FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today charged motion picture company Lions Gate Entertainment Corp. with failing to fully and accurately disclose to investors a key aspect of its effort to thwart a hostile takeover bid.
Lions Gate agreed to pay $7.5 million and admit wrongdoing to settle the SEC’s charges.
According to the SEC’s order instituting settled administrative proceedings, Lions Gate’s management participated in a set of extraordinary corporate transactions in 2010 that put millions of newly issued company shares in the hands of a management-friendly director. A purpose of the maneuver was to defeat a hostile tender offer by a large shareholder who had been locked in a battle for control of the company for at least a year. However, Lions Gate failed to reveal that the move was part of a defensive strategy to solidify incumbent management’s control, instead stating in SEC filings that the transactions were part of a previously announced plan to reduce debt. In fact, the company had made no such prior announcement. Lions Gate also represented that the transactions were not “prearranged” with the management-friendly director, and failed to disclose the extent to which it planned and enabled the transactions with the expectation that the director would get the shares.
“Lions Gate withheld material information just as its shareholders were faced with a critical decision about the future of the company,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “Full and fair disclosure is crucial in tender offers given that shareholders rely heavily on corporate insiders to make informed decisions, especially in the midst of tender offer battles.”
According to the SEC’s order, the large shareholder had made several tender offers and acquired more than 37 percent of Lions Gate’s outstanding stock. For its part, Lions Gate management believed that allowing the shareholder to control the company was not in the best interest of Lions Gate or its shareholders. The company engaged in an active campaign to discourage shareholders from tendering their stock to the shareholder, and vigorously looked for a management ally to purchase available shares of Lions Gate stock. Lions Gate went on to establish the basic framework for an extraordinary three-part set of transactions that would begin by exchanging $100 million in notes from a holder for new notes convertible to stock at a more favorable conversion rate. The note holder would then sell the notes to the management-friendly director at a premium, and the director would then immediately convert the notes to shares.
According to the SEC’s order, the Lions Gate board of directors approved the transactions at a midnight board meeting on July 20, 2010, while facing an imminent tender offer from the large shareholder. Completed in hours, these transactions allowed the friendly director to obtain control of approximately nine percent of the company’s outstanding stock, effectively blocking the takeover bid.
The SEC’s order finds that Lions Gate then failed to meet its disclosure obligations. First, Lions Gate stated in a July 20 press release and 8-K filing that the transactions were done to reduce the company’s debt, and failed to disclose the effort to foil the takeover bid. Furthermore, Lions Gate management knew that a large, direct sale of stock from the company to the friendly director would have required prior approval from its shareholders under a New York Stock Exchange (NYSE) rule. After the transactions, NYSE contacted Lions Gate to inquire whether the transactions violated the NYSE rule requiring shareholder approval. In response to the NYSE inquiry, Lions Gate said it would disclose additional information. In its subsequent tender offer filings made to the SEC in September, Lions Gate represented that the note exchange was not part of a prearranged plan to get shares to the management-friendly director.
Among the facts admitted by Lions Gate, reflecting the extent to which the company planned and enabled the transactions, include:
Lions Gate did not announce a plan to reduce total debt prior to issuing the press release on July 20, 2010.
Lions Gate amended its insider trading policy at the midnight board meeting to allow the friendly director to immediately convert the notes to stock.
Lions Gate approved the friendly director’s last-minute request to change the conversion price.
Lions Gate allowed the friendly director to review the new note terms, term sheet, and exchange agreement before they were provided to the note holder.
Lions Gate failed to include other required information in its tender offer filings, including the fact that the friendly director converted the notes at favorable price resulting in the director owning a near 9 percent interest in Lions Gate.
The SEC’s order finds that Lions Gate violated Sections 13(a) and 14(d) of the Securities Exchange Act of 1934 and Rules 12b-20 13a-11, and 14d-9. In addition to the financial penalty, the order requires Lions Gate to cease and desist from future violations.
The SEC’s investigation was conducted by Nicholas A. Brady with assistance from Jeffrey T. Infelise. The case was supervised by Anita B. Bandy and Moira T. Roberts.
Thursday, March 13, 2014
CARGO UNLOADED FROM SOYUZ TMA-10M SPACECRAFT
Engineers document cargo as it is unloaded from the Soyuz TMA-10M spacecraft after it landed with Expedition 38 Commander Oleg Kotov of the Russian Federal Space Agency, Roscosmos, and Flight Engineers: Mike Hopkins of NASA, and, Sergey Ryazanskiy of Roscosmos, near the town of Zhezkazgan, Kazakhstan on Tuesday, March 11, 2014. Hopkins, Kotov and Ryazanskiy returned to Earth after five and a half months onboard the International Space Station where they served as members of the Expedition 37 and 38 crews. Image Credit-NASA-Bill Ingalls.
WHITE HOUSE PRESS SECRETARY'S STATEMENT ON VISIT BY IRISH PRIME MINISTER KENNY
FROM: THE WHITE HOUSE
Statement by the Press Secretary on the Visit of Irish Prime Minister Enda Kenny
President Obama will welcome Prime Minister (Taoiseach) Enda Kenny of Ireland to the White House on Friday, March 14. The United States and Ireland share a strong bilateral relationship; deep cultural, historic, and people-to-people bonds; and a shared commitment to advancing peace, security, and prosperity in the world. In the morning, the Vice President will host the Taoiseach for breakfast at the Naval Observatory, and the President will meet with the Taoiseach in the Oval Office. Subsequently, the President and the Vice President will attend the traditional St. Patrick’s Day lunch at the U.S. Capitol. In the early evening, the President and the First Lady will host a reception to celebrate their sixth St. Patrick’s Day at the White House. During the reception, the President and Kenny will participate in the annual Shamrock ceremony started under President Truman.
Also on March 14, the Vice President will meet with First Minister Peter Robinson and deputy First Minister Martin McGuinness of Northern Ireland at the White House to discuss progress toward building a peaceful and prosperous future for the people of Northern Ireland.
Statement by the Press Secretary on the Visit of Irish Prime Minister Enda Kenny
President Obama will welcome Prime Minister (Taoiseach) Enda Kenny of Ireland to the White House on Friday, March 14. The United States and Ireland share a strong bilateral relationship; deep cultural, historic, and people-to-people bonds; and a shared commitment to advancing peace, security, and prosperity in the world. In the morning, the Vice President will host the Taoiseach for breakfast at the Naval Observatory, and the President will meet with the Taoiseach in the Oval Office. Subsequently, the President and the Vice President will attend the traditional St. Patrick’s Day lunch at the U.S. Capitol. In the early evening, the President and the First Lady will host a reception to celebrate their sixth St. Patrick’s Day at the White House. During the reception, the President and Kenny will participate in the annual Shamrock ceremony started under President Truman.
Also on March 14, the Vice President will meet with First Minister Peter Robinson and deputy First Minister Martin McGuinness of Northern Ireland at the White House to discuss progress toward building a peaceful and prosperous future for the people of Northern Ireland.
REMARKS: PRESIDENT OBAMA AND UKRAINE PRIME MINISTER YATSENYUK
FROM: THE WHITE HOUSE
Remarks by President Obama and Ukraine Prime Minister Yatsenyuk after Bilateral Meeting
Oval Office
3:30 P.M. EDT
PRESIDENT OBAMA: It is a pleasure to welcome Prime Minister Yatsenyuk to the Oval Office, to the White House.
I think all of us have seen the courage of the Ukrainian people in standing up on behalf of democracy and on the desire that I believe is universal for people to be able to determine their own destiny. And we saw in the Maidan how ordinary people from all parts of the country had said that we want a change. And the Prime Minister was part of that process, showed tremendous courage, and upheld the principles of nonviolence throughout the course of events over the last several months.
Obviously, the Prime Minister comes here during a very difficult time for his country. In the aftermath of President Yanukovych leaving the country, the parliament, the Rada, acted in a responsible fashion to fill the void, created a inclusive process in which all parties had input, including the party of former President Yanukovych. They have set forward a process to stabilize the country, take a very deliberate step to assure economic stability and negotiate with the International Monetary Fund, and to schedule early elections so that the Ukrainian people, in fact, can choose their direction for the future. And the Prime Minister has managed that process with great skill and great restraint, and we’re very much appreciative of the work that he has done.
The most pressing challenge that Ukraine faces at the moment, however, is the threat to its territorial integrity and its sovereignty. We have been very clear that we consider the Russian incursion into Crimea outside of its bases to be a violation of international law, of international agreements of which Russia is a signatory, and a violation of the territorial integrity and sovereignty of Ukraine. And we have been very firm in saying that we will stand with Ukraine and the Ukrainian people in ensuring that that territorial integrity and sovereignty is maintained.
I think we all recognize that there are historic ties between Russia and Ukraine, and I think the Prime Minister would be the first one to acknowledge that. And I think the Prime Minister and the current government in Kyiv has recognized and has communicated directly to the Russian Federation their desire to try to manage through this process diplomatically. But what the Prime Minister I think has rightly insisted on is, is that they cannot have a country outside of Ukraine dictate to them how they should arrange their affairs. And there is a constitutional process in place and a set of elections that they can move forward on that, in fact, could lead to different arrangements over time with the Crimean region, but that is not something that can be done with the barrel of a gun pointed at you.
And so Secretary Kerry is in communications with the Russian government and has offered to try to explore with his counterpart, Foreign Minister Lavrov, a diplomatic solution to this crisis. We are in close communication with the Ukrainian government in terms of how we might proceed going forward. But we will continue to say to the Russian government that if it continues on the path that it is on then not only us, but the international community -- the European Union and others -- will be forced to apply a cost to Russia’s violations of international law and its encroachments on Ukraine.
There’s another path available, and we hope that President Putin is willing to seize that path. But if he does not, I’m very confident that the international community will stand strongly behind the Ukrainian government in preserving its unity and its territorial integrity.
Let me just make two final points. Obviously, because of the political turmoil, the economic situation in Ukraine has become more challenging, not less. And that’s why I’m very proud that not only as critical members of the International Monetary Fund, the IMF, we are working with the Prime Minister and his team in a package that can help to institute necessary reforms inside of the Ukraine, but also help to stabilize the situation so that people feel confident that in their daily lives they can meet their basic necessities.
We’re also asking Congress to act promptly to deliver on an aid package, including a $1 billion loan guarantee that can help smooth the path for reform inside of Ukraine and give the Prime Minister and his government the capacity to do what they need to do as they are also organizing an election process. So I would just ask both Democrats and Republicans, who I know are unified in their support of Ukraine, to move quickly to give us the support that we need so that we can give the Ukrainian people the support that they need.
And then, finally, Mr. Prime Minister, I would ask that you deliver a message on behalf of the American people to all the Ukrainian people, and that is that we admire their courage; we appreciate their aspirations. The interests of the United States are solely in making sure that the people of Ukraine are able to determine their own destiny. That is something that here in the United States we believe in deeply. I know it’s something that you believe in deeply as well. And you can rest assured that you will have our strong support as you move forward during these difficult times.
Thank you.
PRIME MINISTER YATSENYUK: Thank you, Mr. President. And we highly appreciate the support that you have given to the Ukrainian people. And my country feels that the United States stands by the Ukrainian people.
Mr. President, it’s all about the freedom. We fight for our freedom. We fight for our independence. We fight for our sovereignty. And we will never surrender.
My country has faced a number of challenges. The military one is a key challenge today, and we urge Russia to stick to its international obligations, to pull back its military into barracks, and to start the dialogue with no guns, with no military, with no tanks, but with the diplomacy and political tools.
On behalf of my government, I would like to reiterate that we are absolutely ready and open for talks with the Russian Federation. We adhere to all international obligations. And we as the state of Ukraine will fulfill all bilateral and multilateral international treaties.
On the economic side, Mr. President, we highly appreciate the support of the United States and the decision to guarantee $1 billion loan for the Ukrainian economy. You know that we resumed talks with the IMF. We do understand that these are tough reforms, but these reforms are needed for the Ukrainian state. And we are back on track in terms of delivering real reforms in my country.
As I already informed you, probably in the nearest future, next week or in 10 days, Ukraine is to sign a political part of -- association agreement with the European Union, and we want to be very clear that Ukraine is and will be a part of the Western world, and our Russian partners have to realize that we are ready to make a new type or to craft a new type of our relationship where Ukraine is a part of the European Union, but Ukraine is a good friend and partner of Russia.
So much will depend on whether Russia wants to have this talk and whether Russia wants to have Ukraine as a partner or as a subordinate. As I already indicated, we will never surrender and we will do everything in order to preserve peace, stability, and independence of my country. And we appreciate your personal support, the support of your government, support of the American people to the Ukrainian people.
Thank you, Mr. President.
PRESIDENT OBAMA: Mr. Prime Minister, thank you very much.
Q (Inaudible.)
PRESIDENT OBAMA: Julie, we completely reject a referendum patched together in a few weeks with Russian military personnel basically taking over Crimea. We reject its legitimacy. It is contrary to international law. It is contrary to the Ukrainian constitution.
I know that we've heard from the Russian Federation this notion that these kinds of decisions are often made in other places, and they’ve even analogized it to Scotland or other situations of that sort. In each of those cases that they’ve cited, decisions were made by a national government through a long, lengthy, deliberative process. It's not something that happens in a few days, and it's not something that happens with an outside army essentially taking over the region.
As you just heard the Prime Minister indicate, the people of Ukraine recognize historic ties with the people of Russia. The Prime Minister you just heard say, repeat what he said often, which is they’re prepared to respect all international treaties and obligations that they are signatories to, including Russian basing rights in Crimea. The issue now is whether or not Russia is able to militarily dominate a region of somebody else’s country, engineer a slapdash referendum, and ignore not only the Ukrainian constitution but a Ukrainian government that includes parties that are historically in opposition with each other -- including, by the way, the party of the previous President.
So we will not recognize, certainly, any referendum that goes forward. My hope is, is that as a consequence of diplomatic efforts over the next several days that there will be a rethinking of the process that's been put forward.
We have already put in place the architecture for us to apply financial and economic consequences to actions that are taken. But our strong preference is to resolve this diplomatically. And as you heard the Prime Minister say, this idea that somehow the Ukrainian people are forced to choose between good relations with the West or good relations with Russia, economic ties with the West or economic ties with Russia, is the kind of zero-sum formulation that in the 21st century, with a highly integrated, global economy, doesn’t make any sense and is not in the interests of the Ukrainian people.
I actually think, in the end, it's not in the interests of Russia either. Russia should be thinking about how can it work with Ukraine to further strengthen its economic ties and trade and exchanges with Europe. That will make Russia stronger, not weaker. But obviously Mr. Putin has some different ideas at this point.
We do not know yet what our diplomatic efforts will yield, but we'll keep on pressing. In the meantime, the main message I want to send is that we are highly supportive of a government in Kyiv that is taking on some very tough decisions, is committed to law and order, inclusivity, committed to the rights of all Ukrainian people, and is committed to fair and free elections that should settle once and for all any questions that there may be about what’s transpired since former President Yanukovych left the country.
And the most important thing to remember is this is up to the Ukrainian people. It's not up to the United States. It's not up to Russia. It's up to the Ukrainian people to make a decision about how they want to live their lives. That's what all of us should support. And certainly that's the reason why I'm so pleased to have the Prime Minister here today.
END 3:46 P.M. EDT
Wednesday, March 12, 2014
PRESIDENT OBAMA'S MESSAGE TO CONGRESS ON CONTINUATION OF NATIONAL EMERGENCY REGARDING IRAN
FROM: THE WHITE HOUSE
Message to the Congress -- Continuation of the National Emergency with Respect to Iran
TO THE CONGRESS OF THE UNITED STATES:
Section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)) provides for the automatic termination of a national emergency unless, within 90 days prior to the anniversary date of its declaration, the President publishes in the Federal Register and transmits to the Congress a notice stating that the emergency is to continue in effect beyond the anniversary date. In accordance with this provision, I have sent to the Federal Register for publication the enclosed notice stating that the national emergency with respect to Iran that was declared on March 15, 1995, is to continue in effect beyond March 15, 2014.
The crisis between the United States and Iran resulting from the actions and policies of the Government of Iran has not been resolved. The Joint Plan of Action (JPOA) between the P5+1 and Iran went into effect on January 20, 2014, for a period of 6 months. This marks the first time in a decade that Iran has agreed to and taken specific actions to halt its nuclear program and to roll it back in key respects. In return for Iran's actions on its nuclear program, the P5+1, in coordination with the European Union, are taking actions to implement the limited, temporary, and reversible sanctions relief outlined in the JPOA.
Nevertheless, certain actions and policies of the Government of Iran are contrary to the interests of the United States in the region and continue to pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States. For these reasons, I have determined that it is necessary to continue the national emergency declared with respect to Iran and to maintain in force comprehensive sanctions against Iran to deal with this threat.
BARACK OBAMA
Message to the Congress -- Continuation of the National Emergency with Respect to Iran
TO THE CONGRESS OF THE UNITED STATES:
Section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)) provides for the automatic termination of a national emergency unless, within 90 days prior to the anniversary date of its declaration, the President publishes in the Federal Register and transmits to the Congress a notice stating that the emergency is to continue in effect beyond the anniversary date. In accordance with this provision, I have sent to the Federal Register for publication the enclosed notice stating that the national emergency with respect to Iran that was declared on March 15, 1995, is to continue in effect beyond March 15, 2014.
The crisis between the United States and Iran resulting from the actions and policies of the Government of Iran has not been resolved. The Joint Plan of Action (JPOA) between the P5+1 and Iran went into effect on January 20, 2014, for a period of 6 months. This marks the first time in a decade that Iran has agreed to and taken specific actions to halt its nuclear program and to roll it back in key respects. In return for Iran's actions on its nuclear program, the P5+1, in coordination with the European Union, are taking actions to implement the limited, temporary, and reversible sanctions relief outlined in the JPOA.
Nevertheless, certain actions and policies of the Government of Iran are contrary to the interests of the United States in the region and continue to pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States. For these reasons, I have determined that it is necessary to continue the national emergency declared with respect to Iran and to maintain in force comprehensive sanctions against Iran to deal with this threat.
BARACK OBAMA
WHITE HOUSE RELEASES STATEMENT OF G-7 LEADERS ON UKRAINE
FROM: THE WHITE HOUSE
Statement of G-7 Leaders on Ukraine
We, the leaders of Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, the President of the European Council and the President of the European Commission, call on the Russian Federation to cease all efforts to change the status of Crimea contrary to Ukrainian law and in violation of international law. We call on the Russian Federation to immediately halt actions supporting a referendum on the territory of Crimea regarding its status, in direct violation of the Constitution of Ukraine.
Any such referendum would have no legal effect. Given the lack of adequate preparation and the intimidating presence of Russian troops, it would also be a deeply flawed process which would have no moral force. For all these reasons, we would not recognize the outcome.
Russian annexation of Crimea would be a clear violation of the United Nations Charter; Russia’s commitments under the Helsinki Final Act; its obligations to Ukraine under its 1997 Treaty of Friendship, Cooperation and Partnership; the Russia-Ukraine 1997 basing agreement; and its commitments in the Budapest Memorandum of 1994. In addition to its impact on the unity, sovereignty and territorial integrity of Ukraine, the annexation of Crimea could have grave implications for the legal order that protects the unity and sovereignty of all states. Should the Russian Federation take such a step, we will take further action, individually and collectively.
We call on the Russian Federation to de-escalate the conflict in Crimea and other parts of Ukraine immediately, withdraw its forces back to their pre-crisis numbers and garrisons, begin direct discussions with the Government of Ukraine, and avail itself of international mediation and observation offers to address any legitimate concerns it may have. We, the leaders of the G-7, urge Russia to join us in working together through diplomatic processes to resolve the current crisis and support progress for a sovereign independent, inclusive and united Ukraine. We also remind the Russian Federation of our decision to suspend participation in any activities related to preparation of a G-8 Sochi meeting until it changes course and the environment comes back to where the G-8 is able to have a meaningful discussion.
Statement of G-7 Leaders on Ukraine
We, the leaders of Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, the President of the European Council and the President of the European Commission, call on the Russian Federation to cease all efforts to change the status of Crimea contrary to Ukrainian law and in violation of international law. We call on the Russian Federation to immediately halt actions supporting a referendum on the territory of Crimea regarding its status, in direct violation of the Constitution of Ukraine.
Any such referendum would have no legal effect. Given the lack of adequate preparation and the intimidating presence of Russian troops, it would also be a deeply flawed process which would have no moral force. For all these reasons, we would not recognize the outcome.
Russian annexation of Crimea would be a clear violation of the United Nations Charter; Russia’s commitments under the Helsinki Final Act; its obligations to Ukraine under its 1997 Treaty of Friendship, Cooperation and Partnership; the Russia-Ukraine 1997 basing agreement; and its commitments in the Budapest Memorandum of 1994. In addition to its impact on the unity, sovereignty and territorial integrity of Ukraine, the annexation of Crimea could have grave implications for the legal order that protects the unity and sovereignty of all states. Should the Russian Federation take such a step, we will take further action, individually and collectively.
We call on the Russian Federation to de-escalate the conflict in Crimea and other parts of Ukraine immediately, withdraw its forces back to their pre-crisis numbers and garrisons, begin direct discussions with the Government of Ukraine, and avail itself of international mediation and observation offers to address any legitimate concerns it may have. We, the leaders of the G-7, urge Russia to join us in working together through diplomatic processes to resolve the current crisis and support progress for a sovereign independent, inclusive and united Ukraine. We also remind the Russian Federation of our decision to suspend participation in any activities related to preparation of a G-8 Sochi meeting until it changes course and the environment comes back to where the G-8 is able to have a meaningful discussion.
SWISS BANKER PLEADS GUILTY TO CONSPIRACY IN U.S. TAX EVADER CASE
FROM: U.S. JUSTICE DEPARTMENT
Wednesday, March 12, 2014
Swiss Banker Pleads Guilty to Conspiring with U.S. Tax Evaders, Other Swiss Bankers and Bank Management
Defendant Helped U.S. Customers Conceal Assets in Secret Swiss Bank Accounts and Tax Havens
Andreas Bachmann, 56, of Switzerland, pleaded guilty today to conspiring to defraud the Internal Revenue Service (IRS) in connection with his work as a banking and investment adviser for U.S. customers.
Deputy Attorney General James Cole, Assistant Attorney General for the Justice Department’s Tax Division Kathryn Keneally, Acting U.S. Attorney Dana J. Boente for the Eastern District of Virginia and IRS-Criminal Investigation Chief Richard Weber made the announcement after the plea was accepted by U.S. District Judge Gerald Bruce Lee.
“Today’s plea is just the latest step in our wide-ranging investigations into Swiss banking activities and demonstrates the Department of Justice's commitment to global enforcement against those that facilitate offshore tax evasion,” said Deputy Attorney General Cole. “We fully expect additional developments over the course of the coming months.”
Bachmann was charged in a one-count superseding indictment on July 21, 2011, and faces a maximum penalty of five years in prison when he is sentenced on Aug. 8, 2014.
In a statement of facts filed with the plea agreement, Bachmann admitted that between 1994 and 2006, while working as a relationship manager in Switzerland for a subsidiary of an international bank, he engaged in a wide-ranging conspiracy to aid and assist U.S. customers in evading their income taxes by concealing assets and income in secret Swiss bank accounts.
As part of that conspiracy, Bachmann traveled to the United States twice each year to provide banking services and investment advice to his U.S. customers. As a matter of practice, prior to traveling to the United States, Bachmann notified his executive management, including the head of the subsidiary’s private bank in Zurich and the chief executive officer of the subsidiary, of the planned trip and its objectives.
Although Bachmann had been informed of limitations under U.S. law on his ability to provide investment advice to U.S. account holders regarding U.S. securities, the highest ranking executive at the subsidiary was aware that Bachmann was violating U.S. law. According to the statement of facts, Bachmann was effectively told by the chief executive officer for the subsidiary, “Mr. Bachmann, you know what we expect of you, don’t get caught.”
According to the statement of facts, Bachmann also engaged in cash transactions while traveling in the United States. In the course of arranging meetings with U.S. customers, some clients would request that Bachmann either provide them with cash as withdrawals from their undeclared accounts or take cash from them as a deposit to their undeclared accounts. As part of that process, Bachmann agreed to receive cash from U.S. customers and used that cash to pay withdrawals to other U.S. clients. In one instance, Bachmann received $50,000 in cash from one U.S. customer in New York City and intended to deliver the money to another U.S. client in Southern Florida. Airport officials in New York discovered the cash but let Bachmann keep the money after questioning him. The client in Florida refused to take the money after the client learned about the questioning by New York airport officials, and Bachmann returned to Switzerland with the $50,000 in cash in his checked baggage. Bachmann advised the executive management of the subsidiary about the incident with the cash.
Bachmann also understood that a number of his U.S. customers concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities, or structures, which were frequently created in the form of foreign partnerships, trusts, corporations or foundations.
Bachmann dealt with Josef DÓ§rig, a co-defendant, regarding the formation and/or maintenance of structures for U.S. customers, among others. In approximately 1997, the international bank instructed DÓ§rig to form his own company specializing in the formation and management of nominee tax haven entities because it was “too risky” to have Dörig perform that work from inside the international bank. The international bank then directed the subsidiary and others to use DÓ§rig and his Swiss trust company, DÓ§rig Partner AG, as the preferred choice for the formation and management of structures.
This case is being investigated by IRS-Criminal Investigation. Assistant U.S. Attorney Mark D. Lytle and Tax Division Trial Attorneys Mark F. Daly, Nanette L. Davis and Jason Poole are prosecuting the case.
Wednesday, March 12, 2014
Swiss Banker Pleads Guilty to Conspiring with U.S. Tax Evaders, Other Swiss Bankers and Bank Management
Defendant Helped U.S. Customers Conceal Assets in Secret Swiss Bank Accounts and Tax Havens
Andreas Bachmann, 56, of Switzerland, pleaded guilty today to conspiring to defraud the Internal Revenue Service (IRS) in connection with his work as a banking and investment adviser for U.S. customers.
Deputy Attorney General James Cole, Assistant Attorney General for the Justice Department’s Tax Division Kathryn Keneally, Acting U.S. Attorney Dana J. Boente for the Eastern District of Virginia and IRS-Criminal Investigation Chief Richard Weber made the announcement after the plea was accepted by U.S. District Judge Gerald Bruce Lee.
“Today’s plea is just the latest step in our wide-ranging investigations into Swiss banking activities and demonstrates the Department of Justice's commitment to global enforcement against those that facilitate offshore tax evasion,” said Deputy Attorney General Cole. “We fully expect additional developments over the course of the coming months.”
Bachmann was charged in a one-count superseding indictment on July 21, 2011, and faces a maximum penalty of five years in prison when he is sentenced on Aug. 8, 2014.
In a statement of facts filed with the plea agreement, Bachmann admitted that between 1994 and 2006, while working as a relationship manager in Switzerland for a subsidiary of an international bank, he engaged in a wide-ranging conspiracy to aid and assist U.S. customers in evading their income taxes by concealing assets and income in secret Swiss bank accounts.
As part of that conspiracy, Bachmann traveled to the United States twice each year to provide banking services and investment advice to his U.S. customers. As a matter of practice, prior to traveling to the United States, Bachmann notified his executive management, including the head of the subsidiary’s private bank in Zurich and the chief executive officer of the subsidiary, of the planned trip and its objectives.
Although Bachmann had been informed of limitations under U.S. law on his ability to provide investment advice to U.S. account holders regarding U.S. securities, the highest ranking executive at the subsidiary was aware that Bachmann was violating U.S. law. According to the statement of facts, Bachmann was effectively told by the chief executive officer for the subsidiary, “Mr. Bachmann, you know what we expect of you, don’t get caught.”
According to the statement of facts, Bachmann also engaged in cash transactions while traveling in the United States. In the course of arranging meetings with U.S. customers, some clients would request that Bachmann either provide them with cash as withdrawals from their undeclared accounts or take cash from them as a deposit to their undeclared accounts. As part of that process, Bachmann agreed to receive cash from U.S. customers and used that cash to pay withdrawals to other U.S. clients. In one instance, Bachmann received $50,000 in cash from one U.S. customer in New York City and intended to deliver the money to another U.S. client in Southern Florida. Airport officials in New York discovered the cash but let Bachmann keep the money after questioning him. The client in Florida refused to take the money after the client learned about the questioning by New York airport officials, and Bachmann returned to Switzerland with the $50,000 in cash in his checked baggage. Bachmann advised the executive management of the subsidiary about the incident with the cash.
Bachmann also understood that a number of his U.S. customers concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities, or structures, which were frequently created in the form of foreign partnerships, trusts, corporations or foundations.
Bachmann dealt with Josef DÓ§rig, a co-defendant, regarding the formation and/or maintenance of structures for U.S. customers, among others. In approximately 1997, the international bank instructed DÓ§rig to form his own company specializing in the formation and management of nominee tax haven entities because it was “too risky” to have Dörig perform that work from inside the international bank. The international bank then directed the subsidiary and others to use DÓ§rig and his Swiss trust company, DÓ§rig Partner AG, as the preferred choice for the formation and management of structures.
This case is being investigated by IRS-Criminal Investigation. Assistant U.S. Attorney Mark D. Lytle and Tax Division Trial Attorneys Mark F. Daly, Nanette L. Davis and Jason Poole are prosecuting the case.
U.S. DEFENSE DEPARTMENT CONTRACTS FOR MARCH 12, 2014
FROM: U.S. DEFENSE DEPARTMENT
CONTRACTS
NAVY
General Dynamics National Steel and Shipbuilding Co., San Diego, Calif., is being awarded a $128,500,000 modification to previously awarded contract (N00024-09-C-2229) to accomplish the detail design and construction of the Mobile Landing Platform (MLP) 3 Afloat Forward Staging Base (AFSB). This modification will provide the detail, design and construction efforts to convert the MLP 3 to an AFSB variant. Work will be performed in San Diego, Calif., and is expected to be completed by October 2015. Fiscal 2012, 2013 and 2014 national defense sealift funds in the amount of $95,093,500 will be obligated at time of award. Contract funds will not expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington, D.C., is the contracting activity.
Interstate Electronics Corp., Anaheim, Calif., is being awarded an $8,911,790 modification under previously awarded cost-plus-fixed-fee, cost-plus-incentive-fee contract (N00030-14-C-0006) to exercise option line items for a new technology refresh of the C-Band Pulse Doppler Radar (RADAR-C) Transmitter and replacement of the Navy Mobile Instrumentation Ship Communication System in support of Trident II flight tests. These option line items provide for, but are not limited to, engineering services (system engineering, design and development), system testing, verification and validation, logistics and full system documentation in order to achieve Flight Test Instrumentation Steady State for Strategic Systems Programs flight test mission support. The maximum dollar value of the option line items is $8,911,790. Work will be performed in Anaheim, Calif. (80 percent); Cape Canaveral, Fla. (18 percent); and San Jose, Calif. (2 percent), and work is expected to be completed March 15, 2016. Fiscal 2014 other procurement, Navy contract funds in the amount of $8,911,790 will be obligated at the time of award and will not expire at the end of the current fiscal year. This contract was a sole source acquisition pursuant to 10 U.S.C. 2304(c)(1). The Department of the Navy, Strategic Systems Programs, Washington, D.C., is the contracting activity.
ARMY
Northrop Grumman Technical Service Inc., Herdon, Va., was awarded a $30,793,383 modification (P00010) to contract W9124B-13-C-0005 for continued logistic support services. Fiscal 2014 operations and maintenance, Army funds in the amount of $30,793,383 were obligated at the time of the award. Estimated completion date is Jan. 31, 2015. Work will be performed at Fort Irwin, Calif. Army Contracting Command, Fort Irwin, Calif., is the contracting activity.
DRS Technical Services Inc, Herndon, Va., was awarded a $30,271,266 hybrid firm-fixed price, cost-plus fixed-fee and cost reimbursable multi-year contract to operate control and maintain satellite communications between the continental United States and worldwide locations. It will also provide help desk and field operations support. Fiscal 2014 operations and maintenance, Army funds in the amount of $30,271,266 were obligated at the time of the award. Estimated completion date is March 11, 2017. Bids were solicited via the Internet with four received. Work will be performed in Rock Island, Ill., Afghanistan, Kuwait, and Germany. Army Contracting Command, Rock Island, Ill., is the contracting activity (W52P1J-14-C-0026).
DEFENSE LOGISTICS AGENCY
API LLC**, Camuy, Puerto Rico, has been awarded a maximum $11,716,450 modification (P00102) exercising the first option period on a one-year base contract (SPM1C1-13-D-1037) with four one-year option periods for permethrin Army combat uniform coats. This is a firm-fixed-price contract. Location of performance is Puerto Rico with a March 18, 2015 performance completion date. Using military service is Army. Type of appropriation is fiscal 2014 through fiscal 2015 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pa.
MISSILE DEFENSE AGENCY
Northrop Grumman Space and Missions Systems, Colorado Springs, Colo. is being awarded A $750,000,000 in-scope contract modification (P00023) to previously awarded indefinite-delivery/indefinite-quantity contract to increase the estimated contract maximum from $2,500,000,000 to $3,250,000,000. The contract remains a ten (10) year contract with an ordering period from Nov. 21, 2005 through Nov. 21, 2015. The contract is a hybrid omnibus contract performing predominantly research, development, test and evaluation services for the development of the Ballistic Missile Defense System’s Command, Control, Battle Management, and Communications; the support infrastructure including all information technology; facilities; ground and flight test; warfighter wargames and exercises; modeling and simulation; several operational cells including the Ballistic Missile Defense Network Operations and Security Center, the Joint Functional Command Component for Integrated Missile Defense, and the 100th Missile Defense Brigade. Places of performance under the contract are worldwide but mainly support the Missile Defense Integration and Operations Center, Colorado Springs, Colo. Also supported are the Missile Defense Agency sites in Huntsville, Ala., the National Capital Region, and Dahlgren, Va. No task order is being issued as a result of this award. No funds are being obligated as all funding takes place at the task order level. The Missile Defense Agency, Colorado Springs, Colo. is the contracting activity (#H95001-10-D-0001).
*Small Business
**Small Disadvantaged Business
CONTRACTS
NAVY
General Dynamics National Steel and Shipbuilding Co., San Diego, Calif., is being awarded a $128,500,000 modification to previously awarded contract (N00024-09-C-2229) to accomplish the detail design and construction of the Mobile Landing Platform (MLP) 3 Afloat Forward Staging Base (AFSB). This modification will provide the detail, design and construction efforts to convert the MLP 3 to an AFSB variant. Work will be performed in San Diego, Calif., and is expected to be completed by October 2015. Fiscal 2012, 2013 and 2014 national defense sealift funds in the amount of $95,093,500 will be obligated at time of award. Contract funds will not expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington, D.C., is the contracting activity.
Interstate Electronics Corp., Anaheim, Calif., is being awarded an $8,911,790 modification under previously awarded cost-plus-fixed-fee, cost-plus-incentive-fee contract (N00030-14-C-0006) to exercise option line items for a new technology refresh of the C-Band Pulse Doppler Radar (RADAR-C) Transmitter and replacement of the Navy Mobile Instrumentation Ship Communication System in support of Trident II flight tests. These option line items provide for, but are not limited to, engineering services (system engineering, design and development), system testing, verification and validation, logistics and full system documentation in order to achieve Flight Test Instrumentation Steady State for Strategic Systems Programs flight test mission support. The maximum dollar value of the option line items is $8,911,790. Work will be performed in Anaheim, Calif. (80 percent); Cape Canaveral, Fla. (18 percent); and San Jose, Calif. (2 percent), and work is expected to be completed March 15, 2016. Fiscal 2014 other procurement, Navy contract funds in the amount of $8,911,790 will be obligated at the time of award and will not expire at the end of the current fiscal year. This contract was a sole source acquisition pursuant to 10 U.S.C. 2304(c)(1). The Department of the Navy, Strategic Systems Programs, Washington, D.C., is the contracting activity.
ARMY
Northrop Grumman Technical Service Inc., Herdon, Va., was awarded a $30,793,383 modification (P00010) to contract W9124B-13-C-0005 for continued logistic support services. Fiscal 2014 operations and maintenance, Army funds in the amount of $30,793,383 were obligated at the time of the award. Estimated completion date is Jan. 31, 2015. Work will be performed at Fort Irwin, Calif. Army Contracting Command, Fort Irwin, Calif., is the contracting activity.
DRS Technical Services Inc, Herndon, Va., was awarded a $30,271,266 hybrid firm-fixed price, cost-plus fixed-fee and cost reimbursable multi-year contract to operate control and maintain satellite communications between the continental United States and worldwide locations. It will also provide help desk and field operations support. Fiscal 2014 operations and maintenance, Army funds in the amount of $30,271,266 were obligated at the time of the award. Estimated completion date is March 11, 2017. Bids were solicited via the Internet with four received. Work will be performed in Rock Island, Ill., Afghanistan, Kuwait, and Germany. Army Contracting Command, Rock Island, Ill., is the contracting activity (W52P1J-14-C-0026).
DEFENSE LOGISTICS AGENCY
API LLC**, Camuy, Puerto Rico, has been awarded a maximum $11,716,450 modification (P00102) exercising the first option period on a one-year base contract (SPM1C1-13-D-1037) with four one-year option periods for permethrin Army combat uniform coats. This is a firm-fixed-price contract. Location of performance is Puerto Rico with a March 18, 2015 performance completion date. Using military service is Army. Type of appropriation is fiscal 2014 through fiscal 2015 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pa.
MISSILE DEFENSE AGENCY
Northrop Grumman Space and Missions Systems, Colorado Springs, Colo. is being awarded A $750,000,000 in-scope contract modification (P00023) to previously awarded indefinite-delivery/indefinite-quantity contract to increase the estimated contract maximum from $2,500,000,000 to $3,250,000,000. The contract remains a ten (10) year contract with an ordering period from Nov. 21, 2005 through Nov. 21, 2015. The contract is a hybrid omnibus contract performing predominantly research, development, test and evaluation services for the development of the Ballistic Missile Defense System’s Command, Control, Battle Management, and Communications; the support infrastructure including all information technology; facilities; ground and flight test; warfighter wargames and exercises; modeling and simulation; several operational cells including the Ballistic Missile Defense Network Operations and Security Center, the Joint Functional Command Component for Integrated Missile Defense, and the 100th Missile Defense Brigade. Places of performance under the contract are worldwide but mainly support the Missile Defense Integration and Operations Center, Colorado Springs, Colo. Also supported are the Missile Defense Agency sites in Huntsville, Ala., the National Capital Region, and Dahlgren, Va. No task order is being issued as a result of this award. No funds are being obligated as all funding takes place at the task order level. The Missile Defense Agency, Colorado Springs, Colo. is the contracting activity (#H95001-10-D-0001).
*Small Business
**Small Disadvantaged Business
NATO COMMANDER GEN. DUNFORD BRIEFS SENATE ON PROGRESS IN AFGHANISTAN
FROM: U.S. DEFENSE DEPARTMENT
Dunford Briefs Senate on Progress in Afghanistan
By Jim Garamone
American Forces Press Service
WASHINGTON, March 12, 2014 – By any measure, the U.S. and NATO campaign in Afghanistan has been successful, but that success will be jeopardized if international troops must withdraw at the end of the year, said the commander of the NATO-led International Security Assistance Force and of U.S. forces in Afghanistan said here today.
Marine Corps Gen. Joseph F. Dunford Jr. told the Senate Armed Services Committee today that operations in Afghanistan have been successful in preventing al-Qaida and other terror groups from using the nation as a haven and staging ground.
But this progress is fragile, he added, and Afghanistan will need international trainers and some counterterrorism help to maintain progress.
American and international forces have helped Afghanistan develop security forces that have taken the lead throughout the country. Afghan forces did well against a determined enemy in the 2013 fighting season and stand poised to run a safe and secure election next month, the general said.
ISAF has transitioned from a combat role to a support role, Dunford said, and the 33,600 international troops from 49 countries in Afghanistan have focused on a “train, advise and assist” mission. “Currently,” he added, “ISAF advisors are re-orienting their focus away from developing combat skills to now developing the capabilities and institutions needed for the [Afghan national security forces’] long-term sustainability.”
With none months left in the ISAF campaign, NATO and partner forces will focus on supporting Afghan forces as they prepare for the fighting season, political transition, and security transition in December, when they will assume full responsibility for Afghanistan’s security, Dunford told the senators.
Planners also will continue to posture the force in preparation for NATO’s post-2014 train, advise and assist mission, dubbed Operation Resolute Support, which will address gaps in capabilities that are necessary for the Afghan forces to become self-sustainable.
The security forces still have problems, Dunford said. In 2013, Afghan forces relied on NATO forces for enablers, particularly in close air support, casualty evacuation, logistics, and countering roadside bombs, as well as in intelligence, surveillance, and reconnaissance, the general said. “The [Afghan forces] also suffered high casualties and instances of poor leadership, but impressively remained a cohesive and resilient fighting force,” he added.
The security forces had a very high-profile success when they secured the Loya Jirga -- a national council of community elders and leaders -- in November. The council brought 3,000 Afghan leaders to the national capital of Kabul to discuss the U.S.-Afghanistan bilateral security agreement. Terror networks and the Taliban had vowed to disrupt the meeting, but they were unsuccessful.
“On balance, after watching the [Afghan forces] respond to a variety of challenges over the past year, I do not believe the Taliban-led insurgency represents an existential threat to [the Afghan government or Afghan security forces],” Dunford said.
But NATO and partner nations must remain for Operation Resolute Support, the general said. Afghan President Hamid Karzai has refused to sign the agreement, and President Barack Obama has directed the U.S. military to develop plans for a full withdrawal from Afghanistan by the end of the year in the absence of a signed agreement.
“Without the Resolute Support mission, the progress made to date will not be sustainable,” he said. “A limited number of advisors will be required in 2015 to continue the train, advise, and assist mission.” Specifically, he said, the advisors will look at aviation, intelligence, special operations and building the capability to run security departments.
Without this help, Dunford said, Afghan forces will deteriorate. Al-Qaida and like-minded organizations would see an opportunity to again establish bases in Afghanistan, and that would be a threat to the United States and America’s national interests, the general told the senators.
Fortunately, Dunford said, all of the Afghan presidential candidates favor signing the bilateral security agreement and continued affiliation with NATO. He told the senators that he sees a force of between 8,000 and 12,000 in the country, with most involved in the train, advise, assist role and some limited counterterrorism operations.
Dunford Briefs Senate on Progress in Afghanistan
By Jim Garamone
American Forces Press Service
WASHINGTON, March 12, 2014 – By any measure, the U.S. and NATO campaign in Afghanistan has been successful, but that success will be jeopardized if international troops must withdraw at the end of the year, said the commander of the NATO-led International Security Assistance Force and of U.S. forces in Afghanistan said here today.
Marine Corps Gen. Joseph F. Dunford Jr. told the Senate Armed Services Committee today that operations in Afghanistan have been successful in preventing al-Qaida and other terror groups from using the nation as a haven and staging ground.
But this progress is fragile, he added, and Afghanistan will need international trainers and some counterterrorism help to maintain progress.
American and international forces have helped Afghanistan develop security forces that have taken the lead throughout the country. Afghan forces did well against a determined enemy in the 2013 fighting season and stand poised to run a safe and secure election next month, the general said.
ISAF has transitioned from a combat role to a support role, Dunford said, and the 33,600 international troops from 49 countries in Afghanistan have focused on a “train, advise and assist” mission. “Currently,” he added, “ISAF advisors are re-orienting their focus away from developing combat skills to now developing the capabilities and institutions needed for the [Afghan national security forces’] long-term sustainability.”
With none months left in the ISAF campaign, NATO and partner forces will focus on supporting Afghan forces as they prepare for the fighting season, political transition, and security transition in December, when they will assume full responsibility for Afghanistan’s security, Dunford told the senators.
Planners also will continue to posture the force in preparation for NATO’s post-2014 train, advise and assist mission, dubbed Operation Resolute Support, which will address gaps in capabilities that are necessary for the Afghan forces to become self-sustainable.
The security forces still have problems, Dunford said. In 2013, Afghan forces relied on NATO forces for enablers, particularly in close air support, casualty evacuation, logistics, and countering roadside bombs, as well as in intelligence, surveillance, and reconnaissance, the general said. “The [Afghan forces] also suffered high casualties and instances of poor leadership, but impressively remained a cohesive and resilient fighting force,” he added.
The security forces had a very high-profile success when they secured the Loya Jirga -- a national council of community elders and leaders -- in November. The council brought 3,000 Afghan leaders to the national capital of Kabul to discuss the U.S.-Afghanistan bilateral security agreement. Terror networks and the Taliban had vowed to disrupt the meeting, but they were unsuccessful.
“On balance, after watching the [Afghan forces] respond to a variety of challenges over the past year, I do not believe the Taliban-led insurgency represents an existential threat to [the Afghan government or Afghan security forces],” Dunford said.
But NATO and partner nations must remain for Operation Resolute Support, the general said. Afghan President Hamid Karzai has refused to sign the agreement, and President Barack Obama has directed the U.S. military to develop plans for a full withdrawal from Afghanistan by the end of the year in the absence of a signed agreement.
“Without the Resolute Support mission, the progress made to date will not be sustainable,” he said. “A limited number of advisors will be required in 2015 to continue the train, advise, and assist mission.” Specifically, he said, the advisors will look at aviation, intelligence, special operations and building the capability to run security departments.
Without this help, Dunford said, Afghan forces will deteriorate. Al-Qaida and like-minded organizations would see an opportunity to again establish bases in Afghanistan, and that would be a threat to the United States and America’s national interests, the general told the senators.
Fortunately, Dunford said, all of the Afghan presidential candidates favor signing the bilateral security agreement and continued affiliation with NATO. He told the senators that he sees a force of between 8,000 and 12,000 in the country, with most involved in the train, advise, assist role and some limited counterterrorism operations.
U.S. MOVES A DOZEN F-16s TO POLAND "IN LIGHT OF SITUATION IN UKRAINE"
FROM: U.S. DEFENSE DEPARTMENT
Spokesman: F-16 Augmentation Continues U.S.-Poland Partnership
By Army Sgt. 1st Class Tyrone C. Marshall Jr.
American Forces Press Service
WASHINGTON, March 12, 2014 – A dozen more F-16s and 300 personnel based at Aviano Air Base, Italy, will augment the U.S. aviation detachment at Lask Air Base, Poland, a Pentagon spokesman announced today.
Defense Secretary Chuck Hagel announced last week that the United States would augment the aviation detachment in light of the situation in Ukraine, and Army Col. Steven Warren provided details today in a meeting with reporters.
Warren said 12 F-16 Fighting Falcons and associated personnel from the 555th Fighter Squadron at Aviano are expected to arrive in Poland by the end of the week. “This enhancement marks another milestone in the rotational deployment of U.S. military aircraft that we began in late 2012,” he added.
Hagel met with Polish Defense Minister Tomasz Siemoniak on March 9 to consider options for locations, with U.S. European Command deciding on the number of aircraft, Warren told reporters earlier this week. Previously planned rotations will continue, he said today, with this augmentation serving as an addition to those already scheduled.
“It’s consistent with the enduring partnership between the U.S. and Poland,” Warren said. “Augmenting this aviation detachment was a deliberate choice to demonstrate to our allies that U.S. commitments to our collective defense responsibilities are credible and remain in force. The work we’re doing with Poland does just that.”
Spokesman: F-16 Augmentation Continues U.S.-Poland Partnership
By Army Sgt. 1st Class Tyrone C. Marshall Jr.
American Forces Press Service
WASHINGTON, March 12, 2014 – A dozen more F-16s and 300 personnel based at Aviano Air Base, Italy, will augment the U.S. aviation detachment at Lask Air Base, Poland, a Pentagon spokesman announced today.
Defense Secretary Chuck Hagel announced last week that the United States would augment the aviation detachment in light of the situation in Ukraine, and Army Col. Steven Warren provided details today in a meeting with reporters.
Warren said 12 F-16 Fighting Falcons and associated personnel from the 555th Fighter Squadron at Aviano are expected to arrive in Poland by the end of the week. “This enhancement marks another milestone in the rotational deployment of U.S. military aircraft that we began in late 2012,” he added.
Hagel met with Polish Defense Minister Tomasz Siemoniak on March 9 to consider options for locations, with U.S. European Command deciding on the number of aircraft, Warren told reporters earlier this week. Previously planned rotations will continue, he said today, with this augmentation serving as an addition to those already scheduled.
“It’s consistent with the enduring partnership between the U.S. and Poland,” Warren said. “Augmenting this aviation detachment was a deliberate choice to demonstrate to our allies that U.S. commitments to our collective defense responsibilities are credible and remain in force. The work we’re doing with Poland does just that.”
7 CONVICTED BY JURY IN $97 MILLION MEDICARE FRAUD
FROM: U.S. JUSTICE DEPARTMENT
Wednesday, March 12, 2014
Jury Convicts All Seven Defendants in $97 Million Medicare Fraud Scheme
A federal jury in Houston today convicted two owners of a former Houston mental health care company, Spectrum Care P.A. (Spectrum), several of its employees and the owners of certain Houston group care homes for their participation in a $97 million Medicare fraud scheme.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Special Agent in Charge Stephen L. Morris of the FBI’s Houston Field Office and Special Agent in Charge Mike Fields of the Dallas Regional Office of HHS’s Office of Inspector General (HHS-OIG), the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU), Special Agent in Charge Joseph J. Del Favero of the Chicago Field Office of the Railroad Retirement Board, Office of Inspector General (RRB-OIG) and Special Agent in Charge Scott Rezendes of Field Operations of the Office of Personnel Management’s Office of Inspector General (OPM-OIG) made the announcement following a jury trial before U.S. District Judge Vanessa Gilmore in the Southern District of Texas.
Physicians Mansour Sanjar, 81, and Cyrus Sajadi, 66, the owners of Spectrum, were each convicted of conspiracy to commit health care fraud and conspiracy to pay kickbacks as well as related counts of health care fraud and paying illegal kickbacks. Adam Main, 33, a physician’s assistant, was convicted of conspiracy to commit health care fraud and related counts of health care fraud. Shokoufeh Hakimi, 66, administrator of Spectrum, was convicted of conspiracy to commit health care fraud, conspiracy to pay kickbacks and a related count of paying an illegal kickback. Chandra Nunn, 35, a group home owner, was also convicted of conspiracy to commit health care fraud, conspiracy to pay and receive kickbacks and related counts of receiving illegal kickbacks. Sharonda Holmes, 40, a patient recruiter, was convicted of conspiracy to pay and receive kickbacks and a related count of receiving an illegal kickback. Shawn Manney, 51, a group home owner, was convicted of conspiracy to pay and receive illegal kickbacks.
According to evidence presented at trial, Sanjar and Sajadi orchestrated and executed a scheme to defraud Medicare beginning in 2006 and continuing until their arrest in December 2011. Sanjar and Sajadi owned Spectrum, which purportedly provided partial hospitalization program (PHP) services. A PHP is a form of intensive outpatient treatment for severe mental illness. The Medicare beneficiaries for whom Spectrum billed Medicare for PHP services did not qualify for or need PHP services. Sanjar, Sajadi, Main and Moore signed admission documents and progress notes certifying that patients qualified for PHP services, when in fact, the patients did not qualify for or need PHP services. Sanjar and Sajadi also billed Medicare for PHP services when the beneficiaries were actually watching movies, coloring and playing games–activities that are not covered by Medicare.
Evidence presented at trial showed that Sanjar, Sajadi and Hakimi paid kickbacks to Nunn, Holmes, Manney and other group care home operators and patient recruiters in exchange for delivering ineligible Medicare beneficiaries to Spectrum. In some cases, the patients received a portion of those kickbacks. According to evidence presented at trial, Spectrum billed Medicare for approximately $97 million in services that were not medically necessary and, in some cases, werenot provided.
Sanjar, Sajadi and Nunn are scheduled to be sentenced on Sept. 8, 2014. Main, Hakimi, Holmes and Manney are scheduled to be sentenced on Sept. 15, 2014.
The case was investigated by the FBI, HHS-OIG, Texas MFCU, RRB-OIG and OPM-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas. The case is being prosecuted by Assistant Chief Laura M.K. Cordova and Trial Attorneys Jonathan T. Baum and William S.W. Chang of the Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,700 defendants who have collectively billed the Medicare program for more than $5.5 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
Wednesday, March 12, 2014
Jury Convicts All Seven Defendants in $97 Million Medicare Fraud Scheme
A federal jury in Houston today convicted two owners of a former Houston mental health care company, Spectrum Care P.A. (Spectrum), several of its employees and the owners of certain Houston group care homes for their participation in a $97 million Medicare fraud scheme.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Special Agent in Charge Stephen L. Morris of the FBI’s Houston Field Office and Special Agent in Charge Mike Fields of the Dallas Regional Office of HHS’s Office of Inspector General (HHS-OIG), the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU), Special Agent in Charge Joseph J. Del Favero of the Chicago Field Office of the Railroad Retirement Board, Office of Inspector General (RRB-OIG) and Special Agent in Charge Scott Rezendes of Field Operations of the Office of Personnel Management’s Office of Inspector General (OPM-OIG) made the announcement following a jury trial before U.S. District Judge Vanessa Gilmore in the Southern District of Texas.
Physicians Mansour Sanjar, 81, and Cyrus Sajadi, 66, the owners of Spectrum, were each convicted of conspiracy to commit health care fraud and conspiracy to pay kickbacks as well as related counts of health care fraud and paying illegal kickbacks. Adam Main, 33, a physician’s assistant, was convicted of conspiracy to commit health care fraud and related counts of health care fraud. Shokoufeh Hakimi, 66, administrator of Spectrum, was convicted of conspiracy to commit health care fraud, conspiracy to pay kickbacks and a related count of paying an illegal kickback. Chandra Nunn, 35, a group home owner, was also convicted of conspiracy to commit health care fraud, conspiracy to pay and receive kickbacks and related counts of receiving illegal kickbacks. Sharonda Holmes, 40, a patient recruiter, was convicted of conspiracy to pay and receive kickbacks and a related count of receiving an illegal kickback. Shawn Manney, 51, a group home owner, was convicted of conspiracy to pay and receive illegal kickbacks.
According to evidence presented at trial, Sanjar and Sajadi orchestrated and executed a scheme to defraud Medicare beginning in 2006 and continuing until their arrest in December 2011. Sanjar and Sajadi owned Spectrum, which purportedly provided partial hospitalization program (PHP) services. A PHP is a form of intensive outpatient treatment for severe mental illness. The Medicare beneficiaries for whom Spectrum billed Medicare for PHP services did not qualify for or need PHP services. Sanjar, Sajadi, Main and Moore signed admission documents and progress notes certifying that patients qualified for PHP services, when in fact, the patients did not qualify for or need PHP services. Sanjar and Sajadi also billed Medicare for PHP services when the beneficiaries were actually watching movies, coloring and playing games–activities that are not covered by Medicare.
Evidence presented at trial showed that Sanjar, Sajadi and Hakimi paid kickbacks to Nunn, Holmes, Manney and other group care home operators and patient recruiters in exchange for delivering ineligible Medicare beneficiaries to Spectrum. In some cases, the patients received a portion of those kickbacks. According to evidence presented at trial, Spectrum billed Medicare for approximately $97 million in services that were not medically necessary and, in some cases, werenot provided.
Sanjar, Sajadi and Nunn are scheduled to be sentenced on Sept. 8, 2014. Main, Hakimi, Holmes and Manney are scheduled to be sentenced on Sept. 15, 2014.
The case was investigated by the FBI, HHS-OIG, Texas MFCU, RRB-OIG and OPM-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas. The case is being prosecuted by Assistant Chief Laura M.K. Cordova and Trial Attorneys Jonathan T. Baum and William S.W. Chang of the Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,700 defendants who have collectively billed the Medicare program for more than $5.5 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
HOME SECURITY COMPANY SETTLES FTC CHARGES IT CALLED CONSUMERS LISTED ON "DO NOT CALL REGISTRY"
FROM FEDERAL TRADE COMMISSION
FTC Reaches Settlement With Home Security Company that Called Millions of Consumers on the National Do Not Call Registry
The Federal Trade Commission, with the assistance of the U.S. Department of Justice, has settled a complaint against a Massachusetts-based home security company that illegally called millions of consumers on the FTC’s National Do Not Call (DNC) Registry to pitch home security systems.
According to the FTC, Versatile Marketing Solutions (VMS), under the guidance of its owner, Jasjit Gotra, called millions of consumers whose names and phone numbers VMS bought from lead generators. The lead generators claimed that those consumers had given VMS permission to contact them about the installation of a free home security system, but in reality, they had not. In its complaint, the FTC alleges that the defendants’ tactics violated the Commission’s Telemarketing Sales Rule.
The sales leads were obtained by illegal means through rampant use of robocalls from “Tom with Home Protection,” fake survey calls, and calls to phone numbers on the National Do Not Call Registry. According to the complaint, VMS subsequently called these consumers without first checking to see if they had registered their telephone numbers on the DNC Registry.
In addition, the complaint alleges that VMS ignored warning signs that the lead generators were engaged in illegal telemarketing practices. For example, many consumers contacted by VMS complained that they had not given the company permission to call, nor had they given permission to receive a robocall. Despite mounting complaints, VMS continued buying leads from the same lead generators, and calling consumers using those leads.
“Companies that use lead generators must exercise due diligence when they buy lists of phone numbers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, “or else they can be on the hook for illegal telemarketing. Relying on a say-so that the numbers were obtained legally, or that the consumers have agreed to be called, even if their numbers are on the Do Not Call Registry, isn’t enough.”
According to the complaint, between November 2011 and July 2012, VMS made more than two million calls to consumers to try to sell home security goods and services. Of those calls, at least one million were to phone numbers listed on the DNC Registry, and more than 100,000 were to consumers who had previously told VMS not to call them again – another violation of the DNC rules.
The stipulated final court order settling the charges prohibits VMS and Gotra from making abusive telemarketing calls and from calling any consumer whose number is on the DNC Registry, unless they can prove that they have received written permission to make the call or that they have an established business relationship with that consumer. Further, it bars defendants from calling any consumer who has previously told VMS not to call them again. The order also places restrictions on how defendants can obtain and use lead-generated phone numbers in the future.
Finally, the order imposes a $3.4 million penalty judgment against the defendants, with all but $320,700 suspended due to their inability to pay. The entire amount will become due if the defendants are found to have misrepresented their financial condition.
The court settlement announced today resolves the FTC’s complaint against Versatile Marketing Solutions, Inc. also doing business as VMS Alarms, VMS, Alliance Security, and Alliance Home Protection; and its owner, Jasjit Gotra.
The Commission vote authorizing the staff to refer the civil penalty complaint to the Department of Justice, and to approve the proposed consent decree, was 4-0. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the District of Massachusetts on March 10, 2014. The proposed consent decree is subject to court approval.
NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. Consent judgments have the force of law when signed by a district court judge.
FTC Reaches Settlement With Home Security Company that Called Millions of Consumers on the National Do Not Call Registry
The Federal Trade Commission, with the assistance of the U.S. Department of Justice, has settled a complaint against a Massachusetts-based home security company that illegally called millions of consumers on the FTC’s National Do Not Call (DNC) Registry to pitch home security systems.
According to the FTC, Versatile Marketing Solutions (VMS), under the guidance of its owner, Jasjit Gotra, called millions of consumers whose names and phone numbers VMS bought from lead generators. The lead generators claimed that those consumers had given VMS permission to contact them about the installation of a free home security system, but in reality, they had not. In its complaint, the FTC alleges that the defendants’ tactics violated the Commission’s Telemarketing Sales Rule.
The sales leads were obtained by illegal means through rampant use of robocalls from “Tom with Home Protection,” fake survey calls, and calls to phone numbers on the National Do Not Call Registry. According to the complaint, VMS subsequently called these consumers without first checking to see if they had registered their telephone numbers on the DNC Registry.
In addition, the complaint alleges that VMS ignored warning signs that the lead generators were engaged in illegal telemarketing practices. For example, many consumers contacted by VMS complained that they had not given the company permission to call, nor had they given permission to receive a robocall. Despite mounting complaints, VMS continued buying leads from the same lead generators, and calling consumers using those leads.
“Companies that use lead generators must exercise due diligence when they buy lists of phone numbers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, “or else they can be on the hook for illegal telemarketing. Relying on a say-so that the numbers were obtained legally, or that the consumers have agreed to be called, even if their numbers are on the Do Not Call Registry, isn’t enough.”
According to the complaint, between November 2011 and July 2012, VMS made more than two million calls to consumers to try to sell home security goods and services. Of those calls, at least one million were to phone numbers listed on the DNC Registry, and more than 100,000 were to consumers who had previously told VMS not to call them again – another violation of the DNC rules.
The stipulated final court order settling the charges prohibits VMS and Gotra from making abusive telemarketing calls and from calling any consumer whose number is on the DNC Registry, unless they can prove that they have received written permission to make the call or that they have an established business relationship with that consumer. Further, it bars defendants from calling any consumer who has previously told VMS not to call them again. The order also places restrictions on how defendants can obtain and use lead-generated phone numbers in the future.
Finally, the order imposes a $3.4 million penalty judgment against the defendants, with all but $320,700 suspended due to their inability to pay. The entire amount will become due if the defendants are found to have misrepresented their financial condition.
The court settlement announced today resolves the FTC’s complaint against Versatile Marketing Solutions, Inc. also doing business as VMS Alarms, VMS, Alliance Security, and Alliance Home Protection; and its owner, Jasjit Gotra.
The Commission vote authorizing the staff to refer the civil penalty complaint to the Department of Justice, and to approve the proposed consent decree, was 4-0. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the District of Massachusetts on March 10, 2014. The proposed consent decree is subject to court approval.
NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. Consent judgments have the force of law when signed by a district court judge.
OWNER TRADING COMPANY PLEADS GUILTY TO DEFRAUDING INVESTORS OF OVER $30 MILLION
FROM: SECURITIES AND EXCHANGE COMMISSION
Former Owner of a Massachusetts-Based Trading Company Pleads Guilty to Multi-Million Dollar Fraud Scheme
The Securities and Exchange Commission announced today that on March 7, 2014, the former owner of Massachusetts-based Boston Trading and Research, LLC (BTR), pled guilty to charges stemming from his role in an investment scheme that defrauded more than 1,000 investors out of more than $30 million.
Craig A. Karlis, 53, of Hopkinton, MA, pled guilty before U.S. District Court Senior Judge Mark L. Wolf, to nine counts of wire fraud and two counts of filing false tax documents. His sentencing is currently scheduled for June 2, 2014 at 3:00 p.m. His business partner, Ahmet Devrim Akyil, 41, formerly of Hingham, MA, was charged with 10 counts of wire fraud. According to a March 7, 2014 press release issued by the United States Attorney’s Office for the District of Massachusetts (USAO), Akyil left the United States for Turkey in 2009 and remains a fugitive. The USAO unsealed an indictment charging Karlis and Akyil with criminal violations on October 28, 2010.
Also on October 28, 2010, the Commission filed a civil injunctive action in federal district court in Massachusetts against BTR, and its principals Ahmet Devrim Akyil and Craig Karlis for fraudulently raising millions of dollars from investors in a purported foreign currency (Forex) trading venture. Among other things, the Commission alleges that the defendants misappropriated some investor funds and lost the vast majority of remaining investor funds through Forex trading activity after promising investors that most of their funds were protected from such trading losses.
According to the Complaint, BTR collapsed in September 2008 due to significant losses accrued as a result of concealed trading far past the stop loss limits promised to investors. Ultimately, BTR distributed the remaining funds, which accounted for only approximately 10% of account balances, to its investors.
The Commission’s complaint, which is pending, alleges that BTR, Akyil, and Karlis violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission seeks the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against BTR, Akyil, and Karlis.
Former Owner of a Massachusetts-Based Trading Company Pleads Guilty to Multi-Million Dollar Fraud Scheme
The Securities and Exchange Commission announced today that on March 7, 2014, the former owner of Massachusetts-based Boston Trading and Research, LLC (BTR), pled guilty to charges stemming from his role in an investment scheme that defrauded more than 1,000 investors out of more than $30 million.
Craig A. Karlis, 53, of Hopkinton, MA, pled guilty before U.S. District Court Senior Judge Mark L. Wolf, to nine counts of wire fraud and two counts of filing false tax documents. His sentencing is currently scheduled for June 2, 2014 at 3:00 p.m. His business partner, Ahmet Devrim Akyil, 41, formerly of Hingham, MA, was charged with 10 counts of wire fraud. According to a March 7, 2014 press release issued by the United States Attorney’s Office for the District of Massachusetts (USAO), Akyil left the United States for Turkey in 2009 and remains a fugitive. The USAO unsealed an indictment charging Karlis and Akyil with criminal violations on October 28, 2010.
Also on October 28, 2010, the Commission filed a civil injunctive action in federal district court in Massachusetts against BTR, and its principals Ahmet Devrim Akyil and Craig Karlis for fraudulently raising millions of dollars from investors in a purported foreign currency (Forex) trading venture. Among other things, the Commission alleges that the defendants misappropriated some investor funds and lost the vast majority of remaining investor funds through Forex trading activity after promising investors that most of their funds were protected from such trading losses.
According to the Complaint, BTR collapsed in September 2008 due to significant losses accrued as a result of concealed trading far past the stop loss limits promised to investors. Ultimately, BTR distributed the remaining funds, which accounted for only approximately 10% of account balances, to its investors.
The Commission’s complaint, which is pending, alleges that BTR, Akyil, and Karlis violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission seeks the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against BTR, Akyil, and Karlis.
AGENT ORANGE HEALTH CONCERNS RAISED BY CREWS OF C-123 PROVIDER AIRCRAFT
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Fairchild C-123K Provider U.S. Air Force
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Agent Orange Residue on Post-Vietnam War Airplanes
Some Veterans who were crew members on C-123 Provider aircraft, formerly used to spray Agent Orange during the Vietnam War, have raised health concerns about exposure to residual amounts of herbicides on the plane surfaces.
Responding to these concerns, VA asked the Institute of Medicine to study possible health effects. Results are expected in late 2014.
If you have health concerns, talk to your health care provider or local VA Environmental Health Coordinator.
Testing for Agent Orange residue on planes
The U.S. Air Force (USAF) collected and analyzed numerous samples from C-123 aircraft to test for Agent Orange. USAF's risk assessment report (April 27, 2012) (2.3 MB, PDF) found that potential exposures to Agent Orange in C-123 planes used after the Vietnam War were unlikely to have put aircrew or passengers at risk for future health problems. The report’s three conclusions:
There was not enough information and data to conclude how much individual persons would have been exposed to Agent Orange.
It is expected that exposure to Agent Orange in these aircraft after the Vietnam War was lower than exposure during the spraying missions in Vietnam.
Potential Agent Orange exposures were unlikely to have exceeded standards set by regulators or to have put people at risk for future health problems.
How Veterans may have been exposed
During the Vietnam War, the U.S. Air Force used C-123 aircraft to spray Agent Orange to clear jungles that provided enemy cover in Vietnam. At the end of the spraying campaign in 1971, the remaining C-123 planes were reassigned to reserve units in the U.S. for routine cargo and medical evacuation missions spanning the next 10 years.
Crew members aboard one of these post-Vietnam C-123 planes reported smelling strong odors, which raised concerns about Agent Orange exposure – but Agent Orange is odorless. These odors may have come from various chemicals associated with aircraft.
Health effects of Agent Orange residue
The health effects of exposure to Agent Orange residue on airplanes differ from direct contact with liquid Agent Orange. In liquid or spray form, Agent Orange can enter the body through inhalation or ingestion (such as hand-to-mouth contact or getting into food). But in the dry form – for example, adhered to a surface – Agent Orange residue cannot be inhaled or absorbed through the skin, and would be difficult to ingest.
The potential for health effects depends on the amount of Agent Orange present, as well as its ability to enter the body.
After reviewing available scientific reports in 2011 and 2012, VA concluded that the exposure potential in these planes was extremely low and therefore, the risk of long-term health effects is minimal. If crew exposure did occur, it is unlikely that sufficient amounts of dried Agent Orange residue could have entered the body to have caused harm.
We will continue to review new scientific information on this issue as it becomes available.
We’ve also asked the Institute of Medicine of the National Academy of Sciences, an independent non-governmental organization, to study possible health effects from Agent Orange in C-123 post-Vietnam crew members. Results are expected in late 2014.
Research studies on Agent Orange
Research on the health effects of Agent Orange has been extensive and it continues. Diverse populations have been studied, including herbicide sprayers and manufacturers, other Vietnam-era Veterans, and those exposed during industrial accidents. This information helps us to determine what potential health effects may be related to different levels of exposure.
Find out more about research on health effects of Agent Orange.
Health concerns?
If you have health concerns about Agent Orange, talk to your health care provider or local VA Environmental Health Coordinator.
Not enrolled in the VA health care system? Find out if you qualify for VA health care.
Compensation benefits for health problems
The risk of long-term health problems from exposure to Agent Orange residue on post-Vietnam C-123 airplanes is minimal. Veterans may file a claim for disability compensation for health problems they believe are related to exposure to Agent Orange residue on post-Vietnam C-123 airplanes. Veterans must show on a factual basis that they were exposed in order to receive disability compensation for diseases related to Agent Orange exposure.
FORMER PUERTO RICO LAW ENFORCEMENT OFFICERS SENTENCED FOR HEROINE SMUGGLING SCHEME
FROM: U.S. JUSTICE DEPARTMENT
Thursday, March 6, 2014
Two Former Puerto Rico Law Enforcement Officers Sentenced for Scheme to Smuggle Heroin to Inmates
A former state marshal and a correctional officer in Puerto Rico were sentenced today for attempting to smuggle heroin to inmates in exchange for payment, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Rosa Emilia RodrÃguez-Vélez of the District of Puerto Rico.
Joel Torres-Velazquez, 49, of Guánica, Puerto Rico, was sentenced to serve 37 months in prison, followed by three years of supervised release, by U.S. District Judge Francisco A. Besosa of the District of Puerto Rico. He pleaded guilty on Nov. 6, 2013, to a one-count indictment charging him with attempt to distribute a controlled substance.
Jessica Moreno-Alicea, 39, of Ponce, Puerto Rico, was sentenced to serve 37 months in prison, followed by four years of supervised release, by U.S. District Judge Daniel R. Dominguez of the District of Puerto Rico. She pleaded guilty on Dec. 6, 2013, to a one-count indictment charging her with attempt to distribute a controlled substance.
Torres-Velazquez was paid $600 to deliver a package of heroin to an inmate at the Ponce Superior Court, where Torres-Velazquez worked as a state marshal. On March 30, 2011, Torres-Velazquez met with an undercover agent, who he believed was a drug dealer, and was given what he believed to be a package of heroin. He delivered the purported heroin to an inmate in the courthouse that same day.
Moreno was paid $800 to deliver a package of heroin to an inmate at the Ponce State Penitentiary, where Moreno worked as a correctional officer. On Feb. 3, 2011, Moreno met with an undercover agent, who she believed was a drug dealer, and was given what she believed to be heroin. She delivered the purported heroin to an inmate in the prison on Feb. 8, 2011.
The case was investigated by the FBI’s San Juan Division. The case was prosecuted by Assistant U.S. Attorney Hector Ramirez-Carbó of the District of Puerto Rico and Trial Attorney Menaka Kalaskar of the Criminal Division’s Public Integrity Section.
Thursday, March 6, 2014
Two Former Puerto Rico Law Enforcement Officers Sentenced for Scheme to Smuggle Heroin to Inmates
A former state marshal and a correctional officer in Puerto Rico were sentenced today for attempting to smuggle heroin to inmates in exchange for payment, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Rosa Emilia RodrÃguez-Vélez of the District of Puerto Rico.
Joel Torres-Velazquez, 49, of Guánica, Puerto Rico, was sentenced to serve 37 months in prison, followed by three years of supervised release, by U.S. District Judge Francisco A. Besosa of the District of Puerto Rico. He pleaded guilty on Nov. 6, 2013, to a one-count indictment charging him with attempt to distribute a controlled substance.
Jessica Moreno-Alicea, 39, of Ponce, Puerto Rico, was sentenced to serve 37 months in prison, followed by four years of supervised release, by U.S. District Judge Daniel R. Dominguez of the District of Puerto Rico. She pleaded guilty on Dec. 6, 2013, to a one-count indictment charging her with attempt to distribute a controlled substance.
Torres-Velazquez was paid $600 to deliver a package of heroin to an inmate at the Ponce Superior Court, where Torres-Velazquez worked as a state marshal. On March 30, 2011, Torres-Velazquez met with an undercover agent, who he believed was a drug dealer, and was given what he believed to be a package of heroin. He delivered the purported heroin to an inmate in the courthouse that same day.
Moreno was paid $800 to deliver a package of heroin to an inmate at the Ponce State Penitentiary, where Moreno worked as a correctional officer. On Feb. 3, 2011, Moreno met with an undercover agent, who she believed was a drug dealer, and was given what she believed to be heroin. She delivered the purported heroin to an inmate in the prison on Feb. 8, 2011.
The case was investigated by the FBI’s San Juan Division. The case was prosecuted by Assistant U.S. Attorney Hector Ramirez-Carbó of the District of Puerto Rico and Trial Attorney Menaka Kalaskar of the Criminal Division’s Public Integrity Section.
HHS SAYS HEALTH INSURANCE MARKETPLACE ENROLLMENT HITS 4.2 MILLION
FROM: DEPARTMENT OF HEALTH AND HUMAN SERVICES
Enrollment in the Health Insurance Marketplace climbs to 4.2 million in February
27 percent of February Federal Marketplace enrolled are young adults
Enrollment in the Health Insurance Marketplace continued to rise in February to a five-month total of 4.2 million.
As in January, the percent of young adults who selected a Marketplace plan was 3 percentage points higher than it was from October through December (27 percent versus 24 percent). Based on enrollment patterns in other health care programs, it is expected that more people will sign up as we get closer to the March 31st deadline.
“Over 4.2 million Americans have signed up for affordable plans through the Marketplace,” said HHS Secretary Kathleen Sebelius. “Now, during this final month of open enrollment our message to the American people is this: you still have time to get covered, but you’ll want to sign up today – the deadline is March 31st.”
Key findings from today’s report include:
More than 4.2 million (4,242,300) people selected Marketplace plans from Oct. 1, 2013, through Mar. 1, 2014, including 1.6 million in the State Based Marketplaces and 2.6 million in the Federally-facilitated Marketplace. About 943,000 people enrolled in the Health Insurance Marketplace plans in the February reporting period, which concluded March 1, 2014.
Of the more than 4.2 million:
55 percent are female and 45 percent are male;
31 percent are age 34 and under;
25 percent are between the ages of 18 and 34;
63 percent selected a Silver plan (up one percentage point over the prior reporting period), while 18 percent selected a Bronze plan (down one point); and
83 percent selected a plan and are eligible to receive Financial Assistance (up one point).
Today’s report details state-by-state information where available. In some states, only partial datasets were available.
The report features cumulative data for the five-month reporting period because some people apply, shop, and select a plan across monthly reporting periods. Enrollment is measured as those who selected a plan.
Enrollment in the Health Insurance Marketplace climbs to 4.2 million in February
27 percent of February Federal Marketplace enrolled are young adults
Enrollment in the Health Insurance Marketplace continued to rise in February to a five-month total of 4.2 million.
As in January, the percent of young adults who selected a Marketplace plan was 3 percentage points higher than it was from October through December (27 percent versus 24 percent). Based on enrollment patterns in other health care programs, it is expected that more people will sign up as we get closer to the March 31st deadline.
“Over 4.2 million Americans have signed up for affordable plans through the Marketplace,” said HHS Secretary Kathleen Sebelius. “Now, during this final month of open enrollment our message to the American people is this: you still have time to get covered, but you’ll want to sign up today – the deadline is March 31st.”
Key findings from today’s report include:
More than 4.2 million (4,242,300) people selected Marketplace plans from Oct. 1, 2013, through Mar. 1, 2014, including 1.6 million in the State Based Marketplaces and 2.6 million in the Federally-facilitated Marketplace. About 943,000 people enrolled in the Health Insurance Marketplace plans in the February reporting period, which concluded March 1, 2014.
Of the more than 4.2 million:
55 percent are female and 45 percent are male;
31 percent are age 34 and under;
25 percent are between the ages of 18 and 34;
63 percent selected a Silver plan (up one percentage point over the prior reporting period), while 18 percent selected a Bronze plan (down one point); and
83 percent selected a plan and are eligible to receive Financial Assistance (up one point).
Today’s report details state-by-state information where available. In some states, only partial datasets were available.
The report features cumulative data for the five-month reporting period because some people apply, shop, and select a plan across monthly reporting periods. Enrollment is measured as those who selected a plan.
HOSPITAL SYSTEM TO PAY $85 MILLION TO SETTLE ALLEGED IMPROPER PHYSICIAN REFERRAL CASE
FROM: U.S. JUSTICE DEPARTMENT
Tuesday, March 11, 2014
Florida Hospital System Agrees to Pay the Government $85 Million to Settle Allegations of Improper Financial Relationships with Referring Physicians
Halifax Hospital Medical Center and Halifax Staffing Inc. (Halifax), a hospital system based in the Daytona Beach, Fla., area, have agreed to pay $85 million to resolve allegations that they violated the False Claims Act by submitting claims to the Medicare program that violated the Physician Self-Referral Law, commonly known as the Stark Law, the Justice Department announced today.
The Stark Law forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital. In this case, the government alleged that Halifax knowingly violated the Stark Law by executing contracts with six medical oncologists that provided an incentive bonus that improperly included the value of prescription drugs and tests that the oncologists ordered and Halifax billed to Medicare. The government also alleged that Halifax knowingly violated the Stark Law by paying three neurosurgeons more than the fair market value of their work.
“Financial arrangements that compensate physicians for referrals encourage physicians to make decisions based on financial gain rather than patient needs,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery. “The Department of Justice is committed to preventing illegal financial relationships that undermine the integrity of our public health programs.”
In a Nov. 13, 2013, ruling, the U.S. District Court for the Middle District of Florida ruled that Halifax’s contracts with its medical oncologists violated the Stark Law. The case was set for trial on March 3, 2014, on the government’s remaining claims against Halifax when the parties reached this settlement.
“This settlement illustrates our firm commitment to pursue health care fraud," said U.S. Attorney for the Middle District of Florida A. Lee Bentley III. “Medical service providers should be motivated, first and foremost, by what is best for their patients, not their pocketbooks. Where necessary, we will continue to investigate and pursue these violations in our district.”
As part of the settlement announced today, Halifax also has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG), which obligates Halifax to undertake substantial internal compliance reforms and to submit its federal health care program claims to independent review for the next five years.
“Patients deserve to know that recommendations are based on sound medical practice, not illegal financial relationships between providers,” said Inspector General for the U.S. Department of Health and Human Services Daniel R. Levinson. “Halifax now also is required to hire a legal reviewer to monitor provider arrangements and an additional compliance expert to assist the board in fulfilling its oversight obligations. Both of these independent reviewers will submit regular reports to my agency.”
The settlement announced today stems from a whistleblower complaint filed by an employee of Halifax Hospital, Elin Baklid-Kunz, pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the government and to share in the proceeds of the suit. The Act also permits the government to intervene and take over the lawsuit, as it did in this case as to some of Baklid-Kunz’s allegations. Baklid-Kunz will receive $20.8 million of the settlement.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius. 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 this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.
The investigation and litigation was conducted by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Middle District of Florida and HHS-OIG. The claims settled by this agreement are allegations only, and there has been no determination of liability, except as determined by the court’s Nov. 13, 2013, ruling.
Tuesday, March 11, 2014
Florida Hospital System Agrees to Pay the Government $85 Million to Settle Allegations of Improper Financial Relationships with Referring Physicians
Halifax Hospital Medical Center and Halifax Staffing Inc. (Halifax), a hospital system based in the Daytona Beach, Fla., area, have agreed to pay $85 million to resolve allegations that they violated the False Claims Act by submitting claims to the Medicare program that violated the Physician Self-Referral Law, commonly known as the Stark Law, the Justice Department announced today.
The Stark Law forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital. In this case, the government alleged that Halifax knowingly violated the Stark Law by executing contracts with six medical oncologists that provided an incentive bonus that improperly included the value of prescription drugs and tests that the oncologists ordered and Halifax billed to Medicare. The government also alleged that Halifax knowingly violated the Stark Law by paying three neurosurgeons more than the fair market value of their work.
“Financial arrangements that compensate physicians for referrals encourage physicians to make decisions based on financial gain rather than patient needs,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery. “The Department of Justice is committed to preventing illegal financial relationships that undermine the integrity of our public health programs.”
In a Nov. 13, 2013, ruling, the U.S. District Court for the Middle District of Florida ruled that Halifax’s contracts with its medical oncologists violated the Stark Law. The case was set for trial on March 3, 2014, on the government’s remaining claims against Halifax when the parties reached this settlement.
“This settlement illustrates our firm commitment to pursue health care fraud," said U.S. Attorney for the Middle District of Florida A. Lee Bentley III. “Medical service providers should be motivated, first and foremost, by what is best for their patients, not their pocketbooks. Where necessary, we will continue to investigate and pursue these violations in our district.”
As part of the settlement announced today, Halifax also has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG), which obligates Halifax to undertake substantial internal compliance reforms and to submit its federal health care program claims to independent review for the next five years.
“Patients deserve to know that recommendations are based on sound medical practice, not illegal financial relationships between providers,” said Inspector General for the U.S. Department of Health and Human Services Daniel R. Levinson. “Halifax now also is required to hire a legal reviewer to monitor provider arrangements and an additional compliance expert to assist the board in fulfilling its oversight obligations. Both of these independent reviewers will submit regular reports to my agency.”
The settlement announced today stems from a whistleblower complaint filed by an employee of Halifax Hospital, Elin Baklid-Kunz, pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the government and to share in the proceeds of the suit. The Act also permits the government to intervene and take over the lawsuit, as it did in this case as to some of Baklid-Kunz’s allegations. Baklid-Kunz will receive $20.8 million of the settlement.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius. 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 this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.
The investigation and litigation was conducted by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Middle District of Florida and HHS-OIG. The claims settled by this agreement are allegations only, and there has been no determination of liability, except as determined by the court’s Nov. 13, 2013, ruling.
U.S. CONGRATULATES PEOPLE OF MAURITIUS ON THEIR INDEPENDENCE DAY
FROM: U.S. STATE DEPARTMENT
Statement on the Occasion of the Republic of Mauritius' National Day
Press Statement
John Kerry
Secretary of State
Washington, DC
March 11, 2014
On behalf of President Obama and the people of the United States, I congratulate all citizens of Mauritius as you celebrate the 46th year of your independence on March 12. The American people share your pride in the long-established democratic traditions that form the bedrock of our nations’ friendship. Mauritius has embraced the principles of democratic governance, economic reform, and social tolerance that serve as a model to others around the world. The United States appreciates Mauritius’ support for efforts to promote regional security and economic development. As you celebrate with family and friends, we wish the people of Mauritius continued peace and prosperity.
Statement on the Occasion of the Republic of Mauritius' National Day
Press Statement
John Kerry
Secretary of State
Washington, DC
March 11, 2014
On behalf of President Obama and the people of the United States, I congratulate all citizens of Mauritius as you celebrate the 46th year of your independence on March 12. The American people share your pride in the long-established democratic traditions that form the bedrock of our nations’ friendship. Mauritius has embraced the principles of democratic governance, economic reform, and social tolerance that serve as a model to others around the world. The United States appreciates Mauritius’ support for efforts to promote regional security and economic development. As you celebrate with family and friends, we wish the people of Mauritius continued peace and prosperity.
SEC CHARGES ANIMAL FEED COMPANY AND EXECUTIVES WITH ACCOUNTING FRAUD
FROM: SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today charged an animal feed company and top executives with conducting a massive accounting fraud in which they repeatedly reported fake revenues from their China operations in order to meet financial targets and prop up the stock price.
The SEC alleges that four executives in China orchestrated the scheme at AgFeed Industries Inc., which was based in China and publicly traded in the U.S. before merging with a U.S. company in September 2010 and spreading its operations between the two countries. With the bulk of its hog production operations in China, the executives used a variety of methods to inflate revenue from 2008 to mid-2011, including fake invoices for the sale of feed and purported sales of hogs that didn’t really exist. They later tried to cover up their actions by saying the fake hogs died. Because fatter hogs bring higher market prices, they also inflated the weights of actual hogs sold and correspondingly inflated the sales revenues for those hogs.
The SEC also charged a company executive and a company director in the U.S. with scheming to avoid or delay disclosure of the accounting fraud once they learned about it in 2011 while engaged in efforts to raise capital for expansion and acquisitions. The director, K. Ivan (Van) Gothner, was chair of AgFeed’s audit committee. He sought advice from a former director and company advisor who responded in e-mail communications that there was “not just smoke but fire” and recommended that AgFeed hire professional investigators guided by outside legal counsel. However, Gothner ignored the recommendation and internalized the situation while false financial reporting continued.
The SEC also reached a settlement with another U.S.-based company executive and a cooperation agreement with a different executive in the U.S. The eight executives involved in the SEC’s case are no longer at AgFeed, which is headquartered in Hendersonville, Tenn., and has filed for bankruptcy.
“AgFeed’s accounting misdeeds started in China, and U.S. executives failed to properly investigate and disclose them to investors,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “This is a cautionary tale of what happens when an audit committee chair fails to perform his gatekeeper function in the face of massive red flags.”
The SEC’s complaint filed in U.S. District Court for the Middle District of Tennessee charges executive chairman Songyan Li, CEO Junhong Xiong, CFO Selina Jin, and controller Shaobo Ouyang as the management in China behind the scheme, which began in 2008 after AgFeed acquired 29 Chinese farms for its new hog production division. The inflated numbers that included sales of fake hogs and bloated weights of actual hogs were recorded in a fake “outside” set of books that the company provided to its outside auditors. The “inside” real set of books contained accurate, lower revenue numbers that were hidden from auditors. Li, Xiong, Jin, and Ouyang caused AgFeed to report false revenues of approximately $239 million.
According to the SEC’s complaint, U.S. management learned of the accounting fraud by early June 2011, but failed to take adequate steps to investigate and disclose it to investors. Gothner and the CFO who replaced Jin after the merger, Edward J. Pazdro, specifically learned that AgFeed’s China operations kept two sets of accounting books and that Ouyang had admitted to the fraud. Gothner and Pazdro even obtained a partial copy of the two sets of books as well as a memo from AgFeed’s in-house counsel from China that concluded – based on witness accounts and documentary evidence – that the company was involved in a widespread accounting fraud. The memo noted that two sets of accounting books were maintained “in order to make AgFeed’s revenue and net income look better.” The memo concluded that Xiong and Jin had directed the accounting fraud, and Xiong had ordered the destruction of the second set of books.
The SEC alleges that instead of fulfilling their responsibilities as the company’s stewards of financial reporting, Gothner and Pazdro failed to conduct or prompt the company to conduct any further meaningful investigation into the misconduct. Not only did they fail to disclose the fraud to investors or law enforcement, but Gothner and Pazdro instead engaged in efforts to spin off the company’s feed division and raise capital for expansion and acquisitions that would enable profits for AgFeed and them personally. Even as additional red flags arose in June and July 2011, they failed to take appropriate actions. They misled AgFeed’s outside auditor and caused the company to issue false and misleading press releases and SEC filings.
“Officers and directors have an obligation to exercise diligence and ensure that their financial reporting is accurate,” said Julie Lutz, director of the SEC’s Denver Regional Office. “Despite learning about false and misleading financial information, AgFeed executives failed to come clean with investors or law enforcement.”
The SEC’s complaint charges AgFeed, Xiong, Li, Jin, Ouyang, Gothner, and Pazdro with violating or aiding and abetting violations of the anti-fraud, reporting, books and records, and internal controls provisions of the federal securities laws. Xiong, Li, Jin, Ouyang, Gothner, and Pazdro also are charged with making false statements to AgFeed’s outside auditors. The SEC’s complaint seeks disgorgement of ill-gotten gains plus prejudgment interest as well as financial penalties and officer-and-director bars. The SEC also seeks to suspend Jin, Ouyang, and Pazdro from practicing as accountants on behalf of any publicly-traded company or other entity regulated by the SEC.
AgFeed’s former chairman and interim CEO John A. Stadler separately consented to an SEC order barring him from acting as an officer or director and requiring him to pay a $100,000 penalty and cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-11, 13a-13, 13a-14, 13b2-1, and 13b2-2 thereunder. He neither admitted nor denied the findings in the order.
AgFeed’s former CFO Clayton T. Marshall, who replaced Pazdro, entered into a cooperation agreement with the SEC. The terms of his settlement reflect his assistance in the SEC’s investigation and anticipated cooperation in the pending court action. Marshall agreed to be suspended from practicing as an accountant on behalf of any publicly-traded company or other entity regulated by the SEC for a period of at least five years. Without admitting or denying the findings, he consented to an SEC order requiring him to cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-13, 13a-14, 13b2-1, and 13b2-2 thereunder. Whether a financial penalty should be imposed against Marshall will be determined at a later date.
AgFeed consented to an SEC order pursuant to Section 12(j) of the Exchange Act that revokes the registration of each class of its securities. The SEC’s case against AgFeed in federal court is continuing.
The SEC’s investigation was conducted by Michael Cates, Rachael Clarke, Donna Walker, and Ian Karpel of the Denver Regional Office. The SEC’s litigation will be led by Nancy Gegenheimer and Gregory Kasper.
The Securities and Exchange Commission today charged an animal feed company and top executives with conducting a massive accounting fraud in which they repeatedly reported fake revenues from their China operations in order to meet financial targets and prop up the stock price.
The SEC alleges that four executives in China orchestrated the scheme at AgFeed Industries Inc., which was based in China and publicly traded in the U.S. before merging with a U.S. company in September 2010 and spreading its operations between the two countries. With the bulk of its hog production operations in China, the executives used a variety of methods to inflate revenue from 2008 to mid-2011, including fake invoices for the sale of feed and purported sales of hogs that didn’t really exist. They later tried to cover up their actions by saying the fake hogs died. Because fatter hogs bring higher market prices, they also inflated the weights of actual hogs sold and correspondingly inflated the sales revenues for those hogs.
The SEC also charged a company executive and a company director in the U.S. with scheming to avoid or delay disclosure of the accounting fraud once they learned about it in 2011 while engaged in efforts to raise capital for expansion and acquisitions. The director, K. Ivan (Van) Gothner, was chair of AgFeed’s audit committee. He sought advice from a former director and company advisor who responded in e-mail communications that there was “not just smoke but fire” and recommended that AgFeed hire professional investigators guided by outside legal counsel. However, Gothner ignored the recommendation and internalized the situation while false financial reporting continued.
The SEC also reached a settlement with another U.S.-based company executive and a cooperation agreement with a different executive in the U.S. The eight executives involved in the SEC’s case are no longer at AgFeed, which is headquartered in Hendersonville, Tenn., and has filed for bankruptcy.
“AgFeed’s accounting misdeeds started in China, and U.S. executives failed to properly investigate and disclose them to investors,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “This is a cautionary tale of what happens when an audit committee chair fails to perform his gatekeeper function in the face of massive red flags.”
The SEC’s complaint filed in U.S. District Court for the Middle District of Tennessee charges executive chairman Songyan Li, CEO Junhong Xiong, CFO Selina Jin, and controller Shaobo Ouyang as the management in China behind the scheme, which began in 2008 after AgFeed acquired 29 Chinese farms for its new hog production division. The inflated numbers that included sales of fake hogs and bloated weights of actual hogs were recorded in a fake “outside” set of books that the company provided to its outside auditors. The “inside” real set of books contained accurate, lower revenue numbers that were hidden from auditors. Li, Xiong, Jin, and Ouyang caused AgFeed to report false revenues of approximately $239 million.
According to the SEC’s complaint, U.S. management learned of the accounting fraud by early June 2011, but failed to take adequate steps to investigate and disclose it to investors. Gothner and the CFO who replaced Jin after the merger, Edward J. Pazdro, specifically learned that AgFeed’s China operations kept two sets of accounting books and that Ouyang had admitted to the fraud. Gothner and Pazdro even obtained a partial copy of the two sets of books as well as a memo from AgFeed’s in-house counsel from China that concluded – based on witness accounts and documentary evidence – that the company was involved in a widespread accounting fraud. The memo noted that two sets of accounting books were maintained “in order to make AgFeed’s revenue and net income look better.” The memo concluded that Xiong and Jin had directed the accounting fraud, and Xiong had ordered the destruction of the second set of books.
The SEC alleges that instead of fulfilling their responsibilities as the company’s stewards of financial reporting, Gothner and Pazdro failed to conduct or prompt the company to conduct any further meaningful investigation into the misconduct. Not only did they fail to disclose the fraud to investors or law enforcement, but Gothner and Pazdro instead engaged in efforts to spin off the company’s feed division and raise capital for expansion and acquisitions that would enable profits for AgFeed and them personally. Even as additional red flags arose in June and July 2011, they failed to take appropriate actions. They misled AgFeed’s outside auditor and caused the company to issue false and misleading press releases and SEC filings.
“Officers and directors have an obligation to exercise diligence and ensure that their financial reporting is accurate,” said Julie Lutz, director of the SEC’s Denver Regional Office. “Despite learning about false and misleading financial information, AgFeed executives failed to come clean with investors or law enforcement.”
The SEC’s complaint charges AgFeed, Xiong, Li, Jin, Ouyang, Gothner, and Pazdro with violating or aiding and abetting violations of the anti-fraud, reporting, books and records, and internal controls provisions of the federal securities laws. Xiong, Li, Jin, Ouyang, Gothner, and Pazdro also are charged with making false statements to AgFeed’s outside auditors. The SEC’s complaint seeks disgorgement of ill-gotten gains plus prejudgment interest as well as financial penalties and officer-and-director bars. The SEC also seeks to suspend Jin, Ouyang, and Pazdro from practicing as accountants on behalf of any publicly-traded company or other entity regulated by the SEC.
AgFeed’s former chairman and interim CEO John A. Stadler separately consented to an SEC order barring him from acting as an officer or director and requiring him to pay a $100,000 penalty and cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20, 13a-11, 13a-13, 13a-14, 13b2-1, and 13b2-2 thereunder. He neither admitted nor denied the findings in the order.
AgFeed’s former CFO Clayton T. Marshall, who replaced Pazdro, entered into a cooperation agreement with the SEC. The terms of his settlement reflect his assistance in the SEC’s investigation and anticipated cooperation in the pending court action. Marshall agreed to be suspended from practicing as an accountant on behalf of any publicly-traded company or other entity regulated by the SEC for a period of at least five years. Without admitting or denying the findings, he consented to an SEC order requiring him to cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-13, 13a-14, 13b2-1, and 13b2-2 thereunder. Whether a financial penalty should be imposed against Marshall will be determined at a later date.
AgFeed consented to an SEC order pursuant to Section 12(j) of the Exchange Act that revokes the registration of each class of its securities. The SEC’s case against AgFeed in federal court is continuing.
The SEC’s investigation was conducted by Michael Cates, Rachael Clarke, Donna Walker, and Ian Karpel of the Denver Regional Office. The SEC’s litigation will be led by Nancy Gegenheimer and Gregory Kasper.
U.S. DEFENSE DEPARTMENT CONTRACTS FOR MARCH 11, 2014
FROM: U.S. DEFENSE DEPARTMENT
CONTRACTS
DEFENSE LOGISTICS AGENCY
Draeger Medical Inc., Telford, Pa., has been awarded a maximum $140,000,000 modification (P00067) exercising the third option period on a five-year base contract (SPM200-07-D-8003) with five one-year option periods for anesthesia machines, monitors, ventilators and related accessories. This is a fixed-price with economic-price-adjustment, indefinite-delivery/indefinite-quantity contract. Location of performance is Pennsylvania with a March 11, 2015 performance completion date. Using military services are Army, Navy, Air Force, Marine Corps, federal civilian agencies, and Department of Veterans Affairs. Type of appropriation is fiscal 2014 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pa.
Genesis Vision, doing business as Rochester Optical*, Rochester, N.Y., has been awarded a maximum $50,000,000 fixed-price with economic-price-adjustment contract for optical frames. This is a three-year base contract with two one-year option periods. Location of performance is New York with a March 10, 2015 performance completion date. Using military services are Army, Navy, Air Force, Marine Corps, and federal civilian agencies. Type of appropriation is fiscal 2014 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pa., (SPM2DE-14-D-7559).
NAVY
Computer Systems Center Inc.*, Springfield, Va., is being awarded a $12,000,000 cost-plus-fixed-fee, indefinite-delivery/indefinite-quantity contract for the development and fielding of command, control, intelligence, surveillance, reconnaissance and targeting systems for Deployable Tactical Operations Center Components. Work will be performed in Springfield, Va., and is expected to be completed in March 2018. Fiscal 2014 research, development, test and evaluation, Navy funds in the amount of $1,200,000 will be obligated at time of award, none of which will expire at the end of the current fiscal year. This contract was not competitively procured pursuant to FAR 6.302-1. The Naval Air Warfare Center Weapons Division, China Lake, Calif., is the contracting activity (N68936-14-D-0013).
Mikel, Inc.*, Fall River, Mass., is being awarded a $6,689,497 modification to previously awarded contract (N00024-11-C-6295) to exercise options for engineering and technical services for combat systems of the future. Work will be performed in Middletown, R.I. (77 percent), Fall River, Mass. (10 percent), Manassas, Va. (10 percent); Pearl Harbor, Hawaii (2 percent) and North Kingstown, R.I. (1 percent), and is expected to be completed by September 2014. Fiscal 2014 operations and maintenance, Navy funding in the amount of $365,000 will be obligated at time of award and contract funds will expire at the end of the current fiscal year. This contract was not competitively procured, as award is being made under the authority of 10 U.S.C. 2304(c)(5)-Authorized or Required by Statue 15 U.S.C. 638 (r)-Aid to Small Business. The Naval Sea System Command, Washington D.C., is the contracting activity.
AIR FORCE
The Boeing Co., Defense, Space and Security, Kent, Wash., has been awarded a $10,814,354 modification (001) on an existing indefinite-delivery/indefinite-quantity contract (F19628-01-D-0016) for trade studies and analysis for the Japan AWACS mission computing upgrade DMS 3.X requirements planning and hardware procurement to procure end of life hardware. This contract action is implemented as a modification to delivery order #0097 under the AWACS modernization and sustainment support basic contract. Work will be performed at Kent, Wash., and is expected to be completed by Dec. 31, 2014. This is an unclassified foreign military sales contract for Japan. Air Force Life Cycle Management Center/HBSK, Hanscom Air Force Base, Mass., is the contracting activity.
*Small Business
CONTRACTS
DEFENSE LOGISTICS AGENCY
Draeger Medical Inc., Telford, Pa., has been awarded a maximum $140,000,000 modification (P00067) exercising the third option period on a five-year base contract (SPM200-07-D-8003) with five one-year option periods for anesthesia machines, monitors, ventilators and related accessories. This is a fixed-price with economic-price-adjustment, indefinite-delivery/indefinite-quantity contract. Location of performance is Pennsylvania with a March 11, 2015 performance completion date. Using military services are Army, Navy, Air Force, Marine Corps, federal civilian agencies, and Department of Veterans Affairs. Type of appropriation is fiscal 2014 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pa.
Genesis Vision, doing business as Rochester Optical*, Rochester, N.Y., has been awarded a maximum $50,000,000 fixed-price with economic-price-adjustment contract for optical frames. This is a three-year base contract with two one-year option periods. Location of performance is New York with a March 10, 2015 performance completion date. Using military services are Army, Navy, Air Force, Marine Corps, and federal civilian agencies. Type of appropriation is fiscal 2014 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pa., (SPM2DE-14-D-7559).
NAVY
Computer Systems Center Inc.*, Springfield, Va., is being awarded a $12,000,000 cost-plus-fixed-fee, indefinite-delivery/indefinite-quantity contract for the development and fielding of command, control, intelligence, surveillance, reconnaissance and targeting systems for Deployable Tactical Operations Center Components. Work will be performed in Springfield, Va., and is expected to be completed in March 2018. Fiscal 2014 research, development, test and evaluation, Navy funds in the amount of $1,200,000 will be obligated at time of award, none of which will expire at the end of the current fiscal year. This contract was not competitively procured pursuant to FAR 6.302-1. The Naval Air Warfare Center Weapons Division, China Lake, Calif., is the contracting activity (N68936-14-D-0013).
Mikel, Inc.*, Fall River, Mass., is being awarded a $6,689,497 modification to previously awarded contract (N00024-11-C-6295) to exercise options for engineering and technical services for combat systems of the future. Work will be performed in Middletown, R.I. (77 percent), Fall River, Mass. (10 percent), Manassas, Va. (10 percent); Pearl Harbor, Hawaii (2 percent) and North Kingstown, R.I. (1 percent), and is expected to be completed by September 2014. Fiscal 2014 operations and maintenance, Navy funding in the amount of $365,000 will be obligated at time of award and contract funds will expire at the end of the current fiscal year. This contract was not competitively procured, as award is being made under the authority of 10 U.S.C. 2304(c)(5)-Authorized or Required by Statue 15 U.S.C. 638 (r)-Aid to Small Business. The Naval Sea System Command, Washington D.C., is the contracting activity.
AIR FORCE
The Boeing Co., Defense, Space and Security, Kent, Wash., has been awarded a $10,814,354 modification (001) on an existing indefinite-delivery/indefinite-quantity contract (F19628-01-D-0016) for trade studies and analysis for the Japan AWACS mission computing upgrade DMS 3.X requirements planning and hardware procurement to procure end of life hardware. This contract action is implemented as a modification to delivery order #0097 under the AWACS modernization and sustainment support basic contract. Work will be performed at Kent, Wash., and is expected to be completed by Dec. 31, 2014. This is an unclassified foreign military sales contract for Japan. Air Force Life Cycle Management Center/HBSK, Hanscom Air Force Base, Mass., is the contracting activity.
*Small Business
RENT-TO-OWN COMPANY SETTLES WEBCAM AND OTHER CONSUMER SPYING CHARGES WITH FTC
FROM: FEDERAL TRADE COMMISSION
FTC Approves Final Order Settling Charges that Aaron’s Inc. Allowed Franchisees to Spy on Consumers via Rental Computers
Following a public comment period, the Federal Trade Commission has approved a final order settling charges that Aaron’s Inc., a national rent-to-own retailer, knowingly played a direct and vital role in its franchisees’ installation and use of software on rental computers that secretly monitored consumers, including taking webcam pictures of them in their homes.
Under the terms of a consent agreement, first announced in October 2013, Aaron’s is prohibited from using monitoring technology to gather consumers’ information from rental computers, or receiving, storing or communicating such information, except to provide technical support at a consumer’s request. The terms of the settlement also bar the company from gathering information from any consumer product via geophysical location tracking technology without clearly notifying and obtaining express consent from consumers at the time of rental. Aaron’s is further prohibited from installing or activating such technology on rental computers that does not clearly notify consumers of its presence immediately before each use, including via a prominent icon on the computer.
The order further bars Aaron’s from deceptively gathering information about consumers, and from using improperly obtained information to collect debt, money or property as part of a rent-to-own transaction. The company must delete or destroy any information it has collected improperly, and can transmit information obtained via monitoring or location tracking only if it is encrypted. In addition, the order requires Aaron’s to conduct annual monitoring and oversight of its franchisees for compliance with the terms of the agreement, act immediately to ensure compliance, and terminate any franchisee that fails to comply.
The Commission vote approving the final order and letters to members of the public who commented on it was 4-0. (FTC File No. 1123264.
FTC Approves Final Order Settling Charges that Aaron’s Inc. Allowed Franchisees to Spy on Consumers via Rental Computers
Following a public comment period, the Federal Trade Commission has approved a final order settling charges that Aaron’s Inc., a national rent-to-own retailer, knowingly played a direct and vital role in its franchisees’ installation and use of software on rental computers that secretly monitored consumers, including taking webcam pictures of them in their homes.
Under the terms of a consent agreement, first announced in October 2013, Aaron’s is prohibited from using monitoring technology to gather consumers’ information from rental computers, or receiving, storing or communicating such information, except to provide technical support at a consumer’s request. The terms of the settlement also bar the company from gathering information from any consumer product via geophysical location tracking technology without clearly notifying and obtaining express consent from consumers at the time of rental. Aaron’s is further prohibited from installing or activating such technology on rental computers that does not clearly notify consumers of its presence immediately before each use, including via a prominent icon on the computer.
The order further bars Aaron’s from deceptively gathering information about consumers, and from using improperly obtained information to collect debt, money or property as part of a rent-to-own transaction. The company must delete or destroy any information it has collected improperly, and can transmit information obtained via monitoring or location tracking only if it is encrypted. In addition, the order requires Aaron’s to conduct annual monitoring and oversight of its franchisees for compliance with the terms of the agreement, act immediately to ensure compliance, and terminate any franchisee that fails to comply.
The Commission vote approving the final order and letters to members of the public who commented on it was 4-0. (FTC File No. 1123264.
Tuesday, March 11, 2014
LITTORAL COMBAT SHIP CONTRACT AWARDS ANNOUNCED
FROM: U.S. NAVY
Fiscal Year 2014 Littoral Combat Ship Contract Awards Announced
Story Number: NNS140310-12
Release Date: 3/10/2014 9:15:00 PM
From Program Executive Office Littoral Combat Ships (PEO LCS) Public Affairs
WASHINGTON (NNS) -- Today, contract modifications were issued to Lockheed Martin Corporation and Austal USA under their respective Littoral Combat Ship (LCS) block buy contracts to add funding for construction of two fiscal year 2014 Littoral Combat Ships each.
These are the seventh and eighth ships fully funded for each contractor under its previously-awarded, fixed-price incentive "block buy" contract for the design and construction of up to ten LCS Flight 0+ ships. The two block buy contracts provide for the acquisition of a total of up to 20 Littoral Combat Ships from fiscal year 2010 through fiscal year 2015, subject to availability of appropriations.
The amount of funds added under the block buy contract with Lockheed Martin Corporation for the fiscal year 2014 LCS ships is $699 million. The amount of funds added under the block buy contract with Austal USA for the fiscal year 2014 LCS ships is $684 million. The ships will be built at Fincantieri Marinette Marine Corporation in Marinette, Wis., and Austal USA in Mobile, Ala., respectively.
The prices for the fiscal year 2014 ships were determined based on the competitive, LCS dual block buy contracts that were awarded December 29, 2010.
The additional funding obligated is for the 17th - 20th ships in the LCS class. Presently, four LCS ships have been delivered to the Navy. USS Freedom (LCS 1) concluded its first deployment in December 2013 and is currently at its home port in San Diego. USS Independence (LCS 2) is undergoing Mine Countermeasures developmental testing in San Diego. USS Fort Worth (LCS 3) is scheduled to begin initial operational testing and evaluation of its surface warfare mission module in March, and Coronado (LCS 4) is scheduled to be commissioned April 5, 2014, in Coronado, Calif.
LCS is needed to fill critical, urgent warfighting requirement gaps that exist today. LCS is required to establish and maintain U.S. Navy dominance in the littorals and sea lines of communication choke points around the world.
Fiscal Year 2014 Littoral Combat Ship Contract Awards Announced
Story Number: NNS140310-12
Release Date: 3/10/2014 9:15:00 PM
From Program Executive Office Littoral Combat Ships (PEO LCS) Public Affairs
WASHINGTON (NNS) -- Today, contract modifications were issued to Lockheed Martin Corporation and Austal USA under their respective Littoral Combat Ship (LCS) block buy contracts to add funding for construction of two fiscal year 2014 Littoral Combat Ships each.
These are the seventh and eighth ships fully funded for each contractor under its previously-awarded, fixed-price incentive "block buy" contract for the design and construction of up to ten LCS Flight 0+ ships. The two block buy contracts provide for the acquisition of a total of up to 20 Littoral Combat Ships from fiscal year 2010 through fiscal year 2015, subject to availability of appropriations.
The amount of funds added under the block buy contract with Lockheed Martin Corporation for the fiscal year 2014 LCS ships is $699 million. The amount of funds added under the block buy contract with Austal USA for the fiscal year 2014 LCS ships is $684 million. The ships will be built at Fincantieri Marinette Marine Corporation in Marinette, Wis., and Austal USA in Mobile, Ala., respectively.
The prices for the fiscal year 2014 ships were determined based on the competitive, LCS dual block buy contracts that were awarded December 29, 2010.
The additional funding obligated is for the 17th - 20th ships in the LCS class. Presently, four LCS ships have been delivered to the Navy. USS Freedom (LCS 1) concluded its first deployment in December 2013 and is currently at its home port in San Diego. USS Independence (LCS 2) is undergoing Mine Countermeasures developmental testing in San Diego. USS Fort Worth (LCS 3) is scheduled to begin initial operational testing and evaluation of its surface warfare mission module in March, and Coronado (LCS 4) is scheduled to be commissioned April 5, 2014, in Coronado, Calif.
LCS is needed to fill critical, urgent warfighting requirement gaps that exist today. LCS is required to establish and maintain U.S. Navy dominance in the littorals and sea lines of communication choke points around the world.
SECRETARY KERRY'S REMARKS ON ANNIVERSARY OF EAST JAPAN EARTHQUAKE
FROM: STATE DEPARTMENT
Third Anniversary of the Great East Japan Earthquake
Press Statement
John Kerry
Secretary of State
Washington, DC
March 11, 2014
I will never forget hearing the news in my Senate office on that bleak Friday morning: a devastating 8.9-magnitude earthquake had ripped through Japan. The images were gut-wrenching: entire cities reduced to rubble; homes razed or washed out to sea; raging waters sweeping away not just cars and trucks and buildings, but the very fabric of people’s lives.
My cousin had recently left for Japan with her husband. I thought of them and of the many other families, Japanese and American, I had personally never met but whose fates were inextricably linked on that tragic day.
Three years have passed since the Great East Japan Earthquake of March 11, 2011. Today, we remember the courage of the citizens of the Tohoku region and all of Japan. We remember the volunteers from nations around the world who dug deep and pitched in. And we remember the outpouring of emotion, from public condolences to those who shared their grief in private ways – and still do.
I’ve made two trips to Japan as Secretary of State. Every time I visit, in every meeting, I am deeply impressed by the strength of the Japanese people in overcoming the devastation of 3/11. And I know U.S. Ambassador to Japan Caroline Kennedy shares in that pride. Like so many members of her family, Ambassador Kennedy has always understood the vital importance of advancing a cause greater than one’s self. That’s why she visited the Tohoku region on her first official trip outside of Tokyo. And that’s why the United States will continue to stand shoulder to shoulder with our Japanese friends as they rebuild their lives and communities.
On this solemn anniversary, I join all Americans in sending our thoughts and prayers to the people of Japan.
Third Anniversary of the Great East Japan Earthquake
Press Statement
John Kerry
Secretary of State
Washington, DC
March 11, 2014
I will never forget hearing the news in my Senate office on that bleak Friday morning: a devastating 8.9-magnitude earthquake had ripped through Japan. The images were gut-wrenching: entire cities reduced to rubble; homes razed or washed out to sea; raging waters sweeping away not just cars and trucks and buildings, but the very fabric of people’s lives.
My cousin had recently left for Japan with her husband. I thought of them and of the many other families, Japanese and American, I had personally never met but whose fates were inextricably linked on that tragic day.
Three years have passed since the Great East Japan Earthquake of March 11, 2011. Today, we remember the courage of the citizens of the Tohoku region and all of Japan. We remember the volunteers from nations around the world who dug deep and pitched in. And we remember the outpouring of emotion, from public condolences to those who shared their grief in private ways – and still do.
I’ve made two trips to Japan as Secretary of State. Every time I visit, in every meeting, I am deeply impressed by the strength of the Japanese people in overcoming the devastation of 3/11. And I know U.S. Ambassador to Japan Caroline Kennedy shares in that pride. Like so many members of her family, Ambassador Kennedy has always understood the vital importance of advancing a cause greater than one’s self. That’s why she visited the Tohoku region on her first official trip outside of Tokyo. And that’s why the United States will continue to stand shoulder to shoulder with our Japanese friends as they rebuild their lives and communities.
On this solemn anniversary, I join all Americans in sending our thoughts and prayers to the people of Japan.
TWO STORMS BRINGING TROUBLE TO AUSTRALIA
 |
Right: NASA's Aqua satellite passed over Queensland on March 10 at 04:00 UTC and captured Tropical Cyclones Gillian (left) in the Gulf of Carpentaria, just west of Queensland's York Peninsula, and Hadi (right) in the Coral Sea, east of Queensland. Image Credit: NASA Goddard MODIS Rapid Response Team
Gillian and Hadi Spell Double Tropical Trouble Around Queensland
On Friday, March 7 there were two tropical lows located east and west of Queensland, Australia. Those lows organized and intensified into Tropical Cyclone Gillian and Hadi and were caught together in one amazing image from NASA's Aqua satellite. While Gillian has already made one landfall and is expected to make another, Hadi is turning tail and running from the mainland.
NASA's Aqua satellite passed over Queensland on March 10 at 04:00 UTC and the Moderate Resolution Imaging Spectroradiometer instrument known as MODIS captured Tropical Cyclones Gillian in the Gulf of Carpentaria, just west of Queensland's York Peninsula, and Hadi in the Coral Sea, east of Queensland.
On March 10 at 0300 UTC, Tropical Cyclone Gillian, formerly known as the low pressure area "System 98P" had maximum sustained winds near 35 knots/40 mph/62 kph. It was located about 230 nautical miles northeast of Mornington Island. Gillian is moving to the southeast at 5 knots/5.7 mph/9.2 kph, but is expected to re-curve to the southwest.
The Joint Typhoon Warning Center or JTWC noted that animated multi-spectral satellite imagery and radar from Weipa showed that the center made landfall in the northwestern coast of the York Peninsula. Gillian's center is also being battered by moderate northeasterly vertical wind shear, which is preventing any further intensification, but that's expected to change as Gillian turns back toward the Gulf. The JTWC expects Gillian to re-emerge in the Gulf of Carpentaria and head in a southwesterly direction, passing west of Mornington Island (located in the southern Gulf). JTWC forecasts Gillian to make its second and final landfall on the mainland near the Northern Territory/Queensland border on March 13.
The Australian Bureau of Meteorology noted on March 10, that residents from Burketown to the Queensland / Northern Territory border, including Mornington Island and Sweers Island should consider what action they will need to take if the cyclone threat increases.
Tropical Cyclone Hadi, formerly tropical low pressure area "System 96P" lingered off the coast of eastern Queensland near Willis Island on March 8 and 9 and is now being pushed northeast and out to sea.
On March 10 at 0900 UTC/5 a.m. EDT, Tropical Cyclone Hadi had maximum sustained winds near 35 knots/40 mph/62 kph. It was located about 176 nautical miles east-southeast of Willis Island, near 18.8 south and 151.3 east. Hadi was moving slowly to the east-southeast at 4 knots/4.6 mph/7.4 kph.
Satellite imagery showed moderate to strong vertical wind shear, between 20 and 30 knots/23.0 and 34.5 mph / 37.0 and 55.5 kph pushed the strongest thunderstorms south of the center of circulation. The JTWC expects Hadi to strengthen to 55 knots/63.2 mph/101.9 kph as it tracks to the northeast over the next several days.
RECENT U.S. DEFENSE DEPARTMENT PHOTOS
FROM: U.S. DEFENSE DEPARTMENT
Army Rangers prepare their equipment before loading into an aircraft on Fort Benning, Ga., March 3, 2014. The Rangers are assigned to 3rd Battalion, 75th Ranger Regiment. U.S. Army photo by Sgt. Earnest Knight.
Army Rangers provide security during a multilateral airborne operation on Tyndall Air Force Base, Fla., March 3, 2014. U.S. Army photo by Staff Sgt. Teddy Wade.
OBSTRUCTION GUILTY PLEA OBTAINED IN BRIBERY CASE INVOLVING MINING RIGHTS IN REPUBLIC OF GUINEA
FROM: U.S. JUSTICE DEPARTMENT
Monday, March 10, 2014
French Citizen Pleads Guilty to Obstructing Criminal Investigation into Alleged Bribes Paid to Win Mining Rights in the Republic of Guinea
Frederic Cilins, 51, a French citizen, pleaded guilty today in the Southern District of New York to obstructing a federal criminal investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.
Mythili Raman, Acting Assistant Attorney General for the Justice Department’s Criminal Division; Preet Bharara, the U.S. Attorney for the Southern District of New York; and George Venizelos, the Assistant Director in Charge of the FBI’s New York Field Office, made the announcement.
Cilins pleaded guilty to a one-count superseding information filed today, which alleges that Cilins agreed to pay money to induce a witness to destroy, or provide to him for destruction, documents sought by the FBI. According to the superseding information, those documents related to allegations concerning the payment of bribes to obtain mining concessions in the Simandou region of the Republic of Guinea.
According to publicly filed documents, Cilins allegedly attempted to obstruct an ongoing federal grand jury investigation concerning potential violations of the Foreign Corrupt Practices Act and laws proscribing money laundering. Court documents state the federal grand jury was investigating whether a particular mining company and its affiliates – on whose behalf Cilins had been working – transferred into the United States funds in furtherance of a scheme to obtain and retain valuable mining concessions in the Republic of Guinea’s Simandou region. During monitored and recorded phone calls and face-to-face meetings, Cilins allegedly agreed to pay substantial sums of money to induce a witness to the bribery scheme to turn over documents to Cilins for destruction, which Cilins knew had been requested by the FBI and needed to be produced before a federal grand jury. Court documents also allege that Cilins sought to induce the witness to sign an affidavit containing numerous false statements regarding matters under investigation by the grand jury.
Court documents allege that the documents Cilins sought to destroy included original copies of contracts between the mining company and its affiliates and the former wife of a now-deceased Guinean government official, who at the relevant time held an office in Guinea that allowed him to influence the award of mining concessions. The contracts allegedly related to a scheme by which the mining company and its affiliates offered the wife of the Guinean official millions of dollars, which were to be distributed to the official’s wife as well as ministers or senior officials of Guinea’s government whose authority might be needed to secure the mining rights.
According to court documents, the official’s wife incorporated a company in 2008 that agreed to take all necessary steps to secure the valuable mining rights for the mining company’s subsidiary. That same contract stipulated that $2 million was to be transferred to the official’s wife’s company and an additional sum was to be “distributed among persons of good will who may have contributed to facilitating the granting of” the valuable mining rights. According to the complaint, in 2008, the mining company and its affiliates also agreed to give 5 percent of its ownership of particular mining areas in Guinea to the official’s wife.
The case is being investigated by the FBI. The case is being prosecuted by Trial Attorney Tarek Helou of the Criminal Division’s Fraud Section and Assistant United States Attorney Elisha J. Kobre of the Southern District of New York. The Justice Department’s Office of International Affairs and Office of Enforcement Operations also assisted in the investigation.
Monday, March 10, 2014
French Citizen Pleads Guilty to Obstructing Criminal Investigation into Alleged Bribes Paid to Win Mining Rights in the Republic of Guinea
Frederic Cilins, 51, a French citizen, pleaded guilty today in the Southern District of New York to obstructing a federal criminal investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.
Mythili Raman, Acting Assistant Attorney General for the Justice Department’s Criminal Division; Preet Bharara, the U.S. Attorney for the Southern District of New York; and George Venizelos, the Assistant Director in Charge of the FBI’s New York Field Office, made the announcement.
Cilins pleaded guilty to a one-count superseding information filed today, which alleges that Cilins agreed to pay money to induce a witness to destroy, or provide to him for destruction, documents sought by the FBI. According to the superseding information, those documents related to allegations concerning the payment of bribes to obtain mining concessions in the Simandou region of the Republic of Guinea.
According to publicly filed documents, Cilins allegedly attempted to obstruct an ongoing federal grand jury investigation concerning potential violations of the Foreign Corrupt Practices Act and laws proscribing money laundering. Court documents state the federal grand jury was investigating whether a particular mining company and its affiliates – on whose behalf Cilins had been working – transferred into the United States funds in furtherance of a scheme to obtain and retain valuable mining concessions in the Republic of Guinea’s Simandou region. During monitored and recorded phone calls and face-to-face meetings, Cilins allegedly agreed to pay substantial sums of money to induce a witness to the bribery scheme to turn over documents to Cilins for destruction, which Cilins knew had been requested by the FBI and needed to be produced before a federal grand jury. Court documents also allege that Cilins sought to induce the witness to sign an affidavit containing numerous false statements regarding matters under investigation by the grand jury.
Court documents allege that the documents Cilins sought to destroy included original copies of contracts between the mining company and its affiliates and the former wife of a now-deceased Guinean government official, who at the relevant time held an office in Guinea that allowed him to influence the award of mining concessions. The contracts allegedly related to a scheme by which the mining company and its affiliates offered the wife of the Guinean official millions of dollars, which were to be distributed to the official’s wife as well as ministers or senior officials of Guinea’s government whose authority might be needed to secure the mining rights.
According to court documents, the official’s wife incorporated a company in 2008 that agreed to take all necessary steps to secure the valuable mining rights for the mining company’s subsidiary. That same contract stipulated that $2 million was to be transferred to the official’s wife’s company and an additional sum was to be “distributed among persons of good will who may have contributed to facilitating the granting of” the valuable mining rights. According to the complaint, in 2008, the mining company and its affiliates also agreed to give 5 percent of its ownership of particular mining areas in Guinea to the official’s wife.
The case is being investigated by the FBI. The case is being prosecuted by Trial Attorney Tarek Helou of the Criminal Division’s Fraud Section and Assistant United States Attorney Elisha J. Kobre of the Southern District of New York. The Justice Department’s Office of International Affairs and Office of Enforcement Operations also assisted in the investigation.
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