency (EPA) regulations require that all pesticides be registered, properly labeled, and applied as specified by manufacturer’s labeling to protect public health and the environment.

A criminal indictment is not a finding of guilt.  An individual or company charged by criminal indictment is presumed innocent unless and until proven guilty in a court of law.

The falsifying records and mail fraud charge carry a maximum sentence of 20 years in prison and $250,000 fine per count.  The false statements charges each carry a maximum sentence of five years in prison and a $250,000 fine.

These cases are being investigated by Special Agents of the EPA’s Criminal Investigations Division in Atlanta and prosecuted by Trial Attorneys Richard J. Powers and Adam C. Cullman of the Justice Department’s Environment and Natural Resources Division, Environmental Crimes Section.

MAN GETS PRISON TIME FOR MAKING FALSE STATEMENTS TO CERTIFY SHIPS FOR SEA

FROM: U.S. DEPARTMENT OF JUSTICE

Wednesday, August 29, 2012
Miami Man Sentenced to 21 Months in Prison for Obstruction of Justice and False Statements for Certifying Ships Safe for Sea

WASHINGTON – A Miami-based ship surveyor was sentenced today for lying to the Coast Guard and for falsely certifying that inspections had been performed on two ships, which were designed to ensure that the ships were seaworthy and did not pose a threat to the crew or the marine environment, announced Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division at the Department of Justice, Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida, Rear Admiral William D. Baumgartner, 7th Coast Guard District Commander, and Jonathan Sall, U.S. Coast Guard Investigative Service Special Agent in Charge.

Alejandro Gonzalez, 60, of Miami-Dade County, Fla., was sentenced in U.S. District Court for the Southern District of Florida to 21 months in prison.

On May 24, 2012, a federal jury found Gonzalez guilty of lying to a Coast Guard inspector and a federal agent about the drydocking of the M/V Cala Galdana, a 68-meter cargo vessel, in San Juan, Puerto Rico, in April 2009 and December 2009.

Coast Guard inspectors in San Juan discovered the vessel taking on water in August of 2008 and requested the last drydocking of the vessel. Gonzalez concocted a false story about the vessel being drydocked in Colombia in 2006 when he knew it was not. Gonzalez repeatedly claimed the vessel had been drydocked in Cartegena, Colombia, in March of 2006, while evidence at the trial proved conclusively that the vessel was never in Colombia during 2006.

Gonzalez was also convicted of falsifying documents for the M/V Cosette, a 92-meter cargo vessel. As the surveyor on behalf of Bolivia, Gonzalez certified the ship as safe for sea while the vessel was docked in Fort Pierce, Fla., in November 2009. When the vessel shortly thereafter arrived in New York City harbor, Coast Guard inspectors discovered exhaust and fuel pouring into the engine room, endangering the crew and the ship. For his action, Gonzalez was convicted of making a false statement and obstructing a Coast Guard Port State Control examination.

"Mr. Gonzalez is being held accountable today for making false statements and certifications to Coast Guard inspectors whose job it is to ensure the safety of ships at sea," said Assistant Attorney General Moreno. "Ship surveyors serve a crucial public safety role, and when they abdicate their responsibility they put mariners in danger and our nation's waters at risk of contamination. Mr. Gonzalez's prosecution should send a message that we will not tolerate this type of egregious behavior."

"Surveyors are responsible for the safety of the ships they inspect. When they fail to do their jobs properly, lives are put at risk," said U.S. Attorney Ferrer. "Today’s sentence should remind those few surveyors who need reminding of the great responsibility that they carry and the consequences of their actions."

The prosecution was handled by Assistant U.S. Attorney Jaime Raich and Trial Attorney Kenneth Nelson, of the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division.

U.S. CONSULATE GUARD TRIED SELLING INFORMATION TO CHINA FOR MILLIONS

FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, August 30, 2012

Former U.S. Consulate Guard Pleads Guilty to Attempting to Communicate National Defense Information to China

WASHINGTON – Bryan Underwood, a former civilian guard at a U.S. Consulate compound under construction in China, pleaded guilty today in the District of Columbia in connection with his efforts to sell for personal financial gain classified photographs, information and access related to the U.S. Consulate to China’s Ministry of State Security (MSS).

At a hearing today before U.S. District Judge Ellen S. Huvelle, Underwood pleaded guilty to one count of attempting to communicate national defense information to a foreign government with intent or reason to believe that the documents, photographs or information in question were to be used to the injury of the United States or to the advantage of a foreign nation.

The guilty plea was announced by Lisa Monaco, Assistant Attorney General for National Security; Ronald C. Machen Jr., U.S. Attorney for the District of Columbia; James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office; and Eric J. Boswell, Assistant Secretary of State for Diplomatic Security.

Underwood, 32, a former resident of Indiana, was first charged in an indictment on Aug. 31, 2011, with two counts of making false statements and was arrested on Sept. 1, 2011. On Sept. 21, 2011, he failed to appear at a scheduled status hearing in federal court in the District of Columbia. The FBI later located Underwood in a hotel in Los Angeles and arrested him there on Sept. 24, 2011. On Sept. 28, 2011, Underwood was charged in a superseding indictment with one count of attempting to communicate national defense information to a foreign government, two counts of making false statements and one count of failing to appear in court pursuant to his conditions of release. Sentencing for Underwood has been scheduled for Nov. 19, 2012. He faces a maximum potential sentence of life in prison.

"Bryan Underwood was charged with protecting a new U.S. Consulate compound against foreign espionage, but facing financial hardship, he attempted to betray his country for personal gain," said Assistant Attorney General Monaco. "This prosecution demonstrates that we remain vigilant in protecting America’s secrets and in bringing to justice those who attempt to compromise them."

"Bryan Underwood was determined to make millions by selling secret photos of restricted areas inside a U.S. Consulate in China," said U.S. Attorney Machen. "His greed drove him to exploit his access to America’s secrets to line his own pockets. The lengthy prison sentence facing Underwood should chasten anyone who is tempted to put our nation at risk for personal gain."

"Bryan Underwood sought to benefit from his access to sensitive information, but his attempted betrayal was detected before our nation’s secrets fell into the wrong hands," said FBI Assistant Director in Charge McJunkin. "Together with our partners, the FBI will continue to work to expose, investigate and prevent acts of espionage that threaten our national security."

"The close working relationship between the U.S. Department of State’s Diplomatic Security Service, the FBI and the U.S. Attorney’s Office resulted in the capture and conviction of Bryan Underwood before he could harm the security of our country," said Assistant Secretary of State Boswell. "The Diplomatic Security Service is firmly committed to thoroughly investigating all potential intelligence threats to our nation."

According to court documents, from November 2009 to August 2011, Underwood worked as a cleared American guard (CAG) at the construction site of a new U.S. Consulate compound in Guangzhou, China. CAGs are American civilian security guards with Top Secret clearances who serve to prevent foreign governments from improperly obtaining sensitive or classified information from the U.S. Consulate. Underwood received briefings on how to handle and protect classified information as well as briefings and instructions on security protocols for the U.S. Consulate, including the prohibition on photography in certain areas of the consulate.

Plan to Sell Information and Access for $3 Million to $5 Million

In February 2011, Underwood was asked by U.S. law enforcement to assist in a project at the consulate and he agreed. In March 2011, Underwood lost a substantial amount of money in the stock market. According to court documents, Underwood then devised a plan to use his assistance to U.S. law enforcement as a "cover" for making contact with the Chinese government. According to his subsequent statements to U.S. law enforcement, Underwood intended to sell his information about and access to the U.S. Consulate to the Chinese MSS for $3 million to $5 million. If any U.S. personnel caught him, he planned to falsely claim he was assisting U.S. law enforcement.

As part of his plan, Underwood wrote a letter to the Chinese MSS, expressing his "interest in initiating a business arrangement with your offices" and stating, "I know I have information and skills that would be beneficial to your offices [sic] goals. And I know your office can assist me in my financial endeavors." According to court documents, Underwood attempted to deliver this letter to the offices of the Chinese MSS in Guangzhou, but was turned away by a guard who declined to accept the letter. Underwood then left the letter in the open in his apartment hoping that the Chinese MSS would find it, as he believed the MSS routinely conducted searches of apartments occupied by Americans.

In May 2011, Underwood secreted a camera into the U.S. Consulate compound and took photographs of a restricted building and its contents. Many of these photographs depict areas or information classified at the Secret level. Underwood also created a schematic that listed all security upgrades to the U.S. Consulate and drew a diagram of the surveillance camera locations at the consulate. In addition, according to his subsequent statements to U.S. law enforcement, Underwood "mentally" constructed a plan in which the MSS could gain undetected access to a building at the U.S. Consulate to install listening devices or other technical penetrations.

According to court documents, the photographs Underwood took were reviewed by an expert at the State Department’s Bureau of Diplomatic Security who had original classification authority for facilities, security and countermeasures at the U.S. Consulate. The expert determined that many of the photographs contained images classified at the Secret level and that disclosure of such material could cause serious damage to the United States.

In early August 2011, Underwood was interviewed several times by FBI and Diplomatic Security agents, during which he admitted making efforts to contact the Chinese MSS, but falsely claimed that he took these actions to assist U.S. law enforcement. On Aug. 19, 2011, Underwood was again interviewed by law enforcement agents and he admitted that he planned to sell photos, information and access to the U.S. Consulate in Guangzhou to the Chinese MSS for his personal financial gain.

The U.S. government has found no evidence that Underwood succeeded in passing classified information concerning the U.S. Consulate in Guangzhou to anyone at the Chinese MSS.

This investigation was conducted jointly by the FBI’s Washington Field Office and the State Department’s Bureau of Diplomatic Security. The prosecution is being handled by the U.S. Attorney’s Office for the District of Columbia and Trial Attorney Brandon L. Van Grack from the Counterespionage Section of the Justice Department’s National Security Division.

BROOKLYN DOCTOR CONVICTED OF MEDICARE AND INSURANCE FRAUD

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, June 15, 2012
Brooklyn Doctor Convicted for Role in Medicare and Private Insurance Fraud Scheme
WASHINGTON – A Brooklyn board-certified colorectal surgeon, who owned and operated a New York medical clinic, was convicted for his role in a fraud scheme that billed Medicare and numerous private insurance companies for surgeries and other complex medical procedures that were never performed, the Department of Justice, FBI and Department of Health and Human Services (HHS) announced today.

On Wednesday, June 13, 2012, after a two-week trial in federal court in Brooklyn, a jury found Boris Sachakov, M.D., 43, guilty of one count of health care fraud and five counts of health care false statements.

The trial evidence showed that from January 2008 to January 2010, Sachakov, who owned and operated a clinic called Colon and Rectal Care of New York P.C., defrauded Medicare and private insurance companies by billing for surgeries and medical services that he never provided.  According to trial testimony, several private insurance companies began investigating Sachakov after receiving complaints from patients that Sachakov had submitted claims for surgeries, including hemorrhoidectomies, that he never performed.  

At trial, 11 of Dr. Sachakov’s patients testified that they had not received the surgeries and other medical services for which Sachakov had billed their insurance companies.  The evidence presented at trial showed that the medical records Dr. Sachakov created and maintained on these patients, including letters to the patient’s referring doctors, did not support the extensive billings he submitted.  After Dr. Sachakov was confronted by two insurance companies about complaints of billings for surgeries that did not happen, the evidence at trial showed that Dr. Sachakov sent letters to his patients, asking them to falsely certify in writing that they had received the phony surgeries.

The indictment alleged that Sachakov submitted and caused the submission of over $22.6 million in false and fraudulent claims to Medicare and private insurance companies, and received more than $9 million on those claims.

At sentencing, scheduled for Sept. 24, 2012, Sachakov faces a maximum penalty of 35 years in prison and an $18 million fine.

The charges were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; Assistant Director-in-Charge Janice K. Fedarcyk of the FBI’s New York field office; and Special Agent-in-Charge Thomas O’Donnell of the HHS Office of Inspector General (HHS-OIG).

The case is being prosecuted by Trial Attorney Sarah M. Hall and Assistant Chief William Pericak of the Criminal Division’s Fraud Section.   The case was investigated by the FBI, HHS, the New York State Office of Medicaid Inspector General and the New York State Department of Financial Services, Criminal Investigative Division.

The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section.   The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

Since their inception in March 2007, strike force operations in nine districts have charged 1,330 defendants who collectively have falsely billed the Medicare program for more than $4 billion.  In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

MAJOR MORTGAGE COMPANY EXECUTIVE GOES TO PRISON FOR FRAUD

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, June 15, 2012
Former Chief Financial Officer of Taylor, Bean & Whitaker Sentenced to 60 Months in Prison for Fraud Scheme
WASHINGTON – Delton de Armas, a former chief financial officer (CFO) of Taylor, Bean & Whitaker Mortgage Corp. (TBW), was sentenced today to 60 months in prison for his role in a more than $2.9 billion fraud scheme that contributed to the failure of TBW
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De Armas was sentenced today by U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia.  The sentence was announced today by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Christy Romero, Special Inspector General, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; David A. Montoya, Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Richard Weber, Chief of the Internal Revenue Service Criminal Investigation (IRS-CI).

De Armas, 41, of Carrollton, Texas, pleaded guilty in March to one count of conspiracy to commit bank and wire fraud and one count of making false statements.

“For years, Mr. de Armas, the CFO of one of the country’s largest private mortgage companies, helped defraud financial institutions by concealing from them billions of dollars in losses,” said Assistant Attorney General Breuer.  “His lies and deceits contributed to the devastating losses suffered by major institutional investors.  As a consequence for his crimes, he will now spend the next five years of his life behind bars.”

“As CFO, Mr. de Armas could have – and should have – put a stop to the massive fraud at TBW the moment he discovered it,” said U.S. Attorney MacBride. “Instead, he and others lied for years on end to investors, banks, regulators and auditors and caused more than $2.4 billion in losses to major financial institutions.”

“Rather than blow the whistle on billions of dollars in fraud, de Armas chose to help conceal it,” said Special Inspector General Romero.  “This CFO lied to investors, banks, regulators and auditors to cover up the massive fraud scheme which resulted in the failure of both TBW and Colonial Bank.  The court’s decision to sentence de Armas to five years in prison reflects the seriousness of his role as a gatekeeper within TBW and the contribution of his crime to our nation’s financial crisis.”

“The actions of Mr. De Armas and others resulted in the loss of billions of dollars to major financial institutions,” said Assistant Director in Charge McJunkin.  “Today’s sentence serves as a warning to anyone who attempts to take advantage of investors and our banking system.  Together with our law enforcement partners, the FBI will pursue justice for anyone involved in such fraudulent schemes.”

According to court documents, de Armas joined TBW in 2000 as its CFO and reported directly to its chairman, Lee Bentley Farkas, and later to its CEO, Paul Allen.  He previously admitted in court that from 2005 through August 2009, he and other co-conspirators engaged in a scheme to defraud financial institutions that had invested in a wholly-owned lending facility called Ocala Funding.  Ocala Funding obtained funds for mortgage lending for TBW from the sale of asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas. The facility was managed by TBW and had no employees of its own.

According to court records, shortly after Ocala Funding was established, de Armas learned there were inadequate assets backing its commercial paper, a deficiency referred to internally at TBW as a “hole” in Ocala Funding.  De Armas knew that the hole grew over time to more than $700 million.  He learned from the CEO that the hole was more than $1.5 billion at the time of TBW’s collapse.  De Armas admitted he was aware that, in an effort to cover up the hole and mislead investors, a subordinate who reported to him had falsified Ocala Funding collateral reports and periodically sent the falsified reports to financial institution investors in Ocala Funding and to other third parties.  De Armas acknowledged that he and the CEO also deceived investors by providing them with a false explanation for the hole in Ocala Funding.

De Armas also previously admitted in court that he directed a subordinate to inflate an account receivable balance for loan participations in TBW’s financial statements.  De Armas acknowledged that he knew that the falsified financial statements were subsequently provided to Ginnie Mae and Freddie Mac for their determination on the renewal of TBW’s authority to sell and service securities issued by them.

In addition, de Armas admitted in court to aiding and abetting false statements in a letter the CEO sent to the U.S. Department of Housing and Urban Development, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009.  De Armas reviewed and edited the letter, knowing it contained material omissions.  The letter omitted that the delay in submitting the financial data was caused by concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank and its request that TBW retain a law firm to conduct an internal investigation.  Instead, the letter falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.

“We are pleased to have joined our law enforcement colleagues in bringing Mr. de Armas to justice,” said Inspector General Rymer.  “The former Chief Financial Officer’s actions contributed to one of the largest bank frauds in the country and led to the demise of TBW.  His punishment, along with the earlier sentencings of other co-conspirators involved in the Colonial Bank and TBW scheme, sends a clear message that those who abuse their positions of trust and seek to undermine the integrity of the financial services industry will be held accountable.  We will continue to pursue such cases in the interest of ensuring the safety and soundness of our Nation’s banks and the strength of the financial services industry as a whole.”

“Delton de Armas was a key player in the TBW fraud; the significant sentence of 60 months handed down today appropriately takes that role into account,” said Inspector General Linick.

In April 2011, a jury in the Eastern District of Virginia found Lee Bentley Farkas, the chairman of TBW, guilty of 14 counts of conspiracy, bank, securities and wire fraud.  On June 30, 2011, Judge Brinkema sentenced Farkas to 30 years in prison.  In addition, six individuals have pleaded guilty for their roles in the fraud scheme, including: Paul Allen, former chief executive officer of TBW, who was sentenced to 40 months in prison; Raymond Bowman, former president of TBW, who was sentenced to 30 months in prison; Desiree Brown, former treasurer of TBW, who was sentenced to six years in prison; Catherine Kissick, former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division (MWLD), who was sentenced to eight years in prison; Teresa Kelly, former operations supervisor for Colonial Bank’s MWLD, who was sentenced to three months in prison; and Sean Ragland, a former senior financial analyst at TBW, who was sentenced to three months in prison.

The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia.  This case was investigated by SIGTARP, FBI’s Washington Field Office, FDIC OIG, HUD OIG, FHFA OIG and the IRS Criminal Investigation.  The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.  The Department would also like to acknowledge the substantial assistance of the SEC in the investigation of the fraud scheme.

This prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

ARIZONA POLITICIAN CHARGED WITH BRIBER, FRAUD, ATTEMPTED EXTORTION AND FALSE STATEMENTS

Photo:  Lady Justice.  Credit:  Wikimedia
FROM:  U.S. DEPARTMENT OF JUSTICE
Wednesday, May 16, 2012
Arizona State Representative Charged with Bribery, Fraud, Attempted Extortion and Making False Statements
WASHINGTON – A member of the Arizona House of Representatives was charged today by a federal grand jury in the District of Arizona with bribery, fraud, attempted extortion and false statements in connection with receiving more than $6,000 in tickets to sporting and special events while serving as a Tempe, Ariz., City Council councilmember and member-elect of the Arizona House, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and Special Agent in Charge James L. Turgal of the FBI’s Phoenix Field Office.

The indictment charges Paul Ben Arredondo, 63, of Tempe, with one count of federal programs bribery, two counts of honest services mail fraud, one count of attempted Hobbs Act extortion and one count of making false statements.  Arredondo will be arraigned on May 30, 2012, in U.S. District Court for the District of Arizona before U.S. Magistrate Judge Lawrence O. Anderson.

According to the indictment, Arredondo was a councilmember in Tempe for 16 years, until July 2010.  He was elected to the Arizona House of Representatives in November 2010.  The indictment alleges that from February 2009 to November 2010, Arredondo accepted, agreed to accept and solicited things of value from representatives of a company whose purported business objective was to acquire city-owned property in Tempe for real estate development purposes.  The representatives were, in fact, undercover agents with the FBI.  According to the indictment, Arredondo received from the undercover agents more than $6,000 worth of tickets to sporting and other special events.  Those tickets included 18 tickets for Arizona Diamondbacks baseball games valued at a total of approximately $2,400, and four tickets to an American League Championship Series baseball game valued at a total of approximately $1,225.

According to the indictment, in return for those tickets, Arredondo took and agreed to take action in his capacity as a Tempe city councilmember and as a member of the Arizona House of Representatives to facilitate the undercover agents’ purported purchase of city-owned property and development project.  The indictment alleges that Arredondo brokered meetings between the undercover agents and other public officials, divulged information regarding the city of Tempe’s bidding process, and attempted to persuade other city officials to approve the purported development project.
The indictment further alleges that Arredondo lied to the FBI about his conduct during an interview in January 2012.

The federal programs bribery charge carries a maximum penalty of 10 years in prison and a $250,000 fine.  Each count of honest services mail fraud and attempted extortion carries a maximum penalty of 20 years in prison and a $250,000 fine.  The false statement charge carries a maximum penalty of 5 years in prison and a $250,000 fine.  The indictment also contains a notice of forfeiture.

An indictment is merely a charge and a defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

The case is being prosecuted by Trial Attorneys Edward T. Kang and Monique T. Abrishami of the Criminal Division’s Public Integrity Section, and Assistant U.S. Attorney Frederick A. Battista of the District of Arizona.  The case is being investigated by the FBI’s Phoenix Field Office.