Rochester Man Arrested for Filing False Tax Returns

U.S. Attorney William J. Hochul, Jr. announced today that a federal grand jury has returned an indictment charging Patrick Dandrea, 55, of Rochester, New York, with two counts of filing false tax returns. Each count carries a maximum sentence of three years in prison and a $100,000 fine.
Assistant U.S. Attorney Craig R. Gestring, who is handling the case, stated that according to the indictment, the defendant was awarded a contract with Erie County in 2006 to remove damaged trees and branches following a severe snow storm. As a result of this contract, Dandrea received over $5,000,000 in payments, which he failed to report on his 2006 and 2007 federal income tax returns.

The defendant was arrested this morning and will be arraigned before U.S. Magistrate Judge Jonathan W. Feldman at 12:00 p.m. today in Rochester.

The arrest and indictment are the culmination of an investigation on the part of special agents of the Internal Revenue Service, Criminal Investigations Division, under the direction of Victor Lessoff, Special Agent in Charge; and the Federal Bureau of Investigation, under the direction of Special Agent in Charge Christopher M. Piehota.

The fact that a defendant has been charged with a crime is merely an accusation, and the defendant is presumed innocent until and unless proven guilty.

Insurance Broker Sentenced to Over Four Years in Prison

An insurance broker who submitted false applications for insurance premium financing was sentenced today by United States District Judge Willis B. Hunt, Jr. to serve four years, two months in federal prison for using fictitious names in the course of a mail fraud scheme. Douglas Terry Dean, 61, of Jasper, Georgia, pleaded guilty to these charges on August 25, 2011.

“Fraud in the insurance industry leads to higher costs for everyone, including the ultimate consumer,” said United States Attorney Sally Quillian Yates. “This defendant’s scheme impacted not only his direct victims, but everyone who bears the burden of fraud by having to pay higher prices for goods and services.”

Dean was sentenced to four years, two months in prison, to be followed by three years of supervised release. He was ordered to pay restitution totaling approximately $6,964,157. Dean was convicted of these charges on August 25, 2011 upon his plea of guilty.

According to United States Attorney Yates, the charges, and other information presented in court: Dean was an insurance agent who owned his own firm, Dean & Moore Inc. Dean specialized in assisting commercial clients obtain insurance policies, as well as financing to pay for those policies. Dean submitted numerous false and fraudulent applications for financing to premium finance companies. Some of these applications were in the names of real people or companies, while others were submitted for fictitious entities.

The false information was not the same on every application, but examples include the amount to be financed or the existence of an insurance policy when none existed. On some applications, Dean neglected to inform the premium finance company that the insurance policy had already been financed by another company. Dean defrauded the premium finance companies of approximately $6,964,157, which he must now pay as restitution.

This case was investigated by special agents of the Federal Bureau of Investigation.

Assistant United States Attorney Christopher C. Bly prosecuted the case.

Founders of S3 Partners Charged in $21 Million Real Estate Investment Fraud Scheme

The three founders of S3 Partners who allegedly defrauded numerous individual investors and banks out of more than $21 million in connection with a real estate investment fraud scheme were arrested and arraigned on 33 counts of conspiracy, wire, mail, bank and securities fraud, United States Attorney Melinda Haag announced.

According to the indictment, which was filed in San Jose federal district court on May 23 and unsealed on May 24, from 2006 to 2009, Melvin Russell “Rusty” Shields, 42, of Granite Falls, North Carolina.; Michael Sims, 58, of Gilroy, California; and Sam Stafford, 56, of Campbell, California, defrauded individual investors and banks in the Northern District of California and elsewhere in connection with various real estate development projects. The three defendants conducted their business as “S3 Partners” out of a variety of locations including San Jose, Campbell, and Palo Alto, California; and Hickory, North Carolina. Shields, Sims, and Stafford allegedly engaged in securities fraud targeting elderly investors by encouraging those elderly investors to cash out their individual retirement accounts (IRAs) and wire the proceeds to the S3 Partners for the purchase of shares in an S3 Partners-controlled LLC. The three defendants falsely represented to investors that they would receive predictable high rates of return, that there was minimal to no risk of investing, and that profits from S3 Partners business projects would benefit various charitable and religious organizations. Shields, Sims, and Stafford obtained more than $21 million from investors and banks and converted more than half of those funds for their personal benefit, their personal business ventures, and other unauthorized purposes. Their conduct resulted in a near-total loss to investors.

On May 24, the Federal Bureau of Investigation arrested Sims and Stafford in Northern California and Shields in North Carolina pursuant to a sealed arrest warrant. That same day, Sims and Stafford made their initial appearances in San Jose before United States Magistrate Judge Paul Grewal where, subject to the posting of a $100,000 secured bond and being placed on home electronic monitoring, they were ordered released pending a detention hearing. Sims and Stafford are scheduled to appear at a detention hearing in San Jose tomorrow at 9:30 a.m, at which hearing Magistrate Judge Grewal will consider additional conditions governing their pretrial release. Shields made an initial appearance May 24 in Charlotte, North Carolina. After a detention hearing this morning before U.S. Magistrate Judge David C. Keesler, Shields was ordered released subject to a $100,000 unsecured bond and placed on home electronic monitoring.

The maximum statutory penalty for each count of conspiracy to commit wire, mail and bank fraud, wire fraud, and mail fraud in violation of Title 18, United States Code, Sections 1349, 1343 and 1341 is 20 years in prison and a fine of $250,000, plus restitution. The maximum statutory penalty for each count of bank fraud in violation of Title 18, United States Code, Section 1344 is 30 years prison and a fine of $1 million, plus restitution. The maximum statutory penalty for each count of Title 15, United States Code, Sections 78j(b) and 78ff; and 17 C.F.R. Section 240.10b-5-securities fraud is 20 years in prison and a fine of $5 million, plus restitution. Any sentence following conviction would, however, be determined by the court after considering the Federal Sentencing Guidelines, which take into account a number of factors and would be imposed in the discretion of the court.

Assistant United States Attorney Joseph Fazioli is prosecuting the case with the assistance of Legal Assistant Kamille Singh. The prosecution is the result of a multi-year investigation by the Federal Bureau of Investigation.

Please note, an indictment contains only allegations against an individual and, as with all defendants, Shields, Sims, and Stafford must be presumed innocent unless and until proven guilty.

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

New London Woman Sentenced to More Than Three Years in Federal Prison for Role in Mortgage Fraud Scheme

David B. Fein, United States Attorney for the District of Connecticut, announced that Isaura Guzman, 28, of New London, was sentenced today by Senior United States District Judge Alfred V. Covello in Hartford to 37 months of imprisonment, followed by three years of supervised release, for her participation in an eastern Connecticut mortgage fraud scheme.

According to court documents and statements made in court, from approximately 2004 to 2007, Jose Guzman, his daughter, Isaura Guzman, and others used mortgage brokerage, property management, and home improvement companies to arrange for individuals (“borrowers”) to purchase real estate, primarily residential housing properties located in New London County, by obtaining funding from various mortgage companies and mortgage originators after submitting false information on the borrowers’ mortgage loan applications. The fraudulent information included information regarding income, assets, employment, rent history, as well as the borrowers’ intention to make the properties their primary residence. The borrowers were compensated for participating in the scheme.
Isaura Guzman participated in the scheme, first as an assistant to Jose Guzman, and later as a licensed real estate agent for Elizabeth Athan Realty. Isaura Guzman bought and/or sold at least four houses as part of the conspiracy, and she recruited at least other three individuals into the scheme to act as buyers.

According to previously filed court documents, the government believes that more than 200 fraudulent mortgages were funded through this mortgage fraud scheme, causing more than $9 million in losses to lenders.

As part of her sentence, Judge Covello ordered Isaura Guzman to pay restitution in the amount of $7,811,695.44.

On June 14, 2010, Isaura Guzman pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud. Fifteen other individuals, including Jose Guzman, have pleaded guilty to various charges stemming from this scheme. Jose Guzman awaits sentencing.

This case is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Developmen, Office of Inspector General. The case is being prosecuted by Assistant United States Attorneys Michael S. McGarry and David T. Huang.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force or by sending an e-mail to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service-Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

Lancaster Man Sentenced for Using the Internet to Entice a Minor

U.S. Attorney William J. Hochul, Jr. announced today that Kevin Martis, 23, of Lancaster, New York, who was convicted of enticement of a minor and possession of child pornography, was sentenced to 78 months in prison U.S. District Judge Richard J. Arcara.

Assistant U.S. Attorney Maura O’Donnell, who handled the case, stated that the defendant used the Internet on two separate occasions to attempt to encourage a 13-year-old and a 15-year-old to engage in sexual activity. Martis initially contacted the minor victims through Facebook. Police were alerted by the parents of the minor victims. Law enforcement also found over 600 images of child pornography on the defendant’s computer, which included images of children under the age of 12.

“This case shows the important role parents can play in keeping their children safe,” said U.S. Attorney Hochul. “Thanks to the involvement of the parents, law enforcement was able to prevent this defendant from seriously harming two children.”

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state, and local resources to better locate, apprehend, and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

The sentencing is the result of an investigation by special agents of the Federal Bureau of Investigation, under the direction of Special Agent in Charge Christopher M. Piehota; and detectives from the Cheektowaga Police Department, under the direction of Police Chief David Zack. The FBI was assisted by the Kenmore, Depew, and Lancaster Police Departments.

Waterbury Man Sentenced to Two Years in Federal Prison for Possessing Child Pornography

David B. Fein, United States Attorney for the District of Connecticut, announced that Jose Miguel Ortiz, 33, of Waterbury, was sentenced today by United States District Judge Vanessa L. Bryant in Hartford to 24 months of imprisonment, followed by 10 years of supervised release, for possessing child pornography.

According to court documents and statements made in court, on February 8, 2008, during an interview with Federal Bureau of Investigation agents at his Waterbury residence, Ortiz admitted that he used an Internet file sharing program to view and possess images of child pornography. On that date, agents removed from the residence the family computer, a separate hard drive, and 27 compact discs. Subsequent analysis of the computer and related items revealed between 150 and 300 images of children under the age of 12 engaged in sexually explicit conduct.

On August 11, 2011, Ortiz pleaded guilty to one count of possession of child pornography.

This case was investigated by the Federal Bureau of Investigation and the Connecticut Computer Crimes Task Force, which includes federal, state, and local law enforcement agencies. The case was prosecuted by Assistant United States Attorney Deborah R. Slater.

This prosecution is part of the U.S. Department of Justice’s Project Safe Childhood Initiative, and the District of Connecticut’s Operation Constant Vigilance, which are aimed at protecting children from sexual abuse and exploitation.

The Connecticut Computer Crimes Task Force, which is housed at the main FBI office in New Haven, investigates crimes occurring over the Internet, including online crimes against children, and provides computer forensic review services for participating agencies. For more information about the task force, or to report child exploitation crimes, please contact the FBI at 203-777-6311.
To report cases of child exploitation, please visit www.cybertipline.com

Computer Programmer Pleads Guilty in Manhattan Federal Court to Stealing Proprietary Code from the Federal Reserve Bank of New York and to Engaging in Immigation Fraud

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Bo Zhang, a computer programmer, pled guilty today to stealing proprietary software code from the Federal Reserve Bank of New York (FRBNY), where Zhang previously worked as a contract employee, and to engaging in immigration fraud. Zhang pled guilty before United States Magistrate Judge Michael H. Dolinger.

Manhattan U.S. Attorney Preet Bharara said, “Bo Zhang may have thought that he left no fingerprints when he engaged in his high-tech thievery—stealing proprietary government software worth nearly $10 million using little more than a mouse—but he was mistaken. He was caught in his tracks and now he will be punished for his cyber-thievery.”

According to the complaint and information filed in Manhattan federal court and statements made in court during today’s plea proceeding:

The Government-wide Accounting and Reporting Program (GWA) is a software system that is owned by the United States Department of the Treasury (DOT). It is used principally to help keep track of the United States government’s finances. Among other things, the GWA handles ledger accounting for each appropriation, fund, and receipt within the DOT and provides federal agencies with an account statement—similar to bank statements provided to bank customers—of the agencies’ account balances with the United States Treasury. The proprietary computer source code associated with the GWA is maintained by the FRBNY in an access-controlled electronic repository. The FRBNY is further developing the source code for the GWA.

Between May 2011 and August 11, 2011, Bo Zhang was a contract employee assigned to the FRBNY to work on further developing a specific portion of the GWA’s source code (the “GWA Code”) which the United States has spent approximately $9.5 million to develop. In the summer of 2011, Zhang stole the GWA Code and, without authorization from FRBNY, copied it onto his hard drive at the FRBNY and an FRBNY-owned external hard drive. He then transferred the code to his private office computer, his home computer, and his personal laptop.

During his guilty plea today, Zhang admitted that between 2011 and 2012, he submitted fraudulent documentation to immigration authorities to help foreign nationals obtain visas to enter and work in the United States. Zhang falsely represented to immigration authorities that certain foreign nationals worked full-time for his computer training business. At least one individual fraudulently obtained a visa in connection with Zhang’s offense.

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Zhang, 32, of Queens, New York, pled guilty to one count of theft of government property and one count of immigration fraud. He faces a maximum term of 20 years in prison. Zhang will be sentenced by United States District Judge Paul G. Gardephe on October 1, 2012 at 10:00 a.m.

Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked the Department of the Treasury Office of Inspector General and the FRBNY for their assistance in the investigation.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Niketh Velamoor and Nicholas Lewin are in charge of the prosecution.

Canadian Man Pleads Guilty to Receiving Child Pornography in Jacksonville, Florida

Christian Yvon Lapierre (46, a Canadian citizen residing in Jacksonville) pled guilty in U.S. District Court today to receiving child pornography over the Internet. Lapierre faces a mandatory minimum sentence of at least five years and up to 20 years in federal prison, a $250,000 fine, and a potential life term of supervised release.

According to court documents, an investigator with the Florida Attorney General’s Office conducted an undercover operation to identify individuals using the Internet to share child pornography. The investigator was able to identify an Internet protocol (IP) address located in Jacksonville that was sharing files depicting child pornography. Subpoenaed documents later revealed that the Internet service account for this IP address resolved to Lapierre’s Jacksonville residence.

On June 14, 2011, a federal search warrant was executed at Lapierre’s residence. Law enforcement officers seized two computers and other digital media. Lapierre was inside the residence when the search warrant was executed. During an interview, he admitted that he was the one who downloaded the files, using the particular software program, and that he had some videos showing kids, as well as some “teen stuff.” Lapierre admitted using particular terms to search for child pornography and that he downloaded videos which contained mostly girls and reaffirmed that he “would pretty much just look at them and then get rid of them.” Lapierre stated that he would get rid of the videos by deleting them into the computer’s recycling bin because he did not want them on his computer. He also stated that he started deleting the files when he heard the FBI knock and announce themselves at the door. Lapierre believed that one of the videos that he deleted depicted a child having sex with an adult.

Subsequent forensic analysis revealed that Lapierre’s computer media contained five videos and one image depicting child pornography.

This case was investigated by the Federal Bureau of Investigation, the former Child Predator Cybercrime Unit of the Florida Attorney General’s Office, the Naval Criminal Investigative Service, the St. Johns County Sheriff’s Office, and the Jacksonville Sheriff’s Office. It is being prosecuted by Assistant United States Attorney D. Rodney Brown.

This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute individuals who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc and for more information about Internet safety education, please visit www.usdoj.gov/psc and click on the tab “Resources.”

Houston-Area Physician and Local Businessman Charged in Diagnostic Testing Fraud Scheme

Dr. Donald Gibson, II, 56, of Sugarland, Texas, and Sunday Joseph Edem, 53, of Richmond, Texas, have been arrested for health care fraud and conspiracy to commit health care fraud relating medically unnecessary diagnostic testing and physical therapy, United States Attorney Kenneth Magidson announced.

Both defendants were arrested without incident this morning and are expected to make an initial appearance before U.S. Magistrate Judge Mary Milloy.

According to the indictment, returned Thursday, May 17, 2012, and unsealed today upon their arrests, Gibson ordered, prescribed, and authorized medically unnecessary diagnostic tests and other procedures, which included allergy tests, pulmonary function tests, vestibular tests, urodynamic tests, and physical therapy, among others. These services were then billed to Medicare and Medicaid for payment under Gibson’s billing number.

From January 2007 through January 2012, Gibson allegedly caused more than $19.4 million in medical claims to the Medicare and Texas Medicaid Programs. As a result, Medicare deposited approximately $8.5 million into a bank account owned and controlled by Gibson.

The indictment also alleges Edem operated medical clinics under the names of other individuals to conceal his financial interest in the businesses. Edem and Gibson allegedly conspired with one another to cause the submission of false claims to the Medicare and Medicaid programs and share in the proceeds. Gibson and Edem paid patient recruiters for referring Medicare/Medicaid beneficiaries, according to the indictment, and also paid Medicare beneficiaries for showing up at the medical clinics.

This case is the result of a joint investigation involving multiple federal and state agencies, including agents and investigators of the Railroad Retirement Board, Secret Service, Drug Enforcement Administration, FBI, the Texas Attorney General’s Medicaid Fraud Control Unit, and U.S. Department of Health and Human Services-Office of Inspector General. Special Assistant U.S. Attorney Justin Blan and Assistant U.S. Attorney Andrew Leuchtmann are prosecuting this case.

An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless convicted through due process of law.

Louisiana Man Guilty of East Texas Child Pornography Violations

A 66-year-old Covington, Louisiana man has pleaded guilty to child pornography violations in the Eastern District of Texas, announced U.S. Attorney John M. Bales.

Charles Edward Reese pleaded guilty to conspiracy to produce child pornography and wire fraud before U.S. Magistrate Judge Zack Hawthorn.

According to information presented in court, on February 1, 2012, federal officials conducted a search warrant at a home in Orange County, Texas after receiving information from an Internet-based image hosting website reporting that a customer had uploaded digital images from a cell phone that contained sexually explicit conduct of a young child and an adult. An investigation revealed that although the adult in the photos was deceased, another person identified as Charles Reese had been paying money for several years in return for digital pictures of sexually explicit conduct involving minor children. On March 12, 2012, a search warrant was executed at Reese’s home in Covington, during which multiple child pornography images and videos were discovered. Financial records indicate Reese paid over $700,000 between 2004 and 2012 for the production of child pornography. Further investigation revealed Reese defrauded New Orleans based Champagne Beverage Inc., where he was a long-time employee and chief financial officer, by executing wire transfers and checks on the company’s business bank accounts to fund the illegal activity. Reese was arrested on March 5, 2012 and indicted by a federal grand jury on March 21, 2012.

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state, and local resources to better locate, apprehend, and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

Reese faces a minimum of 15 years, and up to 30 years, in federal prison for the child pornography violation and an additional 20 years for the wire fraud offense. A sentencing date has not been set.

This case is being investigated by the FBI, Jefferson County Child Protective Services, the Garth House, and Orange County Sheriff’s Office and is being prosecuted by Executive Assistant U.S. Attorney Brit Featherston and Assistant U.S. Attorney Christopher T. Tortorice.

Redding Man Arrested on Child Pornography Charges

Justin Sturn, 30, of Redding, California, was arrested by the FBI after a federal grand jury returned a one-count indictment charging him with sharing child pornography.

According to court documents, on February 22, 2012, Sturn e-mailed videos containing depictions of the sexual exploitation of children. This was discovered because of a tip sent to the National Center for Missing and Exploited Children’s CyberTipLine.

Sturn was arraigned before United States Magistrate Judge Edmund F. Brennan, where he pleaded not guilty. His next scheduled court date is June 19, 2012 before United States District Judge Lawrence K. Karlton.

This case is the product of an investigation by the Federal Bureau of Investigation. Assistant United States Attorney Matthew Morris is prosecuting the case.

The maximum statutory penalty for distribution of child pornography is 20 years in prison. The actual sentence, if convicted, will be determined at the discretion of the court after consideration of applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and the Child Exploitation and Obscenity Section (CEOS) in the Justice Department’s Criminal Division, Project Safe Childhood marshals federal, state, and local resources to better locate, apprehend, and prosecute individuals who exploit children as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov or call the U.S. Attorney’s Office for the Eastern District of California and ask to speak with the PSC coordinator.

Man Who Operated Allegedly Fraudulent Firm That Promised Profits from Internet Ads Arrives in U.S. After Being a Fugitive for 12 Years

A former resident of Newport Beach who fled the country in 1999 after federal authorities executed a search warrant at his allegedly fraudulent Internet company arrived in the United States today after being deported earlier this week from Malaysia.

James S. Eberhart, 71, arrived  at Los Angeles International Airport and is expected to make his initial appearance in United States District Court in Los Angeles.

The FBI received a tip as to Eberhart’s whereabouts in Maylasia. The FBI had actively been seeking information from the public on its website (see: http://www.fbi.gov/wanted/wcc/james-stanley-eberhart/view). The FBI Legal Attaché in Kuala Lumpur coordinated the information with authorities in Maylasia. Malaysia deported Eberhart because his United States passport had expired.

A 2002 grand jury indictment alleges that Eberhart and another man—Eugene M Carriere—operated a fraudulent Newport Beach company called YES Entertainment Network Inc. Eberhart is specifically charged with 11 counts of mail fraud and nine counts of money laundering.

Using telemarketers at outside firms and written promotional materials, Eberhart and Carriere solicited investors by claiming that YES was creating and maintaining an 18-channel, multimedia, family-oriented website. Prospective investors were told that YES would generate profits through the sale of advertising on the website.

Between February 1999 and October 1999, Carriere and Eberhart allegedly raised nearly $14 million in investor funds through a network of nearly two dozen telemarketing “boiler rooms” across the United States and Canada.

Once YES received money from investors, 45 percent of those funds were given to the outside telemarketers as a sales commission, according to the indictment, which goes on to allege that the remaining investor funds primarily went to Carriere and Eberhart.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.

Carriere, 63, was a fugitive for six years before being arrested in Thailand in April 2005. Carriere pled guilty to two counts of mail fraud on April 30, 2007 and on July 27, 2007 was sentenced to three years in federal prison and ordered to pay $12,838,045 in restitution.

Previously in this investigation, five other defendants, including the owners of telemarketing operations used by YES, were indicted, pleaded guilty, and were sentenced to as much as 142 months in federal prison.

This case is the product of an investigation by the Federal Bureau of Investigation and the United States Postal Inspection Service.

Medicare Fraud Lands Area Chiropractor in Prison

Justina Okehie, aka Dr. Tina Collins, of Richmond, Texas, has been sentenced to federal prison for her role in a multi-million-dollar health care fraud scheme, United States Attorney Kenneth Magidson announced today. Okehie pleaded guilty October 27, 2011.

U.S. District Judge Nancy F. Atlas, taking into consideration Okehie’s health as well as her cooperation with the government, handed her a 24-month term of imprisonment and further ordered her to pay restitution in amount of $1,894,938 to the Medicare Program and $258,893 to the Texas Medicaid program. In handing down the sentence, Judge Atlas stated that “medicare fraud is the worst around,” noting that Okehie lived her life by cheating the system and living off this fraud. Okehie will also serve a two-year term of supervised release following completion of her prison sentence.

Okehie, 55, owned and operated Adom Rehabilitation Services and Healthcare and Wellness Medical Center. Both facilities were located in the southwest part of Houston and purportedly provided physical therapy and chiropractic services. As part of the conspiracy, Okehie would pay patient recruiters (aka runners or marketers) for referring Medicare beneficiaries to her clinics. Okehie also paid remuneration to the Medicare beneficiaries to induce them to show up at her clinics.

From January 2007 through August 2010, Okehie caused the submission of claims to the Medicare and Medicare programs in excess of $8.5 million.

Judge Atlas previously sentenced co-defendants Cassandra Tasby Barnes, 48, of Houston, and Melloneen Davis, 53, of Stafford, Texas, for their roles in a conspiracy to violate the anti-kickback statute. Barnes and Davis each were sentenced to three years’ probation and four months of home confinement. Each were also ordered to pay restitution in the amount of $42,052.48 to Medicare and $8,338.68 to the Texas Medicaid Program.

This case was investigated by agents and investigators of the U.S. Department of Health and Human Services-Office of Inspector General, the Texas Attorney General’s Medicaid Fraud Control Unit, FBI, and the Railroad Retirement Board. Special Assistant U.S. Attorney Justin Blan and Assistant U.S. Attorney Julie Redlinger prosecuted this case.

Oakton Dentist Indicted for Alleged Illegal Distribution of Prescription Medicine, Health Care Fraud, and ID Theft

Hamada Makarita, 50, of Oakton, Virginia, has been charged in a 15-count indictment of using his position as a dentist to illegally distribute prescription pills to patients, employees, and women he dated. He was also charged with allegedly using the identity of another dentist to fraudulently bill an insurance company of more than $160,000 in claims.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement.

Makarita was charged with conspiracy, health care fraud, aggravated identity theft, and 12 counts of dispensing controlled substances. If convicted, he faces a maximum penalty of 10 years in prison on the health care fraud charge, 20 years in prison for conspiracy on each dispensing controlled substances charge, and a consecutive two-year sentence for the aggravated identity theft charge.

According to the indictment, Makarita owns and operates a dental practice in Oakton, Virginia and advertised online at www.fixasmile.com. The indictment alleges that from about 2007 to 2012, Makarita distributed and dispensed thousands of dosages of prescription medicine to patients, employees, and girlfriends, all without a legitimate dental purpose and beyond the bounds of a dental practice. Makarita allegedly asked those who received the prescriptions he issued to return to him some or all the prescribed medicine. On numerous occasions, Makarita would distribute prescription pills to patients and girlfriends in social settings and for prurient purposes, including for consensual and non-consensual sex.

In addition, the indictment alleges that Makarita provided more than $160,000 in services to his family members and billed them to an insurance provider in violation of the provider’s contract. He allegedly billed the services under the name of another dentist who did not practice in Makarita’s office at that time. Makarita received more than $91,000 in reimbursement from the provider for these fraudulent claims.

The investigation was conducted by the FBI’s Washington Field Office. Special Assistant United States Attorney Mazen Basrawi is prosecuting the case on behalf of the United States.

This case is part of an Organized Crime and Drug Enforcement Task Force (OCDETF) investigation (Operation Cotton Candy), which has been focusing on the illegal distribution by numerous doctors, pharmacists, nurses, and patients of pain medication. This OCDETF matter has secured more than 200 drug-trafficking convictions and guilty pleas.

Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless proven guilty.

Brooklyn Rabbi Pleads Guilty to Money Laundering Conspiracy

A rabbi based in Brooklyn, New York has pleaded guilty to conspiring to launder $200,000 to $400,000 in funds that he believed were the proceeds of unlawful activities, United States Attorney Paul J. Fishman announced.

Lavel Schwartz, 60, pleaded guilty Thursday, May 24 before U.S. District Judge Joel A. Pisano in Trenton federal court to a superseding information charging him with money laundering conspiracy. Judge Pisano continued Schwartz’s release on bail pending sentencing, which is scheduled for October 22, 2012.

According to documents filed in this case and statements made in court:

Schwartz admitted that beginning in May 2008, he and his brother, Rabbi Mordchai Fish, met with Solomon Dwek, an individual he now knows was a cooperating witness with the United States. For a fee of approximately 10 percent, Fish and Schwartz agreed to launder and conceal Dwek’s funds through a series of purported charities, also known as “gemachs,” which Fish controlled or to which he had access. Schwartz admitted that prior to laundering Dwek’s funds, Dwek informed him that the funds he sought to launder were the proceeds of Dwek’s purported illegal businesses, which included the trafficking in counterfeit goods.

In order to conceal and disguise the nature and source of Dwek’s funds, Rabbi Fish directed Dwek to make the checks payable to several gemachs, which were purportedly dedicated to providing charitable donations to needy individuals. These included Boyoner Gemilas Chesed, Beth Pinchas, CNE, and Levovous. Once he received the checks from Dwek, Fish provided them to one of his co-conspirators, who deposited them into bank accounts held in the names of the purported charities. Fish would then arrange to make cash available through an underground money transfer network, and other individuals, including David S. Golhirsh, Naftoly Weber, Avrohom Y. Polack, Binyamin Spira, Yoely Gertner, and others, would provide Fish and Dwek with the cash.

Rabbi Schwartz admitted that he would assist Rabbi Fish and Dwek with counting the cash that had been retrieved from a coconspirator and admitted to encouraging Dwek to engage in more transactions, believing that the proceeds stemmed from a counterfeit bag business and that Rabbi Fish was retaining a 10 percent fee.

Schwartz admitted that, despite knowing the illicit nature of the funds, he engaged in approximately 10 money laundering transactions with Dwek. As part of these transactions, Fish helped convert between $200,000 and $400,000 in checks into a similar amount of cash, minus the 10 percent fee that Rabbi Fish extracted from the transactions.

Today’s guilty plea stems from a two-track undercover FBI investigation into public corruption and international money laundering which resulted in charges against 44 individuals via criminal complaints on July 23, 2009. At that time, Schwartz was charged in three separate criminal complaints, all of which likewise charged his brother, Rabbi Mordchai Fish. Rabbi Fish pled guilty to conspiring to commit money laundering and is currently scheduled to be sentenced on June 18, 2012. Weber, Polack, and Spira each pleaded guilty in November 2010 to operating illegal money transmitting businesses, admitting that they transferred thousands of dollars in cash to Fish and Dwek. The charges against Gertner and Goldhirsh remain pending.

The charge to which Schwartz pleaded guilty is punishable by a maximum term of 10 years in prison and a $250,000 fine. Schwartz also agreed to forfeit approximately $90,000 by the date of sentencing which represents the 10 percent fee which Rabbi Fish charged Dwek for conducting the money laundering transactions. Rabbis Fish and Schwartz are jointly liable for this amount.

In determining an actual sentence, Judge Pisano will consult the advisory U.S. Sentencing Guidelines, which recommend sentencing ranges that take into account the severity and characteristics of the offenses, the defendant’s criminal history, if any, and other factors. The judge, however, has discretion and is not bound by those guidelines in determining a sentence. Parole has been abolished in the federal system. Defendants who are given custodial terms must serve nearly all of that time.

Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, and Special Agents of IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge JoAnn S. Zuniga, with the investigation leading to today’s plea.

The government is represented by Assistant U.S. Attorney Mark McCarren of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

Investment Club Manager Sentenced in Virginia to 12 Years in Prison for $40 Million Fraud

Alan James Watson, 47, of Clinton Township, Michigan, was sentenced today to 12 years in prison for fraudulently soliciting and accepting $40 million from more than 900 members of his investment club, Cash Flow Financial LLC (CFF). Watson subsequently lost nearly all of the investors’ money through non-disclosed, high-risk investments. Victims were located in Virginia and nationwide. Watson was also ordered to forfeit $36,615,344.
U.S. District Judge Gerald Bruce Lee in the Eastern District of Virginia also sentenced Watson to three years of supervised release. Watson pleaded guilty to one count of wire fraud on September 22, 2011.

The sentencing was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Virginia Neil H. MacBride; James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office; and Postal Inspector in Charge of Criminal Investigations Gerald O’Farrell of the U.S. Postal Inspection Service (USPIS).

“Mr. Watson deceived members of his investment club from early on and drove his scheme deeper and deeper while investors remained none the wiser,” said Assistant Attorney General Breuer. “His lies destroyed lives, and today’s sentence ensures he will pay for his destructive actions. The 12-year prison sentence handed down today is a signal to fraudsters that criminal deception born from greed will not be tolerated.”

“The pitch Mr. Watson made to investors was a big fat lie, and he kept lying until his scheme collapsed and investors lost nearly everything,” said U.S. Attorney MacBride. “Based on these lies, investors recommended Mr. Watson’s club to their friends and family, and the damage to these relationships was just as harmful as the financial devastation itself.”

“More than 900 unwitting victims thought they had done their homework and calculated their investment wisely; instead, they were met with false documentation that yielded no return on their investment,” said FBI Assistant Director in Charge McJunkin. “Investigating white-collar crime has been and will continue to be a priority for the FBI and our law enforcement partners, as demonstrated by this case and today’s sentence.”

According to court documents, Watson created CFF in 2004 and served as the club’s chief executive officer. From 2006 to 2009, Watson received almost $40 million from investors. Watson purported that the money would be invested through an equities-trading system developed by an expert consultant, Trade LLC, with a promised return on investment of 10 percent per month. In reality, Watson admitted that only $6 million of the $40 million was ever invested in Trade LLC, while the remaining $34 million was secretly invested in miscellaneous, high-risk ventures without the consent of investment club members. These high-risk investments resulted in a near complete loss of the $34 million.

According to court documents, despite the losses for the investors, Watson continued to create false monthly account statements showing net gains from their investments. In addition, Watson included “bonus” items on the account statements that appeared as trading profits, the result of a Ponzi scheme he orchestrated to use new investor funds to pay off earlier investors.

In March of 2009, Watson ceased investing in Trade LLC and re-deposited those funds in separate unauthorized ventures. In 2010, nearly a year after he had fully withdrawn finances from Trade LLC, Watson informed investment club members that he had not invested their money as promised and that none of the reported returns had ever materialized. This resulted in a combined $40 million loss for investment club members.

The Commodity Futures Trading Commission (CFTC) has filed a related civil case in the Eastern District of Michigan.

This case was investigated by the FBI’s Washington Field Office, USPIS, the CFTC, and the U.S. Securities and Exchange Commission. The department thanks these agencies for their substantial assistance in this matter.

Trial Attorney Kevin B. Muhlendorf of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark D. Lytle of the Eastern District of Virginia are prosecuting the case on behalf of the United States.

The investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force, an interagency national task force.

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

Ocean County Man Charged with Sexually Abusing Toddler and Streaming Assault Live Over the Internet

An Ocean County, New Jersey man was charged today with sexually abusing a 14-month-old boy and streaming footage of the sexual assault over the Internet, U.S. Attorney Paul J. Fishman announced.
Rodford W. Brindley, Jr., 67, of Toms River, New Jersey, was arrested and charged by complaint with one count of sexual exploitation of a child. He is scheduled today before U.S. Magistrate Judge Lois Goodman in Trenton federal court.

According to the complaint, law enforcement in Ohio had previously discovered Brindley through their own cybercrime investigation and had engaged in online chats with him. On April 2, 2012, Ohio law enforcement was engaged in an online chat with Brindley when he began sexually assaulting a toddler, recording and sharing the assault over the Internet using a webcam. Ohio law enforcement determined that Brindley was an Ocean County, New Jersey resident and immediately contacted New Jersey law enforcement, which obtained arrest and search warrants.

The charge of child sexual exploitation carries a mandatory minimum penalty of 15 years in prison, a maximum potential penalty of 30 years in prison, and a $250,000 fine.

U.S. Attorney Fishman thanked the Franklin County Sheriff’s Department in Ohio; the Ocean County Prosecutor’s Office, under the direction of Prosecutor Marlene Lynch Ford; and the FBI’s Cyber Crimes Squad, under the direction of Special Agent in Charge Michael B. Ward in Newark, for the investigation leading to today’s arrest.

The case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and the Child Exploitation and Obscenity Section (CEOS) in the Justice Department’s Criminal Division, Project Safe Childhood marshals federal, state, and local resources to better locate, apprehend, and prosecute individuals who exploit children as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

The government is represented by Assistant U.S. Attorney Sarah M. Wolfe of the U.S. Attorney’s Office Criminal Division in Trenton.

The charges and allegations contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Priest Pleads Guilty to Child Exploitation Charges

A Roman Catholic priest pleaded guilty in federal court to charges of violating federal child sexual exploitation laws, United States Attorney David J. Hickton announced today.
Bartley Sorensen, 63, pleaded guilty before United States District Judge Alan N. Bloch to receiving and possessing visual depictions of minors engaged in sexually explicit conduct.

In connection with the guilty plea, the court was advised that Sorensen, a priest at St. John Fisher Church in Churchill, received and possessed many images of minors being sexually abused between June 2011 and December 9, 2011.

“This case is particularly disturbing because it involves a priest, a man in a position of great trust, viewing horrific and degrading images of children,” U.S. Attorney Hickton said. “Consumers of these violent sexual images fuel the production of more images, and the demand for increasingly extreme content. This is not a ‘victimless’ crime.”

Judge Bloch scheduled sentencing for September 3, 2012 at 12:30 p.m. The law provides for a total sentence of at least five years and up to 30 years in prison, a fine of up to $500,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the offenses and the criminal history, if any, of the defendant.

Judge Bloch ordered the defendant be detained pending sentencing.

Assistant United States Attorney Craig W. Haller is prosecuting this case on behalf of the United States.

The Allegheny County District Attorney’s Office, the Allegheny County Police Department, the Federal Bureau of Investigation, and the Churchill Police Department conducted the investigation leading to the conviction in this case.

This case is a product of Project Safe Childhood. Launched in February 2006, Project Safe Childhood is a nationwide initiative designed to protect children from sexual exploitation and abuse. Led by the U.S. Attorneys’ Offices and the Child Exploitation and Obscenity Section of the Department of Justice, Project Safe Childhood marshals federal, state, and local resources to better locate, apprehend, and prosecute individuals who exploit children, as well as identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

Suspect Arrested in Connection with the Prostitution of Minors

Stephen D. Anthony, Special Agent in Charge of the Cleveland Division of the Federal Bureau of Investigation (FBI), for the Northern District of Ohio, in conjunction with Brian D. Lamkin, Special Agent in Charge of the Atlanta Division of the Federal Bureau of Investigation, announce the arrest of Brady D. Jackson, Jr., age 26.

An arrest warrant was issued for Jackson on May 1, 2012 based on allegations of Jackson causing two juveniles, aged 15 and 16, to be recruited, enticed, harbored, and transported in or effecting interstate commerce to engage in commercial sex acts in Toledo, Ohio, a violation of 18 U.S.C., 1591 (a)(i).

Information developed through the investigation indicated Jackson may be traveling in the Atlanta, Georgia area. Jackson was apprehended this morning in the Atlanta territory by the Atlanta Police Department/FBI Violent Crimes Task Force. Jackson is currently being detained in an Atlanta Detention Facility.

This case was investigated by the Northwest Ohio Violent Crimes Against Children Task Force based in Toledo, Ohio.

Jackson is facing a minimum of 10 years for the prostitution of each juvenile.

Dental Practice Operators Charged in $20 Million Medicaid Fraud Conspiracy

David B. Fein, United States Attorney for the District of Connecticut; Susan J. Waddell, Special Agent in Charge of U.S. Health and Human Services, Office of Inspector General for New England; William P. Offord, Special Agent in Charge of IRS Criminal Investigation in New England; and Kimberly K. Mertz, Special Agent in Charge of the Federal Bureau of Investigation, announced that Gary F. Anusavice, also known as “Gary Andrews,” “Gary Andrus” and “Gary Francis,” 59, of North Kingstown, Rhode Island; and Mehran Zamani, DDS, 47, of Pound Ridge, New York, were arrested today on federal charges related to their alleged involvement in a $20 million Medicaid fraud scheme.

“As alleged, these operators of dental practices throughout Connecticut defrauded the Medicaid program of more than $20 million over a two-year period,” said U.S. Attorney Fein. “We are committed to protecting American taxpayers from health care fraud, which can increase costs and jeopardize the integrity of our health care system. I want to commend HHS-OIG, IRS-Criminal Investigation, and the FBI for their investigative efforts and thank the Connecticut Attorney General’s Office, which provided invaluable assistance during the course of this investigation.”

“Although Gary F. Anusavice was barred from Medicare, Medicaid, and other government health programs back in 1998, he allegedly continued to defraud taxpayers by using an elaborate shield of companies and individuals—including Dr. Zamani—to hide his involvement,” said HHS-OIG Special Agent in Charge Waddle. “Working with federal and state partners, our investigators will penetrate such schemes and help bring suspects to justice.”

“To combat healthcare fraud, IRS Criminal Investigation provides the financial investigative expertise to follow the money trail from the crime to the culprit,” said IRS Criminal Investigation Special Agent in Charge Offord. “We are proud to work with our law enforcement partners to document the financial benefits derived from these fraudulent activities.”

“The FBI views health care fraud as a serious crime problem,” said FBI Special Agent in Charge Mertz. “It degrades the integrity of our health care system and legitimate patient care. Today’s arrests send a clear message to those persons who are defrauding our federal Medicare and Medicaid and private health insurance programs. The FBI remains committed to investigating health care fraud and bringing these individuals to justice. The FBI will continue to work aggressively with our law enforcement partners to investigate those who violate the public trust by stealing taxpayer money. We urge anyone with information regarding health care fraud activity to contact its nearest FBI field office.”

According to court documents, the Medicaid program is a joint federal-state program that provides funds for medical services to lower-income individuals who qualify for benefits. The program is jointly administered by the U.S. Department of Health and Human Services and supervised by the Centers for Medicare and Medicaid Services. In Connecticut, the Medicaid program is administered by the State of Connecticut Department of Social Services (DSS).

As alleged in court documents, Anusavice was previously a registered dentist in several states. In July 1997, Anusavice sustained a felony conviction in Massachusetts for submitting false health care claims. Based on that conviction, the U.S. Department of Health and Human Services notified Anusavice in April 1998 that he was being excluded from participation in Medicare and state health care programs, including Medicaid. As part of that notice, Anusavice was informed that, as an excluded individual, he may not “submit claims or cause claims to be submitted” for payment from the federal Medicaid program. Further, Anusavice was advised that Medicaid reimbursement payments are prohibited to any entity in which he serves as an “employee, administrator, operator, or in any other capacity....”

In November 2005, Anusavice surrendered his right to practice dentistry in Rhode Island, and the Massachusetts Board of Registration in Dentistry permanently revoked Anusavice’s license to practice dentistry in Massachusetts in 2006.

The criminal complaint alleges that Anusavice established several dental practices in Connecticut, which were operated by other dentists, including Zamani. These dental practices received millions of dollars in Medicaid reimbursements from the Connecticut Medicaid program, which payments were prohibited given Anusavice’s exclusion from the Medicaid program. The dental practices operated by Anusavice and Zamani included Landmark Dental in West Haven, Dental Group of Connecticut in Trumbull, and Dental Group of Stamford. Despite his permanent exclusion, Anusavice was involved in reviewing patient charts, suggesting dental procedures to be performed, reviewing billing records, reviewing income reports, interviewing and hiring dentists, and providing overall management direction to the offices.

It is alleged that Anusavice hired Zamani at Landmark Dental in October 2008 and that Zamani soon became aware of Anusavice’s disciplinary history. In January 2009, Zamani submitted a Medicaid Provider Enrollment Application with the DSS in order to obtain a Medicaid provider number for Mehran Zamani LLC, listing his group practice name as Landmark Dental. In May 2009, Zamani submitted an application with the DSS for a Medicaid provider number for Landmark Dental. In the applications Zamani submitted, he failed to disclose that Anusavice had an ownership or control interest in Landmark Dental, even though Zamani knew that Anusavice was running the practice and profited from it. From approximately February 2009 to March 2011, Mehran Zamani LLC and Landmark Dental received more than $12.9 million in Medicaid reimbursement payments.

It is further alleged that in April 2009, Zamani and “Haven Consulting,” an entity Anusavice created, entered into a Business Consultant Contract for the Dental Group of Stamford, a practice that Zamani had operated previously. Although the contract provided that Haven Consulting was a “business consultant” to the Dental Group of Stamford, Anusavice had an ownership interest in the practice and acted in an ownership and managerial capacity. Zamani’s DSS application in May 2009 failed to disclose Anusavice’s involvement in the practice and his disciplinary history. From approximately June 2009 to March 2011, the Dental Group of Stamford received more than $4.4 million in Medicaid reimbursement payments.

It is further alleged that Zamani’s April 2010 DSS application for a Medicaid provider number for the Dental Group of Connecticut also failed to disclose Anusavice’s involvement in the practice. From approximately August 2010 to March 2011, the Dental Group of Connecticut received more than $3.5 million in Medicaid reimbursement payments.

It is further alleged that on April 13, 2011, the DSS suspended Medicaid payments to Mehran Zamani, DDS, Landmark Dental, Dental Group of Stamford, and Dental Group of Connecticut based upon a pending investigation of a credible allegation of fraud. As a result, the last Medicaid payment to any of these entities occurred on or about March 22, 2011. By that time, it is alleged that the Anusavice-Zamani entities had collectively received nearly $21 million in Medicaid reimbursement funds. Further, according to Zamani’s accountant’s records, between February 2009 and March 2011, Anusavice-controlled entities received more than $3 million in payments from Zamani-related entities.

It is further alleged that Anusavice and another dentist are now operating a new set of dental clinics, doing business as Alpha Dental Group in Cromwell, Dental Group of New Britain, and Hartford Dental Care. Between November 2011 and March 2012, Arbor Dental has received more than $2.6 million in Medicaid funds. Anusavice also has recently reopened a dental practice at the former location of Dental Care of Connecticut in Trumbull.

Anusavice was arrested this morning at his home in North Kingstown, Rhode Island on a federal criminal complaint charging him with conspiring to commit health care fraud, committing health care fraud, and making false statements involving federal health care programs. Zamani was arrested today at his home in New York on a criminal complaint charging him with the same offenses. Both appeared this afternoon before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport.
In association with today’s arrests, investigating agencies conducted court-authorized searches of Anusavice’s Rhode Island residence and dental clinics he is allegedly operating in New Britain and Trumbull.

The government also has filed a civil forfeiture complaint against the real property located at 229 Potter Road, North Kingstown, Rhode Island, an 8,145 square foot home on 9.66 acres of land, where Anusavice resides. The forfeiture complaint alleges that this property was purchased in February 2011 for $695,000 by AMZ Consulting Inc., a nominee entity controlled by Anusavice and that proceeds used to purchase the property stem from Anusavice’s alleged Medicaid fraud scheme.
U.S. Attorney Fein stressed that a complaint is only a charge and is not evidence of guilt. Charges are only allegations, and each defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This matter is being investigated by the U.S. Department of Health and Human Services, Office of Inspector General; the Internal Revenue Service-Criminal Investigation; and the Federal Bureau of Investigation. The Connecticut Attorney General’s Office provided assistance and cooperation throughout the investigation.

This case is being prosecuted by Assistant United States Attorneys Susan Wines and Richard Molot, and Special Assistant United States Attorney Sean Beaty. The United States Attorney’s Office for the District of Rhode Island and Assistant United States Attorney Paul Daly have provided valuable assistance.

U.S. Attorney Fein encouraged individuals who suspect health care fraud to report it by calling the Health Care Fraud Task Force at 203-777-6311 or 1-800-HHS-TIPS.

Mitigation Analyst from Home Elevation Program Sentenced

Wanda Acker Williams, age 33, of New Orleans, Louisiana, was sentenced to six moths of home detention followed by four years of probation by U.S. District Judge Jane Triche Milazzo after admitting she accepted bribes in connection with her employment in the state’s home elevation program, announced U.S. Attorney Jim Letten. Williams pled guilty in January to a one-count bill of information charging her with conspiracy to commit bribery concerning programs receiving federal funds.

According to court documents, Williams was a mitigation analyst in the New Orleans Office of the Hazard Mitigation Grant Program who used her position as a mitigation analyst to mine the database of homeowners eligible for federal elevation dollars and then provided those names to Rickey Davis in exchange for money. Davis, who pled guilty to bribery on May 16, was in the business of securing contracts with homeowners for general contractors and sub-contractors in exchange for a percentage of the total contract amount. Upon receiving the lists of names from Williams, Davis would either sell the lists to general contractors for them to secure contracts or would use the names as leads to solicit those homeowners to enter a contract with a contractor with whom Davis did business.

Davis is scheduled to be sentenced on August 22, 2012 by U.S. District Court Judge Ivan L.R. Lemelle. Brianna LaFrance, a former mitigation analyst who also pled guilty to conspiracy charges in connection with the bribery of Williams is scheduled to be sentenced on June 14 by U.S. District Judge Jane Triche Milazzo.

The case is being investigated by Department of Homeland Security-OIG, Federal Bureau of Investigation, and the Jefferson Parish Sheriff’s Office. The case is being prosecuted by Assistant United States Attorneys Emily K. Greenfield and Matthew Coman.

Former Provider of Home Health Care Services Indicted for Medicaid Fraud

Janice W. Holland, 41, of Suffolk, Virginia, has been indicted by a federal grand jury on one count of health care fraud, 31 counts of making false statements relating to health care matters, one count of alteration of records, and two counts of aggravated identity theft.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and Virginia Attorney General Ken Cuccinelli made the announcement after the indictment was unsealed following Holland’s arrest. If convicted, Holland faces a maximum penalty of 10 years in prison for health care fraud, five years on each count for making false statements, 20 years for alteration of records, and two years on each count of aggravated identity theft.

According to the indictment, Holland owned and operated A Caring Hand Home Health Care Services Inc., a business located in Suffolk that was authorized to provide respite care to Medicaid recipients. Respite care is designed to provide temporary, substitute care for a Medicaid recipient that is normally provided by the family or another unpaid primary caregiver of the recipient. These services are provided on a short-term basis because of the emergency absence or need for routine or periodic relief of the primary caregiver. Holland filed approximately 1,100 false and fraudulent claims with the Virginia Medicaid program, representing that respite care had been provided by her company to 30 Medicaid recipients, when in fact no such care had been provided. She filed these claims using, without authority, the recipients’ names, dates of birth, and Medicaid identification numbers As a result, Holland obtained health care benefit payments in the approximate amount of $700,000 to which she was not entitled. She also altered and falsified her office records to conceal and cover up her false billings.

This case was investigated by the FBI and the Office of the Virginia Attorney General, Medicaid Fraud Control Unit. Assistant United States Attorney Alan M. Salsbury is prosecuting the case on behalf of the United States.

Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless proven guilty.

Brownsville Mother and Daughter-in-Law Handed Sentences in Health Care Fraud Scheme

Felicitas Velez Alanis, 51, and her daughter-in-law Erika Ortega Alanis, 27, both of Brownsville, Texas, have been sentenced to federal prison for conspiring to defraud the Texas Medicaid program, United States Attorney Kenneth Magidson announced today along with Texas Attorney General Greg Abbott. The pair plead guilty on February 6, 2012 to conspiracy to commit health care fraud and have remained on bond pending sentencing.

Today, U.S. District Judge Randy Crane sentenced Felicitas and Erika Alanis to serve 36 and 32 months, respectively. Both women will be placed on supervision for a period of three years following their release from prison. In addition to their sentences, Judge Crane also ordered both women to repay the Texas Medicaid program the sum of $616,390.

Felicitas Alanis was owner and operator of Vel-Ala Inc., a Medicaid provider, which did business as Nisi Medical Equipment and Supplies in and around Brownsville, Harlingen, and elsewhere in South Texas. Her daughter-in-law assisted in the day-to-day operation of the company. Felicitas and Erika Alanis admitted at their plea hearing on February 6, 2012 that they conspired to send false and fraudulent bills to the Texas Medicaid program in the name of Nisi Medical Equipment and Supplies for medical supplies that they did not provide to Medicaid beneficiaries. Between on or about January 1, 2005 through on or about October 12, 2006, the pair regularly billed the Texas Medicaid program for 200 boxes of alcohol preparation pads when, in fact, they knew that only one box had been delivered at a time. As a result, the pair received $600 from each fraudulent billing rather than $3 for the one box of alcohol preparation pads that they actually delivered.

Previously on bond, Judge Crane ordered Felicitas Alanis to begin serving her sentence immediately and was taken into custody pending transfer to a U.S. Bureau of Prisons facility, where she will serve her sentence. Judge Crane allowed Erika Ortega Alanis to remain on bond but ordered her to surrender to the United States Marshals Service on June 8, 2012, pending transfer to a U.S. Bureau of Prisons facility.

The investigation leading to the charges in this case was conducted by the FBI and the Texas Attorney General’s Medicaid Fraud Control Unit. Assistant United States Attorney Casey N. MacDonald and Special Assistant United States Attorney Rex G. Beasley prosecuted the case.

Houston Man Hit with Hefty Federal Time for Multiple Child Exploitation Charges

Jorge Juan Perez, a 29-year-old Houston man, has been ordered to serve 292 months in federal prison for transferring obscene material to a minor, coercing and enticing a minor, and possessing child pornography, United States Attorney Kenneth Magidson announced today.
T
he Innocent Images Unit of the FBI Houston Office, whose investigative efforts led to the charges, arrested Perez on Wednesday, December 15, 2010. At his detention hearing, U.S. Magistrate Judge Nancy Johnson considered testimony alleging that in 2008, Perez sent a letter and cash to a minor in California in an attempt to persuade, induce, entice, or coerce her to fly to Houston to engage in sexual activity for which a person could be charged with a crime. In Texas, the crime would constitute sexual assault of a person between 14 and 16 years of age. Additionally, the court learned that the state of California has issued warrants for Perez’s arrest for the alleged online enticement of a minor. The testimony also alleged that from October 2009 until July 2010, Perez maintained relationships with two minors in North Carolina by computer and cell phone. The court heard Perez allegedly attempted to persuade, induce, entice, and coerce the minors to create visual depictions of sexually explicit conduct by photographing and/or videotaping themselves. According to testimony, Perez allegedly used the threat of posting suggestive photos of the minors online if they did not comply with his demands. Perez also allegedly sent one of the minors obscene photographs of his genitals. Lastly, the court heard that Perez allegedly had ongoing online and phone contact with a 13-year-old Houston minor female and had allegedly sought out the minor and inquired about her to her friends and neighbors. Based upon these alleged factors, the court found that Perez would pose a danger to the community if released on bond.

On October 7, 2011, Perez pleaded guilty. While in federal custody, Perez befriended another inmate and told the inmate he wanted to kill the FBI special agent who arrested him. Perez indicated he and a friend planned to kill the agent with a bomb. The inmate who alerted authorities to this plan told authorities Perez was skilled in converting transistor radios from AAA batteries to AA batteries.

After considering all the evidence, U.S. District Judge Gray Miller handed Perez the more than 24-year-term and further ordered he be placed on supervised release for life. In handing down that sentence, Judge Miller noted that the crime committed by Perez was a predatory crime.

This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute individuals who sexually exploit children and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. For more information about Internet safety education, please visit www.usdoj.gov/psc and click on the tab “Resources.”

Chinese National Charged with Illegal Export of Sensitive Technology to China

A Chinese national in Massachusetts on business was arrested for illegally supplying U.S. origin parts to end-users in China in violation of U.S. export laws.

Qiang Hu, a/k/a Johnson Hu, 47, was charged in a complaint with conspiracy to violate the Export Administration Regulations and the International Emergency Economic Powers Act. The complaint, originally filed on May 18, was unsealed after Hu’s arrest at his hotel in North Andover yesterday.

The complaint alleges that Hu has been the sales manager at MKS Instruments Shanghai Ltd. (MKS-Shanghai) since 2008. MKS-Shanghai is the Shanghai sales office of MKS Instruments Inc. (MKS), which is headquartered in Andover. Hu’s employment gave him access to MKS-manufactured parts, including export-controlled pressure-measuring sensors (manometer types 622B, 623B, 626A, 626B, 627B, 722A, and 722B), which are commonly known as pressure transducers. Pressure transducers are export controlled because they are used in gas centrifuges to enrich uranium and produce weapons-grade uranium.

The complaint alleges that beginning in 2007, Hu and others caused thousands of MKS pressure transducers worth millions of dollars to be exported from the United States and delivered to unauthorized end-users using export licenses that were fraudulently obtained from the U.S. Department of Commerce. The complaint alleges that Hu and his co-conspirators used two primary means of deception to export the pressure transducers. First, the conspirators used licenses issued to legitimate MKS business customers to export the pressure transducers to China and then caused the parts to be delivered to other end-users who were not themselves named on the export licenses or authorized to receive the parts. Second, the conspirators obtained export licenses in the name of a front company and then used these fraudulently obtained licenses to export the parts to China, where they were delivered to the actual end-users.

MKS is not a target of the government’s investigation into these matters.

Hu remains in custody and is scheduled for a detention hearing on May 31 at 11 a.m. If convicted, he faces a maximum sentence of 20 years in federal prison, to be followed by up to three years of supervised release, and a $1 million fine.

United States Attorney Carmen M. Ortiz; Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Office; Bruce M. Foucart, Special Agent in Charge of U.S. Immigration and Customs Enforcement’s Office of Homeland Security Investigations in Boston; and John J. McKenna, Special Agent in Charge of the U.S. Department of Commerce, Office of Export Enforcement, Boston Field Office made the announcement today. The case is being prosecuted by Assistant U.S. Attorneys William D. Weinreb and B. Stephanie Siegmann in Ortiz’s Antiterrorism and National Security Unit.

The details contained in the complaint are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

French Citizen Causes Flight to Divert to Bangor

United States Attorney Thomas E. Delahanty, II announced that U.S. Airways flight 787 from Paris, France to Charlotte, North Carolina was diverted to Bangor International Airport because of a security issue regarding a passenger and what was reported as an implanted device of some kind.

Upon arrival in Bangor, Lucie Zeeko Marigot, a 41-year-old French citizen and native of Cameroon, was taken into custody by the Federal Bureau of Investigation (FBI). An investigation into charges of interference with the flight crew members and attendants continued throughout the night and this morning by the FBI.

The original detention was based upon probable cause that she interfered with the flight crew. She appeared in front of U.S. District Court Magistrate Judge Margaret Kravchuk this afternoon.

United States Attorney Delahanty and Assistant United States Attorney James McCarthy informed the court that based on further investigation, a criminal complaint would not be filed against her. Instead, she will be taken into custody by United States Customs and Border Protection (CBP) to be returned to France.

United States Attorney Delahanty said that when the plane was over the Atlantic Ocean, it was the correct decision to divert the flight to Bangor, given the circumstances that were known at that time. Marigot had given a note to a flight attendant along with a book authored by her that details her personal story. Both the note and book were in French. The note sought help from President and Mrs. Obama and the American people. The note stated that she was “simply a victim of a group of doctors” and that she had “an object in her body that is out of [her] control.” When the flight attendant asked whether the object could hurt her or others, she replied that she did not know. An examination by two doctors on board determined that she had no visible scars indicating any kind of implant.

Upon arriving in Bangor, a search of the plane and baggage revealed no explosives or dangerous items. The continuing investigation revealed that the plane and its crew and passengers were never actually in danger at any time.

United States Attorney Delahanty praised the thorough investigation that was conducted by the FBI, CBP, the Transportation Security Administration, and the Bangor Police Department.

Final Defendant Sentenced for His Role in International Conspiracy Involving the Forced Labor of Eastern European Women in Detroit-Area Exotic Dance Clubs

Veniamin Gonikman, 56, a naturalized U.S. citizen originally from Ukraine, was sentenced in federal court for his role in an international conspiracy to compel Eastern European women to work in exotic dance clubs in the Detroit metropolitan area. U.S. District Court Judge Victoria A. Roberts sentenced Gonikman to 36 months in prison followed by three years of supervised release. He is the ninth and final member of the charged conspiracy to be sentenced.

Gonikman became a fugitive in 2005 following the arrests of his co-conspirators, Aleksandr Maksimenko and Michael Aronov. He was apprehended in Ukraine in January 2011 and pleaded guilty to money laundering on September 13, 2011. According to information presented in court filings, between September 2001 and February 2005, Gonikman, together with Maksimenko and Aronov, operated Beauty Search Inc., a business that brokered and managed Eastern European women who performed in exotic dance clubs in the Detroit area. The three men recruited a number of these women in Ukraine, facilitated their illegal entry into the United States, and then harbored them for commercial advantage and private financial gain. Gonikman obtained a share of the proceeds earned by the women and transferred the money to Ukraine in order to promote and carry on the Beauty Search business.

“Human trafficking is the equivalent of modern day slavery. It deprives the victims of their freedom and dignity and it has no place in our country,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Justice Department is committed to the aggressive prosecution of those who rob individuals of their freedom.”

“This sentence brings the final member of this human trafficking ring to justice,” Barbara McQuade, U.S. Attorney for the Eastern District of Michigan. “These defendants treated human beings like a commodity, enticing Eastern European women to come to the United States illegally and then exploiting them for commercial advantage.”

“The defendants in this case preyed on young and vulnerable women from a foreign country. These women were brought to America with promises of education and travel, and instead forced to work in seedy strip clubs,” said Brian M. Moskowitz, Special Agent in Charge of Immigration and Customs Enforcement Homeland Security Investigations (ICE-HSI) in Detroit. “After more than seven years of unyielding resolve on the part of our special agents and prosecutors, we are able to formally end this horrific chapter in the lives of the victims and allow them to now move on knowing that justice has prevailed.”

“Justice has been served knowing that Gonikman, Maksimenko, and Aronov are behind bars for their reprehensible behaviors,” said Erick Martinez, Special Agent in Charge of Internal Revenue Service Criminal Investigation. “These individuals took advantage of someone’s daughter, sister, or granddaughter. The joint work and dedication of the law enforcement community shows that these crimes will not be tolerated.”

“This sentencing comes as the result of the hard work of the FBI and law enforcement partner agencies as well as federal prosecutors,” said FBI Special Agent in Charge Andrew G. Arena. “It sends the message that anyone who seeks to profit from human trafficking will be pursued and prosecuted vigorously. These despicable acts designed to enslave women have no place in our society.”

The lead defendants in this case, Maksimenko and Aronov, pleaded guilty in 2006 to forced labor, immigration, and money laundering charges. Maksimenko was sentenced to 14 years in prison and ordered to pay $1,570,450 in restitution to the victims. Aronov was sentenced to seven-and-a-half years in prison and ordered to pay $1 million in restitution.

Six other defendants were also convicted in 2006 for their respective roles in the conspiracy, including: Duay Jado, a Greek national, who was sentenced to four years in prison for setting a victim’s car on fire to retaliate for her escape and to intimidate the other victims; two Ukrainian nationals, Eygeniy Propenko and Alexander Bondarenko, who were convicted of visa fraud to facilitate victims’ illegal entry into the United States; Anna Gonikman-Starchenko, a Ukrainian national formerly married to Gonikman, Niki Papoutsaki, a Greek national formerly married to Aleksandr Maksimenko; and Valentina Maksimenko, a naturalized U.S. citizen also formerly married to Veniamin Gonikman, all three of whom pleaded guilty to obstruction-related charges.

The case was investigated by ICE, the FBI, the IRS, and the State Department. The case was prosecuted by Assistant U.S. Attorney Mark Chutkow and Trial Attorney Benjamin J. Hawk of the Civil Rights Division’s Human Trafficking Prosecution Unit. Assistant U.S. Attorney Peter Ziedas is handling the asset forfeiture part of the case.

Grygla Man Indicted for Sexually Abusing Three Girls

Earlier this week in federal court, a 59-year-old man from the northern Minnesota community of Grygla was charged in a superseding indictment for sexually abusing two additional girls while on the Red Lake Indian Reservation. On May 21, 2012, Dean Earl Wilkens was charged with one count of aggravated sexual abuse of a child under the age of 12 and one count of abusive sexual conduct, in addition to the existing three counts of aggravated sexual abuse of a child under the age of 12. Wilkens remains in custody.

The indictment alleges that between December 12, 2008 and December 12, 2011, Wilkens, an Indian, engaged in sexual acts with each of the three girls. According to a law enforcement affidavit filed in the case, on December 12, 2011, the Federal Bureau of Investigation was informed of one of the assaults. One of the victims had disclosed the abuse to a school official, who contacted law enforcement.

If convicted, Wilkens faces a potential maximum penalty of life in prison on each count. All sentences will be determined by a federal district court judge. This case is the result of an investigation by the Federal Bureau of Investigation. It is being prosecuted by Assistant United States Attorney Clifford B. Wardlaw.

Because the Red Lake Indian Reservation is a federal-jurisdiction reservation, some of the crimes that occur there are investigated by the FBI in conjunction with the Red Lake Tribal Police Department. Those cases are prosecuted by the U.S. Attorney’s Office.

An indictment is a determination by a grand jury that there is probable cause to believe that offenses have been committed by a defendant. A defendant, of course, is presumed innocent until he or she pleads guilty or is proven guilty at trial.

Mission Man Pleads Guilty to Voluntary Manslaughter

United States Attorney Brendan V. Johnson announced that Jason James DeSersa, age 19, of Mission, South Dakota, appeared before United States District Judge Roberto A. Lange on May 22, 2012 and pled guilty to voluntary manslaughter. The maximum penalty upon conviction is 15 years’ imprisonment, a $250,000 fine, or both.

The conviction stems from an incident that took place on October 12, 2011, when DeSersa hit the victim with a closed fist, knocking him to the ground. While the victim was on the ground, DeSersa and others struck the victim several times, including with a baseball bat. The victim died as a result of his injuries.

The investigation was conducted by the Federal Bureau of Investigation and Rosebud Sioux Tribe Law Enforcement Services. The case is being prosecuted by Assistant United States Attorney Tim Maher.

A presentence investigation was ordered, and a sentencing date was set for August 13, 2012. The defendant was remanded to the custody of the United States Marshals Service pending sentencing.

Ponzi Scheme Mastermind Sentenced to 50 Years in Prison

Keith Franklin Simmons, 47, of West Jefferson, North Carolina, was sentenced today to 50 years in prison in connection with a $40 million Ponzi scheme he operated, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. U.S. District Judge Robert J. Conrad, Jr. also ordered the defendant to serve three years under court supervision following his prison term and to pay $35,331,632 in restitution.

Joining U.S. Attorney Tompkins in making today’s announcement is Chris Briese, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division; and Jeannine A. Hammett, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation Division (IRS-CI).

“What makes this case particularly troubling is that from the beginning, this defendant had no intention of investing a single dime of the victims’ money,” said U.S. Attorney Tompkins. “Simmons made slick presentations to his victims about lucrative investment returns that were filled with lies and deceit. Simmons was a con artist who pocketed people’s savings to finance his own lavish lifestyle and went to great lengths to cover up his crimes. The impact of Simmons’ fraud has been devastating to his victims, who trusted him with their hard-earned money. I want to caution potential investors before they turn over their life’s investments to pay close attention to sales pitches that promise large returns on investments. If it sounds too good to be true, it probably is.”

“Keith Simmons preyed on the elderly and the vulnerable, swindling his victims out of millions of dollars. This case is a stark reminder to the con artists who run these schemes that they will face lengthy prison sentences, and it is a lesson to investors to be cautious and to question promises of large payoffs,” said Chris Briese, Special Agent in Charge of FBI Charlotte.

“Our investigators worked closely with the U.S. Attorney’s Office in bringing this case to a successful conclusion. We are sending a clear message that North Carolina will not tolerate financial crime and that we will put financial criminals behind bars,” stated Jeannine A. Hammett, Special Agent in Charge of IRS.

In December 2009, Simmons was arrested by the FBI and detained without bond. In August 2010, a superseding bill of indictment charged Simmons with one count of securities fraud, one count of wire fraud, and two counts of money laundering. In December 2010, Simmons was convicted on all four counts by federal jury. According to filed court documents, court proceedings, and today’s sentencing hearing, beginning in April 2007, Simmons began soliciting victims to invest in Black Diamond for supposed trading in the foreign currency exchange market. From April 2007 through September 2009, Simmons and his co-conspirators induced over 400 victims nationwide to invest more than $40 million in Black Diamond through a series of false representations, including bogus claims that Black Diamond was generating profits of more than 48 percent annually in the foreign currency trading market. In reality, none of the representations Simmons made to his victims were true. Simmons never invested the funds in any foreign currency market. Rather, court records indicate, Simmons used his victims’ money to fund a lavish lifestyle.

At sentencing, Judge Conrad noted, “The court could not help being struck by the devastation suffered by the victims in this case,” and that there was a “callousness to this Ponzi scheme that seems singular to this court.” Judge Conrad said that the defendant’s conduct “had a generational impact on the victims seldom seen by this court.” Judge Conrad also said that, “A 50-year sentence is an enormous sentence, but there seems to be no other sentence...that would accomplish justice in this case.”

In addition to providing for restitution to victims, federal law also provides for forfeiture of proceeds of crime. Accordingly, Judge Conrad sentenced Simmons to forfeit properties, including numerous pieces of real estate, a vehicle, funds obtained from the sale of real estate, and funds obtained from the sale of shares of ultimate fighting companies. In addition, via administrative agency processes, the FBI has already forfeited numerous additional vehicles and collectible coins seized from Simmons. Simmons had purchased the forfeited properties with over $4,800,000 in proceeds of the scheme. The U.S. Attorney’s Office will request liquidation of any finally forfeited assets and return of net proceeds of liquidation to victims.

CommunityONE Bank:

In today’s sentencing hearing Judge Conrad also released $400,000 to be paid by CommunityONE Bank as restitution to the victims of the Ponzi scheme that the bank failed to detect and report. In April 2011, CommunityONE Bank entered into a deferred prosecution agreement with the Department of Justice related to the Black Diamond Ponzi scheme. The deferred prosecution agreement allowed the Bank, which had been critically undercapitalized, to undergo a merger and recapitalization, thereby avoiding losses from a bank failure to innocent account holders and to the FDIC fund estimated at $500 million. At the time of the deferred prosecution agreement, the $400,000 figure represented sixteen percent of the bank’s total value.

As part of the deferred prosecution agreement, CommunityONE Bank admitted to failing to maintain an effective anti-money laundering program which would have detected and reported Simmons’ suspicious transactions. Court documents show that from April 2007 until September 2009, Simmons deposited more than $35 million in investor funds into his CommunityONE Bank account and withdrew over the same time span more than $35 million from that same account.

CommunityONE Bank did not file any Suspicious Activity Report (SAR) on Simmons during this time period, despite the hundreds of suspicious transactions that took place over those two and a half years. Under the Bank Secrecy Act, banks are required to establish, implement, and maintain programs designed to detect and report suspicious activity indicative of money laundering and other financial crimes, such as investment fraud schemes. According to court documents, the bank failed to detect and report the suspicious transactions, as required by the Bank Secrecy Act, due to deficiencies in its anti-money laundering program.

Salazar Sentencing:

In a related proceeding, Judge Conrad also sentenced today Deanna Salazar, 55, of Yucca Valley, California, to serve 54 months in prison and three years of supervised release for her role in the Black Diamond Ponzi scheme. She was also ordered to pay $5,112,687 in restitution. In December 2010, Salazar pled guilty to conspiracy to commit securities, commodities and wire fraud and tax fraud.

According to filed documents and court proceedings, Salazar invested with Black Diamond through the investment firm Life Plus Group LLC (“Life Plus”), which she controlled. Salazar agreed with Simmons and others to induce investments for Black Diamond and Life Plus by making a series of false and fraudulent representations, material omissions, and deceptive half-truths. For example, Salazar falsely represented to victims that she had conducted due diligence on Black Diamond and used a variety of analytical and research tools in selecting Black Diamond as an investment vehicle when, in reality, she did not conduct any due diligence at all and deliberately closed her eyes to the truth about Black Diamond.

Other defendants convicted in this case are set forth below. It should be noted that those defendants already sentenced, including Salazar, had their sentences reduced by the court to reflect their cooperation with the government in its investigation and prosecution of others.

• Jeffrey M. Muyres, 37, of Matthews, North Carolina, pled guilty on May 17, 2011 to conspiracy to commit securities fraud and money laundering conspiracy. Muyres was sentenced to 23 months’ imprisonment by Judge Conrad on January 18, 2012.
• Roy E. Scarboro, 47, of Archdale, North Carolina, pled guilty on December 3, 2010 to securities fraud, money laundering, and making false statements to the FBI. Scarboro was sentenced to 26 months’ imprisonment by Judge Conrad on May 4, 2011.
• James D. Jordan, 49, of El Paso, Texas, pled guilty on September 14, 2010 to conspiracy to commit securities fraud. Jordan was sentenced to 18 months’ imprisonment by Judge Conrad on June 29, 2011.
• Stephen D. Lacy, 52, of Pawleys Island, South Carolina, pled guilty on December 9, 2010, to conspiracy to commit securities fraud. Lacy was sentenced to 6 months’ imprisonment by Judge Conrad on May 4, 2011.
• Bryan Keith Coats, 51, of Clayton, North Carolina, pled guilty on October 24, 2011 to conspiracy to commit securities fraud and money laundering conspiracy. Coats is awaiting sentencing.

Additional Pending Cases Related to the Scheme:

In February 2012, four additional defendants were indicted in connection with the Black Diamond Ponzi scheme. Jonathan D. Davey, 47, of Newark, Ohio; Jeffrey M. Toft, 49, of Oviedo, Florida; Chad A. Sloat, 33, of Kansas City, Missouri; and Michael J. Murphy, 51, of Deep Haven, Minnesota, face four criminal charges relating to an investment fraud conspiracy.

According to filed court documents, the defendants operated “hedge funds” as part of the Black Diamond Ponzi scheme, and in doing so, lied to get money from their victims by claiming, among other things, that they had done due diligence on Black Diamond and were operating legitimate hedge funds with significant safeguards when, in reality, neither claim was true. According to filed documents and court proceedings, when Black Diamond began collapsing, the defendants and others created a new Ponzi scheme and with a separate Ponzi account that Davey administered. Thereafter, new victim money was deposited into the Ponzi account and used to make Ponzi payments to other victims and to fund the defendants’ lifestyles.

Keith Simmons has been in local federal custody since he was arrested in 2009. Upon designation of a federal facility he will be transferred to the custody of the Federal Bureau of Prisons. Federal sentences are served without the possibility of parole.

The Black Diamond investigation relates to the work of Charlotte’s Securities Fraud Task Force, a group made up of several agencies including the FBI, the securities division of the North Carolina Secretary of State’s Office, the North Carolina Attorney General’s Office, the IRS Criminal Division, the U.S. Postal Inspection Service, the Mecklenburg County District Attorney’s Office, the Securities and Exchange Commission, the Commodities Futures Trading Commission (CFTC), and the U.S. Attorney’s Office. The multi-agency task force promotes collaboration between the agencies in the fight against corporate fraud, insider trading, accounting fraud, market manipulation schemes, and other finance-related crimes.

In announcing the sentence, U.S. Attorney Tompkins thanked the FBI and IRS for their assistance in the investigation. U.S. Attorney Tompkins also acknowledged the assistance and cooperation of the CFTC. This matter is being prosecuted by Assistant United States Attorneys Kurt W. Meyers and Mark T. Odulio of the U.S. Attorney’s Office in Charlotte.