ILLEGAL TRADE IN BLACK CORAL LANDS FORMER CEO A MONTH IN JAIL, CONFIMEMENT AND A FINE

FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, February 7, 2013
Former Jewelry Company Executive Sentenced in U.s.v.i. to Pay $1.1 Million in Fines and Community Service for Illegal Trade of Protected Black Coral

Ashu Bhandari, the former president and CEO of GEM Manufacturing LLC, a U.S. Virgin Islands-based company, was sentenced Thursday in federal court in St. Thomas, U.S.V.I., for felony customs violations for his role in a scheme to illegally import protected black coral into the United States, the Department of Justice announced. Bhandari is the last defendant to be sentenced as the result of a far reaching investigation into the illegal trade in black coral. The scheme cost Bhandari’s company, GEM Manufacturing, millions of dollars in financial penalties and sent two of his trading partners to prison.

At today’s hearing, the court imposed a criminal fine of $918,950 and sentenced Bhandari to one month in jail, to be followed by one month of home confinement and one year of supervised release, during which Bhandari would be required to complete 300 hours of community service and be banned from any business venture involving coral or coral products. In addition to the fine, Bhandari will be required to pay $229,687 to the University of the Virgin Islands to be used for community service projects designed to research and protect black corals. The court recognized that Bhandari’s sentence was based, in part, on his cooperation with federal investigators in related illicit coral trafficking cases.

On Nov. 7, 2012, Ashu Bhandari pleaded guilty to one felony count of false classification of goods for his efforts to conceal his illegal importation of internationally protected black coral in 2009. GEM was in the business of manufacturing high-end jewelry and sculpture products that utilize black coral. During his term as CEO, Bhandari was responsible for ensuring the continued supply of raw black coral for the company. Black corals are considered important habitat for the deep sea marine environment and are protected by the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Each of the species of black coral is listed in Appendix II of CITES and is subject to strict trade regulations.

Bhandari admitted that by 2008, he learned that GEM’s Taiwanese suppliers of black coral could not obtain legitimate CITES certificates. In spite of this knowledge, Bhandari made a "business decision to go forward" with the Taiwanese suppliers. The Taiwanese suppliers would label the coral shipments as "plastic" in order to fool customs authorities in Hong Kong and the United States. Bhandari admitted that by 2009 he knew that the shipments he arranged on behalf of GEM were coming into St. Thomas falsely labeled.

"Mr. Bhandari actively participated in an illegal scheme to traffic in protected black coral, a trade that has helped deplete a world resource that serves as essential habitat for marine biodiversity," said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division at the Department of Justice. "As this case clearly shows, the Department of Justice will continue to aggressively prosecute those who violate U.S. law by illegally trafficking in protected species."

"The effective stewardship of our natural resources by vigorously enforcing environmental laws is a priority of the Department of Justice," said Ronald W. Sharpe, U.S. Attorney for the District of the Virgin Islands. "This prosecution, like many cases involving the investigation and prosecution of those who set out to exploit our precious natural resources, was complex, time consuming and required the expertise of multiple law enforcement agencies. The dedication and cooperative efforts of the various law enforcement agencies involved in the successful prosecution of this matter are to be commended."

"This investigation is the culmination of a three year joint investigation led by U.S. Fish and Wildlife Service’s Office of Law Enforcement in partnership with the National Oceanic and Atmospheric Administration, U.S. Immigration and Customs Enforcement-Homeland Security Investigations, U.S. Attorney’s Office, the U.S. Justice Department’s Environment and Natural Resources Division and U.S. Customs and Border Protection," said U.S. Fish and Wildlife Service Resident Agent in Charge David Pharo. "This investigation serves as a great example of multiple agencies, working together to stem the tide of exploitation of internationally protected species originating in marine environments. This investigation demonstrates our commitment to combat illegal international wildlife trafficking and bring justice to those that exploit protected marine resources for personal gain no matter where they are located."

"Illegal importation and exportation of commercial quantities of CITES-protected corals is one of our Division's high priorities," said Otha Easley, Acting Special Agent in Charge for the National Oceanic and Atmospheric Administration’s Office of Law Enforcement's Southeast Division. "Effective enforcement of CITES helps ensure that collection of these species is sustainable and that their survival in the wild is assured."

"This sentence sends a clear message to black coral traffickers that we and our federal law enforcement partners are in the business of preventing illegal wildlife trade," said Angel Melendez, Acting Special Agent in charge of HSI San Juan and U.S.V.I. "We will continue to identify and apprehend those who exploit protected species for commercial gain."

Black coral is a precious coral that can be polished to a high sheen, worked into artistic sculptures and used in inlaid jewelry. Black coral is typically found in deep waters and many species have long life spans and are slow-growing. Using deep sea submersibles, scientists have observed that fish and invertebrates tend to accumulate around the black coral colonies. Thus, black coral communities serve important habitat functions in the mesophotic and deepwater zones. In the last few decades, pressures from overharvesting, due in part to the wider availability of scuba gear and the introduction of invasive species have threatened this group of coral. Recent seizures of illegal black coral around the world have led many to believe that black coral poaching is on the rise.

On Oct. 26, 2011, in the related case of U.S. v. GEM Manufacturing LLC, Case No. 2011-19 (D. Virgin Islands), GEM was sentenced to criminal financial penalties and forfeitures exceeding $4.47 million and three and a half years of probation that included a 10-point compliance plan that incorporated an auditing, tracking and inventory control program. GEM was also banned from doing business with its former coral supplier, Peng Chia Enterprise Co. Ltd. and its management team of Ivan and Gloria Chu. Ashu Bhandari was the individual known as "Co-conspirator X" in the related case of U.S. v. Gloria and Ivan Chu, Case No. 2010-003 (D. Virgin Islands). In January 2010, federal agents arrested the Chus as part of a sting operation in Las Vegas. The Chus were subsequently indicted in 2010 for illegally providing black coral to GEM. On June 23, 2010, Ivan Chu was sentenced to serve 30 months in prison and pay a $12,500 fine. Gloria Chu was sentenced to serve 20 months in prison and pay a $12,500 fine.

The case, developed as a result of Operation "Black Gold", was investigated by agents of the U.S. Fish and Wildlife Service (FWS) and NOAA with support from U.S. Immigration and Customs Enforcement-Homeland Security Investigations and U.S. Customs and Border Protection. Analysis of coral samples by the FWS’s National Forensics Laboratory in Ashland, Ore., was critical to the investigation. The case was prosecuted by Christopher Hale of the Justice Department’s Environmental Crimes Section, Environment and Natural Resources Division and Nelson Jones of the U.S. Attorney’s Office in the U.S. Virgin Islands.

HEALTH CARE FRAUD PAYS, THE GOVERNEMNT IN RECOVERIES

FROM: U.S. DEPARTMENTOF HEALTH AND HUMAN SERVICES

Departments of Justice and Health and Human Services announce record-breaking recoveries resulting from joint efforts to combat health care fraud

Government Teams Recovered $4.2 Billion in FY 2012

WASHINGTON – Attorney General Eric Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius today released a new report showing that for every dollar spent on health care-related fraud and abuse investigations in the last three years, the government recovered $7.90. This is the highest three-year average return on investment in the 16-year history of the Health Care Fraud and Abuse (HCFAC) Program.

The government’s health care fraud prevention and enforcement efforts recovered a record $4.2 billion in taxpayer dollars in Fiscal Year (FY) 2012, up from nearly $4.1 billion in FY 2011, from individuals and companies who attempted to defraud federal health programs serving seniors and taxpayers or who sought payments to which they were not entitled. Over the last four years, the administration’s enforcement efforts have recovered $14.9 billion, up from $6.7 billion over the prior four-year period. Since 1997, the HCFAC Program has returned more than $23 billion to the Medicare Trust Funds.

These findings, released today in the annual HCFAC Program report, are a result of President Obama making the elimination of fraud, waste and abuse, particularly in health care, a top priority for the administration.

The success of this joint Department of Justice and HHS effort was made possible by the Health Care Fraud Prevention and Enforcement Action Team (HEAT), created in 2009 to prevent fraud, waste and abuse in the Medicare and Medicaid programs and to crack down on individuals and entities that are abusing the system and costing American taxpayers billions of dollars. These efforts to reduce fraud will continue to improve with new tools and resources provided by the Affordable Care Act.

"This was a record-breaking year for the Departments of Justice and Health and Human Services in our collaborative effort to crack down on health care fraud and protect valuable taxpayer dollars," said Attorney General Holder. "In the past fiscal year, our relentless pursuit of health care fraud resulted in the disruption of an array of sophisticated fraud schemes and the recovery of more taxpayer dollars than ever before. This report demonstrates our serious commitment to prosecuting health care fraud and safeguarding our world-class health care programs from abuse."

"Our historic effort to take on the criminals who steal from Medicare and Medicaid is paying off: We are gaining the upper hand in our fight against health care fraud," said Secretary Sebelius. "This fight against fraud strengthens the integrity of our health care programs and helps us fulfill our commitment to our seniors."

About $4.2 billion stolen or otherwise improperly obtained from federal health care programs was recovered and returned to the Medicare Trust Funds, the Treasury and others in FY 2012. This is an unprecedented achievement for the HCFAC Program, a joint Justice Department and HHS effort to coordinate federal, state and local law enforcement activities to fight health care fraud and abuse.

The administration is also using tools authorized by the Affordable Care Act to fight fraud, including enhanced screenings and enrollment requirements, increased data sharing across the government, expanded recovery efforts for overpayments and greater oversight of private insurance abuses.

Since 2009, the Justice Department and HHS have improved their coordination through HEAT and increased the number of Medicare Fraud Strike Force teams to nine. The Justice Department’s enforcement of the civil False Claims Act and the Federal Food, Drug and Cosmetic Act have produced similar record-breaking results. These combined efforts coordinated under HEAT have expanded local partnerships and helped educate Medicare beneficiaries about how to protect themselves against fraud. In FY 2012, the two departments continued their series of regional fraud prevention summits, and the Justice Department hosted a training conference for federal prosecutors, FBI agents, HHS Office of Inspector General agents and others.

The strike force teams use advanced data analysis techniques to identify high-billing levels in health care fraud hot spots so that interagency teams can target emerging or migrating schemes as well as with chronic fraud by criminals masquerading as health care providers or suppliers. In July, Attorney General Holder and Secretary Sebelius announced the launch of a ground-breaking partnership among the federal government, state officials, leading private health insurance organizations and other health care anti-fraud groups to share information and best practices to improve detection of and prevent payments to scams that cut across public and private payers.

In FY 2012, the Justice Department opened 1,131 new criminal health care fraud investigations involving 2,148 potential defendants, and a total of 826 defendants were convicted of health care fraud-related crimes during the year. The department also opened 885 new civil investigations.

The strike force coordinated a takedown in May 2012 that involved the highest number of false Medicare billings in the history of the strike force program. The takedown involved 107 individuals, including doctors and nurses, in seven cities, who were charged for their alleged participation in Medicare fraud schemes, involving about $452 million in false billings. As a part of the May 2012 takedown, HHS also suspended or took other administrative action against 52 providers using authority under the health care law to suspend payments until an investigation is complete.

Strike force operations in the nine cities where teams are based resulted in 117 indictments, informations and complaints involving charges against 278 defendants who allegedly billed Medicare more than $1.5 billion in fraudulent schemes. In FY 2012, 251 guilty pleas and 13 jury trials were litigated, with guilty verdicts against 29 defendants, in strike force cases. The average prison sentence in these cases was more than 48 months.

The new authorities under the Affordable Care Act granted to HHS and the Centers for Medicare & Medicaid Services (CMS) were instrumental in clamping down on fraudulent activity in health care. In FY 2012, CMS began the process of screening all 1.5 million Medicare-enrolled providers through the new Automated Provider Screening system that quickly identifies ineligible and potentially fraudulent providers and suppliers prior to enrollment or revalidation to verify the data. As a result, nearly 150,000 ineligible providers have already been eliminated from Medicare’s billing system.

CMS also established the Command Center to improve health care-related fraud detection and investigation, drive innovation and help reduce fraud and improper payments in Medicare and Medicaid.

From May 2011 through the end of 2012, more than 400,000 providers were subject to the new screening requirements and nearly 150,000 lost the ability to bill the Medicare program due to the Affordable Care Act requirements and other proactive initiatives.

The Department of Justice and HHS also continued their successes in civil health care fraud enforcement during FY 2012. The Justice Department’s Civil Division Fraud Section, with their colleagues in U.S. Attorneys’ offices throughout the country, obtained settlements and judgments of more than $3 billion in FY 2012 under the False Claims Act (FCA). These matters included unlawful pricing by pharmaceutical manufacturers, illegal marketing of medical devices and pharmaceutical products for uses not approved by the Food and Drug Administration, Medicare fraud by hospitals and other institutional providers, and violations of laws against self-referrals and kickbacks. This marked the third year in a row that more than $2 billion has been recovered in FCA health care matters. Additionally, the Civil Division’s Consumer Protection Branch, working with U.S. Attorneys’ offices, obtained nearly $1.5 billion in fines and forfeitures, and obtained 14 convictions in matters pursued under the Federal Food, Drug and Cosmetic Act.

MARYLAND HOSPITAL AGREES TO PAY $4.9 MILLION TO SETTLE FALSE CLAIMS ACT ALLEGATIONS



Credit:  U.S. Navy

FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, February 7, 2013
Maryland’s St. Joseph’s Medical Center Agrees to Pay $4.9 Million for Medically Unnecessary Hospital Admissions

St. Joseph’s Medical Center, a hospital located in Towson, Md., has reached a settlement with the United States to pay $4.9 million in connection with its submission of false claims to Medicare, Medicaid and other federal healthcare programs, the Justice Department announced today.

This settlement resolves the hospital’s civil liability to the United States under the False Claims Act for the hospital’s disclosure that from 2007-2009 it engaged in a practice of admitting patients to the hospital unnecessarily. In particular, the hospital disclosed that it admitted patients for short stays – typically one or two days – that were not warranted by the patient’s medical condition, and thereby generated a larger reimbursement than was proper for each patient. Of the $4.9 million to be paid by St. Joseph’s, $4.6 million will go the United States, and $152,406 will go to the state of Maryland, which is also a party to the agreement.

"The improper admission of patients for the purpose of obtaining increased reimbursement is a significant drain on the resources of federal and state healthcare programs," said Stuart F. Delery, Principal Deputy Assistant Attorney General of the Justice Department’s Civil Division. "This recovery reflects the Department’s continuing efforts to safeguard federal funds."

This resolution is part of the government's emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $10.2 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14 billion.

Mr. Delery thanked the Department of Health and Human Services, Office of the Inspector General; the U.S. Attorney’s Office for the District of Maryland; and the Justice Department’s Commercial Litigation Branch, for their resolution of this matter.

JUSTICE CHARGES FIVE CORPORATIONS WITH IMPORTING AND SELLING HAZARDOUS TOYS

FROM: U.S. DEPARTMENT OF JUSTICE
Wednesday, February 6, 2013
Five Individuals and Five Corporations Charged in New York for Importing and Selling Hazardous and Counterfeit Toys

Five individuals and five corporations have been charged in an indictment unsealed today in Brooklyn, N.Y., for allegedly importing hazardous and counterfeit toys from China for sale in the United States, announced Assistant Attorney General Lanny Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of New York Loretta E. Lynch; Special Agent in Charge of Homeland Security Investigations (HSI) in New York James T. Hayes Jr.; Robert E. Perez, New York Field Operations Director of Customs and Border Protection (CBP); Chairman Inez Tenenbaum of the Consumer Product Safety Commission (CPSC); and Commissioner Raymond W. Kelly of the New York City Police Department (NYPD).

The 24-count indictment charges Chenglan Hu, 51, Hua Fei Zhang, 52, and Xiu Lan Zhang, 60, all Chinese nationals and residents of Queens, N.Y., and Guan Jun Zhang, 29, and Jun Wu Zhang, 28, both naturalized citizens and Queens residents, along with their closely held companies Family Product USA Inc., H.M. Import USA Corp., ZCY Trading Corp., Zone Import Corp. and ZY Wholesale Inc., with importing and trafficking hazardous toys in violation of the Consumer Product Safety Act (CPSA) and toys bearing copyright-infringing images and counterfeit trademarks, smuggling, money laundering and structuring.

"The defendants are accused of importing and selling toys that posed significant health hazards to children or were the product of blatant intellectual property theft," said Assistant Attorney General Breuer. "They allegedly retooled their operations many times in order to avoid detection, and despite repeated citations by the authorities, they continued to peddle counterfeit toys featuring Dora the Explorer, SpongeBob SquarePants and other popular children’s characters. Today’s actions reflect a Justice Department focused on ensuring that consumers receive safe and legitimate goods."

"For years, the defendants sought to enrich themselves by importing and selling dangerous and counterfeit children’s toys without regard for the law or the health of our children," said U.S. Attorney Lynch. "Profits from the counterfeit items, as well as toys riddled with lead and choking hazards, went to provide the defendants with luxury cars. We stand committed to protecting the residents of our communities from those who would engage in such conduct."

The five individual defendants were arrested this morning, and a federal task force comprising HSI agents, other federal agents and NYPD officers, aided by CBP officers and CPSC investigators, executed four search warrants and nine seizure warrants. The agents, officers and investigators searched the defendants’ warehouse, two residences and an email account. In addition, three luxury vehicles, including a Porsche and Lexus, three personal bank accounts and three corporate accounts were seized. The agents also filed lis pendens on two of the defendants’ properties in Queens, N.Y. The defendants’ initial appearances are scheduled this afternoon before U.S. Magistrate Judge Ramon E. Reyes Jr. in the Eastern District of New York.

The indictment charges that from July 2005 through January 2013 the individual defendants used their companies, the corporate defendants, to import toys from China that they sold, both wholesale and retail, from a storefront and warehouse in Ridgewood, N.Y., and other locations in Brooklyn and Queens.

According to the indictment, the defendants’ companies had children’s toys seized by CBP from shipping containers entering the United States from China on 33 separate occasions. Seventeen of the 33 seizures were of violative toys – toys prohibited from import into and distribution in the United States, under laws and regulations enforced by the CPSC, because of excessive lead content, excessive phthalate levels, small parts that presented choking, aspiration or ingestion hazards, and easily accessible battery compartments. Sixteen of the 33 seizures were of toys bearing copyright-infringing images and counterfeit trademarks, including knockoff versions of toys featuring a wide variety of popular children’s characters, such as Winnie the Pooh, Dora the Explorer, SpongeBob SquarePants, Betty Boop, Teenage Mutant Ninja Turtles, Power Rangers, Spiderman, Tweety, Mickey Mouse, Pokémon, as well as those from movies, such as the "Cars," "Toy Story" and "High School Musical."

The indictment charges that following each of the 33 seizures, the violator toy company was served written notice by CBP detailing the reason for the seizure, and a representative of the company signed a release form acknowledging the seizure and abandoning the seized goods. Additionally, the violator company and its principal were served written notice by CPSC of the specific safety violations of the toys, and each time a representative of the company signed a release form acknowledging the seizure and abandoning the seized goods.

Due to the number and volume of the seizures, the individual defendants allegedly shifted their use of the companies and alternated formal roles, in order to continue importing and distributing violative and infringing toys. Each time the number of seizures accumulated for one company, the individual defendants allegedly formed a new toy company to continue importing the violative and infringing toys.

"The people and companies involved in this illegal trade not only allegedly infringed on intellectual property rights, they placed the lives of innocent children in danger," said HSI Special Agent in Charge Hayes. "They allegedly sold toys with high lead content and cheap knock offs with substandard parts that break easily and pose a choking hazard. HSI is firm on using its unique customs expertise and law enforcement partnerships to put an end to the importation and sale of dangerous goods."

"Customs and Border Protection is on the forefront of intercepting unsafe, counterfeit products," said CBP New York Field Operations Director Perez. "We are proud to have done our part preventing these dangerous toys from getting in the hands of our children."

"Today’s action highlights the unprecedented level of cooperation and coordination among federal regulatory and law enforcement partners to keep U.S. consumers safe," said CPSC Chairman Tenenbaum. "The United States has some of the strongest toy standards and lowest lead limits in the world, and CPSC is committed to enforcing these child safety requirements at the ports and in the marketplace."

"When it comes to trademark infringement, don’t mess with Mickey or other American icons," said NYPD Commissioner Kelly.

In the indictment, the government is seeking forfeiture of the seized vehicles and bank accounts and the restrained properties, in addition to a money judgment to be determined at trial.

The charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

The case is being prosecuted by Trial Attorney Evan Williams of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorneys Claire Kedeshian and William Campos of the Eastern District of New York. This case was jointly investigated by the HSI Intellectual Property Rights Group and the NYPD, through its participation in the New York Border Enforcement Security Taskforce, with the assistance of CPSC and CBP.

The enforcement action announced today is one of many efforts being undertaken by the Department of Justice Task Force on Intellectual Property (IP Task Force). Attorney General Eric Holder created the IP Task Force to combat the growing number of domestic and international intellectual property crimes, protect the health and safety of American consumers, and safeguard the nation’s economic security against those who seek to profit illegally from American creativity, innovation, and hard work. The IP Task Force seeks to strengthen intellectual property rights protection through heightened criminal and civil enforcement, greater coordination among federal, state, and local law enforcement partners, and increased focus on international enforcement efforts, including reinforcing relationships with key foreign partners and U.S. industry leaders.

U.S. JUSTICE DEPARTMENT SUES S & P, ALLEGING MORTGAGE-BACKED SECURITIES RATING FRAUD

FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, February 5, 2013
Department of Justice Sues Standard & Poor’s for Fraud in Rating Mortgage-Backed Securities in the Years Leading Up to the Financial Crisis

Complaint Alleges that S&P Lied About its Objectivity and Independence And Issued Inflated Ratings for Certain Structured Debt Securities.

Attorney General Eric Holder announced today that the Department of Justice has filed a civil lawsuit against the credit rating agency Standard & Poor’s Ratings Services alleging that S&P engaged in a scheme to defraud investors in structured financial products known as Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs). The lawsuit alleges that investors, many of them federally insured financial institutions, lost billions of dollars on CDOs for which S&P issued inflated ratings that misrepresented the securities’ true credit risks. The complaint also alleges that S&P falsely represented that its ratings were objective, independent, and uninfluenced by S&P’s relationships with investment banks when, in actuality, S&P’s desire for increased revenue and market share led it to favor the interests of these banks over investors.

"Put simply, this alleged conduct is egregious – and it goes to the very heart of the recent financial crisis," said Attorney General Holder. "Today’s action is an important step forward in our ongoing efforts to investigate – and – punish the conduct that is believed to have contributed to the worst economic crisis in recent history. It is just the latest example of the critical work that the President’s Financial Fraud Enforcement Task Force is making possible."

Attorney General Eric Holder was joined in announcing the filing of the civil complaint by Acting Associate Attorney General Tony West, Principal Deputy Assistant Attorney General for the Civil Division Stuart F. Delery, and U.S. Attorney for the Central District of California André Birotte Jr. Also joining the Department of Justice in making this announcement were the attorneys general from California, Connecticut, Delaware, the District of Columbia, Illinois, Iowa and Mississippi, who have filed or will file civil fraud lawsuits against S&P alleging similar misconduct in the rating of structured financial products. Additional state attorneys general are expected to make similar filings today.

"Many investors, financial analysts and the general public expected S&P to be a fair and impartial umpire in issuing credit ratings, but the evidence we have uncovered tells a different story," said Acting Associate Attorney General West. "Our investigation revealed that, despite their representations to the contrary, S&P’s concerns about market share, revenues and profits drove them to issue inflated ratings, thereby misleading the public and defrauding investors. In so doing, we believe that S&P played an important role in helping to bring our economy to the brink of collapse."

Today’s action was filed in the Central District of California, home to the now defunct Western Federal Corporate Credit Union (WesCorp), which was the largest corporate credit union in the country. Following the 2008 financial crisis, WesCorp collapsed after suffering massive losses on RMBS and CDOs rated by S&P.

"Significant harm was caused by S&P’s alleged conduct in the Central District of California," said U.S. Attorney for the Central District of California Birotte. "Across the seven counties in my district, we had huge numbers of homeowners who took out subprime mortgage loans, many of which were made by some of the country’s most aggressive lenders only because they later could be securitized into debt instruments that were given flawed ‘AAA’ ratings by S&P. This led to an untold number of foreclosures in my district. In addition, institutional investors located in my district, such as WesCorp, suffered massive losses after putting billions of dollars into RMBS and CDOs that received flawed and inflated ratings from S&P."

The complaint, which names McGraw-Hill Companies, Inc. and its subsidiary, Standard & Poor’s Financial Services LLC (collectively S&P) as defendants, seeks civil penalties under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) based on three forms of alleged fraud by S&P: (1) mail fraud affecting federally insured financial institutions in violation of 18 U.S.C. § 1341; (2) wire fraud affecting federally insured financial institutions in violation of 18 U.S.C. § 1343; and (3) financial institution fraud in violation of 18 U.S.C. § 1344. FIRREA authorizes the Attorney General to seek civil penalties up to the amount of the losses suffered as a result of the alleged violations. To date, the government has identified more than $5 billion in losses suffered by federally insured financial institutions in connection with the failure of CDOs rated by S&P from March to October 2007.

"The fraud underpinning the crisis took many different forms, and for that reason, so must our response," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Department’s Civil Division. "As today’s filing demonstrates, the Department of Justice is committed to using every available legal tool to bring to justice those responsible for the financial crisis."

According to the complaint, S&P publicly represented that its ratings of RMBS and CDOs were objective, independent and uninfluenced by the potential conflict of interest posed by S&P being selected to rate securities by the investment banks that sold those securities. Contrary to these representations, from 2004 to 2007, the government alleges, S&P was so concerned with the possibility of losing market share and profits that it limited, adjusted and delayed updates to the ratings criteria and analytical models it used to assess the credit risks posed by RMBS and CDOs. According to the complaint, S&P weakened those criteria and models from what S&P’s own analysts believed was necessary to make them more accurate. The complaint also alleges that, from at least March to October 2007, and because of this same desire to increase market share and profits, S&P issued inflated ratings on hundreds of billions of dollars’ worth of CDOs. At the time, according to the allegations in the complaint, S&P knew that the quality of non-prime RMBS was severely impaired, and that the ratings on those mortgage bonds would not hold. The government alleges that S&P failed to account for this impairment in the CDO ratings it was assigning on a daily basis. As a result, nearly every CDO rated by S&P during this time period failed, causing investors to lose billions of dollars.

The underlying federal investigation, code-named "Alchemy," that led to the filing of this complaint was initiated in November 2009 in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.

JUSTICE WORKS TO COUNTER EXTREMISTS ON THE INTERNET

FROM: U.S. DEPARTMENT OF JUSTICE
February 5th, 2013 Posted byTracy Russo

Working to counter online radicalization to violence in the United States

Earlier today, the White House released a policy statement to counter violent extremist use of the Internet to recruit and radicalize to violence in the United States. The statement from Quintan Wiktorowicz, the White House Senior Director for Community Partnerships, on the National Security Staff originally appeared on theThe White House blog and is reposted in full below.

The American public increasingly relies on the Internet for socializing, business transactions, gathering information, entertainment, and creating and sharing content. The rapid growth of the Internet has brought opportunities but also risks, and the Federal Government is committed to empowering members of the public to protect themselves against the full range of online threats, including online radicalization to violence.

Violent extremist groups ─ like al-Qa’ida and its affiliates and adherents, violent supremacist groups, and violent "sovereign citizens" ─ are leveraging online tools and resources to propagate messages of violence and division. These groups use the Internet to disseminate propaganda, identify and groom potential recruits, and supplement their real-world recruitment efforts. Some members and supporters of these groups visit mainstream fora to see whether individuals might be recruited or encouraged to commit acts of violence, look for opportunities to draw targets into private exchanges, and exploit popular media like music videos and online video games. Although the Internet offers countless opportunities for Americans to connect, it has also provided violent extremists with access to new audiences and instruments for radicalization.

As a starting point to prevent online radicalization to violence in the homeland, the Federal Government initially will focus on raising awareness about the threat and providing communities with practical information and tools for staying safe online. In this process, we will work closely with the technology industry to consider policies, technologies, and tools that can help counter violent extremism online. Companies already have developed voluntary measures to promote Internet safety ─ such as fraud warnings, identity protection, and Internet safety tips ─ and we will collaborate with industry to explore how we might counter online violent extremism without interfering with lawful Internet use or the privacy and civil liberties of individual users.

This approach is consistent with Internet safety principles that have helped keep communities safe from a range of online threats, such as cyber bullies, scammers, gangs, and sexual predators. While each of these threats is unique, experience has shown that a well-informed public, armed with tools and resources to stay safe online, is critical to protecting communities. Pursuing such an approach is also consistent with the community-based framework we outlined in Empowering Local Partners to Prevent Violent Extremism in the United States (PDF) and the Strategic Implementation Plan for Empowering Local Partners to Prevent Violent Extremism in the United States (PDF).

A New Interagency Working Group

To more effectively organize our efforts, the Administration is establishing a new Interagency Working Group to Counter Online Radicalization to Violence, chaired by the National Security Staff at the White House and involving specialists in countering violent extremism, Internet safety experts, and civil liberties and privacy practitioners from across the United States Government. This Working Group will be responsible for developing plans to implement an Internet safety approach to address online violent extremism, coordinating the Federal Government’s activities and assessing our progress against these plans, and identifying additional activities to pursue for countering online radicalization to violence.

Raising Awareness through Existing Initiatives

In the coming months, the Working Group will coordinate with Federal departments and agencies to raise awareness and disseminate tools for staying safe from online violent extremism primarily through three means.

First, information about online violent extremism will be incorporated into existing Federal Government Internet safety initiatives. Internet safety initiatives at the Department of Education, the Federal Bureau of Investigation, the Federal Trade Commission, the Department of Homeland Security, and other agencies provide platforms that already reach millions of Americans, and relevant departments and agencies will work to add materials related to online radicalization.

The primary government platform for raising awareness about Internet safety is OnGuard Online, managed by the Federal Trade Commission and involving 16 departments and agencies, including the Department of Homeland Security, the Department of Justice, and the Department of Education. OnGuard Online─ in addition to other Federal Government Internet safety platforms like Stop.Think.Connect and Safe Online Surfing─ will begin including information about online violent extremism. This information also will be posted on the Countering Violent Extremism homepage on the Department of Homeland Security’s website and updated to reflect new best practices and research.

Second, the Federal Government will work with local organizations throughout the country to disseminate information about the threat. One reason for the success of Federal Government Internet safety awareness efforts is that they work closely with local organizations — such as school districts, Parent Teacher Associations, local government, and law enforcement — to communicate to communities. Law enforcement is a particularly important partner in raising awareness about radicalization to violence and is already developing materials with support from the Department of Justice. Law enforcement departments and agencies have established Internet safety programs and relationships with community members and local organizations that can reach multiple audiences with critical information about the threat of online violent extremism and recruitment. Departments and agencies will provide the latest assessments of this threat to our local partners and encourage them to incorporate this information into their programs and initiatives.

Third, departments and agencies will use our preexisting engagement with communities to provide information about Internet safety and details about how violent extremists are using the Internet to target and exploit communities. U.S. Attorneys throughout the country, who historically have engaged with communities on a range of public safety issues, are coordinating these Federal engagement efforts at the local level, with support from other departments and agencies, such as the Department of Homeland Security, the Department of Health and Human Services, and the Department of Education. U.S. Attorneys and others involved in community engagement will seek to incorporate information about Internet radicalization to violence into their efforts, as appropriate. At the same time, the Federal Government will engage with State, local, and tribal government and law enforcement officials to learn from their experiences in addressing online threats, including violent extremism.

Going Forward

As the Federal Government implements this effort in the coming months, we will continue to investigate and prosecute those who use the Internet to recruit others to plan or carry out acts of violence, while ensuring that we also continue to uphold individual privacy and civil liberties. Preventing online radicalization to violence requires both proactive solutions to reduce the likelihood that violent extremists affect their target audiences as well as ensuring that laws are rigorously enforced.

　

COURT ENTERS INJUNCTION AGAINST DRUG MANUFACTURER

FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, January 31, 2013
District Court Enters Permanent Injunction Against Ohio-Based Drug Manufacturer and Company’s Senior Executives

U.S. District Court Judge Lesley Wells entered a consent decree of permanent injunction against Ben Venue Laboratories Inc., a Bedford, Ohio-based drug manufacturer, the Justice Department announced today. The permanent injunction was also entered against George P. Doyle, president and chief executive officer, Kimberly A. Kellermann, vice president of operations, and Douglas A. Rich, vice president of quality operations, for Ben Venue. The department, at the request of the Food and Drug Administration (FDA), asked the court to enter the consent decree.

Ben Venue manufactures numerous generic sterile injectable drug products, including cancer medications. As set forth in the complaint filed by the United States on January 22, FDA conducted an inspection of defendants’ facility from Nov. 7 to Dec. 2, 2011, and documented 10 deviations from current good manufacturing practices. According to the complaint, the FDA found, among other things, that the company failed to create and follow appropriate procedures to prevent contamination of drugs which were purported to be sterile. The FDA also found that the company failed to properly clean and maintain its equipment to ensure the safety and quality of the drugs it manufactured. In addition, the FDA determined that the company failed to conduct adequate investigations of drugs that did not meet their specifications.

Compliance with current good manufacturing practices requirements assures that drugs meet the safety requirements of the law and have the identity and strength and meet the quality and purity characteristics that they purport to or are represented to possess. FDA regulations, which establish minimum current good manufacturing practices applicable to human drugs, require manufacturers to control all aspects of the processes and procedures by which drugs are manufactured in order to prevent the production of unsafe and ineffective products.

According to the complaint, t he deviations observed by FDA during the November - December 2011 inspection were similar to deviations observed by FDA during its many previous inspections of Ben Venue’s facility. During FDA’s May 2011 inspection, FDA documented 48 deviations from current good manufacturing practices including an inadequate quality control unit, inadequate and untimely investigations, inadequately designed aseptic processing areas, poor employee aseptic practices, failure to prevent microbial contamination of drug products purporting to be sterile and failure to determine the root cause for microbial contaminants.

As described in the complaint, FDA’s long inspection and regulatory history of Ben Venue, including 35 inspections since 1997, and approximately 40 recalls since February 2002 associated with drugs manufactured at the Ben Venue facility (including 10 recalls in 2011 and 10 recalls in 2012), reflects a continuing pattern of significant deviations from current good manufacturing practices with its drugs. Some recalls involved drugs contaminated with glass and other particulates. Additional recalls were based on the company’s inability to assure the drug’s sterility. Of the roughly 40 recalls, nine were classified by FDA as "Class I," meaning that FDA determined that there was "a reasonable probability that the use of . . . a violative product will cause serious adverse health consequences or death."

The consent decree entered resolves the complaint by requiring Ben Venue to take a wide range of actions to correct its violations and ensure that they do not happen again. The injunction establishes a series of steps which must occur before Ben Venue can fully resume operations, including the retention of an expert to inspect the company’s facility, the development and then implementation of a remediation plan, and an inspection by FDA to confirm that the company’s manufacturing processes are fully compliant with the law.

"This consent decree restricts Ben Venue from manufacturing and distributing certain drugs until the company fully complies with the law," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. "As this case demonstrates, the Department of Justice and FDA will work together to protect the health and safety of Americans by making sure that those who produce and distribute prescription drugs follow the law."

"This resolution comes following nearly three dozen inspections which revealed inadequate quality control, including contaminated drugs, and led to approximately 40 recalls on products from this facility alone," said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio. "The Justice Department and the Food and Drug Administration will continue to place its highest priority on protecting consumers."

Under the decree, Ben Venue may continue to manufacture and distribute a subset of their drugs (listed on Attachment A to the decree), which FDA has determined are currently in shortage (domestically or abroad) or are vulnerable to shortage. However, prior to distribution of each batch of these drugs, the company’s expert must conduct a batch-by-batch review and certify that no deviations occurred during the manufacture of the drug that would adversely affect the safety or quality of the batch.

TWO MEMBERS OF ARYAN BOTHERHOOD OF TEXAS PLEAD GUILTY FOR CRIMES RELATED TO MEMBERSHIP ACTIVITIES

FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, January 31, 2013
Two Aryan Brotherhood of Texas Gang Members Plead Guilty to Federal Racketeering Charges

Two members of the Aryan Brotherhood of Texas gang (ABT) pleaded guilty to racketeering charges related to their membership in the ABT’s criminal enterprise, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas.

Ben Christian Dillon, aka "Tuff," 40, of Houston, and James Marshall Meldrum, aka "Dirty," 40, of Dallas, each pleaded guilty today before U.S. District Judge Sim Lake in the Southern District of Texas to one count of conspiracy to participate in racketeering activity.

According to court documents, Dillon, Meldrum and other ABT gang members and associates, agreed to commit multiple acts of murder, robbery, arson, kidnapping and narcotics trafficking on behalf of the ABT gang. Dillon, Meldrum and numerous ABT gang members met on a regular basis at various locations throughout Texas to report on gang-related business, collect dues, commit disciplinary assaults against fellow gang members and discuss acts of violence against rival gang members, among other things.

Dillon and Meldrum admitted to being ABT gang members and engaging in multiple acts in support of the criminal enterprise. Dillon admitted to trafficking in methamphetamine, acting as an enforcer to collect drug debts owed to the ABT enterprise, committing acts of arson for the gang and attempting to kill a fellow ABT gang member who had been marked for death by senior ABT officials. Meldrum admitted to trafficking in methamphetamine and severely beating a subordinate gang member.

According to the superseding indictment, the ABT was established in the early 1980s within the Texas prison system. The gang modeled itself after and adopted many of the precepts and writings of the Aryan Brotherhood, a California-based prison gang that was formed in the California prison system during the 1960s. According to the superseding indictment, previously, the ABT was primarily concerned with the protection of white inmates and white supremacy/separatism. Over time, the ABT has expanded its criminal enterprise to include illegal activities for profit.

Court documents allege that the ABT enforced its rules and promoted discipline among its members, prospects and associates through murder, attempted murder, conspiracy to murder, arson, assault, robbery and threats against those who violate the rules or pose a threat to the enterprise. Members, and oftentimes associates, were required to follow the orders of higher-ranking members, often referred to as "direct orders."

According to the superseding indictment, in order to be considered for ABT membership, a person must be sponsored by another gang member. Once sponsored, a prospective member must serve an unspecified term, during which he is referred to as a prospect, while his conduct is observed by the members of the ABT.

At sentencing, Dillon and Meldrum each face a maximum penalty of life in prison. Dillon’s sentencing hearing is scheduled for April 24, 2013, and Meldrum’s sentencing hearing is scheduled for Sept. 26, 2013.

Dillon and Meldrum are two of 34 defendants charged in October 2012 with conducting racketeering activity through the ABT criminal enterprise, among other charges.

This case is being investigated by a multi-agency task force consisting of the Bureau of Alcohol, Tobacco, Firearms and Explosives; the Drug Enforcement Administration; FBI; U.S. Marshals Service; Federal Bureau of Prisons; U.S. Immigration and Customs Enforcement Homeland Security Investigations; Texas Rangers; Texas Department of Public Safety; Montgomery County, Texas, Sheriff’s Office; Houston Police Department-Gang Division; Texas Department of Criminal Justice – Office of Inspector General; Harris County, Texas, Sheriff’s Office; Tarrant County Sheriff’s Office; Atascosa County, Texas, Sheriff’s Office; Orange County, Texas, Sheriff’s Office; Waller County, Texas, Sheriff’s Office; Fort Worth, Texas, Police Department; Alvin, Texas, Police Department; Carrollton, Texas, Police Department; Montgomery County District Attorney’s Office; Atascosa County District Attorney’s Office; and the Kaufman County, Texas, District Attorney’s Office.

The case is being prosecuted by David Karpel of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Jay Hileman of the Southern District of Texas.

LOS ZETAS CARTEL MEMBER PLEADS GUILTY TO DRUG CONSPIRACY CHARGES

FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, January 31, 2013
High-Ranking Member of Mexican "Los Zetas" Cartel Pleads Guilty to Drug Conspiracy Charges

Jesus Enrique Rejon Aguilar, aka "Mamito" and "Caballero," a high ranking member of the "Los Zetas" drug cartel, pleaded guilty today to conspiracy to import multi-ton quantities of cocaine and marijuana into the United States, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and Administrator Michele M. Leonhart of the Drug Enforcement Administration (DEA).

Rejon Aguilar, 36, pleaded guilty before U.S. District Judge Barbara J. Rothstein in the District of Columbia. Rejon Aguilar was extradited to the United States in September 2012 and was ordered detained in federal custody pending trial.

On Nov. 4, 2010, Rejon Aguilar and 19 co-defendants were charged in a superseding indictment with conspiracy to manufacture and distribute five kilograms or more of cocaine and 1,000 kilograms or more of marijuana for importation into the United States. The indictment charges that between 2000 and 2010, members of Los Zetas, including Rejon Aguilar, engaged in a conspiracy with members of the Gulf Cartel in an arrangement referred to as the "Company" to import drugs into the United States. Rejon Aguilar was an original member of Los Zetas and held a high ranking position with the Company.

"As a leader of the Company’s drug trafficking operation, Rejon Aguilar ensured that mass quantities of cocaine and marijuana were brought into the United States for distribution," said Assistant Attorney General Breuer. "The Justice Department is committed to working with its law enforcement partners to bring cartel members and associates to justice for their crimes."

"As an original and high-ranking member of the Los Zetas cartel, Jesus Enrique Rejon Aguilar was responsible for funneling massive amounts of marijuana and cocaine into the United States while using violence to intimidate anyone that stood in his way," said DEA Administrator Leonhart. "Rejon Aguilar’s plea today was possible only with the strength and power of international law enforcement cooperation. DEA, along with our Mexican counterparts, are committed to bringing violent criminals like Rejon Aguilar, to justice."

According to the indictment, the Company transported shipments of cocaine and marijuana by motor vehicles from Mexico to cities in Texas for distribution to other cities within the United States. The indictment alleges that Rejon Aguilar, his co-defendants and others organized, directed and carried out various acts of violence to retaliate against and to intimidate anyone who interfered with, or who were perceived to potentially interfere with, the cocaine and marijuana trafficking activities of the Company.

On April 15, 2009, under the Foreign Narcotics Kingpin Designation Act, the President identified Los Zetas as a Significant Foreign Narcotics Trafficker. On March 24, 2010, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) named Rejon Aguilar as a Significant Foreign Narcotics Trafficker. On July 25, 2011, an executive order was issued that blocks the transfer, payment or export of property belonging to certain transnational criminal organizations, including Los Zetas.

The department expressed its gratitude and appreciation to the government of Mexico for its assistance in this matter.

At sentencing, Rejon Aguilar faces a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.

The case is being prosecuted by trial attorneys from the Criminal Division’s Narcotic and Dangerous Drug Section. The Criminal Division’s Office of International Affairs provided significant assistance in the extradition. The investigation in this case was led by the DEA’s Houston Field Division and the DEA Bilateral Investigation Unit.

U.S. JUSTICE DEPARTMENT SAYS LAWSUIT TRIES TO STOP INCREASED BEER PRICES

Credit:  Wikimedia.

FROM: U.S. DEPARTMENT OF JUSTICE  

JUSTICE DEPARTMENT FILES ANTITRUST LAWSUIT CHALLENGING ANHEUSER-BUSCH INBEV’S PROPOSED ACQUISITION OF GRUPO MODELO

Merger Would Result in U.S. Consumers Paying More for Beer, Less Innovation; Lawsuit Seeks to Maintain Competition in the Beer Industry Nationwide

WASHINGTON — The Department of Justice filed a civil antitrust lawsuit today challenging Anheuser-Busch InBev’s (ABI) proposed acquisition of total ownership and control of Grupo Modelo. The department said that the $20.1 billion transaction would substantially lessen competition in the market for beer in the United States as a whole and in 26 metropolitan areas across the United States, resulting in consumers paying more for beer and having fewer new products from which to choose.

Americans spent at least $80 billion on beer last year. According to the department, ABI’s Bud Light is the best selling beer in the United States and Modelo’s Corona Extra is the best-selling import. Because of the size of the beer market in the United States, even a small increase in the price of beer could result in billions of dollars of harm to American consumers, the department said.

The department’s lawsuit, filed in the U.S. District Court for the District of Columbia, seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate.

"The department is taking this action to stop a merger between major beer brewers because it would result in less competition and higher beer prices for American consumers," said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. "If ABI fully owned and controlled Modelo, ABI would be able to increase beer prices to American consumers. This lawsuit seeks to prevent ABI from eliminating Modelo as an important competitive force in the beer industry."

ABI and Modelo–the largest and third largest beer firms, respectively–together control about 46 percent of annual sales in the United States. MillerCoors, the second largest beer firm, accounts for about 29 percent of nationwide sales. Beer is generally grouped into four distinct segments by industry participants–sub-premium, premium, premium plus and high-end. The sub-premium segment includes: Busch (owned by ABI); and Keystone (owned by MillerCoors). The premium segment includes: Bud Light; Coors Light; and MillerLite. The premium plus segment includes: Michelob (owned by ABI); and Modelo Especial (owned by Modelo). The high-end segment includes: imports such as Corona (owned by Modelo) and Heineken; and a variety of craft beers.

According to the department’s complaint, the U.S. beer market is already highly concentrated, and prices are increased by strategic interactions among the largest brewers, including ABI and MillerCoors. ABI generally acts as the price leader, implementing annual price increases in the sub-premium, premium and premium plus segments of the U.S. beer industry. MillerCoors and other brewers have typically joined the ABI price increases, while Modelo has not. By pricing aggressively, Modelo–through its importer, Crown Imports–puts pressure on ABI to maintain or lower prices, especially in certain parts of the country. As a result, Modelo has become a particularly important competitor in the U.S. market.

The complaint quotes internal company documents demonstrating both ABI’s determination to maintain its upward price leadership in the U.S. beer industry and Modelo’s present-day position as a significant competitive threat to ABI:
ABI has implemented a "conduct plan," whereby ABI hopes to establish "the highest level of [price] followership" by its large rivals by being as "consistent," "simple" and "transparent" as possible;
ABI believes that its conduct plan provides the highest possibility of "sustaining a price increase" and "ensuring competition does not believe they can take share through pricing";
By contrast, Modelo’s pricing strategy in the United States is known as the "momentum plan" and aims to narrow the "price gap" between Modelo’s imports and domestic premium beers, such as ABI’s Bud Light, stealing market share from ABI by enticing consumers to "trade up" to Modelo beer; and
ABI executives acknowledge that Modelo has "put increasing pressure" on ABI competitively, and that Modelo’s strategy is at odds with ABI’s well-established practice of leading prices upward with the expectation that its competitors will follow.
The complaint also discusses ABI’s efforts to target Corona. ABI considered Corona to be a significant threat, and launched Bud Light Lime in 2008 to compete with Corona. ABI went as far as to mimic Corona’s distinctive clear bottle. Ultimately, instead of trying to compete head-to-head with its own product, Bud Light Lime, ABI is thwarting competition by buying Modelo.

The department alleges that ABI’s acquisition of total ownership and control of Modelo would eliminate the existing competition between ABI and Modelo, further concentrating the beer industry, enhancing ABI’s market power and facilitating coordinated pricing between ABI and the remaining large players. Consumers would, as a result, see higher prices and less innovation.

The department’s complaint also alleges that ABI and Modelo efforts to remedy the anticompetitive aspects of their transaction are inadequate. The complaint states that ABI has agreed to sell Modelo’s existing 50 percent interest in Crown to its Crown joint venture partner, Constellation. ABI would also enter into an exclusive agreement to supply Constellation with Modelo beer to import into the United States, although ABI can terminate this supply agreement after 10 years and would retain the Modelo brands and its brewing and bottling facilities.

"The companies’ attempt to fix this anticompetitive deal through the sale of Modelo’s existing interest in Crown and a temporary supply agreement is not sufficient to prevent consumer harm from ABI’s acquisition of its competitor, Modelo," said Baer.

The complaint states that the combined effect of the proposed acquisition of Modelo and the proposed fix is to eliminate from the marketplace a sophisticated brewing firm with a long history of success and replace it with an importer which will own no brands or brewing facilities and be totally dependent on ABI for its supply of Corona and other Modelo brands. The documents in the case show that as Crown’s CEO wrote to his employees after the acquisition was announced: "our #1 competitor will now be our supplier…it is not currently or will not, going forward, be ‘business as usual.’" The department’s complaint said that not only will competition be harmed by the loss of Modelo as a competitor, but by removing an independent brewer–Modelo–from the market, strategically coordinated pricing will become easier in the future.

ABI is a Belgian corporation with its principal place of business in Leuven, Belgium. In 2011, ABI had revenues of approximately $39 billion. ABI currently has a 43 percent voting interest and a 50.35 percent economic interest in Modelo. ABI has stated in its annual reports filed with the Securities and Exchange Commission that it does not have voting or other effective control of Modelo. Through the proposed acquisition, ABI would acquire control of, and the remaining economic interest in Modelo.

Modelo is a Mexican corporation with its principal place of business in Mexico City. In 2011, Modelo had revenues of approximately $7 billion.

FORMER EXECUTIVE CONVICTED FOR ROLE IN PRICE-FIXING

FROM: U.S. DEPARTMENT OF JUSTICE

WASHINGTON — Following a two-week trial, a federal jury in Puerto Rico today convicted a former executive of a Florida-based coastal water freight transportation company for his participation in a conspiracy to fix rates and surcharges for water transportation of freight between the continental United States and Puerto Rico, the Department of Justice announced.

Frank Peake, the former president of Sea Star Line LLC, was found guilty today in the U.S. District Court for the District of Puerto Rico, of participating in a conspiracy to fix rates and surcharges for water transportation of freight between the continental United States and Puerto Rico from at least as early as late 2005, until at least April 2008.

"The coastal shipping price-fixing conspiracy affected the price of nearly every product that was shipped to and from Puerto Rico during the conspiracy," said Bill Baer, Assistant Attorney General in charge of the Department of Justice's Antitrust Division. "This successful prosecution shows that the division will hold accountable high-level executives who perpetuate these crimes."

Sea Star pleaded guilty on Dec. 20, 2011, and was sentenced by Judge Daniel R. Dominguez to pay a $14.2 million criminal fine for its role in the conspiracy from as early as May 2002, until at least April 2008. Sea Star transports a variety of cargo shipments, such as heavy equipment, perishable food items, medicines and consumer goods, on scheduled ocean voyages between the continental United States and Puerto Rico.

According to evidence presented at trial, Sea Star, Peake and co-conspirators carried out the conspiracy by agreeing during meetings and communications to allocate customers of Puerto Rico freight services and to rig bids and fix the rates and surcharges to be charged to purchasers of water transportation of freight between the continental United States and Puerto Rico. The department said the conspirators also engaged in meetings for the purpose of monitoring and enforcing adherence to the agreed-upon rates and sold Puerto Rico freight services at collusive and noncompetitive rates.

Including today’s jury conviction, as a result of this ongoing investigation, three companies and six individuals have pleaded guilty or been convicted at trial. The five individuals and three companies that have been sentenced have been ordered to serve a total of more than 11 years in prison and to pay more than $46 million in criminal fines.

Peake was convicted of price fixing in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today’s conviction arose from an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the coastal water freight transportation industry, which is being conducted by the Antitrust Division’s National Criminal Enforcement Section; the Baltimore Resident Agency of the Department of Defense’s Office of the Inspector General, Defense Criminal Investigative Service (DCIS); the Miami Field Office of the Department of Transportation’s Office of Inspector General; and the Jacksonville Field Office of the FBI.

MAN FROM DOMICAN REPUBLIC SENTENCED TO PRISON FOR ROLE IN IDENTITY TRAFFICKING

FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, January 29, 2013
Dominican National Sentenced to 63 Months in Prison for Leading Role in Identity Trafficking Scheme
A Dominican national was sentenced today to 63 months in prison for his leading role in trafficking the identities of Puerto Rican U.S. citizens and corresponding identity documents, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Rosa E. Rodríguez-Vélez of the District of Puerto Rico; Director John Morton of U.S. Immigration and Customs Enforcement (ICE), which oversees Homeland Security Investigations (HSI); Chief Postal Inspector Guy J. Cottrell of the U.S. Postal Inspection Service (USPIS); Gentry Smith, Acting Director of the U.S. State Department’s Diplomatic Security Service (DSS); and Internal Revenue Service-Criminal Investigation (IRS-CI) Chief Richard Weber.

Rafael Joaquin Beltre-Beltre, 36, formerly of Caguas, Puerto Rico, was sentenced by U.S. District Judge Gustavo A. Gelpí, in the District of Puerto Rico. In addition to Beltre-Beltre’s prison term, Judge Gelpí ordered him to forfeit $424,793 in illegal proceeds and ordered the removal of Beltre-Beltre from the United States to the Dominican Republic after the completion of his sentence. On Sept. 4, 2012, Beltre-Beltre pleaded guilty in Puerto Rico to one count of conspiracy to commit identification fraud, one count of conspiracy to commit alien smuggling for financial gain and one count of international money laundering.

Beltre-Beltre was charged in a superseding indictment returned by a federal grand jury in Puerto Rico on March 22, 2012. To date, a total of 53 individuals have been charged for their roles in the identity trafficking scheme, and 25 defendants have pleaded guilty.

Court documents allege that individuals located in the Savarona area of Caguas, Puerto Rico (Savarona suppliers), obtained Puerto Rican identities and corresponding identity documents. Other conspirators located in various cities throughout the United States (identity brokers) allegedly solicited customers and sold Social Security cards and corresponding Puerto Rico birth certificates for prices ranging from $700 to $2,500 per set. The superseding indictment alleges that identity brokers ordered the identity documents from Savarona suppliers, on behalf of the customers, by making coded telephone calls. The conspirators are charged with using text messages, money transfer services and express, priority or regular U.S. mail to complete their illicit transactions.

Court documents allege that some of the conspirators assumed a Puerto Rican identity themselves and used that identity in connection with the trafficking operation. Their customers allegedly generally obtained the identity documents to assume the identity of Puerto Rican U.S. citizens and to obtain additional identification documents, such as legitimate state driver’s licenses. Some customers allegedly obtained the documents to commit financial fraud and attempted to obtain a U.S. passport.

According to court documents, various identity brokers were operating in Rockford, Ill.; DeKalb, Ill.; Aurora, Ill.; Seymour, Ind.; Columbus, Ind.; Indianapolis; Hartford, Conn.; Clewiston, Fla.; Lilburn, Ga.; Norcross, Ga.; Salisbury, Md.; Columbus, Ohio; Fairfield, Ohio; Dorchester, Mass.; Lawrence, Mass.; Salem, Mass.; Worcester, Mass.; Grand Rapids, Mich.; Nebraska City, Neb.; Elizabeth, N.J.; Burlington, N.C.; Hickory, N.C.; Hazelton, Pa.; Philadelphia; Houston; Abingdon, Va.; Albertville, Ala.; and Providence, R.I.

Beltre-Beltre admitted that he operated as a Savarona supplier and was a leader and organizer in the conspiracy. He also admitted that he and his co-conspirators sold personal identifying information pertaining to real Puerto Rican U.S. citizens, including minors, and that he knew some of the identities would be used to commit tax fraud and some would be used to fraudulently apply for U.S. passports. According to court documents, in June 2011, an unauthorized alien in Arlington, Va., applied for a U.S. passport using legitimate Puerto Rico identity documents that had been supplied by Beltre-Beltre. Law enforcement agents uncovered the fraudulent application and prevented the issuance of the U.S. passport.

On Jan. 11, 2012, Beltre-Beltre was arrested and found to be in possession of over 100 legitimate identity documents in other people’s names, in addition to four legitimate but blank Puerto Rico birth certificates. Beltre-Beltre admitted that at the time of his arrest he possessed a firearm with an obliterated serial number in relation to his identity trafficking and alien smuggling operation. Beltre-Beltre is the 12th defendant to be sentenced in this case.

The charges are the result of Operation Island Express, an ongoing, nationally-coordinated investigation led by the ICE-HSI Chicago Office and USPIS, DSS and IRS-CI offices in Chicago, in coordination with the ICE-HSI San Juan Office and the DSS Resident Office in Puerto Rico. The Illinois Secretary of State Police; Elgin, Ill., Police Department; Seymour, Ind., Police Department; and Indiana State Police provided substantial assistance. The ICE-HSI Assistant Attaché office in the Dominican Republic and International Organized Crime Intelligence and Operations Center (IOC-2) as well as various ICE, USPIS, DSS and IRS-CI offices around the country provided invaluable assistance.

The case is being prosecuted by Trial Attorneys James S. Yoon, Hope S. Olds, Courtney B. Schaefer and Christina Giffin of the Criminal Division’s Human Rights and Special Prosecutions Section, with the assistance of Acting Assistant Deputy Chief Jeannette Gunderson of the Criminal Division’s Asset Forfeiture and Money Laundering Section, and the support of the U.S. Attorney’s Office for the District of Puerto Rico. The U.S. Attorney’s Offices in the Northern District of Illinois, Southern District of Indiana, District of Connecticut, District of Massachusetts, District of Nebraska, Middle District of North Carolina, Southern District of Ohio, District of Rhode Island, Southern District of Texas and Western District of Virginia provided substantial assistance.

BP EXPLORATION AND PRODUCTION INC., TO PAY $4 BILLION FOR CRIMES RELATED TO DEEPWATER HORIZON DISASTER

Photo Credit:  NOAA

FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, January 29, 2013

BP Exploration and Production Inc. Pleads Guilty, Is Sentenced to Pay Record $4 Billon for Crimes Surrounding Deepwater Horizon Incident

Court Accepts Guilty Plea to Felony Manslaughter, Environmental Crimes and Obstruction of Congress Prior to Imposing Historic Sentence

BP Exploration and Production Inc. pleaded guilty today to 14 criminal counts for its illegal conduct leading to and after the 2010 Deepwater Horizon disaster, and was sentenced to pay $4 billion in criminal fines and penalties, the largest criminal resolution in U.S. history, Attorney General Holder announced today.

"Today’s guilty plea and sentencing represent a significant step forward in the Justice Department’s ongoing efforts to seek justice on behalf of those affected by one of the worst environmental disasters in American history," said Attorney General Holder. "I’m pleased to note that more than half of this landmark resolution – which totals $4 billion in penalties and fines, and represents the single largest criminal resolution ever – will help to provide direct support to Gulf Coast residents as communities throughout the region continue to recover and rebuild."

"The Deepwater Horizon explosion was a national tragedy that resulted in the senseless deaths of 11 people and immense environmental damage," said Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division. "Through the tenacious work of the Task Force, BP has received just punishment for its crimes leading up to and following the explosion. The Justice Department will keep a watchful eye on BP’s compliance with the plea agreement’s terms, including the requirements of full cooperation with the department’s ongoing criminal investigation, implementation of enhanced safety protocols and adherence to the recommendations of two newly installed monitors. Should BP fail to comply, we will act swiftly and firmly."

BP’s guilty plea was accepted, and the sentence was imposed, by U.S. District Judge Sarah S. Vance of the Eastern District of Louisiana. During the guilty plea and sentencing proceeding, Judge Vance found, among other things, that the consequential fines imposed under the plea agreement far exceed any imposed in U.S. history, and are structured so that BP will feel the full brunt of the penalties. She also noted that the agreement provides just punishment and significant deterrence, requiring detailed drilling safeguards, monitors and other stringent, special conditions of probation so that BP’s future conduct will be closely watched.

BP pleaded guilty to each count charged in an information filed in U.S. District Court in the Eastern District of Louisiana, including 11 counts of felony manslaughter, one count of felony obstruction of Congress and violations of the Clean Water and Migratory Bird Treaty Acts. In its guilty plea today, BP admitted that, on April 20, 2010, the two highest-ranking BP supervisors onboard the Deepwater Horizon, known as BP’s "Well Site Leaders" or "company men," negligently caused the deaths of 11 men and the resulting oil spill. The company also admitted that on that evening, the two well site leaders observed clear indications that the Macondo well was not secure and that oil and gas were flowing into the well, but chose not to take obvious and appropriate steps to prevent the blowout. Additionally, BP admitted that as a result of the Well Site Leaders’ conduct, control of the Macondo well was lost, resulting in catastrophe.

BP also admitted during its guilty plea that the company, through a senior executive, obstructed an inquiry by the U.S. Congress into the amount of oil being discharged into the Gulf while the spill was ongoing. BP also admitted that the senior executive withheld documents, provided false and misleading information in response to the U.S. House of Representatives’ request for flow-rate information, manipulated internal estimates to understate the amount of oil flowing from the well and withheld data that contradicted BP’s public estimate of 5,000 barrels of oil per day. At the same time that the senior executive was preparing his manipulated estimates, BP admitted, the company’s internal engineering response teams were using sophisticated methods that generated significantly higher estimates. The Flow Rate Technical Group, consisting of government and independent scientists, later concluded that more than 60,000 barrels per day were leaking into the Gulf during the relevant time, contrary to BP’s representations to Congress.

According to the sentence imposed by Judge Vance pursuant to the plea agreement, more than $2 billion dollars will directly benefit the Gulf region. By order of the court, approximately $2.4 billion of the $4.0 billion criminal recovery is dedicated to acquiring, restoring, preserving and conserving – in consultation with appropriate state and other resource managers – the marine and coastal environments, ecosystems and bird and wildlife habitat in the Gulf of Mexico and bordering states harmed by the Deepwater Horizon oil spill. This portion of the criminal recovery is also to be directed to significant barrier island restoration and/or river diversion off the coast of Louisiana to further benefit and improve coastal wetlands affected by the oil spill. An additional $350 million will be used to fund improved oil spill prevention and response efforts in the Gulf through research, development, education and training.

BP was also sentenced to five years of probation – the maximum term of probation permitted under law. The company is also required, according to the order entered by the court pursuant to the plea agreement, to retain a process safety and risk management monitor and an independent auditor, who will oversee BP’s process safety, risk management and drilling equipment maintenance with respect to deepwater drilling in the Gulf of Mexico. BP is also required to retain an ethics monitor to improve its code of conduct to ensure BP’s future candor with the U.S. government.

The charges and allegations pending against individuals in related cases are merely accusations, and those individuals are considered innocent unless and until proven guilty.

The guilty plea and sentence announced today are part of the ongoing criminal investigation by the Deepwater Horizon Task Force into matters related to the April 2010 Gulf oil spill. The Deepwater Horizon Task Force, based in New Orleans, is supervised by Assistant Attorney General Breuer and led by Deputy Assistant Attorney General John D. Buretta, who serves as the director of the task force.