FROM: U.S. JUSTICE DEPARTMENT
Wednesday, July 1, 2015
Former Silk Road Task Force Agent Pleads Guilty to Extortion, Money Laundering and Obstruction
Ex-DEA Agent Used Undercover Status to Fraudulently Obtain Digital Currency Worth Over $700,000
A former DEA agent pleaded guilty today to extortion, money laundering and obstruction of justice, which he committed while working as an undercover agent investigating Silk Road, an online marketplace used to facilitate the purchase and sale of illegal drugs and other contraband.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Melinda Haag of the Northern District of California, Chief Richard Weber of the IRS-Criminal Investigation (IRS-CI), Special Agent in Charge David J. Johnson of FBI’s San Francisco Division, Special Agent in Charge Michael P. Tompkins of the Department of Justice Office of the Inspector General’s Washington, D.C. Field Office and Special Agent in Charge Lori Hazenstab of the Department of Homeland Security’s Office of the Inspector General in Washington D.C. made the announcement.
“While investigating the Silk Road, former DEA Agent Carl Force crossed the line from enforcing the law to breaking it,” said Assistant Attorney General Caldwell. “Seduced by the perceived anonymity of virtual currency and the dark web, Force used invented online personas and encrypted messaging to fraudulently obtain bitcoin worth hundreds of thousands of dollars from the government and investigative targets alike. This guilty plea should send a strong message: neither the supposed anonymity of the dark web nor the use of virtual currency nor the misuse of a law enforcement badge will serve as a shield from the reach of the law.”
“Mr. Force has admitted using his position of authority to weave a complex veil of deception for personal profit,” said U.S. Attorney Haag. “Mr. Force’s actions put at risk other important investigations and betrayed the trust placed in him by his law enforcement partners and the public. We are grateful for the work done by our federal partners to assist in unraveling this crime.”
“Through following the money in the Silk Road investigation it became clear that the defendant was engaged in wire fraud, money laundering, and other related offenses,” said Chief Weber. “He used his position in the investigation to bring himself significant personal financial gain. This investigation sends a clear message -- no person, especially those entrusted with the public’s trust such as federal law enforcement, is above the law and IRS-CI will use their financial investigative skills to track you down.”
Carl M. Force, 46, of Baltimore, Maryland, pleaded guilty before U.S. District Judge Richard Seeborg of the Northern District of California to an information charging him with money laundering, obstruction of justice and extortion under color of official right. Force’s sentencing hearing is scheduled for Oct. 19, 2015.
Force was a Special Agent with the DEA for 15 years. Between 2012 and 2014, he was assigned to the Baltimore Silk Road Task Force, a multi-agency group investigating illegal activity on the Silk Road. Force was the lead undercover agent in communication with Ross Ulbricht, aka “Dread Pirate Roberts,” who ran the Silk Road.
In connection with his guilty plea, Force admitted that, while working in an undercover capacity using his DEA-sanctioned persona, “Nob,” in the summer of 2013, Force offered to sell Ulbricht fake drivers’ licenses and “inside” law enforcement information about the Silk Road investigation, which information Nob claimed to have accessed through a corrupt government employee. Force admitted that he attempted to conceal his communications with Ulbricht about the payments by directing Ulbricht to use encrypted messaging. Although Force understood these payments, which were made in bitcoin, to be government property, as they constituted evidence of a crime, he admitted that he falsified official reports and stole the funds, depositing the bitcoin into his own personal account and then converting them into dollars. Force admitted that, at the time, the value of the bitcoin he received from Ulbricht was in excess of approximately $100,000.
Force also admitted that he devised and participated in a scheme to fraudulently obtain additional funds from Ulbricht through another online persona, “French Maid,” of which his Task Force colleagues were not aware. Force admitted that, as French Maid, he solicited and received bitcoin payments from Ulbricht worth approximately $100,000 in exchange for information concerning the government’s investigation into the Silk Road.
In connection with his guilty plea, Force also admitted that, in late 2013, in his personal capacity, he invested $110,000 worth of bitcoin in CoinMKT, a digital currency exchange company. Although he did not receive permission from the DEA to do so, he served as CoinMKT’s Chief Compliance Officer. In this role, in February 2014, Force was alerted by CoinMKT to what the company initially believed to be suspicious activity in a particular account. Force admitted that, thereafter, in his capacity as a DEA agent, but without authority or a legal basis to do so, he directed CoinMKT to freeze $337,000 in cash and digital currency from the account and he subsequently transferred the approximately $300,000 of digital currency funds into a personal account that he controlled.
Force also admitted to entering into a $240,000 contract with 20th Century Fox Film Studios related to a film concerning the government’s investigation into the Silk Road. Force admitted that he did not secure the necessary approvals from the DEA to do so.
According to his plea agreement, Force admitted that he had obstructed justice both by soliciting and accepting bitcoin from Ulricht and by lying to federal prosecutors and agents who were investigating potential misconduct by Force and others.
The investigation is ongoing. To date, Force is one of two federal agents charged with crimes in connection to their roles in investigating the Silk Road. Shaun W. Bridges, 32, of Laurel, Maryland, a former Special Agent with the U.S. Secret Service, is charged in a two-count information with money laundering and obstruction of justice related to his diversion of over $800,000 in digital currency that he gained control over as part of the Silk Road investigation. The charges contained in an information are merely accusations, and a defendant is presumed innocent until and unless proven guilty.
The case was investigated by the FBI’s San Francisco Division, the IRS-CI’s San Francisco Division, the Department of Justice Office of the Inspector General and the Department of Homeland Security Office of the Inspector General in Washington, D.C. The following additional components assisted with the investigation: IRS-CI’s New York Field Office, HSI’s Chicago/O’Hare Division, the U.S. Attorney’s Office for the Southern District of New York, the Criminal Division’s Computer Crime and Intellectual Property Section, the Criminal Division’s Office of International Affairs, the U.S. Embassy in Slovenia and the FBI Legal Attaché Office in Tokyo.
The case is being prosecuted by Assistant U.S. Attorneys Kathryn Haun and William Frentzen of the Northern District of California and Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section, with assistance from Assistant U.S. Attorney Arvon Perteet.
Showing posts with label MONEY LAUNDERING. Show all posts
Showing posts with label MONEY LAUNDERING. Show all posts
Monday, July 6, 2015
Monday, June 29, 2015
FORMER SENIOR EXEC AT QUALCOMM SENTENCED FOR INSIDER TRADING
FROM: U.S. JUSTICE DEPARTMENT
Friday, June 26, 2015
Former Senior Executive of Qualcomm Sentenced to 18 Months and Fined $500,000 for Insider Trading and Money Laundering
The former Executive Vice President and President of Global Business Operations for Qualcomm Inc., was sentenced today to 18 months in prison and fined $500,000 for his role in a three-year insider trading scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Laura E. Duffy of the Southern District of California made the announcement.
“Through his position as a high-ranking executive at Qualcomm, Jing Wang gained unique access to information about the company’s earnings and intended acquisitions and illegally exploited that inside information for personal gain,” said Assistant Attorney General Caldwell. “He then enlisted the services of others – his stock broker and his brother – to cover up the scheme. This prosecution demonstrates the Criminal Division’s commitment to holding accountable corporate executives who would undermine the integrity of the financial marketplace.”
“Jing Wang was a powerful insider at one of the world’s top corporations – but he threw it all away to make a few hundred thousand dollars,” said U.S. Attorney Duffy. “While Wang has lost his power, his position and his freedom, the real losers here are investors who play by the rules, and our nation’s financial system, which is diminished with every one of these schemes.”
Jing Wang, 52, of Del Mar, California, pleaded guilty in July 2014 to insider trading, money laundering and obstruction of justice for orchestrating a multi-year scheme to trade on the confidential information of Qualcomm and cover up his criminal conduct. The sentence was imposed by U.S. District Judge William Q. Hayes of the Southern District of California.
In connection with his plea, Wang admitted that he made three, separate insider trades using a brokerage account in the name of his British Virgin Island (BVI) shell company, Unicorn Global Enterprises. First, in early 2010, prior to Qualcomm’s announcement of a dividend increase and stock repurchase, Wang bought company stock valued at approximately $277,000. He also admitted that, in December 2010, while attending Qualcomm’s Board of Directors meeting in Hong Kong, and hours after the Board approved a non-public offer to purchase Atheros, a developer of semiconductors for wireless communications, Wang purchased stock in Atheros. Wang further admitted that, just a few weeks later, he directed his stockbroker, Gary Yin, to sell the Atheros stock, for approximately $481,000, and purchase Qualcomm stock one day before the company announced record earnings.
Wang also pleaded guilty to money laundering for transferring the illegal proceeds from Unicorn’s account to an account of a new BVI shell company he controlled. He further admitted to obstructing justice by creating a false cover story in which he and co-conspirator Yin would blame Wang’s brother Bing Wang, who resides in rural China, for the insider trading and ownership of the Unicorn Account. Among other acts, Wang collected incriminating evidence and provided it to Yin to take to China, and arranged meetings between Yin and Bing Wang during which the two rehearsed the false account.
Yin pleaded guilty to conspiring to obstruct justice and launder money, and currently is scheduled to be sentenced on July 17, 2015. Bing Wang has been charged in connection with the scheme, and is wanted on an international arrest warrant.
This case was investigated by the FBI’s San Diego Field Office and the Internal Revenue Service-Criminal Investigation’s San Diego Field Division. The SEC’s Los Angeles Regional Office provided substantial assistance. The case is being prosecuted by Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Eric J. Beste of the Southern District of California.
Friday, June 26, 2015
Former Senior Executive of Qualcomm Sentenced to 18 Months and Fined $500,000 for Insider Trading and Money Laundering
The former Executive Vice President and President of Global Business Operations for Qualcomm Inc., was sentenced today to 18 months in prison and fined $500,000 for his role in a three-year insider trading scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Laura E. Duffy of the Southern District of California made the announcement.
“Through his position as a high-ranking executive at Qualcomm, Jing Wang gained unique access to information about the company’s earnings and intended acquisitions and illegally exploited that inside information for personal gain,” said Assistant Attorney General Caldwell. “He then enlisted the services of others – his stock broker and his brother – to cover up the scheme. This prosecution demonstrates the Criminal Division’s commitment to holding accountable corporate executives who would undermine the integrity of the financial marketplace.”
“Jing Wang was a powerful insider at one of the world’s top corporations – but he threw it all away to make a few hundred thousand dollars,” said U.S. Attorney Duffy. “While Wang has lost his power, his position and his freedom, the real losers here are investors who play by the rules, and our nation’s financial system, which is diminished with every one of these schemes.”
Jing Wang, 52, of Del Mar, California, pleaded guilty in July 2014 to insider trading, money laundering and obstruction of justice for orchestrating a multi-year scheme to trade on the confidential information of Qualcomm and cover up his criminal conduct. The sentence was imposed by U.S. District Judge William Q. Hayes of the Southern District of California.
In connection with his plea, Wang admitted that he made three, separate insider trades using a brokerage account in the name of his British Virgin Island (BVI) shell company, Unicorn Global Enterprises. First, in early 2010, prior to Qualcomm’s announcement of a dividend increase and stock repurchase, Wang bought company stock valued at approximately $277,000. He also admitted that, in December 2010, while attending Qualcomm’s Board of Directors meeting in Hong Kong, and hours after the Board approved a non-public offer to purchase Atheros, a developer of semiconductors for wireless communications, Wang purchased stock in Atheros. Wang further admitted that, just a few weeks later, he directed his stockbroker, Gary Yin, to sell the Atheros stock, for approximately $481,000, and purchase Qualcomm stock one day before the company announced record earnings.
Wang also pleaded guilty to money laundering for transferring the illegal proceeds from Unicorn’s account to an account of a new BVI shell company he controlled. He further admitted to obstructing justice by creating a false cover story in which he and co-conspirator Yin would blame Wang’s brother Bing Wang, who resides in rural China, for the insider trading and ownership of the Unicorn Account. Among other acts, Wang collected incriminating evidence and provided it to Yin to take to China, and arranged meetings between Yin and Bing Wang during which the two rehearsed the false account.
Yin pleaded guilty to conspiring to obstruct justice and launder money, and currently is scheduled to be sentenced on July 17, 2015. Bing Wang has been charged in connection with the scheme, and is wanted on an international arrest warrant.
This case was investigated by the FBI’s San Diego Field Office and the Internal Revenue Service-Criminal Investigation’s San Diego Field Division. The SEC’s Los Angeles Regional Office provided substantial assistance. The case is being prosecuted by Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Eric J. Beste of the Southern District of California.
Sunday, June 28, 2015
ASSISTANT AG CALDWELL'S REMARKS ON DIGITAL CURRENCIES LIKE BITCOM
FROM: U.S. JUSTICE DEPARTMENT
Assistant Attorney General Leslie R. Caldwell Delivers Remarks at the ABA’s National Institute on Bitcoin and Other Digital Currencies
Washington, DC United States ~ Friday, June 26, 2015
Thank you Nina [Marino] for that kind introduction.
It is a pleasure to address today’s ABA National Institute on Bitcoin and Other Digital Currencies. As head of the Justice Department’s Criminal Division, I am privileged to lead over 600 attorneys who investigate and prosecute federal crime, help develop criminal law and formulate law enforcement policy. Our talented prosecutors perform crucial work in many of the areas relevant to today’s discussion, including the fight to combat money laundering, financial fraud, child exploitation and cybercrime.
This afternoon, I’d like to discuss the department’s approach to the emerging virtual currency landscape, our ongoing efforts to prosecute those who commit crimes by using virtual currency, and our view that compliance and cooperation from exchanges, companies and other market actors can ensure that emerging technologies are not misused to fund and facilitate illicit activities.
The department is aware of the many legitimate actual and potential uses of virtual currency. It has the potential to promote a more efficient online marketplace. It also potentially can lower costs for brick and mortar businesses, by removing the need to pay credit card-related costs. And in theory, it can help speed and reduce the cost of cross-border transactions. But we also have seen that criminals have been among the first to enthusiastically embrace the use of virtual currency, primarily in crime involving the internet.
Many of the inherent features of virtual currencies are exactly what makes them attractive to criminals. Many criminals like virtual currency systems because these systems conduct transfers quickly, securely and with a perceived level of anonymity. For others, the irreversibility of payments made in virtual currency and lack of oversight by a central financial authority is appealing. Finally, the ability to conduct international peer-to-peer transactions that lack immediately available personally identifying information has made decentralized virtual currency attractive to those who wish to cover their money trail.
As a result, virtual currency facilitates a wide range of traditional criminal activities as well as sophisticated cybercrime schemes.
Much of the illicit conduct involving virtual currency occurs through online black markets such as the now-shuttered Silk Road, which operated on an anonymized “dark web” network that masked users’ physical locations, making them difficult to track. Similar online black markets continue to operate, offering on a global scale, a wide selection of illicit goods and services. While these have included more traditional crimes such as narcotics trafficking, stolen credit card information, and hit-men for hire, we have also seen a significant evolution in criminal activity.
For example, Bitcoin has been utilized to fund the production of child exploitation material through online crowd-sourcing – a development rarely seen before the prevalence of virtual currency. It has also been used to buy and sell lethal toxins over the internet and as a payment method for virtual kidnapping and extortion, allowing near-instantaneous transactions across the globe between perpetrators of phishing and hacking schemes and their victims.
Despite the significant challenges in investigating, much less prosecuting, this activity, the department already has a strong record of bringing cases in which virtual currencies were used to facilitate criminal conduct. While the burgeoning assortment of online exchanges, virtual currencies and virtual marketplaces has created a complex and evolving environment or “ecosystem” as this audience knows it, we too are keeping pace and will pursue those who exploit vulnerabilities in that ecosystem for illegal gain.
In this arena, we rely principally on money services business, money transmission and anti-money laundering statutes. While individual users who are not acting as exchangers or transmitters are not required to register with FinCEN, many virtual currency systems, exchangers and related services are. Additionally, most states also require money transmitters to obtain a state license in order to conduct business in that state, and some like New York have established virtual-currency specific licensing requirements. Any failure to register or obtain a license may subject a money transmitter to criminal prosecution, and a money transmitter that knowingly moves funds connected to a criminal offense also faces prosecution for money laundering, regardless of licensing status. Whether the currency involved is virtual or traditional, the department enforces these critical laws to prosecute money services businesses that engage in money laundering or facilitate crime by flouting registration and licensing requirements.
The department’s enforcement actions have evolved along with the virtual currency ecosystem. Our first major action against a virtual currency service used for illicit purposes was in 2007, when the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), together with our Computer Crime and Intellectual Property Section (CCIPS), spearheaded the prosecution against e-Gold and its owners on charges related to money laundering and operating an unlicensed money transmitting business. E-Gold was a popular online currency exchange, and was a favored hub for cybercriminals in part because of the lack of account holder identity verification. An e-mail address was the only information needed to set up an account, allowing global anonymous transactions. After a multi-agency investigation, e-Gold and three associated individuals pleaded guilty in 2008 to charges of money laundering and operating an unlicensed money transmitting business.
In the wake of e-Gold’s demise, the virtual currency system Liberty Reserve was created. As alleged in our pending indictment, Liberty Reserve was structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes.
Liberty Reserve quickly became one of the principal money transfer agents used by cybercriminals around the world to distribute, store and launder the proceeds of their illegal activity. Like e-Gold, any would-be account holder needed little more than a working email address to move funds around the globe. Again, this virtual currency platform became a favorite of cybercriminals and other tech-savvy wrongdoers, enabling them to engage in anonymous financial transactions, all conducted in violation of BSA requirements.
Before the government shut down Liberty Reserve in 2013, it had accumulated more than one million users worldwide, including more than 200,000 in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds included suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking and other crimes.
In a case jointly spearheaded by AFMLS and prosecutors from the Southern District of New York, several of Liberty Reserve’s top executives, including a co-founder of the company, the IT Manager and its Chief Technology Officer, have pleaded guilty to money laundering and operating an unlicensed money transmitting business and have been sentenced up to five years in prison. The creator of Liberty Reserve was extradited to the United States from Spain in October 2014 and is currently awaiting trial, where he is, of course, presumed innocent.
The department has also taken action against a number of individuals and groups who sought to exploit decentralized systems such as Bitcoin and anonymized dark web servers to finance illicit trade and activity in online black markets.
The first major prosecution of a dark market website was by the Southern District of New York in a case against Ross Ulbricht, aka “Dread Pirate Roberts,” who was arrested in October 2013 and convicted by a jury for his role in creating and operating Silk Road, an online black market whose payment operations exclusively used Bitcoin.
Silk Road – designed to act as a black-market bazaar completely free from government regulation and oversight – attempted to enable its users to exchange illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement. It emerged as one of the most extensive criminal marketplaces on the internet. Before it was dismantled by law enforcement, Silk Road was used by thousands of drug dealers and other vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a 100,000 buyers, and has been linked to at least six overdose deaths around the world. Further, Silk Road was also used to launder hundreds of millions of dollars derived from these unlawful transactions. And just a few weeks ago, in a federal courtroom in New York City, Ulbricht was sentenced to a term of life in prison – a cautionary tale for all those who would use dark spaces on the internet to flout the law.
The Silk Road story, however, did not end with Ross Ulbricht. Two federal agents, sworn to uphold the law, were also apparently lured by the perceived anonymity of virtual currency.
Carl Force, a Special Agent with the Drug Enforcement Administration, and Shaun Bridges, a Special Agent with the U.S. Secret Service, were both assigned to the Baltimore Silk Road Task Force, which investigated illegal activity in the Silk Road marketplace.
Force served as an undercover agent. According to court documents, Force went rogue and developed additional online personas to engage in complex bitcoin transactions to steal hundreds of thousands of dollars from the government and from the targets of the investigation. Independently, Bridges also allegedly engaged in an even larger direct theft, illegally diverting over $800,000 in virtual currency to his personal account.
Both individuals have been charged by the Criminal Division’s Public Integrity Section and prosecutors from the Northern District of California with wire fraud, theft of government property and money laundering. These investigations and prosecutions should send a strong message to those who would exploit technology to commit crimes: no matter how anonymous people might feel using virtual currency, their actions are not untraceable. People should not assume that law enforcement will not notice when they act on the dark web, or that we are not keeping up with emerging technology. Our successful prosecutions have shown that neither the supposed anonymity of the dark web nor the use of virtual currency is an effective shield from arrest and prosecution.
In addition to the operators of Silk Road and the drug traffickers who conducted their deals online in bitcoin, prosecutors from the Southern District of New York have also taken action against those who enabled this activity through the operation of Bitcoin currency exchanges. We understand that there are legitimate exchanges, and many of those are working closely with FinCEN and other regulators to ensure compliance with the law. But there are also many exchanges that don’t concern themselves with following the law.
From approximately December 2011 to October 2013, Robert Faiella ran an underground Bitcoin exchange on the Silk Road website under the alias “BTCKing,” and sold bitcoin to users to fund their purchases on the site.
Faiella would run bitcoin orders through Charlie Shrem, who operated a New York-based company that acted as a bitcoin to fiat currency exchange. Although Shrem was the company’s Anti-Money Laundering Officer and had registered the company with FinCEN as a money services business, Shrem failed to report any of BTCKing’s activity, despite knowing it was being used for illegal purchases. Shrem’s assistance enabled BTCKing to finance Silk Road transactions without collecting any personal identifying information from customers. Faiella pleaded guilty to operating an unlicensed money transmitting business involving funds he knew were intended to support unlawful activity, and Shrem pleaded guilty to aiding and abetting Faiella’s operations. Just this past winter, they were sentenced to four and two years in prison, respectively.
While these cases demonstrate that the criminal use of virtual currency has grown rapidly in recent years, its comparative scale versus traditional money laundering still pales in magnitude. Few virtual systems currently can accommodate the hundreds of millions of dollars we have seen in certain large-scale money laundering schemes involving government-issued currency. That said, as virtual currencies become more mature and better understood by criminals, we expect to see an increase in both individualized criminal activity and large-scale money laundering enterprises.
In some ways, companies and individuals operating in the virtual currency ecosystem are at a crossroads, and they have an opportunity to help virtual currency emerge from its association with criminal activities. While there obviously are good and legitimate reasons to use these currencies, industry participants are now on notice that criminals too, make regular use of them. So, to ensure the integrity of this ecosystem and prevent its penetration by crime, the industry must raise the level of its game on the compliance front.
That includes strict compliance with money services business regulations and anti-money laundering statutes. I understand that you have heard from our partners at FinCEN this morning about our collaborative efforts to investigate and enforce anti-money laundering laws, and you’ll also hear more from Katie Haun this afternoon about the investigation of the virtual currency business Ripple Labs, which operated an unlicensed money transmitting business.
Ripple sold a virtual currency called “XRP,” but failed for a time to register with FinCEN as a money service business and failed to establish and maintain appropriate anti-money laundering protections. Importantly, the department resolved this investigation after Ripple agreed to a number of substantial remedial measures. This includes cooperation in other ongoing investigations, a change in business model and oversight by independent auditors, an extensive look-back through their previous activities and development of an extensive compliance framework.
The resolution with Ripple Labs underscores the importance of having a strong compliance program to ensure adherence to the law. Virtual currency exchangers and other marketplace actors comprise the front line of defense against money laundering and other financial crime. Robust compliance programs, such as those imposed on Ripple Labs, are essential to keeping crime out of our financial system. If a money services business finds itself subject to a criminal investigation, we will look, as we do in all cases involving potential prosecution of a business entity, at the factors set forth in the Principles of Prosecution of Business Organizations, or Filip Factors. Two of the Filip Factors in particular, the existence of an effective and well-designed compliance program and a company’s remedial actions, including steps to improve upon an existing compliance regime, are explicitly set forth as factors prosecutors should consider.
As you know, there is no “one-size-fits-all” compliance program. Rather, effective anti-money laundering and other compliance programs must be tailored to meet the circumstances, size, structure and risks encountered by each entity. And virtual currencies, with their perceived anonymity, pose compliance risks that money transmitters such as Western Union do not face. Industry participants must address those risks, even when it may be costly to do so.
Just as in any other corporate investigation, when reviewing the conduct of, for example, an exchange, the department will examine whether a company has meaningfully addressed compliance. We have resolved cases against many financial institutions and other entities, and are deeply familiar with hallmarks of a genuine compliance program.
We expect virtual currency businesses to take compliance risk as seriously as they take any other business risk. Now, we recognize that new entrants in emerging fields may find that compliance requires a significant expenditure of resources, and we will be context-specific in analyzing appropriate compliance frameworks including consideration of the size and scope of the business. But a real commitment to compliance is a must, particularly given the significant risks in the virtual currency market. In the long run, investment in effective compliance programs will be well worth it, especially in the event that a company has to interact with law enforcement.
In many ways, I think that is a message that everybody gathered here today can appreciate. As the virtual currency markets attempt to move past their association with the Silk Roads and Liberty Reserves of the online world, are used to finance legitimate activity, and are becoming increasingly subject to regulation, robust compliance with existing anti-money laundering laws and regulations is necessary – indeed, critical – to bolster the reliability and value of virtual currency.
The challenges posed by the cases I’ve described are not unique to the virtual currency world. Indeed, these dark web criminals are merely using new tools to conduct the same old crimes, committing what is essentially street crime like drug trafficking and extortion, but over computer networks.
For those investors, exchanges and compliance officers who deal in virtual currency, compliance is of paramount importance. Adherence to regulations and state license requirements can reduce the liability of corporations who invest or deal in virtual currency. As seen with Ripple Labs, compliance and remediation can lead to a more favorable resolution of criminal investigations and adhering to anti-money laundering guidelines allows the legitimate use of virtual currency to grow and be responsive to infiltration and abuse by criminal elements. While the department will aggressively investigate and prosecute criminal activity that is funded through virtual currency, money services businesses that fall under the department’s scrutiny can also receive credit for meaningful and sincere compliance efforts.
Your compliance and cooperation will make it more difficult for those who seek to operate illicit and underground marketplaces and will be a key element for law enforcement to shed light on these illegal virtual currency transactions. It also will help to ensure the continued viability of virtual currency systems in the future.
Thank you for the opportunity to address this year’s National Institute on Bitcoin and Other Virtual Currencies.
Assistant Attorney General Leslie R. Caldwell Delivers Remarks at the ABA’s National Institute on Bitcoin and Other Digital Currencies
Washington, DC United States ~ Friday, June 26, 2015
Thank you Nina [Marino] for that kind introduction.
It is a pleasure to address today’s ABA National Institute on Bitcoin and Other Digital Currencies. As head of the Justice Department’s Criminal Division, I am privileged to lead over 600 attorneys who investigate and prosecute federal crime, help develop criminal law and formulate law enforcement policy. Our talented prosecutors perform crucial work in many of the areas relevant to today’s discussion, including the fight to combat money laundering, financial fraud, child exploitation and cybercrime.
This afternoon, I’d like to discuss the department’s approach to the emerging virtual currency landscape, our ongoing efforts to prosecute those who commit crimes by using virtual currency, and our view that compliance and cooperation from exchanges, companies and other market actors can ensure that emerging technologies are not misused to fund and facilitate illicit activities.
The department is aware of the many legitimate actual and potential uses of virtual currency. It has the potential to promote a more efficient online marketplace. It also potentially can lower costs for brick and mortar businesses, by removing the need to pay credit card-related costs. And in theory, it can help speed and reduce the cost of cross-border transactions. But we also have seen that criminals have been among the first to enthusiastically embrace the use of virtual currency, primarily in crime involving the internet.
Many of the inherent features of virtual currencies are exactly what makes them attractive to criminals. Many criminals like virtual currency systems because these systems conduct transfers quickly, securely and with a perceived level of anonymity. For others, the irreversibility of payments made in virtual currency and lack of oversight by a central financial authority is appealing. Finally, the ability to conduct international peer-to-peer transactions that lack immediately available personally identifying information has made decentralized virtual currency attractive to those who wish to cover their money trail.
As a result, virtual currency facilitates a wide range of traditional criminal activities as well as sophisticated cybercrime schemes.
Much of the illicit conduct involving virtual currency occurs through online black markets such as the now-shuttered Silk Road, which operated on an anonymized “dark web” network that masked users’ physical locations, making them difficult to track. Similar online black markets continue to operate, offering on a global scale, a wide selection of illicit goods and services. While these have included more traditional crimes such as narcotics trafficking, stolen credit card information, and hit-men for hire, we have also seen a significant evolution in criminal activity.
For example, Bitcoin has been utilized to fund the production of child exploitation material through online crowd-sourcing – a development rarely seen before the prevalence of virtual currency. It has also been used to buy and sell lethal toxins over the internet and as a payment method for virtual kidnapping and extortion, allowing near-instantaneous transactions across the globe between perpetrators of phishing and hacking schemes and their victims.
Despite the significant challenges in investigating, much less prosecuting, this activity, the department already has a strong record of bringing cases in which virtual currencies were used to facilitate criminal conduct. While the burgeoning assortment of online exchanges, virtual currencies and virtual marketplaces has created a complex and evolving environment or “ecosystem” as this audience knows it, we too are keeping pace and will pursue those who exploit vulnerabilities in that ecosystem for illegal gain.
In this arena, we rely principally on money services business, money transmission and anti-money laundering statutes. While individual users who are not acting as exchangers or transmitters are not required to register with FinCEN, many virtual currency systems, exchangers and related services are. Additionally, most states also require money transmitters to obtain a state license in order to conduct business in that state, and some like New York have established virtual-currency specific licensing requirements. Any failure to register or obtain a license may subject a money transmitter to criminal prosecution, and a money transmitter that knowingly moves funds connected to a criminal offense also faces prosecution for money laundering, regardless of licensing status. Whether the currency involved is virtual or traditional, the department enforces these critical laws to prosecute money services businesses that engage in money laundering or facilitate crime by flouting registration and licensing requirements.
The department’s enforcement actions have evolved along with the virtual currency ecosystem. Our first major action against a virtual currency service used for illicit purposes was in 2007, when the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), together with our Computer Crime and Intellectual Property Section (CCIPS), spearheaded the prosecution against e-Gold and its owners on charges related to money laundering and operating an unlicensed money transmitting business. E-Gold was a popular online currency exchange, and was a favored hub for cybercriminals in part because of the lack of account holder identity verification. An e-mail address was the only information needed to set up an account, allowing global anonymous transactions. After a multi-agency investigation, e-Gold and three associated individuals pleaded guilty in 2008 to charges of money laundering and operating an unlicensed money transmitting business.
In the wake of e-Gold’s demise, the virtual currency system Liberty Reserve was created. As alleged in our pending indictment, Liberty Reserve was structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes.
Liberty Reserve quickly became one of the principal money transfer agents used by cybercriminals around the world to distribute, store and launder the proceeds of their illegal activity. Like e-Gold, any would-be account holder needed little more than a working email address to move funds around the globe. Again, this virtual currency platform became a favorite of cybercriminals and other tech-savvy wrongdoers, enabling them to engage in anonymous financial transactions, all conducted in violation of BSA requirements.
Before the government shut down Liberty Reserve in 2013, it had accumulated more than one million users worldwide, including more than 200,000 in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds included suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking and other crimes.
In a case jointly spearheaded by AFMLS and prosecutors from the Southern District of New York, several of Liberty Reserve’s top executives, including a co-founder of the company, the IT Manager and its Chief Technology Officer, have pleaded guilty to money laundering and operating an unlicensed money transmitting business and have been sentenced up to five years in prison. The creator of Liberty Reserve was extradited to the United States from Spain in October 2014 and is currently awaiting trial, where he is, of course, presumed innocent.
The department has also taken action against a number of individuals and groups who sought to exploit decentralized systems such as Bitcoin and anonymized dark web servers to finance illicit trade and activity in online black markets.
The first major prosecution of a dark market website was by the Southern District of New York in a case against Ross Ulbricht, aka “Dread Pirate Roberts,” who was arrested in October 2013 and convicted by a jury for his role in creating and operating Silk Road, an online black market whose payment operations exclusively used Bitcoin.
Silk Road – designed to act as a black-market bazaar completely free from government regulation and oversight – attempted to enable its users to exchange illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement. It emerged as one of the most extensive criminal marketplaces on the internet. Before it was dismantled by law enforcement, Silk Road was used by thousands of drug dealers and other vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a 100,000 buyers, and has been linked to at least six overdose deaths around the world. Further, Silk Road was also used to launder hundreds of millions of dollars derived from these unlawful transactions. And just a few weeks ago, in a federal courtroom in New York City, Ulbricht was sentenced to a term of life in prison – a cautionary tale for all those who would use dark spaces on the internet to flout the law.
The Silk Road story, however, did not end with Ross Ulbricht. Two federal agents, sworn to uphold the law, were also apparently lured by the perceived anonymity of virtual currency.
Carl Force, a Special Agent with the Drug Enforcement Administration, and Shaun Bridges, a Special Agent with the U.S. Secret Service, were both assigned to the Baltimore Silk Road Task Force, which investigated illegal activity in the Silk Road marketplace.
Force served as an undercover agent. According to court documents, Force went rogue and developed additional online personas to engage in complex bitcoin transactions to steal hundreds of thousands of dollars from the government and from the targets of the investigation. Independently, Bridges also allegedly engaged in an even larger direct theft, illegally diverting over $800,000 in virtual currency to his personal account.
Both individuals have been charged by the Criminal Division’s Public Integrity Section and prosecutors from the Northern District of California with wire fraud, theft of government property and money laundering. These investigations and prosecutions should send a strong message to those who would exploit technology to commit crimes: no matter how anonymous people might feel using virtual currency, their actions are not untraceable. People should not assume that law enforcement will not notice when they act on the dark web, or that we are not keeping up with emerging technology. Our successful prosecutions have shown that neither the supposed anonymity of the dark web nor the use of virtual currency is an effective shield from arrest and prosecution.
In addition to the operators of Silk Road and the drug traffickers who conducted their deals online in bitcoin, prosecutors from the Southern District of New York have also taken action against those who enabled this activity through the operation of Bitcoin currency exchanges. We understand that there are legitimate exchanges, and many of those are working closely with FinCEN and other regulators to ensure compliance with the law. But there are also many exchanges that don’t concern themselves with following the law.
From approximately December 2011 to October 2013, Robert Faiella ran an underground Bitcoin exchange on the Silk Road website under the alias “BTCKing,” and sold bitcoin to users to fund their purchases on the site.
Faiella would run bitcoin orders through Charlie Shrem, who operated a New York-based company that acted as a bitcoin to fiat currency exchange. Although Shrem was the company’s Anti-Money Laundering Officer and had registered the company with FinCEN as a money services business, Shrem failed to report any of BTCKing’s activity, despite knowing it was being used for illegal purchases. Shrem’s assistance enabled BTCKing to finance Silk Road transactions without collecting any personal identifying information from customers. Faiella pleaded guilty to operating an unlicensed money transmitting business involving funds he knew were intended to support unlawful activity, and Shrem pleaded guilty to aiding and abetting Faiella’s operations. Just this past winter, they were sentenced to four and two years in prison, respectively.
While these cases demonstrate that the criminal use of virtual currency has grown rapidly in recent years, its comparative scale versus traditional money laundering still pales in magnitude. Few virtual systems currently can accommodate the hundreds of millions of dollars we have seen in certain large-scale money laundering schemes involving government-issued currency. That said, as virtual currencies become more mature and better understood by criminals, we expect to see an increase in both individualized criminal activity and large-scale money laundering enterprises.
In some ways, companies and individuals operating in the virtual currency ecosystem are at a crossroads, and they have an opportunity to help virtual currency emerge from its association with criminal activities. While there obviously are good and legitimate reasons to use these currencies, industry participants are now on notice that criminals too, make regular use of them. So, to ensure the integrity of this ecosystem and prevent its penetration by crime, the industry must raise the level of its game on the compliance front.
That includes strict compliance with money services business regulations and anti-money laundering statutes. I understand that you have heard from our partners at FinCEN this morning about our collaborative efforts to investigate and enforce anti-money laundering laws, and you’ll also hear more from Katie Haun this afternoon about the investigation of the virtual currency business Ripple Labs, which operated an unlicensed money transmitting business.
Ripple sold a virtual currency called “XRP,” but failed for a time to register with FinCEN as a money service business and failed to establish and maintain appropriate anti-money laundering protections. Importantly, the department resolved this investigation after Ripple agreed to a number of substantial remedial measures. This includes cooperation in other ongoing investigations, a change in business model and oversight by independent auditors, an extensive look-back through their previous activities and development of an extensive compliance framework.
The resolution with Ripple Labs underscores the importance of having a strong compliance program to ensure adherence to the law. Virtual currency exchangers and other marketplace actors comprise the front line of defense against money laundering and other financial crime. Robust compliance programs, such as those imposed on Ripple Labs, are essential to keeping crime out of our financial system. If a money services business finds itself subject to a criminal investigation, we will look, as we do in all cases involving potential prosecution of a business entity, at the factors set forth in the Principles of Prosecution of Business Organizations, or Filip Factors. Two of the Filip Factors in particular, the existence of an effective and well-designed compliance program and a company’s remedial actions, including steps to improve upon an existing compliance regime, are explicitly set forth as factors prosecutors should consider.
As you know, there is no “one-size-fits-all” compliance program. Rather, effective anti-money laundering and other compliance programs must be tailored to meet the circumstances, size, structure and risks encountered by each entity. And virtual currencies, with their perceived anonymity, pose compliance risks that money transmitters such as Western Union do not face. Industry participants must address those risks, even when it may be costly to do so.
Just as in any other corporate investigation, when reviewing the conduct of, for example, an exchange, the department will examine whether a company has meaningfully addressed compliance. We have resolved cases against many financial institutions and other entities, and are deeply familiar with hallmarks of a genuine compliance program.
We expect virtual currency businesses to take compliance risk as seriously as they take any other business risk. Now, we recognize that new entrants in emerging fields may find that compliance requires a significant expenditure of resources, and we will be context-specific in analyzing appropriate compliance frameworks including consideration of the size and scope of the business. But a real commitment to compliance is a must, particularly given the significant risks in the virtual currency market. In the long run, investment in effective compliance programs will be well worth it, especially in the event that a company has to interact with law enforcement.
In many ways, I think that is a message that everybody gathered here today can appreciate. As the virtual currency markets attempt to move past their association with the Silk Roads and Liberty Reserves of the online world, are used to finance legitimate activity, and are becoming increasingly subject to regulation, robust compliance with existing anti-money laundering laws and regulations is necessary – indeed, critical – to bolster the reliability and value of virtual currency.
The challenges posed by the cases I’ve described are not unique to the virtual currency world. Indeed, these dark web criminals are merely using new tools to conduct the same old crimes, committing what is essentially street crime like drug trafficking and extortion, but over computer networks.
For those investors, exchanges and compliance officers who deal in virtual currency, compliance is of paramount importance. Adherence to regulations and state license requirements can reduce the liability of corporations who invest or deal in virtual currency. As seen with Ripple Labs, compliance and remediation can lead to a more favorable resolution of criminal investigations and adhering to anti-money laundering guidelines allows the legitimate use of virtual currency to grow and be responsive to infiltration and abuse by criminal elements. While the department will aggressively investigate and prosecute criminal activity that is funded through virtual currency, money services businesses that fall under the department’s scrutiny can also receive credit for meaningful and sincere compliance efforts.
Your compliance and cooperation will make it more difficult for those who seek to operate illicit and underground marketplaces and will be a key element for law enforcement to shed light on these illegal virtual currency transactions. It also will help to ensure the continued viability of virtual currency systems in the future.
Thank you for the opportunity to address this year’s National Institute on Bitcoin and Other Virtual Currencies.
Wednesday, May 27, 2015
SEVERAL FIFA OFFICIALS INDICTED FOR ROLES IN CORRUPTING INTERNATIONAL SOCCER
FROM: U.S. JUSTICE DEPARTMENT
Wednesday, May 27, 2015
Nine FIFA Officials and Five Corporate Executives Indicted for Racketeering Conspiracy and Corruption
The Defendants Include Two Current FIFA Vice Presidents and the Current and Former Presidents of the Confederation of North, Central American and Caribbean Association Football (CONCACAF); Seven Defendants Arrested Overseas; Guilty Pleas for Four Individual Defendants and Two Corporate Defendants Also Unsealed
A 47-count indictment was unsealed early this morning in federal court in Brooklyn, New York, charging 14 defendants with racketeering, wire fraud and money laundering conspiracies, among other offenses, in connection with the defendants’ participation in a 24-year scheme to enrich themselves through the corruption of international soccer. The guilty pleas of four individual defendants and two corporate defendants were also unsealed today.
The defendants charged in the indictment include high-ranking officials of the Fédération Internationale de Football Association (FIFA), the organization responsible for the regulation and promotion of soccer worldwide, as well as leading officials of other soccer governing bodies that operate under the FIFA umbrella. Jeffrey Webb and Jack Warner – the current and former presidents of CONCACAF, the continental confederation under FIFA headquartered in the United States – are among the soccer officials charged with racketeering and bribery offenses. The defendants also include U.S. and South American sports marketing executives who are alleged to have systematically paid and agreed to pay well over $150 million in bribes and kickbacks to obtain lucrative media and marketing rights to international soccer tournaments.
The charges were announced by Attorney General Loretta E. Lynch, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Director James B. Comey of the FBI, Assistant Director in Charge Diego W. Rodriguez of the FBI’s New York Field Office, Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Erick Martinez of the IRS-CI’s Los Angeles Field Office.
Also earlier this morning, Swiss authorities in Zurich arrested seven of the defendants charged in the indictment, the defendants Jeffrey Webb, Eduardo Li, Julio Rocha, Costas Takkas, Eugenio Figueredo, Rafael Esquivel and José Maria Marin, at the request of the United States. Also this morning, a search warrant is being executed at CONCACAF headquarters in Miami, Florida.
The guilty pleas of the four individual and two corporate defendants that were also unsealed today include the guilty pleas of Charles Blazer, the long-serving former general secretary of CONCACAF and former U.S. representative on the FIFA executive committee; José Hawilla, the owner and founder of the Traffic Group, a multinational sports marketing conglomerate headquartered in Brazil; and two of Hawilla’s companies, Traffic Sports International Inc. and Traffic Sports USA Inc., which is based in Florida.
“The indictment alleges corruption that is rampant, systemic, and deep-rooted both abroad and here in the United States,” said Attorney General Lynch. “It spans at least two generations of soccer officials who, as alleged, have abused their positions of trust to acquire millions of dollars in bribes and kickbacks. And it has profoundly harmed a multitude of victims, from the youth leagues and developing countries that should benefit from the revenue generated by the commercial rights these organizations hold, to the fans at home and throughout the world whose support for the game makes those rights valuable. Today’s action makes clear that this Department of Justice intends to end any such corrupt practices, to root out misconduct, and to bring wrongdoers to justice – and we look forward to continuing to work with other countries in this effort.”
Attorney General Lynch extended her grateful appreciation to the authorities of the government of Switzerland, as well as several other international partners, for their outstanding assistance in this investigation.
“Today’s announcement should send a message that enough is enough,” said Acting U.S. Attorney Currie. “After decades of what the indictment alleges to be brazen corruption, organized international soccer needs a new start – a new chance for its governing institutions to provide honest oversight and support of a sport that is beloved across the world, increasingly so here in the United States. Let me be clear: this indictment is not the final chapter in our investigation.”
Acting U.S. Attorney Currie extended his thanks to the agents, analysts and other investigative personnel with the FBI New York Eurasian Joint Organized Crime Squad and the IRS-CI Los Angeles Field Office, as well as their colleagues abroad, for their tremendous effort in this case.
“As charged in the indictment, the defendants fostered a culture of corruption and greed that created an uneven playing field for the biggest sport in the world,” said Director Comey. “Undisclosed and illegal payments, kickbacks, and bribes became a way of doing business at FIFA. I want to commend the investigators and prosecutors around the world who have pursued this case so diligently, for so many years.”
“When leaders in an organization resort to cheating the very members that they are supposed to represent, they must be held accountable,” said Chief Weber. “Corruption, tax evasion and money laundering are certainly not the cornerstones of any successful business. Whether you call it soccer or football, the fans, players and sponsors around the world who love this game should not have to worry about officials corrupting their sport. This case isn't about soccer, it is about fairness and following the law. IRS-CI will continue to investigate financial crimes and follow the money wherever it may lead around the world, leveling the playing field for those who obey the law.”
The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The Enterprise
FIFA is composed of 209 member associations, each representing organized soccer in a particular nation or territory, including the United States and four of its overseas territories. FIFA also recognizes six continental confederations that assist it in governing soccer in different regions of the world. The U.S. Soccer Federation is one of 41 member associations of the confederation known as CONCACAF, which has been headquartered in the United States throughout the period charged in the indictment. The South American confederation, called CONMEBOL, is also a focus of the indictment.
As alleged in the indictment, FIFA and its six continental confederations, together with affiliated regional federations, national member associations and sports marketing companies, constitute an enterprise of legal entities associated in fact for purposes of the federal racketeering laws. The principal – and entirely legitimate – purpose of the enterprise is to regulate and promote the sport of soccer worldwide.
As alleged in the indictment, one key way the enterprise derives revenue is to commercialize the media and marketing rights associated with soccer events and tournaments. The organizing entity that owns those rights – as FIFA and CONCACAF do with respect to the World Cup and Gold Cup, their respective flagship tournaments – sells them to sports marketing companies, often through multi-year contracts covering multiple editions of the tournaments. The sports marketing companies, in turn, sell the rights downstream to TV and radio broadcast networks, major corporate sponsors and other sub-licensees who want to broadcast the matches or promote their brands. The revenue generated from these contracts is substantial: according to FIFA, 70% of its $5.7 billion in total revenues between 2011 and 2014 was attributable to the sale of TV and marketing rights to the 2014 World Cup.
The Racketeering Conspiracy
The indictment alleges that, between 1991 and the present, the defendants and their co-conspirators corrupted the enterprise by engaging in various criminal activities, including fraud, bribery and money laundering. Two generations of soccer officials abused their positions of trust for personal gain, frequently through an alliance with unscrupulous sports marketing executives who shut out competitors and kept highly lucrative contracts for themselves through the systematic payment of bribes and kickbacks. All told, the soccer officials are charged with conspiring to solicit and receive well over $150 million in bribes and kickbacks in exchange for their official support of the sports marketing executives who agreed to make the unlawful payments.
Most of the schemes alleged in the indictment relate to the solicitation and receipt of bribes and kickbacks by soccer officials from sports marketing executives in connection with the commercialization of the media and marketing rights associated with various soccer matches and tournaments, including FIFA World Cup qualifiers in the CONCACAF region, the CONCACAF Gold Cup, the CONCACAF Champions League, the jointly organized CONMEBOL/CONCACAF Copa América Centenario, the CONMEBOL Copa América, the CONMEBOL Copa Libertadores and the Copa do Brasil, which is organized by the Brazilian national soccer federation (CBF). Other alleged schemes relate to the payment and receipt of bribes and kickbacks in connection with the sponsorship of CBF by a major U.S. sportswear company, the selection of the host country for the 2010 World Cup and the 2011 FIFA presidential election.
The Indicted Defendants
As set forth in the indictment, the defendants and their co-conspirators fall generally into three categories: soccer officials acting in a fiduciary capacity within FIFA and one or more of its constituent organizations; sports media and marketing company executives; and businessmen, bankers and other trusted intermediaries who laundered illicit payments.
Nine of the defendants were FIFA officials by operation of the FIFA statutes, as well as officials of one or more other bodies:
Jeffrey Webb: Current FIFA vice president and executive committee member, CONCACAF president, Caribbean Football Union (CFU) executive committee member and Cayman Islands Football Association (CIFA) president.
Eduardo Li: Current FIFA executive committee member-elect, CONCACAF executive committee member and Costa Rican soccer federation (FEDEFUT) president.
Julio Rocha: Current FIFA development officer. Former Central American Football Union (UNCAF) president and Nicaraguan soccer federation (FENIFUT) president.
Costas Takkas: Current attaché to the CONCACAF president. Former CIFA general secretary.
Jack Warner: Former FIFA vice president and executive committee member, CONCACAF president, CFU president and Trinidad and Tobago Football Federation (TTFF) special adviser.
Eugenio Figueredo: Current FIFA vice president and executive committee member. Former CONMEBOL president and Uruguayan soccer federation (AUF) president.
Rafael Esquivel: Current CONMEBOL executive committee member and Venezuelan soccer federation (FVF) president.
José Maria Marin: Current member of the FIFA organizing committee for the Olympic football tournaments. Former CBF president.
Nicolás Leoz: Former FIFA executive committee member and CONMEBOL president.
Four of the defendants were sports marketing executives:
Alejandro Burzaco: Controlling principal of Torneos y Competencias S.A., a sports marketing business based in Argentina, and its affiliates.
Aaron Davidson: President of Traffic Sports USA Inc. (Traffic USA).
Hugo and Mariano Jinkis: Controlling principals of Full Play Group S.A., a sports marketing business based in Argentina, and its affiliates.
And one of the defendants was in the broadcasting business but allegedly served as an intermediary to facilitate illicit payments between sports marketing executives and soccer officials:
José Margulies: Controlling principal of Valente Corp. and Somerton Ltd.
The Convicted Individuals and Corporations
The following individuals and corporations previously pleaded guilty under seal:
On July 15, 2013, the defendant Daryll Warner, son of defendant Jack Warner and a former FIFA development officer, waived indictment and pleaded guilty to a two-count information charging him with wire fraud and the structuring of financial transactions.
On Oct. 25, 2013, the defendant Daryan Warner waived indictment and pleaded guilty to a three-count information charging him with wire fraud conspiracy, money laundering conspiracy and the structuring of financial transactions. Daryan Warner forfeited over $1.1 million around the time of his plea and has agreed to pay a second forfeiture money judgment at the time of sentencing.
On Nov. 25, 2013, the defendant Charles Blazer, the former CONCACAF general secretary and a former FIFA executive committee member, waived indictment and pleaded guilty to a 10-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy, income tax evasion and failure to file a Report of Foreign Bank and Financial Accounts (FBAR). Blazer forfeited over $1.9 million at the time of his plea and has agreed to pay a second amount to be determined at the time of sentencing.
On Dec. 12, 2014, the defendant José Hawilla, the owner and founder of the Traffic Group, the Brazilian sports marketing conglomerate, waived indictment and pleaded guilty to a four-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy and obstruction of justice. Hawilla also agreed to forfeit over $151 million, $25 million of which was paid at the time of his plea.
On May 14, 2015, the defendants Traffic Sports USA Inc. and Traffic Sports International Inc. pleaded guilty to wire fraud conspiracy.
All money forfeited by the defendants is being held in reserve to ensure its availability to satisfy any order of restitution entered at sentencing for the benefit of any individuals or entities that qualify as victims of the defendants’ crimes under federal law.
* * * *
The indictment unsealed today has been assigned to U.S. District Court Judge Raymond J. Dearie of the Eastern District of New York.
The indicted and convicted individual defendants face maximum terms of incarceration of 20 years for the RICO conspiracy, wire fraud conspiracy, wire fraud, money laundering conspiracy, money laundering and obstruction of justice charges. In addition, Eugenio Figueredo faces a maximum term of incarceration of 10 years for a charge of naturalization fraud and could have his U.S. citizenship revoked. He also faces a maximum term of incarceration of five years for each tax charge. Charles Blazer faces a maximum term of incarceration of 10 years for the FBAR charge and five years for the tax evasion charges; and Daryan and Daryll Warner face maximum terms of incarceration of 10 years for structuring financial transactions to evade currency reporting requirements. Each individual defendant also faces mandatory restitution, forfeiture and a fine. By the terms of their plea agreements, the corporate defendants face fines of $500,000 and one year of probation.
The government’s investigation is ongoing.
The government’s case is being prosecuted by Assistant U.S. Attorneys Evan M. Norris, Amanda Hector, Darren A. LaVerne, Samuel P. Nitze, Keith D. Edelman and Brian D. Morris of the Eastern District of New York, with assistance provided by the Justice Department’s Office of International Affairs and Organized Crime and Gang Section.
Wednesday, May 27, 2015
Nine FIFA Officials and Five Corporate Executives Indicted for Racketeering Conspiracy and Corruption
The Defendants Include Two Current FIFA Vice Presidents and the Current and Former Presidents of the Confederation of North, Central American and Caribbean Association Football (CONCACAF); Seven Defendants Arrested Overseas; Guilty Pleas for Four Individual Defendants and Two Corporate Defendants Also Unsealed
A 47-count indictment was unsealed early this morning in federal court in Brooklyn, New York, charging 14 defendants with racketeering, wire fraud and money laundering conspiracies, among other offenses, in connection with the defendants’ participation in a 24-year scheme to enrich themselves through the corruption of international soccer. The guilty pleas of four individual defendants and two corporate defendants were also unsealed today.
The defendants charged in the indictment include high-ranking officials of the Fédération Internationale de Football Association (FIFA), the organization responsible for the regulation and promotion of soccer worldwide, as well as leading officials of other soccer governing bodies that operate under the FIFA umbrella. Jeffrey Webb and Jack Warner – the current and former presidents of CONCACAF, the continental confederation under FIFA headquartered in the United States – are among the soccer officials charged with racketeering and bribery offenses. The defendants also include U.S. and South American sports marketing executives who are alleged to have systematically paid and agreed to pay well over $150 million in bribes and kickbacks to obtain lucrative media and marketing rights to international soccer tournaments.
The charges were announced by Attorney General Loretta E. Lynch, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Director James B. Comey of the FBI, Assistant Director in Charge Diego W. Rodriguez of the FBI’s New York Field Office, Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Erick Martinez of the IRS-CI’s Los Angeles Field Office.
Also earlier this morning, Swiss authorities in Zurich arrested seven of the defendants charged in the indictment, the defendants Jeffrey Webb, Eduardo Li, Julio Rocha, Costas Takkas, Eugenio Figueredo, Rafael Esquivel and José Maria Marin, at the request of the United States. Also this morning, a search warrant is being executed at CONCACAF headquarters in Miami, Florida.
The guilty pleas of the four individual and two corporate defendants that were also unsealed today include the guilty pleas of Charles Blazer, the long-serving former general secretary of CONCACAF and former U.S. representative on the FIFA executive committee; José Hawilla, the owner and founder of the Traffic Group, a multinational sports marketing conglomerate headquartered in Brazil; and two of Hawilla’s companies, Traffic Sports International Inc. and Traffic Sports USA Inc., which is based in Florida.
“The indictment alleges corruption that is rampant, systemic, and deep-rooted both abroad and here in the United States,” said Attorney General Lynch. “It spans at least two generations of soccer officials who, as alleged, have abused their positions of trust to acquire millions of dollars in bribes and kickbacks. And it has profoundly harmed a multitude of victims, from the youth leagues and developing countries that should benefit from the revenue generated by the commercial rights these organizations hold, to the fans at home and throughout the world whose support for the game makes those rights valuable. Today’s action makes clear that this Department of Justice intends to end any such corrupt practices, to root out misconduct, and to bring wrongdoers to justice – and we look forward to continuing to work with other countries in this effort.”
Attorney General Lynch extended her grateful appreciation to the authorities of the government of Switzerland, as well as several other international partners, for their outstanding assistance in this investigation.
“Today’s announcement should send a message that enough is enough,” said Acting U.S. Attorney Currie. “After decades of what the indictment alleges to be brazen corruption, organized international soccer needs a new start – a new chance for its governing institutions to provide honest oversight and support of a sport that is beloved across the world, increasingly so here in the United States. Let me be clear: this indictment is not the final chapter in our investigation.”
Acting U.S. Attorney Currie extended his thanks to the agents, analysts and other investigative personnel with the FBI New York Eurasian Joint Organized Crime Squad and the IRS-CI Los Angeles Field Office, as well as their colleagues abroad, for their tremendous effort in this case.
“As charged in the indictment, the defendants fostered a culture of corruption and greed that created an uneven playing field for the biggest sport in the world,” said Director Comey. “Undisclosed and illegal payments, kickbacks, and bribes became a way of doing business at FIFA. I want to commend the investigators and prosecutors around the world who have pursued this case so diligently, for so many years.”
“When leaders in an organization resort to cheating the very members that they are supposed to represent, they must be held accountable,” said Chief Weber. “Corruption, tax evasion and money laundering are certainly not the cornerstones of any successful business. Whether you call it soccer or football, the fans, players and sponsors around the world who love this game should not have to worry about officials corrupting their sport. This case isn't about soccer, it is about fairness and following the law. IRS-CI will continue to investigate financial crimes and follow the money wherever it may lead around the world, leveling the playing field for those who obey the law.”
The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The Enterprise
FIFA is composed of 209 member associations, each representing organized soccer in a particular nation or territory, including the United States and four of its overseas territories. FIFA also recognizes six continental confederations that assist it in governing soccer in different regions of the world. The U.S. Soccer Federation is one of 41 member associations of the confederation known as CONCACAF, which has been headquartered in the United States throughout the period charged in the indictment. The South American confederation, called CONMEBOL, is also a focus of the indictment.
As alleged in the indictment, FIFA and its six continental confederations, together with affiliated regional federations, national member associations and sports marketing companies, constitute an enterprise of legal entities associated in fact for purposes of the federal racketeering laws. The principal – and entirely legitimate – purpose of the enterprise is to regulate and promote the sport of soccer worldwide.
As alleged in the indictment, one key way the enterprise derives revenue is to commercialize the media and marketing rights associated with soccer events and tournaments. The organizing entity that owns those rights – as FIFA and CONCACAF do with respect to the World Cup and Gold Cup, their respective flagship tournaments – sells them to sports marketing companies, often through multi-year contracts covering multiple editions of the tournaments. The sports marketing companies, in turn, sell the rights downstream to TV and radio broadcast networks, major corporate sponsors and other sub-licensees who want to broadcast the matches or promote their brands. The revenue generated from these contracts is substantial: according to FIFA, 70% of its $5.7 billion in total revenues between 2011 and 2014 was attributable to the sale of TV and marketing rights to the 2014 World Cup.
The Racketeering Conspiracy
The indictment alleges that, between 1991 and the present, the defendants and their co-conspirators corrupted the enterprise by engaging in various criminal activities, including fraud, bribery and money laundering. Two generations of soccer officials abused their positions of trust for personal gain, frequently through an alliance with unscrupulous sports marketing executives who shut out competitors and kept highly lucrative contracts for themselves through the systematic payment of bribes and kickbacks. All told, the soccer officials are charged with conspiring to solicit and receive well over $150 million in bribes and kickbacks in exchange for their official support of the sports marketing executives who agreed to make the unlawful payments.
Most of the schemes alleged in the indictment relate to the solicitation and receipt of bribes and kickbacks by soccer officials from sports marketing executives in connection with the commercialization of the media and marketing rights associated with various soccer matches and tournaments, including FIFA World Cup qualifiers in the CONCACAF region, the CONCACAF Gold Cup, the CONCACAF Champions League, the jointly organized CONMEBOL/CONCACAF Copa América Centenario, the CONMEBOL Copa América, the CONMEBOL Copa Libertadores and the Copa do Brasil, which is organized by the Brazilian national soccer federation (CBF). Other alleged schemes relate to the payment and receipt of bribes and kickbacks in connection with the sponsorship of CBF by a major U.S. sportswear company, the selection of the host country for the 2010 World Cup and the 2011 FIFA presidential election.
The Indicted Defendants
As set forth in the indictment, the defendants and their co-conspirators fall generally into three categories: soccer officials acting in a fiduciary capacity within FIFA and one or more of its constituent organizations; sports media and marketing company executives; and businessmen, bankers and other trusted intermediaries who laundered illicit payments.
Nine of the defendants were FIFA officials by operation of the FIFA statutes, as well as officials of one or more other bodies:
Jeffrey Webb: Current FIFA vice president and executive committee member, CONCACAF president, Caribbean Football Union (CFU) executive committee member and Cayman Islands Football Association (CIFA) president.
Eduardo Li: Current FIFA executive committee member-elect, CONCACAF executive committee member and Costa Rican soccer federation (FEDEFUT) president.
Julio Rocha: Current FIFA development officer. Former Central American Football Union (UNCAF) president and Nicaraguan soccer federation (FENIFUT) president.
Costas Takkas: Current attaché to the CONCACAF president. Former CIFA general secretary.
Jack Warner: Former FIFA vice president and executive committee member, CONCACAF president, CFU president and Trinidad and Tobago Football Federation (TTFF) special adviser.
Eugenio Figueredo: Current FIFA vice president and executive committee member. Former CONMEBOL president and Uruguayan soccer federation (AUF) president.
Rafael Esquivel: Current CONMEBOL executive committee member and Venezuelan soccer federation (FVF) president.
José Maria Marin: Current member of the FIFA organizing committee for the Olympic football tournaments. Former CBF president.
Nicolás Leoz: Former FIFA executive committee member and CONMEBOL president.
Four of the defendants were sports marketing executives:
Alejandro Burzaco: Controlling principal of Torneos y Competencias S.A., a sports marketing business based in Argentina, and its affiliates.
Aaron Davidson: President of Traffic Sports USA Inc. (Traffic USA).
Hugo and Mariano Jinkis: Controlling principals of Full Play Group S.A., a sports marketing business based in Argentina, and its affiliates.
And one of the defendants was in the broadcasting business but allegedly served as an intermediary to facilitate illicit payments between sports marketing executives and soccer officials:
José Margulies: Controlling principal of Valente Corp. and Somerton Ltd.
The Convicted Individuals and Corporations
The following individuals and corporations previously pleaded guilty under seal:
On July 15, 2013, the defendant Daryll Warner, son of defendant Jack Warner and a former FIFA development officer, waived indictment and pleaded guilty to a two-count information charging him with wire fraud and the structuring of financial transactions.
On Oct. 25, 2013, the defendant Daryan Warner waived indictment and pleaded guilty to a three-count information charging him with wire fraud conspiracy, money laundering conspiracy and the structuring of financial transactions. Daryan Warner forfeited over $1.1 million around the time of his plea and has agreed to pay a second forfeiture money judgment at the time of sentencing.
On Nov. 25, 2013, the defendant Charles Blazer, the former CONCACAF general secretary and a former FIFA executive committee member, waived indictment and pleaded guilty to a 10-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy, income tax evasion and failure to file a Report of Foreign Bank and Financial Accounts (FBAR). Blazer forfeited over $1.9 million at the time of his plea and has agreed to pay a second amount to be determined at the time of sentencing.
On Dec. 12, 2014, the defendant José Hawilla, the owner and founder of the Traffic Group, the Brazilian sports marketing conglomerate, waived indictment and pleaded guilty to a four-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy and obstruction of justice. Hawilla also agreed to forfeit over $151 million, $25 million of which was paid at the time of his plea.
On May 14, 2015, the defendants Traffic Sports USA Inc. and Traffic Sports International Inc. pleaded guilty to wire fraud conspiracy.
All money forfeited by the defendants is being held in reserve to ensure its availability to satisfy any order of restitution entered at sentencing for the benefit of any individuals or entities that qualify as victims of the defendants’ crimes under federal law.
* * * *
The indictment unsealed today has been assigned to U.S. District Court Judge Raymond J. Dearie of the Eastern District of New York.
The indicted and convicted individual defendants face maximum terms of incarceration of 20 years for the RICO conspiracy, wire fraud conspiracy, wire fraud, money laundering conspiracy, money laundering and obstruction of justice charges. In addition, Eugenio Figueredo faces a maximum term of incarceration of 10 years for a charge of naturalization fraud and could have his U.S. citizenship revoked. He also faces a maximum term of incarceration of five years for each tax charge. Charles Blazer faces a maximum term of incarceration of 10 years for the FBAR charge and five years for the tax evasion charges; and Daryan and Daryll Warner face maximum terms of incarceration of 10 years for structuring financial transactions to evade currency reporting requirements. Each individual defendant also faces mandatory restitution, forfeiture and a fine. By the terms of their plea agreements, the corporate defendants face fines of $500,000 and one year of probation.
The government’s investigation is ongoing.
The government’s case is being prosecuted by Assistant U.S. Attorneys Evan M. Norris, Amanda Hector, Darren A. LaVerne, Samuel P. Nitze, Keith D. Edelman and Brian D. Morris of the Eastern District of New York, with assistance provided by the Justice Department’s Office of International Affairs and Organized Crime and Gang Section.
Monday, April 20, 2015
BUSINESS OWNER PLEADS GUILTY FOR ROLE IN $2.6 MILLION HOME HEALTH CARE SCHEME
FROM: U.S. JUSTICE DEPARTMENT
Wednesday, April 15, 2015
Michigan Home Health Agency Owner Pleads Guilty in Connection with $2.6 Million Home Health Care Scheme
The owner of a greater Detroit-area home health care agency pleaded guilty today to fraud and money laundering charges in connection with her role in a $2.6 million home health care scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Chicago Regional Office and Special Agent in Charge Jarod Koopman of Internal Revenue Service Criminal Investigation (IRS-CI) made the announcement.
Rahmat Begum, 49, of Farmington Hills, Michigan, pleaded guilty today – during the second day of her trial – to all charges in a six-count indictment, including one count of conspiracy to commit wire fraud, one count of making false statements relating to health care matters, one count of conspiracy to violate the Anti-Kickback Statute and three counts of money laundering. A sentencing hearing is scheduled for Aug. 18, 2015, before U.S. District Judge Bernard A. Friedman of the Eastern District of Michigan.
According to admissions made as part of her guilty plea, Begum conspired to submit falsified claims to Medicare where the claims were based upon referrals obtained through illegal kickbacks to patient recruiters and physicians. Begum also admitted to conspiring to pay illegal kickbacks to patient recruiters and physicians and to making a false statement to Medicare pledging not to pay kickbacks, when in fact she was paying them. Finally, Begum admitted to laundering the proceeds of the wire fraud conspiracy.
This case was investigated by the FBI, HHS-OIG and IRS-CI and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan. This case is being prosecuted by Trial Attorneys Niall M. O’Donnell and James P. McDonald 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 2,100 defendants who have collectively billed the Medicare program for more than $6.5 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.
Wednesday, April 15, 2015
Michigan Home Health Agency Owner Pleads Guilty in Connection with $2.6 Million Home Health Care Scheme
The owner of a greater Detroit-area home health care agency pleaded guilty today to fraud and money laundering charges in connection with her role in a $2.6 million home health care scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Chicago Regional Office and Special Agent in Charge Jarod Koopman of Internal Revenue Service Criminal Investigation (IRS-CI) made the announcement.
Rahmat Begum, 49, of Farmington Hills, Michigan, pleaded guilty today – during the second day of her trial – to all charges in a six-count indictment, including one count of conspiracy to commit wire fraud, one count of making false statements relating to health care matters, one count of conspiracy to violate the Anti-Kickback Statute and three counts of money laundering. A sentencing hearing is scheduled for Aug. 18, 2015, before U.S. District Judge Bernard A. Friedman of the Eastern District of Michigan.
According to admissions made as part of her guilty plea, Begum conspired to submit falsified claims to Medicare where the claims were based upon referrals obtained through illegal kickbacks to patient recruiters and physicians. Begum also admitted to conspiring to pay illegal kickbacks to patient recruiters and physicians and to making a false statement to Medicare pledging not to pay kickbacks, when in fact she was paying them. Finally, Begum admitted to laundering the proceeds of the wire fraud conspiracy.
This case was investigated by the FBI, HHS-OIG and IRS-CI and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan. This case is being prosecuted by Trial Attorneys Niall M. O’Donnell and James P. McDonald 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 2,100 defendants who have collectively billed the Medicare program for more than $6.5 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.
Saturday, March 28, 2015
DOJ ANNOUNCES CONVICTION OF OXYWATER MAKERS WITH FRAUD, MONEY LAUNDERING, TAX CRIMES
FROM: U.S. JUSTICE DEPARTMENT
Wednesday, March 25, 2015
Jury Convicts Makers of OXYwater for Wire Fraud, Money Laundering and Tax Crimes
Today, a federal jury convicted a man from Lewis Center, Ohio, and his business partner of Powell, Ohio, of defrauding their company’s investors and diverting investors’ funds for their own personal use. Preston Harrison and his wife, Lovena E. Harrison, 42, were also both convicted of conspiracy to defraud the United States and filing a false income tax return, and Lovena Harrison was convicted of structuring financial transactions to evade currency reporting requirements.
Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Carter M. Stewart of the Southern District of Ohio, Special Agent in Charge Kathy Enstrom of Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Angela L. Byers of the FBI’s Cincinnati Field Division announced the verdict reached today, which was returned following a trial that began on March 16 before U.S. District Judge Gregory L. Frost.
According to court testimony, Thomas E. Jackson, 40, of Powell, and Preston J. Harrison, 43, of Lewis Center, operated Westerville, Ohio, based Imperial Integrated Health Research and Development LLC and developed a product called OXYwater, a beverage that promoters claimed was an all-natural, vitamin-enhanced sports drink that contained added oxygen for improved physical performance.
The defendants engaged in a scheme to deceive the investors in their company about the structure, composition, finances, sales and profits of OXYwater in order to make the company appear to be a lucrative and profitable financial investment. Jackson and Harrison produced and sent false and fraudulent documents intended to deceive investors, the ultimate purpose of such false statements being for Jackson and Preston Harrison to obtain money invested in the company. They then misappropriated that money for their own personal use and household expenditures including the purchase of jewelry, a Cadillac Escalade, a BMW, weapons, clothing, home improvements and a swimming pool.
“This case was about the millions of dollars that the defendants stole from investors to fuel their lavish lifestyle,” said Assistant U.S. Attorney Jessica Kim in court.
Jackson and Harrison misappropriated approximately $2 million of the investors’ funds between August 2010 and spring 2013. The defendants’ scheme caused investors to suffer substantial losses when the corporation was forced to declare bankruptcy with no assets. As a result of the defendants’ conduct, investors lost approximately $9 million.
Jackson and Preston Harrison were each convicted of one count of conspiracy to commit wire fraud, for which they face a statutory maximum sentence of 20 years in prison, and one count of conspiracy to commit money laundering, for which they face a statutory maximum sentence of 10 years in prison. Jackson was convicted of eight counts of wire fraud, which carries a statutory maximum sentence of 20 years in prison, and 12 counts of money laundering, which carries a statutory maximum sentence of 10 years in prison. Harrison was convicted of 12 counts of money laundering, for which he faces a statutory maximum sentence of 10 years in prison.
Preston and Lovena Harrison were both convicted of conspiracy to defraud the United States and with filing a false tax return. Preston Harrison misappropriated approximately $1.1 million in 2011 from his company, which he and his wife, Lovena Harrison, placed in an account in the name of her daycare business. They used the money for personal expenses and did not report the money as income on their 2011 income tax return. Lovena Harrison was also convicted of one count of structuring financial transactions to evade currency reporting requirements. Conspiracy to defraud the United States and structuring financial transactions to evade currency reporting requirements are each crimes with a statutory maximum sentence of five years in prison, and filing a false tax return carries a statutory maximum sentence of three years in prison.
Preston Harrison and Jackson also face potential forfeiture of $1.1 million, including two vehicles, eight weapons, cash and the contents of a bank account.
The three defendants were indicted by a grand jury on May 20, 2014.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Stewart commended the cooperative investigation by the IRS-CI and FBI, as well as Assistant U.S. Attorney Jessica Kim and Trial Attorneys Andrew Young and Jason Scheff of the Tax Division, who prosecuted the case.
Wednesday, March 25, 2015
Jury Convicts Makers of OXYwater for Wire Fraud, Money Laundering and Tax Crimes
Today, a federal jury convicted a man from Lewis Center, Ohio, and his business partner of Powell, Ohio, of defrauding their company’s investors and diverting investors’ funds for their own personal use. Preston Harrison and his wife, Lovena E. Harrison, 42, were also both convicted of conspiracy to defraud the United States and filing a false income tax return, and Lovena Harrison was convicted of structuring financial transactions to evade currency reporting requirements.
Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Carter M. Stewart of the Southern District of Ohio, Special Agent in Charge Kathy Enstrom of Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Angela L. Byers of the FBI’s Cincinnati Field Division announced the verdict reached today, which was returned following a trial that began on March 16 before U.S. District Judge Gregory L. Frost.
According to court testimony, Thomas E. Jackson, 40, of Powell, and Preston J. Harrison, 43, of Lewis Center, operated Westerville, Ohio, based Imperial Integrated Health Research and Development LLC and developed a product called OXYwater, a beverage that promoters claimed was an all-natural, vitamin-enhanced sports drink that contained added oxygen for improved physical performance.
The defendants engaged in a scheme to deceive the investors in their company about the structure, composition, finances, sales and profits of OXYwater in order to make the company appear to be a lucrative and profitable financial investment. Jackson and Harrison produced and sent false and fraudulent documents intended to deceive investors, the ultimate purpose of such false statements being for Jackson and Preston Harrison to obtain money invested in the company. They then misappropriated that money for their own personal use and household expenditures including the purchase of jewelry, a Cadillac Escalade, a BMW, weapons, clothing, home improvements and a swimming pool.
“This case was about the millions of dollars that the defendants stole from investors to fuel their lavish lifestyle,” said Assistant U.S. Attorney Jessica Kim in court.
Jackson and Harrison misappropriated approximately $2 million of the investors’ funds between August 2010 and spring 2013. The defendants’ scheme caused investors to suffer substantial losses when the corporation was forced to declare bankruptcy with no assets. As a result of the defendants’ conduct, investors lost approximately $9 million.
Jackson and Preston Harrison were each convicted of one count of conspiracy to commit wire fraud, for which they face a statutory maximum sentence of 20 years in prison, and one count of conspiracy to commit money laundering, for which they face a statutory maximum sentence of 10 years in prison. Jackson was convicted of eight counts of wire fraud, which carries a statutory maximum sentence of 20 years in prison, and 12 counts of money laundering, which carries a statutory maximum sentence of 10 years in prison. Harrison was convicted of 12 counts of money laundering, for which he faces a statutory maximum sentence of 10 years in prison.
Preston and Lovena Harrison were both convicted of conspiracy to defraud the United States and with filing a false tax return. Preston Harrison misappropriated approximately $1.1 million in 2011 from his company, which he and his wife, Lovena Harrison, placed in an account in the name of her daycare business. They used the money for personal expenses and did not report the money as income on their 2011 income tax return. Lovena Harrison was also convicted of one count of structuring financial transactions to evade currency reporting requirements. Conspiracy to defraud the United States and structuring financial transactions to evade currency reporting requirements are each crimes with a statutory maximum sentence of five years in prison, and filing a false tax return carries a statutory maximum sentence of three years in prison.
Preston Harrison and Jackson also face potential forfeiture of $1.1 million, including two vehicles, eight weapons, cash and the contents of a bank account.
The three defendants were indicted by a grand jury on May 20, 2014.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Stewart commended the cooperative investigation by the IRS-CI and FBI, as well as Assistant U.S. Attorney Jessica Kim and Trial Attorneys Andrew Young and Jason Scheff of the Tax Division, who prosecuted the case.
Thursday, February 12, 2015
TWO U.S. ARMY SERGEANTS PLEAD GUILTY TO ACCEPTING BRIBES FROM AFGHAN TRUCK DRIVERS
FROM: U.S. JUSTICE DEPARTMENT
Wednesday, February 11, 2015
Two U.S. Army Sergeants Plead Guilty to Taking Bribes While Deployed in Afghanistan
Two sergeants with the U.S. Army have pleaded guilty for accepting bribes from Afghan truck drivers at Forward Operating Base Gardez, Afghanistan (FOB Gardez), in exchange for allowing the drivers to take thousands of gallons of fuel from the base for resale on the black market, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Michael J. Moore of the Middle District of Georgia.
James Edward Norris, 41, of Fort Irwin, California, and Seneca Darnell Hampton, 31, of Fort Benning, Georgia, each pleaded guilty before Chief U.S. District Judge Clay D. Land in the Middle District of Georgia to one count of conspiracy to commit bribery of a public official and one count of money laundering.
During their guilty pleas, Hampton and Norris admitted to conspiring with other soldiers stationed at FOB Gardez to solicit and accept approximately $2,000 per day from local Afghan truck drivers in exchange for permitting the truck drivers to take thousands of gallons of fuel from the base. Hampton admitted that he concealed the scheme by attributing the increase in fuel usage to colder winter temperatures.
Hampton and Norris admitted that they shipped the bribe money back to the United States in tough boxes. Norris further admitted that on June 7, 2013, after returning from deployment, he purchased a 2008 Cadillac Escalade with $31,000 cash derived from the bribery scheme. Hampton further admitted that on May 20, 2013, after returning from deployment, he purchased a 2013 GMC Sierra with $29,000 cash derived from the bribery scheme.
As part of their plea agreements, Hampton and Norris agreed to forfeit the proceeds they received from the bribery scheme and the vehicles they purchased with those proceeds, as well as to pay full restitution. Sentencing has been scheduled for May 21, 2015.
The case is being investigated by the U.S. Army Criminal Investigation Command, the Office of the Special Inspector General for Afghanistan Reconstruction, the Defense Criminal Investigative Service and the Defense Contract Audit Agency, Investigative Support Division. The case is being prosecuted by Trial Attorney John Keller of the Criminal Division’s Public Integrity Section.
Wednesday, February 11, 2015
Two U.S. Army Sergeants Plead Guilty to Taking Bribes While Deployed in Afghanistan
Two sergeants with the U.S. Army have pleaded guilty for accepting bribes from Afghan truck drivers at Forward Operating Base Gardez, Afghanistan (FOB Gardez), in exchange for allowing the drivers to take thousands of gallons of fuel from the base for resale on the black market, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Michael J. Moore of the Middle District of Georgia.
James Edward Norris, 41, of Fort Irwin, California, and Seneca Darnell Hampton, 31, of Fort Benning, Georgia, each pleaded guilty before Chief U.S. District Judge Clay D. Land in the Middle District of Georgia to one count of conspiracy to commit bribery of a public official and one count of money laundering.
During their guilty pleas, Hampton and Norris admitted to conspiring with other soldiers stationed at FOB Gardez to solicit and accept approximately $2,000 per day from local Afghan truck drivers in exchange for permitting the truck drivers to take thousands of gallons of fuel from the base. Hampton admitted that he concealed the scheme by attributing the increase in fuel usage to colder winter temperatures.
Hampton and Norris admitted that they shipped the bribe money back to the United States in tough boxes. Norris further admitted that on June 7, 2013, after returning from deployment, he purchased a 2008 Cadillac Escalade with $31,000 cash derived from the bribery scheme. Hampton further admitted that on May 20, 2013, after returning from deployment, he purchased a 2013 GMC Sierra with $29,000 cash derived from the bribery scheme.
As part of their plea agreements, Hampton and Norris agreed to forfeit the proceeds they received from the bribery scheme and the vehicles they purchased with those proceeds, as well as to pay full restitution. Sentencing has been scheduled for May 21, 2015.
The case is being investigated by the U.S. Army Criminal Investigation Command, the Office of the Special Inspector General for Afghanistan Reconstruction, the Defense Criminal Investigative Service and the Defense Contract Audit Agency, Investigative Support Division. The case is being prosecuted by Trial Attorney John Keller of the Criminal Division’s Public Integrity Section.
Wednesday, January 14, 2015
MAN SENTENCED FOR ROLE IN ILLEGAL IMPORTATION AND TRAFFICKING IN NARWHAL TUSKS
FROM: U.S. JUSTICE DEPARTMENT
Monday, January 12, 2015
New Jersey Man Sentenced to 33 Months in Prison for Trafficking in Illegally-Imported Narwhal Tusks and Money Laundering
Andrew J. Zarauskas, a New Jersey resident, was sentenced to 33 months in prison for illegally importing and trafficking in narwhal tusks and associated money laundering crimes, announced Assistant Attorney General John C. Cruden for the Environment and Natural Resources Division. Zarauskas was also ordered to forfeit $85,089, six narwhal tusks and one narwhal skull. In addition, Zarauskas was ordered to pay a fine of $7,500. His prison sentence will be followed by three years of supervised release.
On Feb. 14, 2014, a federal jury in Bangor, Maine, convicted Zarauskas on six counts, including conspiracy, smuggling violations for buying and illegally importing narwhal tusks into the United States and money laundering violations associated with the illegal importations. The market value of the teeth and tusks illegally imported by Zarauskas was determined to be between $120,000 and $200,000.
Narwhals are listed as “threatened” under the Endangered Species Act (ESA) and are covered by the international Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). It is illegal to import parts of the narwhal into the United States without a permit and without declaring the parts at the time of importation to U.S. Customs and Border Protection and the U.S. Fish and Wildlife Service.
“The Justice Department is committed to the fight to save the world’s protected wildlife species, many of which are under sustained attack by poachers and wildlife traffickers,” said Assistant Attorney General Cruden. “We are particularly grateful to our federal and Canadian law enforcement partners for unraveling this scheme to traffic in narwhal tusks and for bringing Zarauskas and his co-conspirators to justice.”
“The significant penalties imposed today for Mr. Zarauskas send a powerful message to any individual that decides to engage in the trade of illegal wildlife,” said Deputy Assistant Director for Law Enforcement Edward Grace of the U.S. Fish and Wildlife Service. “We will continue to work closely with our international, federal and state partners to root out those individuals who exploit protected wildlife species for their own financial gain.”
“This is yet another case where dedicated investigators helped stop an international smuggling ring attempting to profit from the illegal exploitation and trade of vulnerable and threatened marine species,” said Assistant Administrator Eileen Sobeck for National Oceanic and Atmospheric Administration (NOAA) Fisheries. “NOAA will continue to work in collaboration with our international, federal and state law enforcement partners to make sure marine resources are protected now and into the future.”
According to the evidence presented a trial, Zarauskas purchased approximately 33 narwhal tusks over nearly six years from two Canadian co-defendants. The Canadian co-defendants purchased the narwhal tusks in Canada and subsequently brought them into the United States illegally by concealing the narwhal tusks either under their truck or under a utility trailer and not declaring the wildlife to border officials as required. Once in the United States, a Canadian co-defendant shipped the narwhal tusks to Zarauskas from Bangor, Maine. Zarauskas knew that the co-defendants lived in Canada and had illegally imported the narwhal tusks into the United States.
The case was investigated by agents from the Law Enforcement Offices of NOAA, U.S. Fish and Wildlife Service, and Environment Canada. The case was prosecuted by Trial Attorneys Todd S. Mikolop and James B. Nelson of the Department of Justice’s Environmental Crimes Section.
Monday, January 12, 2015
New Jersey Man Sentenced to 33 Months in Prison for Trafficking in Illegally-Imported Narwhal Tusks and Money Laundering
Andrew J. Zarauskas, a New Jersey resident, was sentenced to 33 months in prison for illegally importing and trafficking in narwhal tusks and associated money laundering crimes, announced Assistant Attorney General John C. Cruden for the Environment and Natural Resources Division. Zarauskas was also ordered to forfeit $85,089, six narwhal tusks and one narwhal skull. In addition, Zarauskas was ordered to pay a fine of $7,500. His prison sentence will be followed by three years of supervised release.
On Feb. 14, 2014, a federal jury in Bangor, Maine, convicted Zarauskas on six counts, including conspiracy, smuggling violations for buying and illegally importing narwhal tusks into the United States and money laundering violations associated with the illegal importations. The market value of the teeth and tusks illegally imported by Zarauskas was determined to be between $120,000 and $200,000.
Narwhals are listed as “threatened” under the Endangered Species Act (ESA) and are covered by the international Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). It is illegal to import parts of the narwhal into the United States without a permit and without declaring the parts at the time of importation to U.S. Customs and Border Protection and the U.S. Fish and Wildlife Service.
“The Justice Department is committed to the fight to save the world’s protected wildlife species, many of which are under sustained attack by poachers and wildlife traffickers,” said Assistant Attorney General Cruden. “We are particularly grateful to our federal and Canadian law enforcement partners for unraveling this scheme to traffic in narwhal tusks and for bringing Zarauskas and his co-conspirators to justice.”
“The significant penalties imposed today for Mr. Zarauskas send a powerful message to any individual that decides to engage in the trade of illegal wildlife,” said Deputy Assistant Director for Law Enforcement Edward Grace of the U.S. Fish and Wildlife Service. “We will continue to work closely with our international, federal and state partners to root out those individuals who exploit protected wildlife species for their own financial gain.”
“This is yet another case where dedicated investigators helped stop an international smuggling ring attempting to profit from the illegal exploitation and trade of vulnerable and threatened marine species,” said Assistant Administrator Eileen Sobeck for National Oceanic and Atmospheric Administration (NOAA) Fisheries. “NOAA will continue to work in collaboration with our international, federal and state law enforcement partners to make sure marine resources are protected now and into the future.”
According to the evidence presented a trial, Zarauskas purchased approximately 33 narwhal tusks over nearly six years from two Canadian co-defendants. The Canadian co-defendants purchased the narwhal tusks in Canada and subsequently brought them into the United States illegally by concealing the narwhal tusks either under their truck or under a utility trailer and not declaring the wildlife to border officials as required. Once in the United States, a Canadian co-defendant shipped the narwhal tusks to Zarauskas from Bangor, Maine. Zarauskas knew that the co-defendants lived in Canada and had illegally imported the narwhal tusks into the United States.
The case was investigated by agents from the Law Enforcement Offices of NOAA, U.S. Fish and Wildlife Service, and Environment Canada. The case was prosecuted by Trial Attorneys Todd S. Mikolop and James B. Nelson of the Department of Justice’s Environmental Crimes Section.
Wednesday, January 7, 2015
ODOMETER TAMPERING AUTO DEALERS INDICTED FOR ODOMETER TAMPERING AND MONEY LAUNDERING
FROM: U.S. JUSTICE DEPARTMENT
Tuesday, January 6, 2015
Used Motor Vehicle Dealers Indicted for Odometer Tampering and Money Laundering
A Queens, New York, man and his Israeli brother were charged in indictments unsealed today in federal courts in Philadelphia and Brooklyn, New York, with offenses related to a long-running odometer tampering and money laundering scheme, the Justice Department and the U.S. Attorney’s Office for the Eastern District of New York announced.
Chaim Gali aka Mike Gali and John Triculy, 40, of Queens Village, New York, and Shmuel Gali aka Sam Gali, 42, of Israel, are charged in a 15-count indictment in the Eastern District of Pennsylvania (EDPA) with conspiracy, securities fraud and false odometer statements. The Galis are also charged in a related two-count indictment in the Eastern District of New York (EDNY) with mail and wire fraud conspiracy, and money laundering conspiracy. If convicted of the charges in the EDPA indictment, the defendants face a statutory maximum of five years in prison on the conspiracy charge; a statutory maximum of 10 years in prison for each securities fraud charge and up to three years in prison for each false odometer statement charge. If convicted of the charges in the EDNY indictment, they face a statutory maximum of 20 years in prison for each of the charges.
“Mileage is one of the most important factors in a consumer’s decision to purchase a used car,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division. “Misrepresenting the mileage on a used car fraudulently induces a consumer to pay more money for less value, and it hides necessary information that will affect how a consumer maintains and repairs that vehicle.”
The indictments allege that the Galis devised a scheme to defraud buyers of used motor vehicles by misrepresenting the mileage of approximately 690 vehicles they sold beginning as early as 2006 and through at least 2011. The indictments charge that the Galis used fictitious dealer names to purchase high-mileage, used motor vehicles from a national vehicle leasing company. The defendants are charged with conspiring to alter the odometers in these vehicles, which they purchased in Florida, Maryland, Missouri and elsewhere, to reflect false lower mileages. The indictments allege that the Galis then fraudulently altered the motor vehicle titles to reflect the false lower mileages and as a result, the commonwealth of Pennsylvania issued motor vehicle titles reflecting the altered mileages.
The defendants subsequently sold the vehicles at wholesale automobile auctions in Pennsylvania and New Jersey using various dealerships, including Chase Auto Center and Conestoga City Autos. At the auctions, the Galis provided the buyers with Pennsylvania vehicle titles bearing the false lower mileages. The EDPA indictment alleges that in some instances, the title indicated mileage more than 100,000 miles less than the true mileage of the vehicle and as a result, the defendants received inflated sales prices for the vehicles they sold.
The defendants deposited the proceeds of the sales of the rolled-back vehicles into various bank accounts, mainly in Brooklyn. Among other things, the defendants then used this money to purchase additional used vehicles and continue their fraud scheme.
“As alleged, the defendants created an elaborate odometer tampering and money laundering scheme to con would-be buyers into purchasing used cars at inflated prices,” said U.S. Attorney Loretta E. Lynch for the EDNY. “They then used the proceeds of their crimes to continue their fraud against additional unsuspecting consumers. This case demonstrates our commitment to protect consumers from fraud.”
Acting Assistant Attorney General Branda and U.S. Attorney Lynch commended the investigative efforts of the Internal Revenue Service-Criminal Investigation and the U.S. Department of Transportation National Highway Traffic Safety Administration’s (NHTSA) Office of Odometer Fraud Investigation.
Chaim Gali was arrested today in New York. Shmuel Gali is in Israel and the government will seek his extradition.
The case is being prosecuted by Trial Attorney Kathryn Drenning and Senior Litigation Counsel Linda I. Marks of the Civil Division’s Consumer Protection Branch, and Assistant U.S. Attorney Catherine M. Mirabile of the Eastern District of New York.
NHTSA has established a special hotline to handle odometer fraud complaints. Individuals who have information relating to odometer tampering should call (800) 424-9393 or (202) 366-4761.
An update on the status of the case is available on the Consumer Protection Branch’s website. More information on odometer fraud is available on NHTSA’s website, and tips on detecting and avoiding odometer fraud are also available on the NHTSA website.
The charges in the indictments are merely allegations, and do not constitute proof of guilt. Every defendant is presumed to be innocent unless and until proven guilty.
Tuesday, January 6, 2015
Used Motor Vehicle Dealers Indicted for Odometer Tampering and Money Laundering
A Queens, New York, man and his Israeli brother were charged in indictments unsealed today in federal courts in Philadelphia and Brooklyn, New York, with offenses related to a long-running odometer tampering and money laundering scheme, the Justice Department and the U.S. Attorney’s Office for the Eastern District of New York announced.
Chaim Gali aka Mike Gali and John Triculy, 40, of Queens Village, New York, and Shmuel Gali aka Sam Gali, 42, of Israel, are charged in a 15-count indictment in the Eastern District of Pennsylvania (EDPA) with conspiracy, securities fraud and false odometer statements. The Galis are also charged in a related two-count indictment in the Eastern District of New York (EDNY) with mail and wire fraud conspiracy, and money laundering conspiracy. If convicted of the charges in the EDPA indictment, the defendants face a statutory maximum of five years in prison on the conspiracy charge; a statutory maximum of 10 years in prison for each securities fraud charge and up to three years in prison for each false odometer statement charge. If convicted of the charges in the EDNY indictment, they face a statutory maximum of 20 years in prison for each of the charges.
“Mileage is one of the most important factors in a consumer’s decision to purchase a used car,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division. “Misrepresenting the mileage on a used car fraudulently induces a consumer to pay more money for less value, and it hides necessary information that will affect how a consumer maintains and repairs that vehicle.”
The indictments allege that the Galis devised a scheme to defraud buyers of used motor vehicles by misrepresenting the mileage of approximately 690 vehicles they sold beginning as early as 2006 and through at least 2011. The indictments charge that the Galis used fictitious dealer names to purchase high-mileage, used motor vehicles from a national vehicle leasing company. The defendants are charged with conspiring to alter the odometers in these vehicles, which they purchased in Florida, Maryland, Missouri and elsewhere, to reflect false lower mileages. The indictments allege that the Galis then fraudulently altered the motor vehicle titles to reflect the false lower mileages and as a result, the commonwealth of Pennsylvania issued motor vehicle titles reflecting the altered mileages.
The defendants subsequently sold the vehicles at wholesale automobile auctions in Pennsylvania and New Jersey using various dealerships, including Chase Auto Center and Conestoga City Autos. At the auctions, the Galis provided the buyers with Pennsylvania vehicle titles bearing the false lower mileages. The EDPA indictment alleges that in some instances, the title indicated mileage more than 100,000 miles less than the true mileage of the vehicle and as a result, the defendants received inflated sales prices for the vehicles they sold.
The defendants deposited the proceeds of the sales of the rolled-back vehicles into various bank accounts, mainly in Brooklyn. Among other things, the defendants then used this money to purchase additional used vehicles and continue their fraud scheme.
“As alleged, the defendants created an elaborate odometer tampering and money laundering scheme to con would-be buyers into purchasing used cars at inflated prices,” said U.S. Attorney Loretta E. Lynch for the EDNY. “They then used the proceeds of their crimes to continue their fraud against additional unsuspecting consumers. This case demonstrates our commitment to protect consumers from fraud.”
Acting Assistant Attorney General Branda and U.S. Attorney Lynch commended the investigative efforts of the Internal Revenue Service-Criminal Investigation and the U.S. Department of Transportation National Highway Traffic Safety Administration’s (NHTSA) Office of Odometer Fraud Investigation.
Chaim Gali was arrested today in New York. Shmuel Gali is in Israel and the government will seek his extradition.
The case is being prosecuted by Trial Attorney Kathryn Drenning and Senior Litigation Counsel Linda I. Marks of the Civil Division’s Consumer Protection Branch, and Assistant U.S. Attorney Catherine M. Mirabile of the Eastern District of New York.
NHTSA has established a special hotline to handle odometer fraud complaints. Individuals who have information relating to odometer tampering should call (800) 424-9393 or (202) 366-4761.
An update on the status of the case is available on the Consumer Protection Branch’s website. More information on odometer fraud is available on NHTSA’s website, and tips on detecting and avoiding odometer fraud are also available on the NHTSA website.
The charges in the indictments are merely allegations, and do not constitute proof of guilt. Every defendant is presumed to be innocent unless and until proven guilty.
Tuesday, December 16, 2014
CHIEF TECH OFFICER SENTENCED IN CASE INVOLVING DIGITAL CURRENCIES AND ORGANIZED CRIME
FROM: U.S. JUSTICE DEPARTMENT
Friday, December 12, 2014
Chief Technology Officer of Liberty Reserve Sentenced to Five Years in Prison
The former chief technology officer of Liberty Reserve was sentenced today to serve five years in prison for conspiring to operate an unlicensed money transmitting business that processed more than $16 billion through Liberty Reserve’s digital currency system. The Court found that Marmilev understood the illegal nature of Liberty Reserve’s business and that he knew that a wide array of criminal enterprises used Liberty Reserve to further their criminal activity.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York made the announcement.
“Marmilev used his technical expertise to create a virtual currency business that was used extensively by criminals throughout the world,” said Assistant Attorney General Caldwell. “Marmilev boasted that the crime group was beyond the reach of U.S. law enforcement, but he couldn’t have been more wrong. Today’s prison sentence shows that those who hide their illegal activities on-line and off-shore will be caught and sent to prison.”
“Mark Marmilev spent years designing and maintaining the technological architecture that allowed Liberty Reserve to operate a global payment processor and money transfer system that catered to criminals,” said Manhattan U.S. Attorney Preet Bharara. “Now, he will pay for that crime with five years in federal prison.”
Mark Marmilev, 35, of Brooklyn, New York, pleaded guilty on Sept. 11, 2014, for his role in designing and maintaining the technological infrastructure for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services. In addition to the prison sentence, U.S. District Judge Denise L. Cote also ordered Marmilev to pay a $250,000 fine.
According to allegations contained in the indictment, and statements made in other court documents filed in Manhattan federal court and related court proceedings:
Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured, and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. It emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity because it provided an infrastructure that enabled cybercriminals to conduct anonymous and untraceable financial transactions.
Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than five million user accounts worldwide, including more than 600,000 accounts associated with users in the United States, and processed tens of millions of transactions through its system, totaling more than $16 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking, and other crimes.
According to court documents, Marmilev was a longtime associate of Liberty Reserve founder Arthur Budovsky, and he served as Liberty Reserve’s chief technology officer. In that role, Marmilev was principally responsible for designing and maintaining Liberty Reserve’s technological infrastructure. Marmilev also promoted Liberty Reserve to criminals on the Internet, where, using aliases, he touted Liberty Reserve’s lack of anti-money laundering policies and its tolerance for “shady businesses.”
In conjunction with the sentencing, a civil forfeiture complaint was filed today seeking the forfeiture of Gourmet Boutique, a retail grocery business located in Brooklyn, New York, and the forfeiture of Marmilev’s interest in Grimaldi’s, a pizzeria located in the Coney Island area of Brooklyn, New York; according to the complaint, Marmilev purchased these business interests using more than $1.6 million in Liberty Reserve proceeds.
This case is being investigated by the Internal Revenue Service-Criminal Investigation, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, with assistance fromthe United States Secret Service’s New York Electronic Crimes Task Force. The Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police’s Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office also provided assistance.
This case is being prosecuted jointly by the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) and the U.S. Attorney’s Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit in the Southern District of New York, with assistance from the Criminal Division’s Office of International Affairs and Computer Crime and Intellectual Property Section.
Trial Attorney Kevin Mosley of AFMLS and Assistant U.S. Attorneys Serrin Turner, Andrew Goldstein and Christine Magdo of the Southern District of New York are in charge of the prosecution, and Assistant U.S. Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
Friday, December 12, 2014
Chief Technology Officer of Liberty Reserve Sentenced to Five Years in Prison
The former chief technology officer of Liberty Reserve was sentenced today to serve five years in prison for conspiring to operate an unlicensed money transmitting business that processed more than $16 billion through Liberty Reserve’s digital currency system. The Court found that Marmilev understood the illegal nature of Liberty Reserve’s business and that he knew that a wide array of criminal enterprises used Liberty Reserve to further their criminal activity.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York made the announcement.
“Marmilev used his technical expertise to create a virtual currency business that was used extensively by criminals throughout the world,” said Assistant Attorney General Caldwell. “Marmilev boasted that the crime group was beyond the reach of U.S. law enforcement, but he couldn’t have been more wrong. Today’s prison sentence shows that those who hide their illegal activities on-line and off-shore will be caught and sent to prison.”
“Mark Marmilev spent years designing and maintaining the technological architecture that allowed Liberty Reserve to operate a global payment processor and money transfer system that catered to criminals,” said Manhattan U.S. Attorney Preet Bharara. “Now, he will pay for that crime with five years in federal prison.”
Mark Marmilev, 35, of Brooklyn, New York, pleaded guilty on Sept. 11, 2014, for his role in designing and maintaining the technological infrastructure for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services. In addition to the prison sentence, U.S. District Judge Denise L. Cote also ordered Marmilev to pay a $250,000 fine.
According to allegations contained in the indictment, and statements made in other court documents filed in Manhattan federal court and related court proceedings:
Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured, and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. It emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity because it provided an infrastructure that enabled cybercriminals to conduct anonymous and untraceable financial transactions.
Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than five million user accounts worldwide, including more than 600,000 accounts associated with users in the United States, and processed tens of millions of transactions through its system, totaling more than $16 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking, and other crimes.
According to court documents, Marmilev was a longtime associate of Liberty Reserve founder Arthur Budovsky, and he served as Liberty Reserve’s chief technology officer. In that role, Marmilev was principally responsible for designing and maintaining Liberty Reserve’s technological infrastructure. Marmilev also promoted Liberty Reserve to criminals on the Internet, where, using aliases, he touted Liberty Reserve’s lack of anti-money laundering policies and its tolerance for “shady businesses.”
In conjunction with the sentencing, a civil forfeiture complaint was filed today seeking the forfeiture of Gourmet Boutique, a retail grocery business located in Brooklyn, New York, and the forfeiture of Marmilev’s interest in Grimaldi’s, a pizzeria located in the Coney Island area of Brooklyn, New York; according to the complaint, Marmilev purchased these business interests using more than $1.6 million in Liberty Reserve proceeds.
This case is being investigated by the Internal Revenue Service-Criminal Investigation, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, with assistance fromthe United States Secret Service’s New York Electronic Crimes Task Force. The Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police’s Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office also provided assistance.
This case is being prosecuted jointly by the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) and the U.S. Attorney’s Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit in the Southern District of New York, with assistance from the Criminal Division’s Office of International Affairs and Computer Crime and Intellectual Property Section.
Trial Attorney Kevin Mosley of AFMLS and Assistant U.S. Attorneys Serrin Turner, Andrew Goldstein and Christine Magdo of the Southern District of New York are in charge of the prosecution, and Assistant U.S. Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
Sunday, December 7, 2014
ATTORNEY SENT TO PRISON FOR ROLE IN PUMP-AND-DUMP STOCK FRAUD
FROM: U.S. JUSTICE DEPARTMENT
Friday, December 5, 2014
Attorney Sentenced to 17 Years in Prison for Multi-Million Dollar Stock Fraud
A California attorney was sentenced to serve 17 years in prison today in the Southern District of Florida for operating a five-year, multi-million dollar market manipulation and fraud scheme, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.
Mitchell J. Stein, 53, of Hidden Hills, California, was convicted by a jury on May 20, 2013, of conspiracy to commit mail and wire fraud, three counts of wire fraud, three counts of securities fraud, three counts of money laundering, and one count of conspiracy to obstruct justice. In addition to the prison sentence, U.S. District Judge Kenneth A. Marra of the Southern District of Florida ordered Stein to forfeit $5.3 million. Restitution will be determined at a later date.
“Lawyers for companies are supposed to guide their clients through the important reporting and regulatory requirements that ensure the integrity of our financial markets,” said Assistant Attorney General Caldwell. “Stein abdicated his responsibility, and instead abused his position of trust to defraud a public company, its shareholders, and the investing public of millions of dollars.”
“The ‘pump and dump’ scheme orchestrated by Stein and his co-conspirators was extremely elaborate,” said U.S. Attorney Ferrer. “In an effort to conceal his fraudulent financial scheme, Stein falsely testified before the SEC and used his position of trust to arrange for others to do the same. The sentencing announced today underscores the department's commitment to hold liable those individuals who profit from manipulating the financial markets and violating securities and other laws that are intended to protect investors and markets.”
According to evidence presented at trial, Stein’s wife held a controlling majority interest in Signalife Inc., a publicly-traded company currently known as Heart Tronics that purportedly sold electronic heart monitoring devices. While acting as Signalife’s outside legal counsel, Stein engaged in a scheme to artificially inflate the price of Signalife stock by creating the false impression of sales activity at the company. Specifically, the evidence at trial showed that Stein and his co-conspirators created fake purchase orders and related documents from fictitious customers, then caused Signalife to issue press releases and file documents with the Securities and Exchange Commission (SEC) trumpeting these fictitious sales. Evidence at trial also proved that in a further effort to create the false appearance of sales activity, Stein arranged to have Signalife products shipped to and temporarily stored with an individual who had not purchased any products.
Evidence at trial further proved that Stein disguised his selling of Signalife stock at artificially inflated prices by placing shares in purportedly blind trusts, and having a co-conspirator sell the shares after Stein caused the false sales information to be disseminated to the public. Stein also caused Signalife to issue shares to third parties so that those third parties could sell the shares and remit the proceeds to Stein. From one co-conspirator alone, Stein received illicit gains of over $1.8 million from those sales.
In addition, evidence at trial proved that Stein conspired to obstruct the SEC investigation into Heart Tronics by testifying falsely and arranging for others to testify falsely in an effort to conceal the fraud scheme.
This case was investigated by the U.S. Postal Inspection Service, with assistance from the Office of the Special Inspector General for the Troubled Asset Relief Program. The SEC referred this matter to the Justice Department, conducted a parallel investigation resulting in a civil enforcement action against Stein and others, and provided substantial assistance in this investigation. The Financial Industry Regulatory Authority’s Criminal Prosecution Assistance Group likewise provided substantial assistance in this matter.
This case was prosecuted by Assistant Chief Albert B. Stieglitz Jr., Assistant Chief Kevin B. Muhlendorf, and Trial Attorney Andrew H. Warren of the Criminal Division’s Fraud Section and Assistant Chief Darrin McCullough of the Criminal Division’s Asset Forfeiture and Money Laundering Section.
Friday, December 5, 2014
Attorney Sentenced to 17 Years in Prison for Multi-Million Dollar Stock Fraud
A California attorney was sentenced to serve 17 years in prison today in the Southern District of Florida for operating a five-year, multi-million dollar market manipulation and fraud scheme, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.
Mitchell J. Stein, 53, of Hidden Hills, California, was convicted by a jury on May 20, 2013, of conspiracy to commit mail and wire fraud, three counts of wire fraud, three counts of securities fraud, three counts of money laundering, and one count of conspiracy to obstruct justice. In addition to the prison sentence, U.S. District Judge Kenneth A. Marra of the Southern District of Florida ordered Stein to forfeit $5.3 million. Restitution will be determined at a later date.
“Lawyers for companies are supposed to guide their clients through the important reporting and regulatory requirements that ensure the integrity of our financial markets,” said Assistant Attorney General Caldwell. “Stein abdicated his responsibility, and instead abused his position of trust to defraud a public company, its shareholders, and the investing public of millions of dollars.”
“The ‘pump and dump’ scheme orchestrated by Stein and his co-conspirators was extremely elaborate,” said U.S. Attorney Ferrer. “In an effort to conceal his fraudulent financial scheme, Stein falsely testified before the SEC and used his position of trust to arrange for others to do the same. The sentencing announced today underscores the department's commitment to hold liable those individuals who profit from manipulating the financial markets and violating securities and other laws that are intended to protect investors and markets.”
According to evidence presented at trial, Stein’s wife held a controlling majority interest in Signalife Inc., a publicly-traded company currently known as Heart Tronics that purportedly sold electronic heart monitoring devices. While acting as Signalife’s outside legal counsel, Stein engaged in a scheme to artificially inflate the price of Signalife stock by creating the false impression of sales activity at the company. Specifically, the evidence at trial showed that Stein and his co-conspirators created fake purchase orders and related documents from fictitious customers, then caused Signalife to issue press releases and file documents with the Securities and Exchange Commission (SEC) trumpeting these fictitious sales. Evidence at trial also proved that in a further effort to create the false appearance of sales activity, Stein arranged to have Signalife products shipped to and temporarily stored with an individual who had not purchased any products.
Evidence at trial further proved that Stein disguised his selling of Signalife stock at artificially inflated prices by placing shares in purportedly blind trusts, and having a co-conspirator sell the shares after Stein caused the false sales information to be disseminated to the public. Stein also caused Signalife to issue shares to third parties so that those third parties could sell the shares and remit the proceeds to Stein. From one co-conspirator alone, Stein received illicit gains of over $1.8 million from those sales.
In addition, evidence at trial proved that Stein conspired to obstruct the SEC investigation into Heart Tronics by testifying falsely and arranging for others to testify falsely in an effort to conceal the fraud scheme.
This case was investigated by the U.S. Postal Inspection Service, with assistance from the Office of the Special Inspector General for the Troubled Asset Relief Program. The SEC referred this matter to the Justice Department, conducted a parallel investigation resulting in a civil enforcement action against Stein and others, and provided substantial assistance in this investigation. The Financial Industry Regulatory Authority’s Criminal Prosecution Assistance Group likewise provided substantial assistance in this matter.
This case was prosecuted by Assistant Chief Albert B. Stieglitz Jr., Assistant Chief Kevin B. Muhlendorf, and Trial Attorney Andrew H. Warren of the Criminal Division’s Fraud Section and Assistant Chief Darrin McCullough of the Criminal Division’s Asset Forfeiture and Money Laundering Section.
Wednesday, December 3, 2014
FORMER OHIO DEPUTY TREASUER SENTNECED IN BRIBERY/MONEY LAUNDERING CASE
FROM: U.S. JUSTICE DEPARTMENT
Monday, December 1, 2014
Former Ohio Deputy Treasurer and Friend Sentenced for Roles in Bribery and Money Laundering Scheme
Ohio’s
former deputy treasurer and a Chicago businessman were sentenced to
federal prison today for their roles in a bribery and money laundering
scheme involving the Ohio Treasurer’s Office.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, First Assistant U.S. Attorney Mark T. D’Alessandro of the Southern District of Ohio, Acting Special Agent in Charge John A. Barrios of the FBI’s Cincinnati Division and Attorney General Mike DeWine of Ohio made the announcement.
Amer Ahmad, 40, and Joseph Chiavaroli, 34, both of Chicago, were sentenced today by U.S. District Judge Michael H. Watson of the Southern District of Ohio to serve 15 years in prison and 18 months in prison, respectively. Ahmad was ordered to forfeit $3.2 million, and Chiavroli was ordered to forfeit $400,000. Last year, Ahmad pleaded guilty to federal program bribery and conspiracy to commit honest services wire fraud, federal program bribery and money laundering, and Chiavaroli pleaded guilty to money laundering. Following his guilty plea, former Deputy Treasurer Ahmad fled to Pakistan and was sentenced today in absentia. He is currently in Pakistani custody pending an extradition request from the United States government.
According to the defendants’ admissions in connection with their guilty pleas, from January 2009 through January 2011, Ahmad used his position as deputy treasurer to direct official state of Ohio business to securities broker Douglas E. Hampton in return for bribes. Ahmad and Chiavaroli concealed the payments received from Hampton by passing them through the accounts of their landscaping business. Hampton also funneled more than $123,000 to Mohammed Noure Alo, an attorney and lobbyist who was Ahmad’s close personal friend and business associate. Over the course of the scheme, Hampton paid in excess of $500,000 in bribes and received, in exchange, approximately $3.2 million in commissions for 360 securities trades on behalf of the Ohio Treasurer’s Office.
Hampton and Alo were sentenced on Nov. 12, 2014, and Nov. 13, 2014, to 45 months in prison and 48 months in prison, respectively, for their roles in the scheme.
The case was investigated by the FBI’s Central Ohio Public Corruption Task Force, which includes special agents from the FBI and the Ohio Bureau of Criminal Investigation. The case is being prosecuted by Trial Attorneys Eric L. Gibson and Menaka Kalaskar of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Douglas W. Squires of the Southern District of Ohio.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, First Assistant U.S. Attorney Mark T. D’Alessandro of the Southern District of Ohio, Acting Special Agent in Charge John A. Barrios of the FBI’s Cincinnati Division and Attorney General Mike DeWine of Ohio made the announcement.
Amer Ahmad, 40, and Joseph Chiavaroli, 34, both of Chicago, were sentenced today by U.S. District Judge Michael H. Watson of the Southern District of Ohio to serve 15 years in prison and 18 months in prison, respectively. Ahmad was ordered to forfeit $3.2 million, and Chiavroli was ordered to forfeit $400,000. Last year, Ahmad pleaded guilty to federal program bribery and conspiracy to commit honest services wire fraud, federal program bribery and money laundering, and Chiavaroli pleaded guilty to money laundering. Following his guilty plea, former Deputy Treasurer Ahmad fled to Pakistan and was sentenced today in absentia. He is currently in Pakistani custody pending an extradition request from the United States government.
According to the defendants’ admissions in connection with their guilty pleas, from January 2009 through January 2011, Ahmad used his position as deputy treasurer to direct official state of Ohio business to securities broker Douglas E. Hampton in return for bribes. Ahmad and Chiavaroli concealed the payments received from Hampton by passing them through the accounts of their landscaping business. Hampton also funneled more than $123,000 to Mohammed Noure Alo, an attorney and lobbyist who was Ahmad’s close personal friend and business associate. Over the course of the scheme, Hampton paid in excess of $500,000 in bribes and received, in exchange, approximately $3.2 million in commissions for 360 securities trades on behalf of the Ohio Treasurer’s Office.
Hampton and Alo were sentenced on Nov. 12, 2014, and Nov. 13, 2014, to 45 months in prison and 48 months in prison, respectively, for their roles in the scheme.
The case was investigated by the FBI’s Central Ohio Public Corruption Task Force, which includes special agents from the FBI and the Ohio Bureau of Criminal Investigation. The case is being prosecuted by Trial Attorneys Eric L. Gibson and Menaka Kalaskar of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Douglas W. Squires of the Southern District of Ohio.
Wednesday, October 29, 2014
FORMER PRESIDENT OF REHAB CLINIC PLEADS GUILTY TO HEALTH CARE FRAUD AND MONEY LAUNDERING
FROM: U.S. JUSTICE DEPARTMENT
Monday, October 27, 2014
Former President and Owner of Rehabilitation Clinic Pleaded Guilty in Health Care Fraud and Money Laundering Scheme
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney A. Lee Bentley III of the Middle District of Florida, Acting Special Agent in Charge Derrick Jackson of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Regional Office and Special Agent in Charge Paul Wysopal of the FBI’s Tampa Field Office made the announcement.
Laura Leyva, 45, of Miami Lakes, Florida, pleaded guilty in the U.S. District Court for the Middle District of Florida to conspiracy to commit health care fraud and conspiracy to commit money laundering. Her sentencing date will be set by the court.
According statements made in court, from June 2007 through November 2009, Leyva was the president and owner of American Rehab of Kissimmee Inc., aka American Rehab of South Florida Inc., a comprehensive outpatient rehabilitation facility located in Kissimmee, Florida, and Hialeah, Florida. During that time period, American Rehab submitted approximately $2,543,368 in false and fraudulent claims for reimbursement to Medicare seeking payment for rehabilitation therapy services that were not legitimately prescribed and not provided. Medicare paid approximately $1,074,278 on those claims. Co-conspirators falsified and forged medical records were used to give the appearance that therapy services were rendered to Medicare beneficiaries at American Rehab when, in fact, they were not. Leyva admitted that she destroyed falsified medical records in order to conceal evidence of the health care fraud and money laundering scheme.
This case is being investigated by HHS-OIG and the FBI 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 Middle District of Florida. This case is being prosecuted by Trial Attorney Christopher J. Hunter 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 2,000 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.
Saturday, October 25, 2014
TWO CHARGED, ONE PLEADS GUILTY IN COSTA RICAN TELEMARKETING SCHEME
FROM: U.S. JUSTICE DEPARTMENT
Thursday, October 23, 2014
Two Individuals Charged, Third Pleads Guilty For Roles In Costa Rican Telemarketing Schemes Targeting U.S. Residents
A California woman pleaded guilty today for her role in a half-million-dollar “sweepstakes fraud” scheme that was run from Costa Rica and targeted U.S. residents. A Costa Rican national and an Ohio resident were also indicted for their roles in separate but similar schemes earlier this week.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Anne M. Tompkins of the Western District of North Carolina made the announcement.
Patricia Diane Clark, 56, of Sacramento, California, pleaded guilty today before U.S. Magistrate Judge David S. Cayer of the Western District of North Carolina to conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering, all in connection with a Costa Rican telemarketing fraud scheme that targeted U.S. residents.
According to Clark’s plea agreement, from approximately 2007 through February 2013, her co-conspirators called U.S. residents from Costa Rican call centers, falsely informing them that they had won a substantial cash prize in a “sweepstakes.” The victims, many of whom were elderly, were told that in order to receive the prize, they had to send money for a purported “refundable insurance fee.” Clark admitted that she picked up money from the victims and sent it to her co-conspirators in Costa Rica. Clark also admitted that she managed others who picked up money from the victims in the United States and that she kept a portion of the victims’ payments.
Also according to Clark’s plea agreement, once the victims sent money, Clark’s co-conspirators contacted the individuals again and falsely informed them that the prize amount had increased, either because of a clerical error or because another prize winner was disqualified. The victims then had to send additional money to pay for new purported fees to receive the now larger sweepstakes prize. The attempts to collect additional money from the victims continued until an individual either ran out of money or discovered the fraudulent nature of the scheme.
Clark admitted that, along with her co-conspirators, she was responsible for approximately $640,000 in losses to hundreds of U.S. citizens.
Additionally, earlier this week, Marco Vinicio Fallas Hernandez, 41, a Costa Rican citizen, was charged in a superseding indictment in the Western District of North Carolina with one count of conspiracy to commit wire fraud, ten counts of wire fraud, one count of conspiracy to commit money laundering, and nine counts of international money laundering in connection with a similar telemarketing scheme. According to the indictment, Hernandez and his co-conspirators were responsible for causing approximately $10,000,000 in losses to hundreds of U.S. citizens, many of whom are elderly. Eight individuals, including Hernandez, are charged in the superseding indictment.
Separately, Paul Ronald Toth Jrj., 38, a resident of Bloomingdale, Ohio, was indicted in the Western District of North Carolina this week on one count of conspiracy to commit money laundering and six counts of international money laundering. According to the indictment, between November 2009 and November 2010, Toth and others he supervised received money from victims of a Costa Rican telemarketing scheme. Toth allegedly kept some of the proceeds and wired the remainder to Costa Rica using numerous persons as senders and recipients, all in a manner designed to conceal and disguise the fraudulent source and nature of the transactions. Toth is alleged to have received more than $300,000 of illegal proceeds during the scheme.
The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.
These cases were investigated by the U.S. Postal Inspection Service, FBI, Internal Revenue Service, Federal Trade Commission, and Department of Homeland Security. These cases are being prosecuted by Senior Litigation Counsel Patrick Donley and Trial Attorneys William Bowne and Anna Kaminska of the Criminal Division’s Fraud Section.
Sunday, October 12, 2014
EXTRADITED FROM SPAIN: FOUNDER OF VIRTUAL CURRENCY USED BY CYBER-CRIMINALS TO LAUNDER MONEY
FROM: U.S. JUSTICE DEPARTMENT
Friday, October 10, 2014
Liberty Reserve Founder Extradited from Spain
The founder of Liberty Reserve, a virtual currency used by cybercriminals around the world to launder proceeds of their illegal activity, was extradited from Spain and arrived in the United States this afternoon.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York made the announcement.
Arthur Budovsky, 40, a citizen of Costa Rica, was arrested in Spain in May 2013 after being indicted by a grand jury in the Southern District of New York. Following his extradition by Spanish authorities, Budovsky arrived in New York this afternoon and will be presented before U.S. Magistrate Judge James C. Francis IV on Oct. 11, 2014, at 2:00 p.m. Budovsky will be arraigned before U.S. District Judge Denise L. Cote on Oct. 14, 2014, at 12:45 p.m.
“Arthur Budovsky allegedly built Liberty Reserve overseas to provide the international underworld with a crime-friendly digital currency and elude the scrutiny of American authorities. He even renounced his U.S. citizenship to try to escape facing justice in an American courtroom,” said Assistant Attorney General Caldwell. “With the cooperation of our foreign partners in Spain and elsewhere, this case and extradition are a clear example that money launderers can run, but they cannot hide from the Department of Justice.”
“For years, Arthur Budovsky allegedly enabled criminals in the United States and around the world to process illegal payments and to launder billions of dollars in crime proceeds through Liberty Reserve,” said U.S. Attorney Bharara. “Budovsky operated Liberty Reserve from Costa Rica, hoping to evade the reach of U.S. law enforcement. Thanks to the cooperative efforts of our law enforcement partners here and in Spain, he was apprehended and extradited to the United States where he will now face justice.”
According to allegations contained in the indictment and statements made in related court proceedings, Liberty Reserve was born out of Budovsky’s unsuccessful experience running a third-party exchange service, called Gold Age Inc., for another digital currency, called E-Gold. In or about 2006, Budovsky was convicted in New York State of operating Gold Age Inc. as an unlicensed money transmitting business. In 2007, the operators of E-Gold were also charged with criminal offenses, including money laundering and operating an unlicensed money transmitting business, and subsequently ceased doing business. In the wake of his own criminal conviction, Budovsky set about building a digital currency that would succeed in eluding law enforcement where E-Gold had failed, by, among other ways, locating the business outside the United States. Accordingly, Budovsky emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve.
Liberty Reserve, which billed itself as the Internet’s “largest payment processor and money transfer system,” was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. The indictment alleges that Budovsky devoted himself to building and expanding Liberty Reserve so that the company could profit from attracting more and more criminal customers, all while seeking to evade the scrutiny and reach of U.S. law enforcement authorities. At all relevant times, Budovsky directed and supervised Liberty Reserve’s operations, finances, and corporate strategy.
Liberty Reserve emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals to conduct anonymous and untraceable financial transactions. The indictment alleges that Budovsky was so committed to evading U.S. law enforcement that he formally renounced his U.S. citizenship in 2011 and became a Costa Rican citizen, telling U.S. immigration authorities that he was concerned that the “software” his “company” was developing “might open him up to liability in the U.S.”
Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, narcotics trafficking, and other crimes.
Budovsky is among seven individuals charged in the indictment, which was unsealed on May 28, 2013. Four co-defendants – Vladimir Kats, Azzeddine el Amine, Mark Marmilev, and Maxim Chukharev – have pleaded guilty and await sentencing before U.S. District Judge Denise L. Cote. Charges against Liberty Reserve and two individual defendants who have not been apprehended remain pending.
The charges contained in the indictment remain pending and are merely accusations. The defendants are presumed innocent unless and until proven guilty.
This case is being investigated by the U.S. Secret Service, the Internal Revenue Service-Criminal Investigation and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, with assistance from the Secret Service’s New York Electronic Crimes Task Force. The Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Financial and Economic Crime Unit of the Spanish National Police, the Cyber Crime Unit at the Swedish National Bureau of Investigation and the Swiss Federal Prosecutor’s Office also provided assistance.
This case is being prosecuted jointly by the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) and the U.S. Attorney’s Office’s Complex Frauds Unit and Asset Forfeiture Unit in the Southern District of New York, with assistance from the Criminal Division’s Office of International Affairs and Computer Crime and Intellectual Property Section.
Trial Attorney Kevin Mosley of AFMLS and Assistant U.S. Attorneys Serrin Turner, Andrew Goldstein and Christine Magdo of the Southern District of New York are in charge of the prosecution, and Assistant U.S. Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
Saturday, October 4, 2014
MAN PLEADS GUILTY IN SHELL COMPANY HEALTH CARE FRAUD SCHEME
FROM: U.S. JUSTICE DEPARTMENT
Thursday, October 2, 2014
Shell Company Operator Pleads Guilty in Multi-Million Dollar Health Care Fraud and Money Laundering Scheme
A Florida managing member of a shell company pleaded guilty today in federal court in Tampa for his role in a multi-million dollar health care fraud and money laundering scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney A. Lee Bentley III of the Middle District of Florida, Acting Special Agent in Charge Derrick Jackson of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Regional Office, and Special Agent in Charge Paul Wysopal of the FBI’s Tampa Field Office made the announcement.
Leonard Austin, 45, of Lake Worth, Florida, pleaded guilty in the U.S. District Court for the Middle District of Florida to conspiracy to commit money laundering of health care fraud proceeds. His sentencing date will be set at a later date by the court.
According to his plea agreement and factual proffer, from June 2010 through April 2014, Austin’s co-conspirators submitted $12 million in fraudulent claims to Medicare through three purported health clinics, Cornerstone Health Specialists of Lakeland, Florida, Summit Health Specialists P.L. of Tampa, Florida, and Coastal Health Specialists LLC of Lakeland and Melbourne, Florida. These fraudulent claims included claims resulting from illegal kickback arrangements and claims for radiology, audiology, neurology, and cardiology services that were never rendered. In fact, some of the services were purportedly provided to Medicare beneficiaries who actually had died before the supposed date of service. Medicare paid over $2,500,000 on the fraudulent claims.
Austin admitted that he and his co-conspirators attempted to conceal the funds by transferring funds through bank accounts for the clinics and Austin’s shell company, BONB LLC, aka BioScan, and other entities.
Four other defendants were indicted in this case on health care fraud and money laundering charges and are scheduled for a jury trial on April 6, 2015. An indictment is merely an accusation, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
This case is being investigated by HHS-OIG and the FBI and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and U.S. Attorney’s Office for the Middle District of Florida. This case is being prosecuted by Trial Attorney Christopher J. Hunter 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 2,000 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.
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