Saturday, June 30, 2012

Catonsville Real Estate Appraiser Pleads Guilty in Scheme to Obtain Over $4.3 Million in Fraudulent Mortgage Loans

Real estate appraiser David C. Christian, age 62, of Catonsville, Maryland pleaded guilty today to conspiracy to commit wire fraud.

The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; Inspector General Steve A. Linick of the Federal Housing Finance Agency; Acting Postal Inspector in Charge Peter R. Rendina of the U.S. Postal Inspection Service—Washington Division.

According to his guilty plea, Christian appraised a number of properties on behalf of purchasers who were seeking financing through a mortgage brokerage company operating out of an office on Gough Street in Baltimore. From April 2004 to April 2008, at the request of a co-conspirator who controlled the mortgage brokerage company, Christian prepared at least 17 fraudulent appraisals for $4,306,950 in loans originated at the mortgage company. Christian falsified the appraisals by using fake photos and descriptions of the properties, misrepresenting the condition of the properties, and used inappropriate comparable properties. The total loss for the 17 loans amounted to $2,661,366.

In March and June 2007, Christian used his co-conspirator as the mortgage broker to refinance property that he and his wife owned in Catonsville. Christian submitted false appraisals that inflated the property value and caused another appraiser to sign the documents to avoid the obvious conflict of performing an appraisal on his own property. With Christian’s knowledge, his co-conspirator processed the loan in Christian’s wife’s name, falsifying her income and employment, as well as the balance in the couple’s bank account and misrepresented other information. The loans were funded by another mortgage company, and Christian and his wife eventually defaulted on the loan, resulting in a loss of nearly $140,000.

Christian faces a maximum sentence of 20 years in prison followed by three years of supervised release. U.S. District Judge James K. Bredar scheduled his sentencing for October 18, 2012, at 1:00 p.m.

The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote the integrity of the credit markets. Information about mortgage fraud prosecutions is available www.justice.gov/usao/md/Mortgage-Fraud/index.html

This law enforcement action is part of 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.

United States Attorney Rod J. Rosenstein commended the FBI, Federal Housing Finance Agency—Office of Inspector General, and U.S. Postal Inspection Service. Mr. Rosenstein thanked Assistant U.S. Attorney Gregory R. Bockin and Special Assistant U.S. Attorney Stephen Learned, assigned from the Federal Housing Finance Agency’s Office of Inspector General, who are prosecuting the case.

Peter Madoff, Former Chief Compliance Officer and Senior Managing Director at Bernard L. Madoff Investment Securities LLC, Pleads Guilty to Securities Fraud and Tax Fraud Conspiracy in Manhattan Federal Court

Preet Bharara, the United States Attorney for the Southern District of New York, Janice K. Fedarcyk, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Toni Weirauch, the Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), Robert L. Panella, Special Agent-in-Charge for the New York Regional Office of the U.S. Department of Labor’s Office of the Inspector General, Office of Labor Racketeering and Fraud Investigations (“DOL-OIG”), and Jonathan Kay, the Director for the New York Regional Office of the U.S. Department of Labor, Employee Benefits Security Administration (“DOL-EBSA”), announced that PETER MADOFF, the former Chief Compliance Officer and Senior Managing Director of Bernard L. Madoff Investment Securities LLC (“BLMIS”), pled guilty today to a two-count Superseding Information charging him with, among other things, conspiracy to commit securities fraud, tax fraud, mail fraud, ERISA fraud and falsifying records of an investment advisor. The overt acts in the conspiracy count also include, among other things, making false statements to investors about BLMIS’s compliance program and the nature and scope of its Investment Advisory business. MADOFF pled guilty in Manhattan federal court before United States District Judge Laura Taylor Swain.

Manhattan U.S. Attorney Preet Bharara said: “Peter Madoff enabled the largest fraud in human history. He will now be jailed well into old age, and he will forfeit virtually every penny he has. We are not yet finished calling to account everyone responsible for the epic fraud of Bernard Madoff and the epic pain of his many victims.”

FBI Assistant Director-in-Charge Janice K. Fedarcyk said: “The Madoff investment empire, built on a foundation of deceit, was a house of cards that grew to skyscraper proportions. As Peter Madoff has admitted today, he was one of the chief architects. For years he certified that periodic reviews established the firm’s compliance with internal and regulatory rules. In fact, Peter Madoff conducted no reviews. He certified that his examination of the firm’s trading process established its integrity. He did not—indeed, he could not—conduct any such examination: Despite the façade, the investment advisory business did not actually trade any stocks. Peter Madoff played an essential enabling role in the largest investment fraud in U.S. history. He made a pretense of compliance; he was really about complicity.”

IRS-CI Acting Special Agent-in-Charge Toni Weirauch said: “This scheme relied on sophisticated teamwork to prevent its discovery by investors and law enforcement. One of the consequences of the concealment is that the IRS was hindered from performing its lawful duty, thus harming our nation’s law abiding taxpayers, along with the defrauded victims. IRS-Criminal Investigation is proud to bring our financial investigative skills to this complex joint investigation and be part of the team that is helping to untangle the web of lies and sort out the culpabilities of the individuals involved. Today’s plea represents an important step forward.”

DOL-OIG Special Agent-in-Charge Robert L. Panella said: “During today’s plea, Peter Madoff admitted to his role in a fraud scheme that harmed the savings of thousands of investors. The investigation that led to today’s guilty plea by Madoff serves as a stern warning to those who would knowingly undermine the financial well-being of workers. In addition, by conspiring to make false statements and to falsify documents required by the Employee Retirement Income Security Act, he failed to protect the integrity of employee benefit plan assets and personally benefited from proceeds gained as a result of these false statements. The OIG will continue to work tirelessly with the U.S. Attorney and our law enforcement partners to investigate such crimes.” DOL-EBSA New York Regional Director Jonathan Kay said: “Today’s plea is a testament to the good work and strong collaboration among multiple federal agencies. This agency remains committed to protecting worker benefit plans from those who would defraud them for personal gain.”

According to the Superseding Information to which MADOFF pled and other court filings:

MADOFF was employed at BLMIS from 1965 through at least December 11, 2008. Beginning in 1969, he became the Chief Compliance Officer (“CCO”) and Senior Managing Director of BLMIS. In his role as CCO, MADOFF created false and misleading BLMIS compliance documents, as well as false reports that were filed with the U.S. Securities and Exchange Commission (“SEC”) that materially misstated the nature and scope of BLMIS’s Investment Advisory (“IA”) business.

Specifically, in his capacity as CCO, MADOFF created numerous false compliance documents in which he stated that he had performed compliance reviews of the trading in the BLMIS IA business on a regular basis, when in reality, the reviews were never performed. The false statements were designed to mislead regulators, auditors, and IA clients.

Further, in August 2006, BLMIS registered as an investment adviser with the SEC. As a registered investment adviser, on at least an annual basis, BLMIS was required to file forms with the SEC that are used to guide the examination programs of investment advisors. Madoff was integrally involved with both the SEC registration process and in the creation of the forms, known as “Forms ADV,” which were materially false and misleading. The numerous false statements in the Forms ADV created the false appearance that BLMIS’s IA business had a small number of highly sophisticated clients and far fewer assets under management than was actually the case. For example, the Forms ADV stated that there were only 23 IA accounts under management at BLMIS when in fact there were more than 4,000 at the time of the firm’s collapse in 2008, and that its IA services were available “only to institutional and high net worth clients.” The Forms also stated that, in 2008, BLMIS had $17.1 billion in assets under management when, on paper, it had more than $65 billion at that time. MADOFF also misrepresented that he, as CCO, ensured that reviews of the IA trading were being performed.

In addition, from 1998 through 2008, MADOFF engaged in a tax fraud scheme involving the transfer of wealth within the Madoff family in ways that allowed him to avoid paying millions of dollars in required taxes to the IRS. Most, if not all of the “wealth,” came directly or indirectly from IA client funds held at BLMIS. The schemes in which he engaged also allowed Bernie Madoff to evade his tax obligations. The methods by which MADOFF engaged in tax fraud included the following:

  • MADOFF received approximately $15,700,000 from Bernard L. Madoff and his wife, and executed sham promissory notes to make it appear that the transfers were loans, in order to avoid paying taxes;
  • MADOFF gave approximately $9,900,000 to family members, and in order to avoid paying taxes, executed sham promissory notes to make it appear that the transfers of these funds were loans;
  • MADOFF did not pay taxes on approximately $7,750,000 that he received from BLMIS;
  • MADOFF received approximately $16,800,000 from Bernard L. Madoff from two sham trades, and disguised the proceeds of the trades as long-term stock transactions in order to take advantage of the lower tax rate for long-term capital gains;
  • MADOFF charged approximately $175,000 in personal expenses to a corporate American Express card and did not report those expenses as income. MADOFF also arranged for his wife to have a “no-show” job at BLMIS from which she received between approximately $100,000 to $160,000 per year in salary, a 401(k), and other benefits to which she was not entitled.

In December 2008, when the collapse of BLMIS was virtually certain, MADOFF agreed with others to send the $300 million that remained in the IA accounts to preferred employees, family members and friends. BLMIS collapsed before the funds were ever disbursed. On December 10, 2008, one day prior to BLMIS’s collapse, MADOFF also withdrew $200,000 from BLMIS for his personal use.

MADOFF, 66, of Old Westbury, NY, faces a statutory maximum sentence of 10 years in prison. The statutory maximum sentences for each of the charged offenses are set forth in the attached chart. Pursuant to his plea agreement with the Government, MADOFF agrees not to seek a sentence of other than 10 years in prison. MADOFF is also subject to mandatory restitution and criminal forfeiture and faces criminal fines up to twice the gross gain or loss derived from the offense. He has agreed to forfeiture of more than $143.1 billion, including all of his real and personal property. This amount represents all of the investor funds paid into BLMIS from 1996—the start of MADOFF’s involvement in the conspiracy—through December 2008.

As part of the defendant’s forfeiture, the Government has entered into a settlement with MADOFF’s family that requires the forfeiture of all of his wife Marion’s and daughter Shana’s assets, and assets belonging to other family members. The surrendered assets include, among other things, several homes, a Ferrari and more than $10 million in cash and securities. Marion Madoff is being left with approximately $771,733 to live on for the rest of her life. The forfeited assets, including the net proceeds from the sale of the forfeited properties, will be used to compensate victims of the fraud, consistent with applicable Department of Justice regulations.

Judge SWAIN set a sentencing date for MADOFF of October 4, 2012 at 3:30 p.m.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission, the Internal Revenue Service and the U.S. Department of Labor for their assistance.

These cases were brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. 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.

The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Lisa A. Baroni, Julian J. Moore, Matthew L. Schwartz, Arlo Devlin-Brown and Barbara A. Ward are in charge of the prosecution.

United States v. Peter Madoff, S7 10 Cr. 228 (LTS)

COUNT CHARGE MAXIMUM PENALTIES
1 Conspiracy to (1) Commit Securities Fraud; (2) Falsify Records of an Investment Adviser; (3) Falsify Records of a Broker-Dealer ; (4) Make False Filings with the SEC; (5) Commit Mail Fraud; (6) Falsify Statements in Relation to Documents Required by ERISA; and (7) Obstruct and Impede the Lawful Governmental Function of the IRS. Five years in prison; three years of supervised release; fine of the greatest of $250,000 or twice the gross gain or loss; mandatory $100 special assessment; and restitution.
2 Falsifying Records of an Investment Adviser Five years in prison; three years of supervised release; fine of the greatest of $10,000 or twice the gross gain or loss; mandatory $100 special assessment; and restitution.

Friday, June 29, 2012

Former Citigroup Vice President Sentenced to 97 Months for Embezzling More Than $22 Million

Gary Foster, a former vice president in Citigroup, Inc.’s treasury finance department, was sentenced to 97 months’ imprisonment today on a conviction for bank fraud arising from his embezzlement of more than $22 million from Citigroup. Foster was sentenced by the Hon. Eric N. Vitaliano, United States District Judge, at the United States Courthouse in Brooklyn.

The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York.

Between September 2003 and June 2011, Foster embezzled more than $22 million from various Citigroup accounts by first transferring money to Citigroup’s cash account and then wiring it to his personal bank account at another bank. Foster concealed his thefts by making various false accounting entries to create the appearance that the cash account was in balance and by placing a fraudulent contract or deal number in the reference line of the wire transfer instructions to give the appearance that the wire transfers were actually in support of an existing Citigroup contract. Foster used the money to buy real estate and luxury automobiles, including a Ferrari and a Maserati. The government has restrained real estate purchased by Foster in Brooklyn, Manhattan and New Jersey and seized numerous luxury automobiles and bank accounts that her controlled. In total, the value of the seized and restrained property is estimated to be approximately $14 million. Foster forfeited the property pursuant to the terms of his guilty plea agreement with the government.

Ms. Lynch extended her grateful appreciation to the Federal Bureau of Investigation, New York Field Office, the agency that led the government’s investigation.

The government’s case is being prosecuted by Assistant United States Attorneys Michael L. Yaeger and Karen R. Hennigan.

The Defendant:

Gary Foster
Age: 35

Second Owner of Houston-Area Home Health Care Agency Sentenced to 108 Months in Prison for Role in $5.2 Million Medicare Fraud

The former co-owner of a Houston-area home health care company was sentenced in Houston to 108 months in prison for his participation in a $5.2 million Medicare fraud scheme, announced the Department of Justice, the FBI and the Department of Health and Human Services (HHS).

Princewill Njoku, a former co-owner and administrator at Family Healthcare Group, was sentenced yesterday by U.S. District Judge Nancy Atlas in the Southern District of Texas to 108 months in prison, followed by three years of supervised release. Njoku was ordered to pay $5.1 million in restitution jointly and severally with his co-defendants. In January 2011, Njoku pleaded guilty to one count of conspiracy to commit health care fraud, one count of conspiracy to pay illegal kickbacks to patient recruiters and sixteen counts of paying such illegal kickbacks.

According to court documents and other evidence presented to the court, Family Healthcare Group, a Houston home health care company, purported to provide skilled nursing to Medicare beneficiaries. According to the evidence, Princewill Njoku paid co-conspirators to recruit Medicare beneficiaries for the purpose of Family Healthcare Group filing claims with Medicare for skilled nursing that was medically unnecessary or not provided. Njoku and his co-conspirators then falsified documents to support the fraudulent payments from Medicare.

Njoku is the ninth defendant sentenced in connection with this scheme, including Njoku’s co-owner, Clifford Ubani, who also received a 108 month sentence earlier this month. One remaining defendant awaits sentencing.

The sentence was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; Special Agent-In-Charge Stephen L. Morris of the FBI’s Houston Field Office; Special Agent-in-Charge Mike Fields of the Dallas Regional Office of HHS’s Office of the Inspector General (HHS-OIG) and the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU).

This case is being prosecuted by Trial Attorney Charles D. Reed and Deputy Chief Sam S. Sheldon of the Criminal Division’s Fraud Section. The case was investigated by the FBI, HHS-OIG, Texas OAG-MFCU and the Federal Railroad Retirement Board-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas.

Since their inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,330 defendants who collectively have falsely billed the Medicare program for more than $4.4 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.

Thursday, June 28, 2012

Georgia Man Convicted in New Jersey for His Role in ‘Phishing’ Scheme

Osarhieme Uyi Obaygbona, 32, of Atlanta, Ga., was convicted today of conspiracy to commit wire fraud, conspiracy to commit identity theft, and conspiracy to gain unauthorized access to protected computers, U.S. Attorney Paul J. Fishman announced.

The jury returned the guilty verdict against Obaygbona following a one-week trial before U.S. District Judge William J. Martini in Newark federal court.

According to documents filed in this case and the evidence at trial:

“Phishing” attacks use fraudulent web pages that mimic the legitimate web pages of ecommerce companies such as banks and payroll processors. Internet scammers trick unwitting customers of those companies into visiting the fake web pages and providing confidential personal and financial information, including names, dates of birth, Social Security numbers, mother’s maiden names, and online account user names and passwords (“Stolen Identifiers”). The Stolen Identifiers are then used to make unauthorized withdrawals from victim accounts.

Obaygbona, Marvin Hill and Alphonsus Osuala were provided with Stolen Identifiers by Waya Nwaki, who received them from Karlis Karklins, a Latvian national who worked with defendant Charles Umeh Chidi and others to deploy phishing websites across the Internet.

Obaygbona, Nwaki, Hill, Osuala, and others used the Stolen Identifiers to make unauthorized withdrawals from victims’ accounts. Some of the Stolen Identifiers were used to create fake driver’s licenses, with which conspirators could impersonate victims at bank branches. The scheme also used the Stolen Identifiers to gain access to the victims’ online accounts, where Obaygbona, Nwaki, and Hill could view victim signatures on check images and then forge checks and withdrawal slips in furtherance of fraudulent withdrawals.

In a second variation of the scheme, Karklins used Stolen Identifiers to gain access to payroll accounts at ADP, the New Jersey-based payroll processor. Karklins and others added fake employees to victim companies’ payrolls, and then caused paychecks to be issued to those fake employees. Karklins, Nwaki, Hill, and others then withdrew the fraudulent payroll amounts using both Stolen Identifiers and unwitting intermediaries (“Mules”). As part of the scheme, more than $300,000 in fraudulent payroll was wired to defendant Olaniyi Jones, a Nigerian national who impersonated a European woman interested in romantic relationships to dupe Mules into wiring the proceeds of the scheme overseas.

Chase Bank, Bank of America, ADP and Branch Bank & Trust Co. lost a total of $1.5 million to the fraud ring.

Nwaki and Hill have both pleaded guilty and are awaiting sentencing before Judge Martini. Osuala is in custody on unrelated federal charges in Georgia. Jones is detained in Nigeria pending extradition. Karklins and Chidi are at large.

The counts for which Obaygbona was convicted carry a maximum total penalty of 50 years in prison and fines of $1 million, or twice the gross gain or loss from the offense. Sentencing is currently scheduled for Oct. 17, 2012.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward in Newark, with the investigation leading to today’s verdict. He also thanked special agents of the FBI’s Atlanta Division, under the direction of Special Agent in Charge Brian D. Lamkin, and the Alpharetta, Ga., Police Department, under the direction of Director of Public Safety Gary George, for their assistance in the investigation.

The government is represented by Assistant U.S. Attorneys Christopher J. Kelly of the Economic Crimes Unit and Andrew S. Pak of the Computer Hacking and Intellectual Property Section.

Operator of Payroll Companies Charged in North Carolina with Federal Fraud and Money Laundering Crimes

Arthur S. Weiss was indicted by a grand jury for tax fraud, wire fraud, mail fraud, bank loan fraud, money laundering and bankruptcy fraud, the Justice Department and Internal Revenue Service (IRS) announced today. The indictment was returned yesterday in the Middle District of North Carolina.

According to the indictment, Weiss operated professional employer organizations (PEOs), which provided payroll-related services to client companies. For his client companies, Weiss agreed to pay the employees, withhold and remit federal and state taxes, prepare and file the federal and state employment tax returns, and provide workers compensation insurance (WCI). Weiss did pay the employees and withhold the employment taxes, but he failed to remit the employment taxes, keeping them for his personal use.

From 2004 to 2011, Weiss failed to file employment tax returns and failed to pay over to the IRS employment taxes of over $4 million. In addition, Weiss collected WCI premiums from his clients but failed to obtain adequate WCI protection, and diverted WCI premiums for his personal use.

The indictment also alleges that Weiss used a portion of his fraud proceeds to purchase expensive jewelry. During a trip to Europe, Weiss fraudulently reported four pieces of jewelry lost or stolen, and received $177,480 from his insurance company. The jewelry was later seized during a search at his former residence in Marion, N.C.

According to the indictment, Weiss also committed bank loan fraud. In order to receive four loans from a bank, Weiss provided numerous personal income tax returns to the bank. Each of the returns Weiss provided to the bank included significantly greater income than the returns actually filed with the IRS. The indictment also alleges that Weiss filed two false personal income tax returns, and lied under oath in his bankruptcy proceeding.

Each of the 13 wire fraud, 10 mail fraud and four bank loan fraud counts against Weiss carries a maximum of 30 years in prison upon conviction. Weiss faces a maximum potential prison sentence of 10 years upon conviction for each of the two money-laundering counts. The bankruptcy fraud count carries a maximum sentence of five years. As to the tax charges, the count of corrupt interference with the Internal Revenue laws and each count of filing a false tax return carry a maximum of three years’ imprisonment upon conviction. Each of the 33 charges alleged in the indictment also carries a maximum $250,000 fine upon conviction.

The case was investigated by IRS-Criminal Investigation, the FBI and the North Carolina Industrial Commission’s Fraud Unit. The case is being prosecuted by Assistant U.S. Attorney Clifton Barrett and Trial Attorney Todd Ellinwood of the Justice Department’s Tax Division.

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

California Man Pleads Guilty in Manhattan Federal Court to Scheme to Sell Fake Babe Ruth Baseball Glove for $200,000

Preet Bharara, the United States Attorney for the Southern District of New York, and Janice K. Fedarcyk, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced that California resident IRVING SCHEIB pled guilty to trying to sell a 19th century baseball glove for $200,000 that he falsely claimed was owned by Babe Ruth. SCHEIB surrendered today in New York and pled guilty to one count of wire fraud before U.S. District Judge Robert P. Patterson.

Manhattan U.S. Attorney Preet Bharara said: “Irving Scheib wove a fantastical tale in an attempt to exploit the iconic status of a legendary figure in the world of baseball, Babe Ruth, to make a quick buck. The peddling of counterfeit goods is a crime, and his plea today makes clear that it is a crime we will prosecute.”

FBI Assistant Director-in-Charge Janice K. Fedarcyk said: “Unlike a work of art or other rare collectible, an item of sports memorabilia derives its value from its context. A baseball bat or glove is not inherently valuable; a bat or glove used by a famous athlete is. What the defendant attempted to sell was in fact a baseball glove. That the glove ever belonged to Babe Ruth was a complete and elaborately constructed fiction.”

According to the Complaint and Information filed in Manhattan federal court, as well as statements made during today’s court proceeding:

On January 12, 2012, SCHEIB purchased a 19th century baseball glove on eBay for $750 which was described as an “1890’s Full Web Workman Baseball Mitt.” At the time he bought the glove, SCHEIB knew that the glove had no connection to Babe Ruth.

Shortly after purchasing the glove on eBay, SCHEIB set out to resell the glove by fraudulently claiming that it was used by baseball legend Babe Ruth. Among other things, SCHEIB fraudulently told a sports memorabilia broker in Nevada that the glove was a family heirloom that was obtained directly from Babe Ruth. Specifically, he claimed that deceased Hollywood actor Robert Young, to whom SCHEIB is related by marriage, obtained the glove from Ruth. SCHEIB also sent fake documents to the memorabilia dealer corroborating this fabricated provenance, and falsely claimed in a letter that the glove “was gifted to Babe Ruth’s personal friend and Golden Era Star Robert Young in 1944. . .[and that Ruth] he was so affectionate towards this glove that he slept with it under his pillow at the orphanage.” These fake documents, in turn, were sent to an individual interested in purchasing the glove (the “Buyer”). After paying for the glove, the Buyer asked SCHEIB to notarize one of the letters attesting to the provenance that was signed by SCHEIB and purportedly signed by SCHEIB’s wife, who is Young’s granddaughter. SCHEIB refused to do so and the Buyer accordingly returned the glove.

Subsequently, SCHEIB repeated the same fabricated provenance for the alleged Babe Ruth glove over the telephone to someone he believed was another potential buyer in New York. That potential buyer was in actuality an undercover investigator for the U.S. Attorney’s Office.

SCHEIB, 50, of Bonsall, California, is charged with one count of wire fraud. He faces a maximum sentence of 20 years in prison. He will be sentenced by Judge Patterson on October 30, 2012 at 4:00 p.m.

Mr. Bharara praised the work of the FBI.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Jason P. Hernandez is in charge of the prosecution.

RGV DME Owner and Others Indicted on Multiple Health Care Crimes

The owner of a now defunct McAllen area durable medical equipment (DME) business, his wife and two former employees have been charged in a 22-count indictment for their alleged roles in a scheme to defraud Medicare and Medicaid through fraudulent billings, United States Attorney Kenneth Magidson and Texas Attorney General Greg Abbott announced today.

Those charged and arrested include Marcello Herrera, 39, the owner of RGV DME, and his wife Carla Cantu Herrera, 31, both of Mission, Texas, along with Ramon De La Garza, 51, also of Mission, and Beatriz Ramos, 27, of Edinburg, Texas. The sealed indictment, returned Tuesday, June 26, 2012, was unsealed upon their respective arrests this morning. The charges include one count of conspiracy to commit health care fraud, six counts of health care fraud, five counts of wire fraud and 10 counts of aggravated identity theft. They could make their initial appearances as early as 10:30 a.m. today before U.S. Magistrate Judge Peter Ormsby. Otherwise, they will appear in federal court tomorrow.

From early 2004 through early 2010, Marcello Herrera, who did business as RGV DME in the McAllen area, allegedly engaged in and directed a scheme to submit fraudulent claims to Medicare and Texas Medicaid for power wheelchairs, incontinent supplies, hospital beds and mattresses as well as other DME supplies. The indictment alleges that Carla Cantu Herrera, De La Garza and Ramos participated in the conspiracy and aided Marcello Herrera and each other in the submission of fraudulent billings, wire fraud and theft of the identities of beneficiaries and doctors.

According to allegations contained in the indictment, RGV DME submitted approximately 25,000 claims totaling approximately $11 million to Medicare and Texas Medicaid for DME allegedly provided to Medicare and Medicaid beneficiaries and was paid more than $7.1 million. The indictment alleges that 80 to 90 percent of the billings were fraudulent and that the fraudulent claims to Medicare were sent by wire transmissions in interstate commerce.

The indictment also alleges the defendants illegally paid “marketers” to obtain Medicare and Medicaid identification numbers and other information from beneficiaries and then used those numbers and information to fraudulently bill Medicare and Medicaid for expensive power wheelchairs, hospital beds and mattresses, incontinent supplies and other DME. The defendants allegedly billed for DME that was never prescribed, was never delivered, was not needed and in some cases was claimed to have been delivered to persons who were deceased at the time of the alleged delivery. To conceal the fraud, the indictment alleges the defendants forged documents and illegally used the identities of beneficiaries and doctors on their unlawful billings.

Conspiracy to commit health care fraud and each of the six counts of health care fraud carry a maximum punishment of 10 years in federal prison without parole and a $250,000 fine upon conviction. Each of the five counts of wire fraud carries a maximum punishment of 20 years in federal prison without parole and a $250,000 fine upon conviction. Each of the 10 counts of aggravated identity theft carries a mandatory two-year additional prison term which must be served consecutive to any other prison sentence imposed for conviction on any of the other crimes charged.

The investigation leading to the charges was conducted by the U.S. Department of Health and Human Services-Office of Inspector General, the FBI and the Texas Attorney General’s Medicaid Fraud Control Unit. Special Assistant United States Attorney Rex Beasley and Assistant United States Attorney Grady Leupold are prosecuting the case.

An indictment is an accusation of criminal conduct, not evidence.

A defendant is presumed innocent unless convicted through due process of law.

Corporate Employee Charged with Embezzlement and Tax Fraud

Sheila Kaye Jameson, 55, of Blandon, PA, was charged today by Information with mail fraud and filing false tax returns, announced United States Attorney Zane David Memeger. According to the information, Jameson, a Logistics Analyst for EnerSys Corporation in Reading, Pennsyvlania, embezzled approximately $1.8 million dollars from EnerSys Corporation by using a shell corporation, Aries Consulting Group, that she created for the purpose of sending bogus invoices to EnerSys requesting payment which Aries Consulting Group was not entitled to receive. The information further charged Jameson with tax fraud because she failed to include any of the embezzeled income on federal income tax returns that she filed with the Internal Revenue Service. The Information also seeks restitution of the money that Jameson embezzeled and any assets that she may have acquired with the money that she stole.

If convicted, Jameson faces a maximum possible sentence of 295 years of imprisonment, a fine of $4.75 million, a special assessment of $1,900, and two years of supervised release.

The case was investigated by Philadelphia Field Office of the FBI and the Internal Revenue Service Criminal Investigation Division and is being prosecuted by Assistant United States Attorney Floyd J. Miller.

An Indictment or Information is an accusation. A defendant is presumed innocent unless and until proven guilty.

Baytown Woman Sentenced for Embezzling from Employer

Alicia Mayo Mosley, 34, of Baytown, Texas, has been sentenced to federal prison for mail fraud, United States Attorney Kenneth Magidson announced today.

At a hearing today, U.S. District Judge Lee H. Rosenthal sentenced Mosley to 24 months in federal prison and ordered her to pay $508,964.77 in restitution to Plant Performance Services LLC (P2S), a subsidiary of Fluor Daniel Corporation.

Mosley pleaded guilty to one count of mail fraud on Jan. 18, 2012, stemming from her scheme to defraud P2S, where she worked as an administrative assistant in its Information Technology unit. Among other things, Mosley was responsible for ordering cellular telephones, notebook computers and other electronic devices for P2S personnel and allocating their costs to P2S departments or projects. Between August 2009 and August 2010, she ordered such items purportedly for use by P2S personnel and had them shipped to her office via Federal Express. Instead of assigning the items to P2S personnel, however, Mosley gave them to people who did not work for P2S, including family members and friends who used them at P2S’s expense or resold them at reduced prices. To avoid detection, she altered bills AT&T sent P2S by lowering the amounts due, causing P2S to fall behind on what it owed.

Mosley was permitted to remain on bond and voluntarily surrender to a U.S. Bureau of Prisons facility to be determined in the near future. The case was investigated by the FBI and prosecuted by Assistant U.S. Attorney Stephen L. Corso.

Two Alabama Real Estate Investors and Their Company Indicted for Conspiracies to Rig Bids and Commit Mail Fraud for the Purchase of Real Estate at Public Foreclosure Auctions

A federal grand jury in Mobile, Ala., returned an indictment today against two real estate investors and their company, charging them with participating in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions held in southern Alabama, the Department of Justice announced today.

The department said the father and son real estate investors, Robert M. Brannon of Laurel, Miss., and Jason R. Brannon of Mobile, respectively, and their Mobile-based company, J & R Properties LLC, conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama. The indictment, returned in the U.S. District Court for the Southern District of Alabama, charges that after a designated bidder bought a property at a public auction, which typically takes place at the county courthouse, the conspirators would generally hold a secret, second auction, at which each participant would bid the amount above the public auction price he or she was willing to pay. The highest bidder at the secret, second auction won the property.

The Brannons and J & R Properties were also charged with conspiring to use the U.S. mail to carry out a scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators, and to cause financial institutions, homeowners and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties. Jason Brannon, Robert Brannon and J & R Properties are charged with participating in the bid-rigging and mail fraud schemes from as early as October 2004 until at least August 2007.

“Today’s indictment underscores the commitment of the Antitrust Division to prosecute those who illegally profit on the real estate market at the expense of distressed homeowners,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s Criminal Enforcement Program. “The division will pursue vigorously those who engage in collusive schemes to eliminate competition in the marketplace.”

FBI Acting Special Agent in Charge Patrick Kiernan reaffirmed his commitment to pursuing these complex economic investigations stating, “This investigation has sent a strong message to the community at large, and the real estate community specifically, that abuses within the real estate industry will not be tolerated. Fraud related to home mortgage investments can have financial implications both locally and nationally, and the integrity of the system must be vigilantly maintained.”

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals, and a $100 million fine for companies. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the statutory maximum fine. Each count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine of $250,000 for individuals, and a fine of $500,000 for companies. The fine may be increased to twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.

The investigation into fraud and bid rigging at certain real estate foreclosure auctions in southern Alabama is being conducted by the Antitrust Division’s Atlanta Field Office and the FBI’s Mobile Office, with the assistance of the U.S. Attorney’s Office for the Southern District of Alabama. To date, five individuals—Harold H. Buchman, Allen K. French, Bobby Threlkeld Jr., Steven J. Cox and Lawrence B. Stacy—and one company—M & B Builders LLC— have pleaded guilty in the U.S. District Court for the Southern District of Alabama in connection with the investigation. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s Atlanta Field Office at 404-331-7100 or visit www.justice.gov/atr/contact/newcase.htm.

Today’s charges are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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 on the task force, visit www.StopFraud.gov.

United Technologies Subsidiary Pleads Guilty to Criminal Charges for Helping China Develop New Attack Helicopter

Pratt & Whitney Canada Corp. (PWC), a Canadian subsidiary of the Connecticut-based defense contractor United Technologies Corporation (UTC), today pleaded guilty to violating the Arms Export Control Act and making false statements in connection with its illegal export to China of U.S.-origin military software used in the development of China’s first modern military attack helicopter, the Z-10.

In addition, UTC, its U.S.-based subsidiary Hamilton Sundstrand Corporation (HSC) and PWC have all agreed to pay more than $75 million as part of a global settlement with the Justice Department and State Department in connection with the China arms export violations and for making false and belated disclosures to the U.S. government about these illegal exports. Roughly $20.7 million of this sum is to be paid to the Justice Department. The remaining $55 million is payable to the State Department as part of a separate consent agreement to resolve outstanding export issues, including those related to the Z-10. Up to $20 million of this penalty can be suspended if applied by UTC to remedial compliance measures. As part of the settlement, the companies admitted conduct set forth in a stipulated and publicly filed statement of facts.

Today’s actions were announced by David B. Fein, U.S. Attorney for the District of Connecticut; Lisa Monaco, Assistant Attorney General for National Security; John Morton, Director of U.S. Immigration and Customs Enforcement (ICE); Ed Bradley, Special Agent in Charge of the Northeast Field Office of the Defense Criminal Investigative Service (DCIS); Kimberly K. Mertz, Special Agent in Charge of the FBI New Haven Division; David Mills, Department of Commerce Assistant Secretary for Export Enforcement; and Andrew J. Shapiro, Assistant Secretary of State for Political-Military Affairs.

The Charges

Today in the District of Connecticut, the Justice Department filed a three-count criminal information charging UTC, PWC and HSC. Count One charges PWC with violating the Arms Export Control Act in connection with the illegal export of defense articles to China for the Z-10 helicopter. Count Two charges PWC, UTC and HSC with making false statements to the U.S. government in their belated disclosures relating to the illegal exports. Count Three charges PWC and HSC with failure to timely inform the U.S. government of exports of defense articles to China.

While PWC has pleaded guilty to Counts One and Two, the Justice Department has recommended that prosecution of UTC and HSC on Count Two, and PWC and HSC on Count Three be deferred for two years, provided the companies abide by the terms of a deferred prosecution agreement with the Justice Department. As part of the agreement, the companies must pay $75 million and retain an Independent Monitor to monitor and assess their compliance with export laws for the next two years.

The Export Scheme

Since 1989, the United States has imposed a prohibition upon the export to China of all U.S. defense articles and associated technical data as a result of the conduct in June 1989 at Tiananmen Square by the military of the People’s Republic of China. In February 1990, the U.S. Congress imposed a prohibition upon licenses or approvals for the export of defense articles to the People’s Republic of China. In codifying the embargo, Congress specifically named helicopters for inclusion in the ban.

Dating back to the 1980s, China sought to develop a military attack helicopter. Beginning in the 1990s, after Congress had imposed the prohibition on exports to China, China sought to develop its attack helicopter under the guise of a civilian medium helicopter program in order to secure Western assistance. The Z-10, developed with assistance from Western suppliers, is China’s first modern military attack helicopter.

During the development phases of China’s Z-10 program, each Z-10 helicopter was powered by engines supplied by PWC. PWC delivered 10 of these development engines to China in 2001 and 2002. Despite the military nature of the Z-10 helicopter, PWC determined on its own that these development engines for the Z-10 did not constitute “defense articles,” requiring a U.S. export license, because they were identical to those engines PWC was already supplying China for a commercial helicopter.

Because the Electronic Engine Control software, made by HSC in the United States to test and operate the PWC engines, was modified for a military helicopter application, it was a defense article and required a U.S. export license. Still, PWC knowingly and willfully caused this software to be exported to China for the Z-10 without any U.S. export license. In 2002 and 2003, PWC caused six versions of the military software to be illegally exported from HSC in the United States to PWC in Canada, and then to China, where it was used in the PWC engines for the Z-10.

According to court documents, PWC knew from the start of the Z-10 project in 2000 that the Chinese were developing an attack helicopter and that supplying it with U.S.-origin components would be illegal. When the Chinese claimed that a civil version of the helicopter would be developed in parallel, PWC marketing personnel expressed skepticism internally about the “sudden appearance” of the civil program, the timing of which they questioned as “real or imagined.” PWC nevertheless saw an opening for PWC “to insist on exclusivity in [the] civil version of this helicopter,” and stated that the Chinese would “no longer make reference to the military program.” PWC failed to notify UTC or HSC about the attack helicopter until years later and purposely turned a blind eye to the helicopter’s military application.

HSC in the United States had believed it was providing its software to PWC for a civilian helicopter in China, based on claims from PWC. By early 2004, HSC learned there might an export problem and stopped working on the Z-10 project. UTC also began to ask PWC about the exports to China for the Z-10. Regardless, PWC on its own modified the software and continued to export it to China through June 2005.

According to court documents, PWC’s illegal conduct was driven by profit. PWC anticipated that its work on the Z-10 military attack helicopter in China would open the door to a far more lucrative civilian helicopter market in China, which according to PWC estimates, was potentially worth as much as $2 billion to PWC.

Belated and False Disclosures to U.S. Government

These companies failed to disclose to the U.S. government the illegal exports to China for several years and only did so after an investor group queried UTC in early 2006 about whether PWC’s role in China’s Z-10 attack helicopter might violate U.S. laws. The companies then made an initial disclosure to the State Department in July 2006, with follow-up submissions in August and September 2006.

The 2006 disclosures contained numerous false statements. Among other things, the companies falsely asserted that they were unaware until 2003 or 2004 that the Z-10 program involved a military helicopter. In fact, by the time of the disclosures, all three companies were aware that PWC officials knew at the project’s inception in 2000 that the Z-10 program involved an attack helicopter.

Today, the Z-10 helicopter is in production and initial batches were delivered to the People’s Liberation Army of China in 2009 and 2010. The primary mission of the Z-10 is anti-armor and battlefield interdiction. Weapons of the Z-10 have included 30 mm cannons, anti-tank guided missiles, air-to-air missiles and unguided rockets.

“PWC exported controlled U.S. technology to China, knowing it would be used in the development of a military attack helicopter in violation of the U.S. arms embargo with China,” said U.S. Attorney Fein. “PWC took what it described internally as a ‘calculated risk,’ because it wanted to become the exclusive supplier for a civil helicopter market in China with projected revenues of up to two billion dollars. Several years after the violations were known, UTC, HSC and PWC disclosed the violations to the government and made false statements in doing so. The guilty pleas by PWC and the agreement reached with all three companies should send a clear message that any corporation that willfully sends export controlled material to an embargoed nation will be prosecuted and punished, as will those who know about it and fail to make a timely and truthful disclosure.”

“Due in part to the efforts of these companies, China was able to develop its first modern military attack helicopter with restricted U.S. defense technology. As today’s case demonstrates, the Justice Department will spare no effort to hold accountable those who compromise U.S. national security for the sake of profits and then lie about it to the government,” said Assistant Attorney General Monaco. “I thank the agents, analysts and prosecutors who helped bring about this important case.”

“This case is a clear example of how the illegal export of sensitive technology reduces the advantages our military currently possesses,” said ICE Director Morton. “I am hopeful that the conviction of Pratt & Whitney Canada and the substantial penalty levied against United Technologies and its subsidiaries will deter other companies from considering similarly ill-conceived business practices in the future. American military prowess depends on lawful, controlled exports of sensitive technology by U.S. industries and their subsidiaries, which is why ICE will continue its present campaign to aggressively investigate and prosecute criminal violations of U.S. export laws relating to national security.”

“Today’s charges and settlement demonstrate the continued commitment of the Defense Criminal Investigative Service (DCIS) and fellow agencies to protect sensitive U.S. defense technology from being illegally exported,” said DCIS Special Agent in Charge Bradley. “Safeguarding our military technology is vital to our nation’s defense and the protection of our war fighters both home and abroad. We know that foreign governments are actively seeking U.S. defense technology for their own development. Thwarting these efforts is a top priority for DCIS. I applaud the agents and prosecutors who worked tirelessly to bring about this result.”

“Preventing the loss of critical U.S. information and technologies is one of the most important investigative priorities of the FBI,” said FBI Special Agent in Charge Mertz. “Our adversaries routinely target sensitive research and development data and intellectual property from universities, government agencies, manufacturers, and defense contractors. While the thefts associated with economic espionage and illegal technology transfers may not capture the same level of attention as a terrorist incident, the costs to the U.S. economy and our national security are substantial. Violations of the Arms Export Control Act put our nation at risk and the FBI, along with all of our federal agency partners, are committed to ensuring that embargoed technologies do not fall into the wrong hands. Those who violate these laws should expect to be held accountable. An important part of the FBI’s strategy in this area involves the development of strategic partnerships. In that regard, the FBI looks forward to future coordination with UTC and its subsidiaries to strengthen information sharing and counterintelligence awareness.”

“Protecting national security is our top priority,” said Assistant Secretary of Commerce for Export Enforcement Mills. “Today’s action sends a clear signal that federal law enforcement agencies will work together diligently to prevent U.S. technology from falling into the wrong hands.”

Assistant Secretary Shapiro, of the State Department’s Bureau of Political and Military Affairs, said, “Today’s $75 million settlement with United Technologies Corporation sends a clear message: willful violators of U.S. arms export control regulations will be pursued and punished. The successful resolution of this case is the byproduct of the tireless work of our compliance officers and highlights the relentless commitment of the State Department to protect sensitive American technologies from being illegally transferred.”

U.S. Attorney Fein commended the many agencies involved in this investigation, including ICE’s Homeland Security Investigations (HSI) in New Haven; the DCIS in New Haven; the New Haven Division of the FBI; the Department of Commerce’s Boston Office of Export Enforcement. He also praised the Office of the HSI Attaché in Toronto, which was essential to the initiation and investigation of this matter, and the State Department’s Office of Defense Trade Controls Compliance in the Bureau of Political-Military Affairs, for its critical role in the global resolution of this matter.

The prosecution is being handled by Assistant U.S. Attorneys Stephen B. Reynolds and Michael J. Gustafson from the U.S. Attorney’s Office for the District of Connecticut, with assistance from Steven Pelak and Ryan Fayhee of the Counterespionage Section of the Justice Department’s National Security Division.

Hardin County Woman Charged with Using the Internet to Arrange Sex with a Minor

A Rosiclare (Hardin County), Illinois woman has been charged in federal court with using the Internet to arrange sex acts with a minor, the United States Attorney for the Southern District of Illinois, Stephen R. Wigginton, announced today.

According to a criminal complaint filed today in federal district court in Benton, Illinois, Heather M. Banks, 23, of Rosiclare, Illinois, is alleged to have used the Internet on June 18, 2012 to induce a minor to engage in illegal sex acts. The complaint further alleges that Banks was using the Internet to induce a minor to provide her with prescription medications in exchange for sex. The charged offense carries a penalty of from 10 years, up to life in prison, a $250,000 fine, and a term of supervised release from five years to life. The case was investigated by the Federal Bureau of Investigation and the Hardin County State’s Attorney’s Office. The case is being prosecuted by Assistant United States Attorney Thomas E. Leggans.

Birmingham Woman Indicted for Disaster Fraud

On June 27, 2012, a federal grand jury indicted a Birmingham woman for fraudulently claiming disaster benefits following the April 27, 2011 tornadoes that struck North Alabama, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Patrick J. Maley, and Department of Homeland Security, Office of the Inspector General, Special Agent in Charge James E. Ward.

The three-count indictment filed in U.S. District Court charges Charlotte H. Browning, 51, with making fraudulent representations to the Federal Emergency Management Agency in an application for disaster benefits concerning her place of residence on the day of the tornadoes. Browning falsely represented that she lived at a residence on First Avenue South in Birmingham that had been damaged by the storm. She also was charged with making a false statement to FEMA by presenting a false lease on the First Avenue South property in applying for disaster-benefits.

The indictment further charges Browning with mail fraud in connection with an $11,647 U.S. Treasury check mailed to her based on a false FEMA benefits application she filed in someone else’s name, without their knowledge, for a house on Lafayette Street in Birmingham. Neither Browning nor the person in whose name she filed for those disaster benefits lived at the Lafayette Street address, according to the indictment.

The maximum penalties for the charges Browning faces are: disaster fraud, 30 years in prison and a $250,000 fine; false statement, five years in prison and a $250,000 fine; and mail fraud, 30 years in prison and a $1 million fine.

The public can report fraud, waste, abuse, or allegations of mismanagement involving disaster relief operations through the National Disaster Fraud Hotline, toll-free, at 1-866-720-5721 or by e-mailing disaster@leo.gov. The telephone line is staffed by a live operator 24 hours a day, seven days a week.

The FBI and DHS-OIG investigated the case.

Members of the public are reminded that the indictment contains only charges. A defendant is presumed innocent of the charges, and it will be the government’s burden to prove a defendant’s guilt beyond a reasonable doubt at trial.

Tuesday, June 26, 2012

Anonymous Associate, Friends Charged in Computer Hacking Scheme

Three residents of Pittsburgh have been indicted by a federal grand jury in Pittsburgh on cyber crime charges, United States Attorney David J. Hickton announced today.

The five-count superseding indictment, returned on June 6 and unsealed today, named Matthew James West, 20, of 116 Sanford Street, Pittsburgh, Pennsylvania, 15204; Jonathan Cunningham, 28, and his wife, Alyson Cunningham, 24, both of 232 Augusta Street, Pittsburgh, Pennsylvania, 15211, as the defendants.

According to the superseding indictment, West was an associate of Alyson and Jonathan Cunningham who had an interest in computer hacking and identified himself as an associate of the computer hacking collective “Anonymous.” On or about November 28, 2011, Alyson Cunningham was terminated from her employment with a law firm “VG.” That same day West, assisted by Jonathan and Alyson Cunningham, hacked into the computer server at VG and installed software that could be used to capture passwords of anyone on the firm’s network. On or about November 29, 2011, West provided personal financial information of Alyson’s former workers at VG to Jonathan Cunningham in violation of federal law.

The defendants were arrested this morning and made an initial appearance in federal court before Magistrate Judge Maureen Kelly. Arraignments are scheduled for June 29 at 10 a.m. before Magistrate Judge Cynthia Eddy. The defendants were released on $10,000 unsecured bond.

The law provides for a maximum total sentence of 26 years in prison, a fine of $1.1 million, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed would be based upon the seriousness of the offenses and the prior criminal history, if any, of the defendants.

Assistant United States Attorney James T. Kitchen is prosecuting this case on behalf of the government.

The Federal Bureau of Investigation conducted the investigation leading to the indictment in this case.

An indictment is an accusation. Defendants are presumed innocent unless and until proven guilty.

Friday, June 22, 2012

Coggon Farmer Sentenced to Eight Years in Prison for Bank Fraud

A hog farmer who defrauded a northeast Iowa bank out of almost $7 million was sentenced on Thursday, June 21, 2012, to more than eight years in federal prison.

David LeClere, age 59, from Coggon, Iowa, received the prison term after a March 12, 2012 guilty plea to one count of bank fraud.

At the plea hearing and in a written plea agreement, LeClere admitted engaging in a scheme to defraud a northeast Iowa bank from approximately March 2007 through May 2009. LeClere admitted he defrauded the bank by knowingly providing the bank with false information each month, falsely inflating the number and weight of his hogs, and falsely inflating his accounts receivable by reporting that packing plants owed him more money than they did. LeClere further admitted defrauding the bank by redepositing on multiple occasions checks he had received as payment from packing plants. The bank lost at least $6.9 million through the fraudulent scheme.

LeClere was sentenced in Cedar Rapids by United States District Court Chief Judge Linda R. Reade. LeClere was sentenced to 96 months’ imprisonment. A special assessment of $100 was imposed, and he was ordered to make $8,274,887.69 in restitution to the victim bank. He must also serve a five-year term of supervised release after the prison term. There is no parole in the federal system.

LeClere is being held in the United States Marshals custody until he can be transported to a federal prison.

The case was prosecuted by Assistant United States Attorney C.J. Williams and investigated by the Federal Bureau of Investigation.

Maryland Man Pleads Guilty to Stealing More Than $1 Million Through False Health Insurance Claims

Luis Rodriguez, 46, of Bethesda, Maryland, a contractor with the Federal Aviation Administration, pled guilty today to a federal charge stemming from the submission of false health care claims, announced U.S. Attorney Ronald C. Machen, Jr. and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office.

Rodriguez pleaded guilty in the U.S. District Court for the District of Columbia to one count of health care fraud. In this case, the charge carries a statutory maximum of 10 years in prison and potential fines. Judge Richard W. Roberts scheduled sentencing for September 25, 2012.

According to a statement of offense signed by the defendant as well as the government, Rodriguez is a Spanish national who is in the United States on a G-4 work visa, due to his wife’s employment with the Inter-American Development Bank (IDB). The IDB is an international financial institution established in 1959 by the Organization of American States and maintains its principal offices in Washington, D.C. The IDB is the largest source of development financing for Latin America and the Caribbean and is funded by its 48 member countries, including the United States, which holds 30.01 percent of the IDB’s shares and is the largest shareholder. The U.S. Secretary of the Treasury serves on the bank’s Board of Governors.

The IDB offers health insurance to all of its staff members and their eligible dependents. IDB’s health insurance plan is administered by CIGNA. Persons covered under the plan may pay their doctors or medical providers out-of-pocket and then submit claims for reimbursement to the IDB through CIGNA.

From March 2006 through April 2010, Rodriguez submitted approximately 2,800 reimbursement claim forms to CIGNA, identifying over 25,000 individual services such as physical therapy that Rodriguez claimed had been provided to him or his two minor children. The bills submitted by Rodriguez totaled more than $1.3 million.

In fact, all of those claims were false; none of the claimed services had ever been provided. Based on the submission of false claims, CIGNA sent checks to Rodriguez for more than $1.25 million. Because the fraud was discovered in time to stop payment on some of the checks, the IDB’s actual loss was just over $1,014,475.

When Rodriguez realized federal authorities were investigating his fraud scheme, he devised a plan to obstruct the federal investigation. Rodriguez attempted to impersonate a senior IDB official and ordered CIGNA to tell the FBI to close the investigation without further action.

“Health care fraud is a growing scourge on our nation. Whether the victim is a private entity like the Inter-American Development Bank—which is partially funded by the American taxpayer—or a government-funded program like Medicare or Medicaid, health care fraud increases the costs of medical care for everyone and diverts resources away from those who truly need it,” said U.S. Attorney Machen. “This prosecution is one of many that demonstrates our commitment to holding accountable those who would steal from the health care system for their own personal profit.”

“Mr. Rodriguez stole more than $1 million through insurance claims for services he did not receive,” said Assistant Director in Charge McJunkin. “Today’s plea demonstrates that the FBI will pursue all such fraudulent schemes which damage the ability of health care providers, employers, and patients to participate in a system free of fraud and dishonesty.”

In announcing the plea, U.S. Attorney Machen and Assistant Director in Charge McJunkin praised the special agents who investigated the case from the FBI’s Washington Field Office. They also expressed appreciation for the assistance provided by the IDB and CIGNA. Finally, they acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office, including Legal Assistant Nicole Wattelet and Assistant U.S. Attorney Ted L. Radway, who is prosecuting the matter.

Thursday, June 21, 2012

Former CIO of Stanford Financial Group Pleads Guilty to Obstruction of Justice

Laura Pendergest-Holt, 38, the former chief investment officer of Houston-based Stanford Financial Group, pleaded guilty today to obstructing a U.S. Securities and Exchange Commission (SEC) investigation into Stanford International Bank (SIB), the Antiguan offshore bank owned by convicted financier Robert Allen Stanford.

The plea was announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; FBI Assistant Director Kevin Perkins of the Criminal Investigative Division; Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis C. Borzi; Chief Postal Inspector Guy J. Cottrell from the U.S. Postal Inspection Service (USPIS); and Chief Richard Weber, Internal Revenue Service-Criminal Investigation (IRS-CI).

Holt entered her guilty plea this morning before U.S. District Judge David Hittner. A plea agreement was also filed with the court. If the agreement is accepted by the court at Holt’s September 13, 2012 sentencing, it will result in a sentence of 36 months in prison, followed by three years of supervised release. Holt will also be subject to a fine of up to $250,000.

In January 2009, the SEC sought testimony and documents related to SIB’s entire investment portfolio. During her guilty plea, Holt admitted that despite knowing that she was incapable of testifying about the vast majority of that portfolio, Holt agreed to testify before the SEC. Holt acknowledged that her eventual appearance and sworn testimony before the SEC was a stall tactic designed to frustrate the SEC’s efforts to obtain important information about SIB’s investment portfolio, and Holt admitted that she took this action intentionally and corruptly, knowing that her testimony would impede the SEC’s investigation and help SIB continue operating.

In addition to Stanford and Holt, a grand jury in the Southern District of Texas previously indicted additional co-conspirators: Stanford Financial Group Chief Financial Officer James Davis, Stanford Financial Group former Chief Accounting Officer Gilberto Lopez, former controller Mark Kuhrt, and former head of the Antiguan Financial Services Regulatory Commission Leroy King. Stanford was sentenced last week to 110 years in prison. Davis previously pleaded guilty and faces up to 30 years in prison. The cases against the remaining defendants are still pending. They are presumed innocent unless and until convicted through due process of law.

The investigation was conducted by the FBI’s Houston Field Office; USPIS; IRS-CI; and the U.S. Department of Labor, Employee Benefits Security Administration. The case against Holt is being prosecuted by Assistant U.S. Attorney Jason Varnado of the Southern District of Texas, Deputy Chief Jeffrey Goldberg of the Criminal Division’s Fraud Section, and Fraud Section Trial Attorney Andrew Warren. Former AUSA Gregg Costa and Fraud Section Deputy Chief William Stellmach were also involved in this case.

The Justice Department thanks the SEC for their assistance and cooperation in this matter.

Hamilton Township Mayor Indicted for Alleged Extortion, Bribery, and Money Laundering Offenses

A federal grand jury returned an Indictment today charging the mayor of Hamilton Township, New Jersey in connection with $12,400 in bribes he allegedly solicited and accepted in exchange for his official influence to assist a cooperating witness in maintaining the position of health insurance broker with the township’s school district, U.S. Attorney Paul J. Fishman announced.

John Bencivengo, 58, of Hamilton, was originally charged by complaint in April 2012 with one count of attempted obstruction of commerce by extortion under the color of official right related to the alleged bribes. The indictment adds a count of obstruction of commerce by extortion under the color of official right; two counts of violating the federal Travel Act, for allegedly causing the interstate travel of a cooperating witness (the “CW”) and using a facility in interstate commerce in aid of the bribery scheme; and one count of money laundering.

According to the indictment and other documents filed in this case:

While serving as mayor between May 2011 and July 2011, Bencivengo accepted payments totaling $12,400 from the CW. In exchange, Bencivengo agreed to use his official assistance, action, and influence to assist the CW and the CW’s employer—identified in the indictment as the “Insurance Broker”—to retain the position as health insurance broker for the Hamilton Township School District. Bencivengo agreed to speak to a member of the School District’s Board of Education—identified in the indictment as “School Board Member No. 1”—about retaining the CW as the school district’s health insurance broker instead of putting that position out for public bid; and agreed to let the CW choose the individual to replace another member of the school board—identified in the indictment as “School Board Member No. 2”—if that member left the board to run for the New Jersey Assembly.

Bencivengo received the $12,400 in multiple payments. The CW passed a $5,000 check to an intermediary who accepted it on Bencivengo’s behalf. Bencivengo, the intermediary, and the CW later agreed to make the check payable to the intermediary’s spouse to further conceal the payment. In addition, Bencivengo, the intermediary, and the CW agreed to put the notation “cherry bedroom set” on the check, agreeing that if anyone asked about the payment, they would say that the CW bought a bedroom set from the intermediary’s spouse. After receiving the check, the intermediary deposited the check and distributed the proceeds to Bencivengo in cash increments over several weeks.

In one of the meetings recorded during the course of the investigation, Bencivengo told the CW that he needed $7,400 to pay his outstanding taxes. The CW responded, “7,400 is definitely doable, as long as you got my back with [School Board Member No. 1].” To which Bencivengo responded, “When have I ever not had your back?” When the CW said, “Come January, [School Board Member No. 1 is] gonna want to go out to bid. You got to definitely get to [School Board Member No. 1],” Bencivengo responded, “I’m gonna.” The CW also reminded Bencivengo that if School Board Member No. 2 was elected to the Assembly, the CW needed to pick the person to replace School Board Member No. 2 on the board.

Bencivengo subsequently received $7,400 in cash from the CW in July 2011, broken into two payments.

The extortion and attempted extortion counts charged in counts one and two each carry a maximum potential penalty of 20 years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. The violations of the Travel Act contained in counts three and four each carry a maximum potential penalty of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. Count five, which charges money laundering, carries a maximum potential penalty of 20 years and a fine of $500,000, or twice the value of the property involved in the transaction. The indictment also seeks forfeiture of the $12,400 in alleged bribe payments.

U.S. Attorney Fishman credited special agents of the FBI’s Trenton Resident Agency, Newark Field Office, under the direction of Special Agent in Charge Michael B. Ward, for the investigation leading to the charges.

The government is represented by Assistant U.S. Attorney Harvey Bartle of the U.S. Attorney’s Office Special Prosecutions Division in Trenton.

The charges and allegations made in the indictment are merely accusations, and the defendant is considered innocent unless and until proven guilty.

Hospice Care of Kansas and Texas-Based Parent Company to Pay $6.1 Million to Resolve Allegations of False Claims

Hospice Care of Kansas LLC and its parent company, Ft. Worth, Texas-based Voyager HospiceCare Inc., have agreed to pay $6.1 million to resolve allegations that they violated the False Claims Act by submitting claims to the Medicare program for ineligible hospice services, the Justice Department announced today. Hospice Care of Kansas currently provides hospice services throughout the state of Kansas. Hospice Care of Kansas, which is based in Wichita, Kansas, was purchased by Voyager in 2004.

The Medicare hospice benefit is available for patients who elect palliative treatment (medical care focused on providing patients with relief from the symptoms, pain, and stress of a serious illness) for a terminal illness and who have a life expectancy of six months or less if the disease runs its normal course. Today’s settlement resolves allegations that Hospice Care of Kansas and Voyager submitted or caused the submission of false Medicare claims between January 2004 and December 2008 for beneficiaries that did not have a terminal prognosis of six months or less.

The government alleged that Hospice Care of Kansas and Voyager engaged in certain practices that resulted in the submission of false claims, including the provision of compensation to clinical employees based on patient census and admissions, delaying discharges of patients determined not to have a six month or less prognosis, instructions to staff to document patient conditions in a misleading manner, and implementation of an inadequate compliance program.

“The Medicare hospice benefit is intended to provide comfort and care to terminally ill persons in the final stages of their disease,” said Stuart F. Delery, Acting Assistant Attorney General for the Department of Justice’s Civil Division. “This settlement shows that the Department of Justice will not tolerate hospice providers that attempt to maximize their profits at the expense of their legal and ethical obligations to the Medicare program, taxpayers, and beneficiaries.”

“Our goals are to protect taxpayer dollars, ensure the viability of government health care programs, and strengthen our national health care system,” said Barry Grissom, U.S. Attorney for the District of Kansas. “This case is a step in that direction.”

“We expect providers of Medicare services to operate with the utmost integrity and with the best interests of our beneficiaries in mind. Working with our partners at the Department of Justice, we will hold those accountable who do not operate in this manner,” said Gerald Roy, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General.

The allegations that are the subject of today’s settlement were originally raised in a lawsuit filed by a former Hospice Care of Kansas nurse, Beverly Landis, under the qui tam, or whistleblower, provisions of the False Claims Act. The act allows private citizens with knowledge of fraud to bring an action on behalf of the United States and share in any recovery. As a part of today’s resolution, Ms. Landis will receive payments totaling $1.342 million.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services, in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $7.7 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $11.3 billion.

The investigation was jointly handled by the Justice Department’s Civil Division, the FBI, the Office of the Inspector General of the Department of Health and Human Services, and the U.S. Attorney’s Office for the District of Kansas. The claims settled by this agreement are allegations only, and there has been no determination of liability.

Wednesday, June 20, 2012

Payroll Agent Charged with Embezzling $1.1 Million from Land O’ Lakes

Yesterday in federal court, a former payroll agent for Land O’ Lakes was charged with embezzling more than $1 million from the company. Cynthia Carol Jacobsen, age 58, of Brooklyn Park, was charged via an information with one count of mail fraud.

Allegedly, from 2008 through May 15, 2012, Jacobsen fraudulently entered her daughter’s name into the company’s payment system as a vendor and then authorized payments to her. During that time, Jacobsen worked as an accounts payable supervisor and authorized payments to vendors for services rendered. The illegal payments were sent by mail to Jacobsen’s residence. In addition, Jacobsen allegedly concealed her actions and made misrepresentations to the company concerning its financial condition.

If convicted, Jacobsen faces a potential maximum penalty of 20 years in prison. All sentences will be determined by a federal district court judge. This case is the result of an investigation by the United States Postal Inspection Service, and the Federal Bureau of Investigation. It is being prosecuted by Assistant U.S. Attorney Christian S. Wilton.

A defendant, of course, is presumed innocent until he or she pleads guilty or is proven guilty at trial.

Detroit-Area Clinic Owner Pleads Guilty to $16 Million Psychotherapy Fraud Scheme

Detroit-area resident Louisa Thompson pleaded guilty today for her role in a $16 million fraud scheme, announced the Department of Justice, the FBI, and the Department of Health and Human Services (HHS).

Thompson, 63, pleaded guilty today before U.S. District Judge Nancy D. Edmunds in the Eastern District of Michigan to one count of conspiracy to commit health care fraud. At sentencing, scheduled for Oct. 18, 2012, Thompson faces a maximum penalty of 10 years in prison and a $250,000 fine.

According to the plea documents, in approximately January 2006, Thompson began billing Medicare for psychotherapy services through two companies, TGW Medical Inc. and Caldwell Thompson Manor Inc. The services billed by Thompson at TGW and Caldwell Thompson were never performed or were performed by unlicensed staff who were not authorized to perform services reimbursed by Medicare. The unlicensed staff members also fabricated therapy notes for patients that were never seen and billed Medicare using document templates created by Thompson.

According to court documents, Thompson also received payments from the owner of P&C Adult Day Care Inc., a psychotherapy clinic. Those payments to Thompson were, in part, for the use of Thompson’s provider number by P&C. Thompson also admitted signing therapy documents for P&C patients she never saw or treated. P&C, like TGW and Caldwell Thompson, billed for psychotherapy services that were either not performed or performed by unlicensed staff. Caldwell Thompson and P&C shared Medicare beneficiaries and/or beneficiary information.

Thompson admitted to submitting or causing to be submitted approximately $15.9 million in fraudulent psychotherapy claims on behalf of TGW, Caldwell Thompson and P&C. Medicare paid approximately $4.9 million of those claims.

The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Acting Special Agent in Charge of the FBI’s Detroit Field Office Edward J. Hanko; and Special Agent in Charge Lamont Pugh III of the HHS Office of Inspector General’s (HHS-OIG), Chicago Regional Office.

The case is being prosecuted by Trial Attorney Gejaa T. Gobena of the Criminal Division’s Fraud Section and Assistant U.S. Attorney for the Eastern District of Michigan Philip A. Ross. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.

Since its inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,330 individuals and organizations that collectively have billed the Medicare program for more than $4 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.

Tuesday, June 19, 2012

Chesapeake Man Sentenced for Mortgage Fraud Scheme

Philip Villasis, 41, of Chesapeake, Virginia, was sentenced today to 33 months in prison followed by 24 months of supervised release for conspiracy to commit wire fraud in connection with a fraudulent foreclosure rescue scheme. Villasis also will be required to pay over $216,000 in restitution to his victims.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and John Boles, Supervisory Agent in Charge of the Federal Bureau of Investigation, made the announcement after sentencing by United States District Senior Judge Robert G. Doumar. Villasis previously pled guilty on March 13, 2012.

According to court documents, from November 2006 until February 2011, Villasis engaged in a foreclosure rescue scheme that defrauded homeowners and mortgage lenders. Villasis promised homeowners that he could save them from foreclosure by arranging a sale of their homes to co-conspirator, Ray D. Gata, and other straw borrowers. The homeowners were promised that they could remain in their homes after the sale, pay rent, and Villasis would resell the homes back to them once they were more financially secure. Villasis and Gata profited from this scheme by taking all of the proceeds from the home sales. They completed the scheme by executing false closing documents that showed the proceeds of the sale going back to the homeowners when, in fact, the proceeds were going to Villasis, Gata, and the other straw borrowers. The homeowners received nothing from the sale of their homes while Villasis, Gata, and others received in excess of $170,000. In almost every case, Villasis required the homeowners to pay more in rent to cover a larger mortgage, and ultimately evicted these homeowners from their homes.

This case was investigated by the FBI. Assistant United States Attorney Melissa E. O’Boyle is prosecuting the case on behalf of the United States.

Second Recruiter Convicted in City Nursing Scheme

Gwendolyn Kay Frank, 43, of Houston, has entered a plea of guilty to conspiracy to violate the Anti-Kickback Statue for her role in role in the $45 million City Nursing health care scandal, United States Attorney Kenneth Magidson announced today.

The Anti-Kickback Statute prohibits referring beneficiaries to business that bill federal health care programs in return for payments. According to the plea agreement, Frank referred at least 28 Medicare beneficiaries to the owner of City Nursing in return for $24,500. City Nursing then billed Medicare for approximately $1,051,392 worth of services for those individuals which were not provided and received $712,052 in payments from Medicare and Medicaid.

Frank is the second recruiter to plead guilty to conspiracy to violate the Anti-Kickback Statue this month and one of a growing list of individuals convicted in the Houston-based City Nursing health care fraud conspiracy. Floyd Leslie Brooks, 45, of Houston, pleaded guilty earlier this month. The owner of City Nursing, Umawa Oke Imo, was convicted in May 2011 and sentenced to more than 27 years in federal prison for his role in the health care fraud conspiracy which included making cash payments to both Medicare beneficiaries and recruiters bringing Medicare beneficiaries to City Nursing.

Frank was permitted to remain on bond pending her sentencing hearing, set for September 14, 2012. At that time, she faces up to five years in prison and a $250,000 fine.

This case has been investigated by the FBI, Internal Revenue Service-Criminal Investigations, the Department of Health and Human Services-Office of Inspector General and the Texas Attorney General’s Office-Medicare Fraud Control Unit. Assistant United States Attorney Julie Redlinger is prosecuting the case.

Owner and Employee of Miami Home Health Company Sentenced to Prison in $22 Million Medicare Fraud Scheme

The owner and an employee of a Miami home health care agency were sentenced today to 108 months and 46 months in prison, respectively, for their participation in a $22 million Medicare fraud scheme, announced the Department of Justice, the FBI, and the Department of Health and Human Services (HHS).

U.S. District Judge Patricia A. Seitz in Miami sentenced Marietha Morales, 38, to 108 months in prison and Eduardo Saborit-Dominguez, 48, to 46 months in prison. Both defendants were each sentenced to three years of supervised release. In addition, Morales was ordered to pay $14 million in restitution and Dominugez was ordered to pay $2 million in restitution, jointly and severally with each other.

Last year, Morales pleaded guilty to one count of conspiracy to commit health care fraud, and Dominguez pleaded guilty to one count of conspiracy to defraud the United States and to receive and pay health care kickbacks.

Morales was the president and Dominguez was an employee of Prime Home Health Services Inc., a Florida home health agency that purported to provide home health care and physical therapy services to eligible Medicare beneficiaries.

According to plea documents, Morales conspired with patient recruiters for the purpose of billing the Medicare program for unnecessary home health care and therapy services. Morales and her co-conspirators paid kickbacks and bribes to patient recruiters in return for the recruiters providing patients to Prime Home Health, as well as prescriptions, plans of care (POCs), and certifications for medically unnecessary therapy and home health services for Medicare beneficiaries. Dominguez distributed the kickbacks and bribes to co-conspirator patient recruiters and knew that the payment of kickbacks and bribes was in violation of federal criminal laws. Morales used these prescriptions, POCs, and medical certifications to fraudulently bill Medicare for home health care services, which Morales knew was in violation of federal criminal laws.

According to plea documents, nurses and office staff at Prime Home Health falsified patient files for Medicare beneficiaries to make it appear that such beneficiaries qualified for home health care and therapy services. Morales admitted that she knew the beneficiaries did not actually qualify for and did not receive such services. Morales knew that these files were falsified so that Medicare could be billed for medically unnecessary therapy and home health related services.

From approximately February 2005 through April 2011, Morales and her co-conspirators submitted approximately $22 million in false and fraudulent claims to Medicare. Medicare actually paid approximately $14 million on those claims.

The sentences were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; John V. Gillies, Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher Dennis of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Miami Office.

This case is being prosecuted by Senior Trial Attorney Joseph S. Beemsterboer of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.

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

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.