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Healthcare Fraud: SHALONDA SUGGS Sentenced for Committing Health Care Fraud and Food Stamp Fraud

February 7, 2017 FraudsWatch Leave a comment

Oklahoma City Woman Pleads Guilty to Committing Health Care Fraud and Food Stamp Fraud

Oklahoma City, Oklahoma – SHALONDA SUGGS, 36, of Oklahoma City, pled guilty last Thursday to health care fraud in connection with submitting false claims to Medicaid for behavioral health counseling services, announced Mark A. Yancey, Acting United States Attorney for the Western District of Oklahoma, and Scott Pruitt, Attorney General for the State of Oklahoma. Suggs also pled guilty to stealing Supplemental Nutrition Assistance Program benefits (SNAP benefits, formerly known as food stamps), which she wrongfully received based on her false statements regarding her income.

On April 5, 2016, Suggs was indicted on sixteen counts of health care fraud and one count of theft of government funds. The Indictment alleged that in July 2013, Suggs opened a behavioral health counseling agency called Focus Pointe Counseling, LLC. It is alleged Suggs obtained a contract with the Oklahoma Health Care Authority (OHCA), which allowed Focus Pointe to receive reimbursement from Medicaid for providing behavioral health counseling services to Medicaid-eligible children. It was alleged that Suggs then submitted Medicaid claims for behavioral health counseling services that were purportedly provided by four counselors supposedly employed by Focus Pointe. It was alleged that the counselors were never actually employed by Focus Pointe and never provided any of the counseling services claimed by Focus Pointe. It was alleged that the OHCA paid Focus Pointe for the false claims and that Suggs used the proceeds for her personal benefit. It is further alleged that during the time period Suggs was fraudulently receiving funds from the OHCA, she was receiving SNAP benefits by making false statements to the Oklahoma Department of Human Services that she was unemployed and had a negligible source of income.

Last Thursday, Suggs admitted that on February 4, 2015, she used Focus Pointe Counseling to submit a claim to the OHCA using the name and Medicaid provider number of certain counselor for a behavioral counseling session that was supposedly provided to a Medicaid beneficiary on August 16, 2014. Suggs admitted that the counselor was not in fact employed by Focus Pointe and that the counseling session was not actually provided. She also admitted that from August 2014 through May 2015, she was receiving SNAP benefits that she obtained by making false statements about her lack of income.

As part of her plea, Suggs agreed to pay restitution to Medicaid in the amount of $204,334.24 and to the Supplemental Nutrition Assistance Program in the amount of $4,959.00.

At sentencing, Suggs faces up to 10 years in prison, three years of supervised release, and a $250,000 fine on each count. A sentencing date will be set by the court in approximately 90 days. Reference is made to the Indictment and other public filings for further information.

Medicaid and SNAP are programs that are funded and administered jointly by the federal government and the State of Oklahoma. This case is the result of a cooperative federal and state investigation by the Federal Bureau of Investigation, the Oklahoma Attorney General’s Office, and the United States Department of Agriculture, Office of Inspector General. It is being prosecuted by Assistant U.S. Attorney Amanda Maxfield Green and Oklahoma Assistant Attorney General Lory Dewey.

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Identity Theft: Jeff Crews Sentenced For Conspiring To Participate In a Racketeering Conspiracy And For Aggravated Identity Theft

January 31, 2017 FraudsWatch Leave a comment

Leader of The Simple City Criminal Organization Sentenced to Over 10 Years in Federal Prison for a Racketeering Conspiracy and Aggravated Identity Theft

Stole Vehicles and Used the Stolen Identity Information of Victims to Engage in Fraudulent Financial Transactions

Greenbelt, Maryland – U.S. District Judge George J. Hazel sentenced Jeff Crews, a/k/a “Fro,” age 25, of Washington, D.C., today to 121 months in prison, followed by three years of supervised release, for conspiring to participate in a racketeering conspiracy and for aggravated identity theft, in connection with his activities as the leader of the Simple City Criminal Organization (SCCO). SCCO was a racketeering enterprise engaged in fraud and related activity, including vehicle theft, interstate transportation of stolen property, and aggravated identity theft. Judge Hazel also entered an order requiring Crews to forfeit and pay restitution of $1,250,000.

The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein;Special Agent in Charge Gordon B. Johnson of the Federal Bureau of Investigation; Chief Hank Stawinski of the Prince George’s County Police Department; and Chief J. Thomas Manger of the Montgomery County Police Department.

According to his plea agreement, the SCCO is a criminal organization based in the southeast quadrant of Washington, D.C. in a neighborhood known as “Simple City.” From at least 2009 to July 2015, Crews and his conspirators, including Sylvia Price and Stefon Janey, met on a regular basis, and planned criminal activity, including vehicle theft, the interstate transportation of stolen property, identity theft and credit/debit card fraud. The SCCO received money and income from those criminal activities.

According to his plea agreement, Crews and other SCCO members would steal vehicles in Prince George’s and Montgomery Counties, Maryland, as well as in Washington, D.C. Crews and SCCO members sometimes used the stolen vehicle in a short crime spree during which they committed a string of auto thefts; thefts from autos; and commercial burglaries targeting ATM machines. Once the SCCO had used a stolen vehicle to commit one or more crime sprees, the SCCO would then transport the stolen vehicle across state lines for resale.

Crews and other SCCO members would provide any personal identification information and access devices stolen during the crime spree to another group within the SCCO, which was led by Sylvia Price. Sylvia Price and those under her direction would conduct fraudulent transactions with the stolen identification documents and access devices, in Maryland, Washington, D.C., and Virginia. Price would provide a portion of the fraud proceeds to Crews, for disbursement to the SCCO members who participated in the thefts.

For example, on April 18, 2015, Crews, Janey, and another co-conspirator robbed a BP Gas Station in Beltsville, Maryland. While Crews acted as the getaway driver, Janey and another co-conspirator used a crowbar to forcibly enter the vestibule area, where an employee was working. Janey and the co-conspirator threatened the employee and stole the employee’s cell phone and cash from a cash register. In addition, Janey and the co-conspirator forcibly opened an ATM in the gas station, causing damage to the ATM, and took cash from the ATM. They fled the gas station in a gray Acura MDX that had previously been stolen in Prince George’s County, on March 31, 2015.

At least $550,000, but not more than $1,500,000, was reasonably foreseeable to Crews based on his involvement in the activities of the SCCO.

All fourteen defendants charged in this case have pleaded guilty to their participation in the racketeering conspiracy. Sylvia Price, a/k/a “Deez Nuts,” age 50, of Suitland, Maryland, was sentenced to 75 months in prison, ordered to pay a money judgment of $453,900, and to forfeit 101 high end women’s handbags, 45 debit cards, as well as gift cards, credit cards and gas cards. Stefon Janey, a/k/a “Stef,” and “Stef Luva,” age 23, of Marlow Heights, Maryland, was sentenced to 27 months in prison. Three other defendants have been sentenced to between 27 and 43 months in prison. The nine remaining defendants are scheduled to be sentenced in the next few months.

United States Attorney Rod J. Rosenstein praised the FBI, Prince George’s County Police Department, Montgomery County Police Department and the members of the Washington Area Vehicle Enforcement Unit for their work in the investigation. Mr. Rosenstein thanked Assistant United States Attorneys Thomas M. Sullivan and Nicolas A. Mitchell, who are prosecuting the case.

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Healthcare Fraud: Group Of Individuals Sentenced For Fraudulent Medicare Billing Scheme

January 31, 2017 FraudsWatch Leave a comment

Seven Sentenced in $6 Million Health Care Fraud Scheme

HOUSTON – The final seven of eight convicted in a $6 million fraudulent Medicare billing scheme have been ordered to federal prison, announced U.S. Attorney Kenneth Magidson.

A Houston federal jury has returned guilty verdicts June 28, 2016, against Giam Nguyen, D.O.,47, of Houston; Benjamin Martinez, M.D., 35, of Dallas; Donovan Simmons, M.D., 43, of Austin; and Anna Bagoumian, 44, of Glendale, California, following an eight-day trial and approximately 13 hours of deliberation. Zaven Pogosyan, 38, Edvard Shakhbazyan, 41, and Seryan Mirzakhanyan, 32, all of Glendale, California; and Frank Montgomery, 67, of Houston; pleaded guilty prior to trial.

Today, U.S. District Judge Lynn N. Hughes handed Nguyen, Edvard Shakhbazyan and Pogosyan all sentences of 87 months in prison and ordered they pay restitution in the amount of $3.3 million. Martinez, Montgomery and Simmons were ordered to serve respective sentences of 28, 17 and 15 months, while Bagoumian will serve a 51-month-term of imprisonment. All were also ordered to pay varying terms of restitution ranging from $6,200 to $2.6 million.

Seryan Mirzakhanyan, 32, was sentenced earlier this month to a 28-month-term of imprisonment and ordered to pay restitution of $1.48 million.

The scheme involved fraudulent billing for diagnostic testing done at three different clinics from September 2008 to May 2010. Patients were paid to come to the clinics, and the clinics then billed for tests that were either not performed or not medically necessary.

Pogosyan and Edvard Shakhbazyan were the former owners of medical clinics located at 2110 Jefferson, 2112 Pease and 6892 Southwest Freeway, Suite 2A, in Houston. Both admitted they opened the three clinics with the intention to defraud Medicare. The majority of the diagnostic tests allegedly performed there were either not done or not medically necessary. Further, the medical equipment, patient files and doctors were all there only to make it appear legitimate. The men also admitted hiring doctors for that purpose and that they paid marketers to bring patients to the fraudulent clinics.

Pogosyan hired Nguyen, who was the only doctor working at the clinics. Pogosyan also hired Martinez and Simmons to travel to Houston once a month to review patient files at the clinic located on Pease Street.

Patients were brought to the clinics by recruiters/marketers like Montgomery who were paid for each patient they delivered. Seryan Mirzakhanyan and Edvard Shakhbazyan paid the marketers for the patients as did Pogosyan and Bagoumian. Mirzakhanyan and Montgomery testified at trial about receiving the cash payments. The court also heard that Bagoumian participated in shredding all of the patient and business records of the Jefferson clinic.

Some of the Medicare beneficiaries also testified as to being paid approximately $100 to go to the clinics. They had primary care physicians, but they reported that they were not referred to the clinics by their physicians nor did they receive any of the test results.

During trial, a law enforcement agent testified about reviewing patient files seized during the searches of the Pease and Southwest Freeway clinics. The jury heard that 730 of the 1229 patients reported their chief complaint as back pain. Nevertheless, those patients were given ultrasounds of their kidneys, abdomens, thyroids, carotid arteries as well as allergy tests and anorectal tests. His testimony also revealed that not one of the files contained a plan of treatment or any indication that the test results were discussed with the patient.

Further, an expert witness told the jury that the anorectal manometry and EMG of the anal or urethral sphincter test results in the patient files were physiologically impossible and therefore could not have been done. He also said there was no medical justification in any of the files to do either of the tests.

The court also heard that Simmons had admitted being paid $40,000 for reviewing 20-30 patient files in less than four hours. Bagoumian received checks totaling $183,000 and cashed every one of them, according to testimony.

With the exception of Bagoumian and Montgomery, who were ordered into custody for violating the terms of their pre-trial release, all had been on bond. Nguyen was taken into custody following the sentencing where he will remain pending transfer to a U.S. Bureau of Prisons facility to be determined in the near future. The remaining defendants were permitted to remain on bond and voluntarily surrender to a U.S. Bureau of Prisons facility to be determined in the near future.

Multiple agencies conducted the investigation to include The Texas Attorney General’s Office – Medicaid Fraud Control Unit, IRS – Criminal Investigation, FBI, Department of Health and Human Services – Office of Inspector General. Assistant U.S. Attorneys Al Balboni and Rodolfo Ramirez prosecuted the case.

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Financial Fraud: Group Of Individuals Sentenced For Their Roles In a Penny-Stock Fraud

January 31, 2017 FraudsWatch Leave a comment

Eight people sentenced to prison for penny-stock fraud that resulted in $39 million loss to investors

Eight people were sentenced to prison this month for their roles in a penny-stock fraud that resulted in a $39 million loss to investors, said Carole S. Rendon, U.S. Attorney for the Northern District of Ohio, and Stephen D. Anthony, Special Agent in Charge of the FBI’s Cleveland Office.

Zirk de Maison, of Redlands, California, was sentenced to more than 12 years in prison and ordered to pay $39.1 million in restitution.
Stephen Wilshinsky, of Woodland Hills, California, was sentenced to nearly three years in prison and $4.2 million in restitution.
Talman Harris, of Monroe, Connecticut, after a jury convicted him on all counts following a three-week trial, was sentenced to more than five years in prison and $843,423 in restitution.
Gregory Goldstein, of Stevenson Ranch, California, was sentenced to nearly three years in prison and $6.3 million in restitution.
Jack Tagliafero, of Glen Cove, New York, was sentenced to more than five years in prison and more than $5 million in restitution.
Victor Alfaya, of Port Washington, New York, was sentenced to nearly two years in prison and $3.6 million in restitution.
Kieran Kuhn, of Port Washington, New York, was sentenced to nearly four years in prison and $5.6 million in restitution.
William Scholander, of Queens, New York, was sentenced to nearly two years in prison and $843,423 in restitution.
Two additional co-conspirators have their sentencings scheduled for February and July 2017.

De Maison and the other defendants conspired to defraud investors and potential investors in several public issuers, including Kensington Leasing, Ltd., Lenco Mobile, Casablanca Mining, Ltd., Lustros, Inc., and Gepco Ltd., (the manipulated companies), by issuing millions of shares to themselves at little or no cost and then artificially controlling the price and volume of traded shares by, among other means, paying undisclosed commissions to brokers, former brokers, and boiler-room operators and promoters, for soliciting investors to make investments in, and fraudulently concealing the ownership interests of, the manipulated companies, according to court documents.

Little or no portion of the investments went to fund the operations of the manipulated companies. Rather, de Maison and the co-conspirators used most of the investments to enrich themselves, according to court documents.

For each of the manipulated companies, de Maison and other co-conspirators controlled a substantial number of outstanding shares through their personal companies, co-conspirators, and associates over which they had influence and control.

Many of the defendants were brokers and former brokers who abused their client relationships to solicit and induce investors to purchase de Maison’s stock in the manipulated companies at what they knew to be artificially inflated values. In exchange, de Maison paid the brokers and former brokers enormous, illegal kickbacks, often as large as 50% of the investment, which were never disclosed to the client-investors.

Other defendants either owned or worked in what were commonly referred to as boiler rooms. For instance, Kuhn owned and operated a boiler room called Small Cap Resources in New York City, where he employed promoters to cold call and solicit potential investors to purchase shares of the manipulated companies. de Maison and others dictated what stocks Kuhn and others pushed. The cold calls to potential investors typically coincided with favorable press releases or other information that de Maison caused to be released, according to court documents.

Kuhn and others touted the manipulated companies using high-pressure sales tactics and misrepresentations about the value of the companies and their stock. The boiler room promoters did not disclose that de Maison and other co-conspirators paid them commissions on the sale of the stock to the investors, either on the open market or through private placements, according to court documents.

De Maison and his co-conspirators caused more than $54 million to be invested in the purchase of stock in the manipulated companies and caused a loss to investors in the amount of approximately $39 million from the scheme. de Maison profited through the fraudulent scheme relating to the companies’ stocks. He received and embezzled approximately $39 million in investor monies, according to court documents.

The case was prosecuted by Assistant U.S. Attorneys Christos N. Georgalis, Paul M. Flannery, and Adam Hollingsworth after an investigation by agents of the Federal Bureau of Investigation.

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Tax Fraud: Gerard Terry Charged With Tax Evasion And Obstructing The Administration Of Internal Revenue Laws

January 31, 2017 FraudsWatch Leave a comment

Gerard Terry, Former Chairman Of The North Hempstead Democratic Party And Nassau County Board Of Elections Official, Indicted For Tax Evasion And Obstructing Internal Revenue Laws

Defendant Failed to Pay Over $1.4 Million in Federal Tax Due While Holding at Least Six Government Jobs

An indictment was unsealed today in the United States District Court for the Eastern District of New York charging Gerard Terry with tax evasion and obstructing the administration of internal revenue laws. Terry was arrested this morning and his arraignment is scheduled for Tuesday before U.S. District Judge Joanna Seybert at the U.S. Courthouse, 100 Federal Plaza, Central Islip, New York.

The charges were announced by U.S. Attorney Robert L. Capers of the Eastern District of New York, Acting Special Agent in Charge Kathy A. Enstrom, Internal Revenue Service-Criminal Investigation (IRS-CI), and William F. Sweeney, Jr., Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (FBI).

As detailed in the indictment and in other publicly filed court documents, Terry, an attorney licensed to practice in New York state, attempted to evade substantial income tax due and owed by him, despite earning income from numerous government and quasi-government positions in Nassau County, including the Democratic Party in the town of North Hempstead, the Nassau County Board of Elections, the Town of North Hempstead, the Long Beach Housing Authority, the North Hempstead Housing Authority, the Freeport Community Development Agency, the Roosevelt Public Library, the Village of Port Washington, and the Village of Manorhaven. Since January 2000, Terry has failed to pay a federal tax debt of over $1.4 million, despite earning over $250,000 per year.

During the period charged in the indictment, Terry routinely failed to file personal Form 1040 tax returns, filing years later and only after vigorous pursuit by the IRS. Even then, Terry filed Forms 1040 that contained false information and failed to report income. Moreover, Terry has still failed to file returns for tax years 2009 and 2010. Terry also evaded the IRS’s attempts at levy collection by cashing hundreds of wage and compensation checks worth over $500,000, rather than depositing them into checking or savings accounts where they could be seized. When depositing those checks into his bank account, Terry did so in the minimum amounts necessary to cover checks and payments for his own personal expenses and luxury items, thereby making sure there were insufficient funds upon which the IRS could levy.

In his communications with the IRS, Terry routinely provided false, misleading, and incomplete information to obstruct internal revenue laws. For example, Terry created and utilized a checking account in the name of a corporate nominee so as to conceal income and avoid levy collection. Additionally, Terry had one of his employers make direct payments to his credit card rather than issuing him a paycheck, allegedly to avoid levy collection by the IRS.

“As alleged in the indictment, the defendant knowingly and willfully refused to pay his federal income taxes. That he did so while earning hundreds of thousands of dollars from government and civic positions only makes his conduct more offensive,” stated U.S. Attorney Capers. “Today’s indictment demonstrates our resolve to aggressively investigate and prosecute those who fail to meet their income tax obligations under the law.”

“Taxes are inevitable, we all have to pay them. Mr. Terry allegedly tried to avoid paying them, especially egregious given his position and roles in government organizations which rely on taxes from citizens who work hard and obey laws,” said FBI Assistant Director in Charge Sweeney.

“As alleged in today’s indictment, not only did Mr. Terry fail to pay taxes and file tax returns for over a decade, after being steadfastly pursued by the IRS he continued with his flagrant disregard for our nation’s tax system by filing fraudulent tax returns,” said IRS-CI Special Agent in Charge Enstrom. “Fulfilling individual tax obligations is a legal requirement and those who willfully evade this obligation will be held accountable.”

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

The government’s case is being prosecuted by Assistant U.S. Attorney Artie McConnell.

The Defendant:

GERARD TERRY

Age: 62

Roslyn, New York

E.D.N.Y. Docket No. 17-CR-37

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Tax Fraud: Kevin B. Lake Pleaded Guilty To Drug, Tax And Fraud Charges

January 31, 2017 FraudsWatch Leave a comment

Ohio Doctor Pleads Guilty to Running South Side Medical Center as Drug Premises and Evading More Than $3.5 Million in Taxes

Government seizes more than $29 million in proceeds

Today the government unsealed a plea agreement with the owner and operator of Columbus Southern Medical Center, which provided unlawful prescriptions of controlled substances to addicts throughout the Midwest and who engaged in a series of schemes to evade more than $3.5 million in taxes, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Benjamin C. Glassman for the Southern District of Ohio.

Kevin B. Lake, 50, of New Albany, Ohio, pleaded guilty to drug, tax and fraud charges and agreed to the forfeiture of what remains from the $29 million in seized funds earned from the clinic’s illegal activities, after restitution is paid from the funds.

According to court documents, Lake owned and managed Columbus Southern Medical Center through one or more corporate or trust entities which he used to insulate himself from the illegal drug trafficking being conducted at the clinic.

In the filed plea document, he admitted that between 2006 and 2013, he knew doctors and staff at the 2912 South High Street clinic prescribed controlled substances to patients without a legitimate medical purpose. During that time, hundreds of patients showed up daily – 85 percent of whom were returning patients – to receive prescriptions of oxycodone, hydrocodone and Xanax. The percentage of patients who were prescribed these controlled substances rose each year, jumping from nearly 60 percent in 2004 to nearly 92 percent in 2009 and 2010.

Lake agreed to plead guilty to maintaining the clinic as a drug premises. He also admitted that he exclusively controlled all of the proceeds generated by the illegal activity being conducted by the doctors, physician assistants and staff at the clinic, which was more than $38 million in payments for patient visits. He admitted to engaging in more than $20 million in money laundering transactions with these illegal drug proceeds.

The doctor also agreed to plead guilty to tax evasion on his personal income tax returns and admitted to filing fraudulent tax returns for his corporations and trusts. He paid himself more than $90,000 in 2010 through 2013 from the clinic entities, which he did not report as income, but instead disguised as phony rental payments ostensibly for use of his personal residence for corporate retreats. He also took inflated charitable contribution deductions on his individual income tax returns. In addition, Lake admitted causing the filing of corporate tax returns that falsely claimed inflated depreciation deductions for nearly $7.4 million in so-called “equipment” purchases by his corporations from his trust for tax years 2005 through 2011. He also admitted to falsely reporting these purchases as capital gains on his trust tax returns rather than as ordinary income, thereby securing a much lower tax rate. Lake’s tax crimes caused a tax loss of more than $3.5 million.

After the DEA first appeared at the clinic in June 2010, Lake took several steps to separate himself from the drug premises; he stopped paying himself a salary, and instead filed a fraudulent claim for disability payments from his two disability insurers. The insurance companies ultimately denied his claims, and only paid out $18,000. Lake also sold the clinic’s remaining stock to employees through an Employee Stock Ownership Plan (ESOP) for the inflated price of $14 million.

After the ESOP sale and the denial of his fraudulent disability claim, Lake fraudulently filed for and collected unemployment benefits, stealing more than $20,000 in government funds.

Finally, the doctor admitted to defrauding the Bureau of Workers’ Compensation by having employees upcode office visits in order to bill for higher level medical services in addition to those provided by physician assistants as if they were provided by physicians, causing a loss of more than $260,000.

As part of the plea agreement, and due to Lake’s cooperation in the government’s investigation, the parties involved recommended to the court that Lake receive a sentence of 60 months in prison. Judge Watson will consider the recommended sentence at a sentencing hearing that has yet to be scheduled.

“At the same time Dr. Lake was running his medical center as an illegal drug premises, he took every opportunity to cheat the U.S. Treasury out of millions of dollars in taxes,” said Acting Deputy Assistant Attorney General Goldberg. “As the income tax filing season begins, Lake’s guilty plea is a stark reminder of what awaits those filing false returns — no matter their profession, income level or the complexity of their scheme.”

“For seven years, Kevin Lake operated Columbus Southern Medical Center as a pill mill,” said U.S. Attorney Glassman. “He got rich by feeding the addictions of hundreds and hundreds of people. Thanks to the thorough investigation of federal, state, and local law enforcement agencies, however, Lake has agreed to plead guilty to drug, tax, and fraud charges, forfeit his ill-gotten gains, and serve time in federal prison for his misdeeds.”

“Today’s guilty plea exemplifies DEA’s determination to combat the troubling prescription drug and opiate abuse problem currently plaguing this country,” said Drug Enforcement Administration (DEA) Special Agent in Charge Timothy J. Plancon. “Kevin Lake abused his position of trust and jeopardized the lives of many individuals, by conspiring with others to illegally prescribe controlled substances that ended up being consumed throughout Ohio and the surrounding states. This investigation uncovered the elaborate lengths that Lake undertook to conceal his illegal profits, and the seizure of $29 million from Lake is indicative of the scope of his illegal activity. Lake’s guilty plea should serve as a warning to all medical professionals that if you prescribe medicine for personal gain, you will be prosecuted to the fullest extent of the law. This investigation was a success thanks to the outstanding investigative work by all of our federal, state, and local law enforcement partners.”

“Dr. Lake’s conduct detailed in this case is egregious and had such a negative impact on our community,” said Acting Special Agent in Charge Troy N. Stemen of Internal Revenue Service Criminal Investigation (IRS-CI), Cincinnati Field Office. “This is an important victory for the citizens of Central Ohio. Dr. Lake not only fueled the prescription drug problem in Central Ohio, but he supported addiction in several parts of the country. As a result of this joint investigative effort, the government has seized a significant portion of the illegal proceeds through asset forfeiture, and Dr. Lake is faced with having to pay back taxes with interest and steep penalties.”

“The Office of Inspector General congratulates the U.S. Attorney’s Office and all of the investigators on this important case,” said Special Agent in Charge James Vanderberg of the U.S. Department of Labor, Office of Inspector General’s Chicago Region. “The OIG will continue to work with our law enforcement partners to investigate unemployment insurance fraud and employee retirement plan fraud schemes.”

“There is no doubt that today’s opiate epidemic is due in large part to the overprescribing of prescription pain medication across this state,” said Ohio Attorney General Mike DeWine. “This defendant preyed on those battling addiction in an effort to make millions from their suffering. An incredible amount of hard work went into investigating and prosecuting this case. Because of this team effort, this pill mill operation has been shut down.”

“We place trust in our healthcare professionals to provide quality treatment that improves the health of injured workers,” said Ohio Bureau of Workers’ Compensation (BWC) Administrator/CEO Sarah Morrison. “We’re pleased to do our part to address the problem of prescription drug abuse in Ohio, as well as put an end to Dr. Lake’s fraudulent billing scheme.”

“It is through the hard work of the investigators and the cooperation of agencies at the federal, state, and local level that led to the successful investigation and prosecution of this pill mill,” said Columbus Police Deputy Chief Michael Woods.

Three co-defendants have pleaded guilty as part of this case. Dr. Terry Dragash was sentenced in October 2014 to one year in prison for conspiracy to distribute drugs as a result of his conduct in prescribing at the clinic. Dr. David Rath pleaded guilty to a similar conspiracy charge. And in December 2015, Karen Climer – another employee of Lake’s – pleaded guilty to conspiracy and was sentenced to six months in prison after the government revealed she was cooperating in the investigation into Lake.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Glassman commended the investigation of this case by the DEA Tactical Diversion Squad – including the Ohio Attorney General’s Bureau of Criminal Investigation (BCI) and Columbus Division of Police – IRS Criminal Investigation, Ohio Bureau of Workers’ Compensation, Department of Labor OIG and Employee Benefits Security Administration, Central Ohio Drug Enforcement Task Force, Franklin County Sheriff’s Office, Ohio State Board of Pharmacy and the State Medical Board of Ohio, as well as Assistant U.S. Attorney Kenneth F. Affeldt and Department of Justice Tax Division Trial Attorneys Richard M. Rolwing and Carl F. Brooker, who are representing the United States in this case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

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Financial Fraud: Wen Ping Chen, Kewang Lin and Shao Qing Chen Sentenced For Credit Card Scam

January 31, 2017 FraudsWatch Leave a comment

Three New Yorkers Sentenced For Credit Card Scam

The United States Attorney for the District of Vermont announced that three residents of Brooklyn, New York were recently sentenced in United States District Court in Brattleboro following their guilty pleas to charges involving credit card fraud. Today, U.S. District Judge J. Garvan Murtha sentenced Wen Ping Chen, 39, who was the organizer of this conspiracy, to 12 months plus one day of imprisonment. Two lower-level participants in the conspiracy, Kewang Lin, 38, and Shao Qing Chen, 28, were sentenced last week to terms of probation. Wen Ping Chen was ordered to serve three years of supervised release upon completion of his prison term. The three defendants were ordered to pay restitution in the total amount of $25,600. The court ordered that Wen Ping Chen surrender to the Bureau of Prisons on April 4 to begin serving his sentence.

On October 15, 2015, a federal grand jury in Burlington returned a three-count indictment charging Wen Ping Chen with conspiring to commit access device fraud, possessing 15 or more counterfeit access devices, and using counterfeit access devices. In 2014, the grand jury had charged Kewang Lin and Shao Chen with related crimes. The prosecution stemmed from an incident in August 2014 which resulted in the arrests in South Burlington of co-conspirators Shao Chen and Lin.

According to the indictment and court records, between about 2013 and August 22, 2014, Wen Ping Chen recruited Shao Chen, Kewang Lin and other young men and women to commit credit card fraud across the Eastern United States. As part of the conspiracy, Wen Ping Chen recruited young women to obtain waitressing jobs at Chinese restaurants outside New York City. Chen gave his recruits credit card skimming devices which enabled them to steal the credit card numbers of restaurant customers. Chen used the stolen credit card numbers to manufacture counterfeit credit cards. He then recruited young men to travel from New York to other states and use counterfeit credit cards to make purchases, primarily of gift cards. The merchandise acquired through the fraudulent purchases would then be resold on a black market. In August 2014, Wen Ping Chen, Shao Chen and Lin drove from New York to Vermont. Shao Chen and Lin spent two days buying gift cards with counterfeit credit cards provided to them by Wen Ping Chen. On August 22, 2014, Shao Chen and Lin were arrested and later pled guilty in federal court to credit card related crimes. Wen Ping Chen was also arrested in 2014 but was initially released pending further investigation. More than 80 counterfeit credit cards were recovered by South Burlington officers, as well as thousands of dollars of gift cards.

Before being arrested in Vermont, Shao Chen, Lin and other conspirators made shopping trips to Virginia, Ohio, Indiana, Arkansas and Louisiana to buy gift cards with counterfeit credit cards supplied by Wen Ping Chen.

This case was investigated by the South Burlington Police Department, the United States Secret Service, and the Bureau of Immigration and Customs Enforcement.

Wen Ping Chen is represented by Paul Brenner; Shao Chen by Stacey Van Malden; and Kewang Lin by Edgar Fankbonner. The prosecutor is Assistant U.S. Attorney Gregory Waples.

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Financial Fraud: Cyril Gordon Lunn Pleaded Guilty to Concealing Assets From His Bankruptcy Creditors And Making a False Statement

January 31, 2017 FraudsWatch Leave a comment

Former Pepperell Man Who Fled to Canada on Snowmobile Pleads Guilty to Bankruptcy Fraud

BOSTON – A former Pepperell man pleaded guilty today in U.S. District Court in Worcester in connection with concealing $3–$4 million in his bankruptcy filings.

Cyril Gordon Lunn, 68, pleaded guilty today to concealing assets from his bankruptcy creditors and making a false statement under the penalty of perjury in one of his bankruptcy schedules. U.S. District Court Judge Timothy S. Hillman scheduled sentencing for May 3, 2017.

From 1985 until 2001, Lunn was the owner of CY Realty Corporation, a construction and land development business in Pepperell. 1998 to September 2001, Lunn transferred a variety of assets belonging to CY Realty and himself, including $3-$4 million in cash, from the United States to Canada, where he deposited some or all of the funds in safe deposit boxes. In the fall of 2001, Lunn filed for bankruptcy for CY Realty and himself; however, he failed to disclose in either bankruptcy case the asset transfers, including the millions in cash. Lunn’s actions were discovered after he testified about the asset transfers during a 2004 Canadian civil lawsuit. In March 2005, Lunn rented a snowmobile in Maine and fled across the border into Canada where he remained a fugitive until he was extradited from Canada in 2016.

Lunn also pleaded guilty to making a false statement in one of his bankruptcy filings by falsely stating that he had closed all safe deposit boxes by September 2001, when in fact, he had failed to disclose a safe deposit box that he had opened at the Granite Bank in New Hampshire, and which he continued to access after the bankruptcy filing.

The charging statutes provide for a sentence of no greater than five years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

Acting United States Attorney William D. Weinreb and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement today. Assistant U.S. Attorney Mark J. Balthazard of Weinreb’s Economic Crimes Unit is prosecuting the case.

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Financial Fraud: STEVEN SIMMONS and JOSEPH MELI Charged on Conspiracy, Securities Fraud, Wire Fraud, And Scheme to Defraud Investors

January 28, 2017 FraudsWatch Leave a comment

Two Individuals Arrested And Charged In Manhattan Federal Court With Securities And Wire Fraud For Participating In A Multimillion-Dollar Ponzi Scheme

Steven Simmons and Joseph Meli Charged with Defrauding Investors and Diverting Fraudulent Proceeds For Their Own Use and to Further the Ponzi-Like Operation of a Hedge Fund

Joon H. Kim, the Deputy United States Attorney for the Southern District of New York, and William F. Sweeney, Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that STEVEN SIMMONS and JOSEPH MELI were arrested this morning on conspiracy, securities fraud, and wire fraud charges stemming from their participation in a scheme to defraud investors and provide those fraud proceeds to earlier investors in a hedge fund (the “Hedge Fund”). MELI is also charged with wire fraud in connection with a related fraudulent scheme in which MELI solicited investments through false representations that MELI had entered into an agreement to purchase tickets to a particular Broadway show (the “Show”), which MELI could then resell for a profit.

SIMMONS and MELI are expected to be presented today in Magistrate Court before the Honorable James C. Francis IV.

Deputy U.S. Attorney Joon H. Kim said: “As alleged, while soliciting funds from investors for legitimate-sounding investments, Steven Simmons and Joseph Meli were in fact running Ponzi schemes. Meli allegedly made up out of whole cloth purported deals to buy Broadway tickets that he could later sell at a profit. But as alleged, Meli was just robbing Peter to pay Paul. Thanks to the work of the FBI, the curtain has fallen on Simmons and Meli’s alleged fraud scheme.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “When fraudsters think they’re going to get away with scheming investors out of money, they tend to forget that at some point the money will run out. It’s the way a Ponzi scheme ends. At some point, the original investors will want to see returns on their investments, and they’re going to demand an explanation as to why there isn’t any money. The men arrested in this case even allegedly joked about the scheme, calling it a ‘shell game.’ This should serve as a warning to others playing the same games, at some point, the FBI and our law enforcement partners will discover the fraud and will make sure the criminals behind it are held accountable.”

According to the Complaint unsealed today in Manhattan federal court:

Beginning in at least November 2015 through in or about January 2017, SIMMONS and MELI solicited investments by falsely representing to the investors that their funds would be used for legitimate, specified, investment purposes. SIMMONS represented that investor funds would be invested in securities by the Hedge Fund and MELI represented that investor funds would be used to purchase a large number of tickets for the Show which would then be resold by MELI for a profit. In fact, SIMMONS and MELI failed to invest the investor monies as promised, but rather used the money, in a Ponzi-like fashion, to fund the repayment of earlier investors in the Hedge Fund whose redemption requests could not be forestalled, and diverted investor monies to their own use.

Among other false and misleading statements, SIMMONS told one investor (“Victim Entity-1”) that its funds would be placed by the Hedge Fund with a highly successful group of portfolio managers, and provided performance information for these portfolio managers. In truth and in fact, SIMMONS solicited those investment funds from Victim Entity-1 for the purpose of repaying an earlier investor in the Hedge Fund that had demanded the return of its investment. Most of Victim Entity-1’s funds were, within minutes of their receipt by the Hedge Fund, wired to the earlier investor. The following day, $50,000 was wired by the Hedge Fund to an account controlled by SIMMONS. In a later consensually recorded conversation with a cooperating witness (the “CW”), SIMMONS expressed concern that Victim Entity-1 would contact the portfolio managers with whom it believed its funds were invested and learn that “there’s no . . . money.”

MELI also solicited at least three investors in a separate business run by MELI by falsely representing that he had entered into an agreement with the producer of the Show under which MELI would purchase a large number of tickets to the Show and then resell those tickets at a profit. MELI promised these investors a share in these profits. In truth and in fact, MELI had not entered into an agreement to purchase tickets to the Show but rather diverted investor money to his own personal use, including spending more than $200,000 at a luxury car dealership, and used investor monies to repay earlier investors in both his own Ponzi-like ticket resale scheme and the Hedge Fund. In later consensually recorded conversations with the CW, MELI discussed his “fraudulent ticket deal” and described playing a “shell game” with investor monies.

SIMMONS, 48, of Wilton, Connecticut, and MELI, 42, of Manhattan, were arrested this morning. SIMMONS is charged with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, and one count of wire fraud. MELI is charged with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, and two counts of wire fraud. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Mr. Kim praised the work of the FBI and thanked the Securities and Exchange Commission for its assistance. He added that the investigation is continuing.

The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Elisha J. Kobre is in charge of the prosecution.

The allegations contained in the Complaint are merely accusations, and the defendant ispresumed innocent unless and until proven guilty.

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Financial Fraud: Jason Laut Charged For Wire Fraud, False Statements And Two Counts of Identity Theft

January 24, 2017 FraudsWatch Leave a comment

Former Paramedic Charged in 37-Count Indictment With Wire Fraud, Making False Statements and Identity Theft Regarding the Theft of Controlled Substances

Donald S. Boyce, United States Attorney for the Southern District of Illinois, announced the unsealing of a 37 count indictment against Jason Laut, 39, of O’Fallon, Illinois. The indictment was returned by a federal grand jury in East St. Louis, Illinois on January 18, 2017. Laut who was arrested by the FBI, was arraigned today in East St. Louis, Illinois, on six counts of wire fraud, 29 counts of making false statements and two counts of identity theft.

The indictment returned by the grand jury alleges that Laut, who was a paramedic supervisor for MedStar Ambulance, changed, altered, and falsified documents and records, between January of 2013 and May of 2015 to conceal the theft of Fentanyl and Morphine. Both Fentanyl and Morphine are addictive Schedule II controlled pain killers. The indictment alleged that the theft of these controlled substances was from narcotic boxes that are maintained on ambulances in order to render aid to injured individuals consistent with operating procedures approved by a medical director or hospital orders.

Counts 1 through 6 of the indictment allege a wire fraud scheme claiming that Laut, using his administrator access for MedStar Ambulance, altered records stored outside of Illinois, known as patient care reports, to falsely indicate that controlled substances were given to patients when they were not. The theft of these drugs and acts to conceal the theft caused a loss to Memorial Hospital who was responsible, at their own cost, for keeping ambulance narcotic boxes filled.

Counts 7 through 35 of the indictment allege that Laut made false statements on narcotics logs submitted to Memorial Hospital. Narcotics logs are used by paramedics to record the circumstances of the administering of drugs including Fentanyl and Morphine while treating patients. The indictment alleges that Laut claimed to have given Fentanyl and Morphine to patients

that did not exist (phantom patients) or to patients that did not receive Fentanyl or Morphine.

Counts 36 and 37 allege that Laut concealed his theft of Fentanyl and Morphine by utilizing the name of a former doctor at Memorial Hospital on a narcotics log as authorization for the administering of Fentanyl and Morphine, when none was actually administered.

Wire fraud as charged in Counts 1 through 6 each carry a possible penalty of up to 20 years of imprisonment, a fine of up to $250,00, followed by up to 3 years of supervised release.

False statements as alleged in Counts 7-35 each carry a possible penalty of up to 5 years of imprisonment, a fine of up to $250,00, followed by up to 3 years of supervised release.

Aggravated identity theft as alleged in Counts 36 and 37 each carry a mandatory 2 years of imprisonment consecutive to any other sentence, a fine of up to $250,000, followed by one year of supervised release.

Trial has been set in the United States District Court in East St. Louis on March 27, 2017.

An indictment is a formal charge against a defendant. Under the law, a defendant is presumed to be innocent of a charge until proved guilty beyond a reasonable doubt to the satisfaction of a jury.

The investigation was conducted by the Federal Bureau of Investigation, the Sparta, Illinois Police Department and Diversion Investigators of the Drug Enforcement Administration. The case is being prosecuted by Assistant United States Attorney Ranley R. Killian.

MedStar Ambulance of Sparta, Illinois, and Memorial Hospital participated in the investigation.

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Financial Fraud: Hasan Hussain and Ricardo Abreu Charged in a Conspiracy to Defraud Financial Institutions & Mortgage Fraud

January 24, 2017 FraudsWatch Leave a comment

Two Indicted in Sweeping Mortgage Fraud Investigations

PROVIDENCE, R.I. – A 14-count federal indictment filed in U.S. District Court in Providence charges two individuals, Hasan Hussain, 55, of Princeton, N.J., and Ricardo Abreu, 50, of Cranston, R.I., with allegedly participating in a conspiracy to defraud financial institutions, investors and financially distressed homeowners of at least 14 properties in Providence, Pawtucket and Cranston of fees, rental income, mortgage payment funds, property ownership and/or proceeds from the sale of their properties.

United States Attorney Peter F. Neronha announced today that this indictment represents the latest charges brought in a wide-ranging series of on-going federal criminal investigations into mortgage fraud in Rhode Island. The investigations are being conducted by the United States Attorney’s Office, the FBI, the U.S. Department of Housing and Urban Development Office of Inspector General, the U.S. Secret Service and the Rhode Island State Police Financial Crimes Unit.

To date, 10 individuals have been charged in U.S. District Court in Providence.

United States Attorney Peter F. Neronha commented, “Today’s defendants join their cohorts in facing charges for allegedly manipulating the mortgage lending process in a whole variety of ways. As alleged in the Indictment, the defendants used more than a dozen properties to advance their scheme to defraud, and in some instances, used a single property to defraud and victimize multiple people and entities. As alleged, their creativity was exceeded only by their greed, but their scheme, however complicated, has now been unraveled by law enforcement. The kind of schemes alleged here raise the cost of mortgage lending for all Rhode Islanders, and are therefore deserving of our most concerted law enforcement efforts.”

Joining United States Attorney Peter F. Neronha in announcing an indictment which charges Hasan Hussain with one (1) count of conspiracy, five (5) counts of wire fraud and eight (8) counts of aggravated identity theft; and Ricard Abreu with one (1) count of conspiracy and two (2) counts of wire fraud are Harold H. Shaw, Special Agent in Charge of the Boston Division of the FBI; Christina D. Scaringi, Special Agent in Charge of the Northeast Region of the U.S. Department of Housing and Urban Development Office of Inspector General; Brian Deck, Resident Agent in Charge of the Providence Office of the U.S. Secret Service; and Colonel Ann C. Assumpico, Superintendent of the Rhode Island State Police.

It is alleged that Hasan Hussain, through his various enterprises, with the assistance of employee and co-conspirator Ricardo Abreu, offered distressed homeowners loan modification, property management and property short sales services for a fee. Instead, it is alleged, the defendants conspired to fraudulently steal those funds, and to acquire and sell at least fourteen properties owned by distressed homeowners, many of whom are not fluent in English.

It is alleged that as part of the scheme, Hussain instructed distressed homeowners to vacate their properties while he worked to acquire loan modifications or short sales on their behalf. After taking control of the properties, Hussain not only pocketed fees and mortgage payments provided by the homeowners, he rented out some of the properties and pocketed rental payments without the owners’ knowledge.

It is also alleged that as part of the scheme, Hussain and Abreu acquired the properties in short sales and then solicited investors to purchase these properties at much higher prices thereby earning substantial profit. It is alleged that Abreu and others damaged the properties in order to reduce their appraised value prior to a bank inspection. Investors were promised investment opportunities that would require no down payment. It is alleged that the defendants caused false mortgage applications and other documentation to be filed to lending institutions for conventional bank and FHA mortgage loans for the buyers. Some of the documentation contained the names and personal identifying information of individuals who were unaware that their information was being used.

Hasan Hussain is scheduled to be arraigned in U.S. District Court on January 27, 2016. Ricardo Abreu was arraigned before U.S. District Court Magistrate Judge Patricia A. Sullivan on January 20, 2017, and released on unsecured bond.

An indictment is merely an allegation and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

Other cases charged in federal court as a result of the mortgage fraud investigations include:

A 22-count federal indictment returned in December 2015, which alleged that between 2007 and 2014, a Rhode Island real estate attorney, a real estate agent, a licensed loan originator, a former loan officer, a loan processor and a real estate investor, conspired to execute a scheme which caused prospective homebuyers to obtain mortgages from financial institutions based upon materially false loan applications and fraudulent supporting documentation. It was also alleged that as part of the conspiracy, false representations were made in order to obtain fees to which the defendants were not entitled or to make a profit selling property in which they had an ownership interest. It was further alleged that, in some instances, thousands of dollars were fraudulently obtained by misrepresenting on a Housing and Urban Development form the amount of funds due or to be paid to parties involved in a transaction;
In September 2015, a former mortgage loan originator was convicted of conspiracy to commit bank fraud by participating in a scheme to defraud Flagstar Bank, by filing a fraudulent mortgage loan application and supporting documentation in the name of a person known to be deceased; and
In July 2015, a real estate appraiser whose licensed had expired, but who continued to conduct and issue real estate appraisals using the identity, license and insurance certificate of two licensed appraisers without his permission or knowledge, was convicted of making false statements on a loan application.

The cases are being prosecuted by Assistant U.S. Attorneys Sandra R. Hebert and William J. Ferland.

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Financial Fraud: Raymond E. Gallison, Jr Plead Guilty to Federal Mail Fraud, Wire Fraud, Aggravated Identity Theft and Tax Charges

January 23, 2017 FraudsWatch Leave a comment

Fmr. RI House Finance Chairman to Plead Guilty to Fraud, Aggravated Identity Theft, Tax Charges

PROVIDENCE – According to signed documents filed in U.S. District Court in Providence today, Raymond E. Gallison, Jr., 64, of Bristol, R.I., a former member of the Rhode Island House of Representatives and House Finance Committee Chairman, has agreed to plead guilty to federal mail fraud, wire fraud, aggravated identity theft and filing false tax return charges.

According to signed court documents, Gallison will admit to wide-ranging fraudulent and deceptive conduct to steal private money and hide his misuse of public money, and covering his tracks while doing so. Gallison will admit to the theft of funds from the estate of a deceased individual to which he was appointed executor; theft of funds from a Special Needs Trust established to protect the long-term welfare of a disabled individual to which he was appointed trustee; providing false information on tax documents, including vastly inflating the number of students assisted by a non-profit organization funded by public money while failing to disclose amounts paid by that organization to him; and failure to pay taxes on income derived from his criminal actions.

United States Attorney Peter F. Neronha and Rhode Island Attorney General Peter F. Kilmartin today announced the filing of a federal Information charging Raymond E. Gallison, Jr., with four (4) counts of mail fraud; one (1) count of wire fraud; one (1) count of aggravated identity theft; one (1) count of aiding the filing of a false tax document; and two (2) counts of filing a false tax return. According to a Plea Agreement filed in this matter, Gallison will serve, at a minimum, two years in federal prison.

According to signed documents filed with the Court, Gallison will admit that:

As executor of an estate of an individual from Barrington, R.I., who passed away in February 2012, he devised and executed various schemes to steal or transfer to his own name and bank accounts, cash, checks, stocks and real property belonging to the deceased person and/or his estate, valued at a total of $677,957.06. Gallison will admit that he fraudulently used the name and social security number of the deceased person to execute a scheme to cause the liquidation of certain stocks belonging to the deceased person;
He caused the filing of a false tax document on behalf of Alternative Education Programming (AEP), a non-profit organization which provided educational programs to students who may need assistance with course work, and/or minority and/or disadvantaged students who may need financial or other assistance to gain an education, and of which Gallison was listed as Assistant Director. The tax document listed that $77,957 in tuition and related fees and expenses were paid for 47 students from July 1, 2012, through June 30, 2013. In fact, on behalf of AEP, Gallison paid only $3,137.29 to assist 2 students during that year and paid approximately $64,575 to himself and another person in wages and consulting fees for no work undertaken on AEP’s behalf;
As trustee for a disabled person’s Special Needs Trust, he defrauded the Trust by writing a check from the Trust account for $8,900, which he deposited into an AEP account. Gallison then wrote a check for $8,800 from the AEP account to pay an outstanding bill at the Community College of Rhode Island; and
He failed to claim a total of $622,286.17 in income on joint IRS tax returns for tax years 2012 and 2013, and, as a result of his relevant conduct from 2012-2015, Gallison failed to pay a total of $226,332.31 in taxes.

An information is merely an allegation and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

Joining United States Attorney Peter F. Neronha and Rhode Island Attorney General Peter F. Kilmartin in announcing the filing of an information and plea agreement in this matter are Harold H. Shaw, Special Agent in Charge of the FBI Boston Division; Joel P. Garland, Special Agent in Charge, Internal Revenue Service Criminal Investigation; and Colonel Ann C. Assumpico, Superintendent of the Rhode Island State Police.

The matter was investigated by the United States Attorney’s Office, FBI, Internal Revenue Service Criminal Investigation, Rhode Island Department of the Attorney General, and the Rhode Island State Police.

The case is being prosecuted in federal court by Assistant U.S. Attorneys Dulce Donovan and William J. Ferland, and Special Assistant U.S. Attorney James R. Baum of the Rhode Island Department of the Attorney General.

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Mortgage Fraud: Société Générale, S.A. Will Pay Civil Penalty to Resolve Claims Related to Its Activities

January 20, 2017 FraudsWatch Leave a comment

Société Générale Agrees To Pay $50 Million Penalty To Settle RMBS Fraud Claims

United States Attorney Robert L. Capers announced today that Société Générale, S.A. will pay a $50 million civil penalty to resolve claims related to its activities, which were conducted through several affiliates (together, “SocGen”), in connection with the marketing, sale, and issuance of a residential mortgage-backed security (“RMBS”) named SG Mortgage Securities Trust 2006-OPT2 (“SG 2006-OPT2”). As part of the agreement, SocGen has acknowledged in writing that it made false representations to prospective investors in SG 2006-OPT2. Investors, including federally insured financial institutions, suffered significant losses on their investments in SG 2006-OPT2.

The settlement includes a statement of facts agreed to by SocGen, whereby SocGen acknowledges responsibility for its conduct. For example, SocGen acknowledges that it falsely represented to investors that the loans underlying SG 2006-OPT2 were originated generally in accordance with the loan originator’s underwriting guidelines. Indeed, as detailed in the statement of facts, SocGen’s third-party due diligence vendor for SG 2006-OPT2 determined that almost 40% of the loans it reviewed were underwritten outside of guidelines and lacked adequate compensating factors to make the loans eligible for securitization. SocGen acknowledges that it did not disclose these results to investors.

Likewise, SocGen represented to investors that, at the time of origination, no loan in SG 2006-OPT2 had a loan-to-value or combined loan-to-value ratio of more than 100% (in other words, that the value of any mortgage on a property did not exceed the value of the property itself) – a representation that SocGen now acknowledges was false. Moreover, SocGen knew that there were industry-wide problems with subprime loan origination practices. As described by a senior member of SocGen’s Contract Finance group, “The whole process [was] a joke.”

“SocGen’s acknowledgement of its misconduct in the securitization of SG 2006-OPT2 was a critical component of this resolution. It severely impacted investors and institutions across the United States, including in this district. Most emphatically, it was not a ‘joke’”, stated United States Attorney Capers. “We will not tolerate investment banks making false representations to investors – if and when they do so, they will be held accountable.” Mr. Capers extended his grateful appreciation to the Office of the Inspector General for the Federal Housing Finance Agency for its assistance in conducting the investigation in this matter.

The $50 million civil monetary penalty resolves claims under the Financial Institutions Reform Recovery and Enforcement Act of 1989, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. As part of the settlement, SocGen has agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.

Assistant U.S. Attorneys Clayton P. Solomon, Morgan J. Clark, and Katharine E.G. Brooker led the government’s investigation.

About the RMBS Working Group: The RMBS Working Group, part of the Financial Fraud Enforcement Task Force, was established by the Attorney General in late January 2012. The Working Group has been dedicated to initiating, organizing, and advancing new and existing investigations by federal and state authorities into fraud and abuse in the RMBS market that helped precipitate the 2008 Financial Crisis. The Working Group’s efforts to date have resulted in settlements providing for tens of billions of dollars in civil penalties and consumer relief from banks and other entities that are alleged to have committed fraud in connection with the issuance of RMBS.

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Financial Fraud: ENRICO RUBANO And SHIVANAND MAHARAJ Charged to Commit Wire Fraud in Connection With a False Invoicing Scheme

January 19, 2017 FraudsWatch Leave a comment

Information Technology Chief And Consultant Charged With Multimillion-Dollar False Invoicing Scheme

Preet Bharara, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the filing of a criminal complaint charging ENRICO RUBANO, a/k/a “Rick Rubano,” and SHIVANAND MAHARAJ with two counts of conspiracy to commit wire fraud in connection with a false invoicing scheme that defrauded health and retirement funds (the “Funds”) of millions of dollars. As alleged, over a period of six years, RUBANO, MAHARAJ, and their co-conspirators generated hundreds of invoices for work they had not performed, which RUBANO, in his role as co-head of information technology for the Funds, approved for payment. RUBANO and MAHARAJ were arrested this morning, and will be presented before U.S. Magistrate Judge Andrew J. Peck.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Enrico Rubano used his position as the co-head of IT for a health and retirement benefit fund to perpetrate a scheme to falsely invoice millions of dollars from the fund for consulting work never actually performed. Rubano allegedly had the fund make payments based on hundreds of fake invoices to Shivanand Maharaj’s company, not for IT work actually done by that company, but really in exchange for alleged kickback payments to Rubano. Money that should have gone to help pay retirement and health care benefits were instead allegedly diverted to Rubano and Maharaj.”

USPIS Inspector-in-Charge Philip R. Bartlett said: “These defendants devised a scheme to falsely bill their client for work that was never performed by allegedly using an ‘inside’ employee to approve bogus invoices. They went one step too far when they decided to use the US Mail to facilitate their criminal misdeeds. Postal Inspectors will resolutely pursue fraudsters who use the U.S. mail to facilitate fraud schemes.”

According to the Complaint:

From 2008 through October 2015, RUBANO was the co-head of information technology for the Funds and had the authority to approve the payment of invoices from third-party vendors. Beginning in 2009, and continuing through 2015, RUBANO, MAHARAJ, and others devised a scheme in which companies they owned or controlled submitted to the Funds invoices for millions of dollars in information technology services that were never performed or that had, in fact, been performed by employees of the Funds or other vendors. RUBANO, in his position as co-head of information technology, approved these fraudulent invoices, and received kickbacks from MAHARAJ and other co-conspirators. Between 2009 and 2015, RUBANO, MAHARAJ, and their co-conspirators falsely billed and fraudulently received from the Funds at least approximately $3.4 million.

RUBANO, 48, of Tappan, New York, and MAHARAJ, 36, of Cresskill, New Jersey, were arrested this morning in Tappan, New York, and Cresskill, New Jersey, respectively. RUBANO and MAHARAJ are each charged with two counts of conspiracy to commit wire fraud, each of which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Bharara praised the efforts of the USPIS in this investigation. He added that the investigation is continuing.

This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Matthew Podolsky and Jacob Warren are in charge of the prosecution.

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

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Financial Fraud: Western Union Admits to Criminal Violations Including Willfully Failing to Maintain an Effective Anti-Money Laundering

January 19, 2017 FraudsWatch Leave a comment

Western Union Admits Anti-Money Laundering and Consumer Fraud Violations, Forfeits $586 Million in Settlement with Justice Department and Federal Trade Commission

Company also Agrees to Implement Anti-Fraud Program and Enhanced Compliance Obligations in Agreements with Federal Authorities

The Western Union Company (Western Union), a global money services business headquartered in Englewood, Colorado, has agreed to forfeit $586 million and enter into agreements with the Justice Department, the Federal Trade Commission (FTC), and the U.S. Attorney’s Offices for the Middle District of Pennsylvania, the Central District of California, the Eastern District of Pennsylvania and the Southern District of Florida. In its agreement with the Justice Department, Western Union admits to criminal violations including willfully failing to maintain an effective anti-money laundering (AML) program and aiding and abetting wire fraud.

Acting Assistant Attorney General David Bitkower of the Justice Department’s Criminal Division; FTC Chairwoman Edith Ramirez; U.S. Attorney Bruce D. Brandler of the Middle District of Pennsylvania; U.S. Attorney Eileen M. Decker of the Central District of California; Acting U.S. Attorney Louis D. Lappen of the Eastern District of Pennsylvania; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Inspector in Charge David W. Bosch of the U.S. Postal Inspection Service (USPIS) Philadelphia Division; Assistant Director in Charge Deirdre Fike of the FBI’s Los Angeles Field Office; Chief Richard Weber of Internal Revenue Service-Criminal Investigation (IRS-CI); Special Agent in Charge Marlon V. Miller of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Philadelphia; and Special Agent in Charge Stephen Carroll of the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau (FRB-CFPB OIG) Eastern Region made the announcement.

“As this case shows, wiring money can be the fastest way to send it – directly into the pockets of criminals and scam artists,” said Acting Assistant Attorney General Bitkower. “Western Union is now paying the price for placing profits ahead of its own customers. Together with our colleagues, the Criminal Division will both hold to account those who facilitate fraud and abuse of vulnerable populations, and also work to recoup losses and compensate victims.”

“Western Union owes a responsibility to American consumers to guard against fraud, but instead the company looked the other way, and its system facilitated scammers and rip-offs,” said Chairwoman Ramirez. “The agreements we are announcing today will ensure Western Union changes the way it conducts its business and provides more than a half billion dollars for refunds to consumers who were harmed by the company’s unlawful behavior.”

“The U.S. Attorney’s Office for the Middle District of Pennsylvania has a long history of prosecuting corrupt Western Union Agents,” said U.S. Attorney Brandler. “Since 2001, our office, in conjunction with the U.S. Postal Inspection Service, has charged and convicted 26 Western Union Agents in the United States and Canada who conspired with international fraudsters to defraud tens of thousands of U.S. residents via various forms of mass marketing schemes. I am gratified that the deferred prosecution agreement reached today with Western Union ensures that $586 million will be available to compensate the many victims of these frauds.”

“Our investigation uncovered hundreds of millions of dollars being sent to China in structured transactions designed to avoid the reporting requirements of the Bank Secrecy Act, and much of the money was sent to China by illegal immigrants to pay their human smugglers,” said U.S. Attorney Decker. “In a case being prosecuted by my office, a Western Union agent has pleaded guilty to federal charges of structuring transactions – illegal conduct the company knew about for at least five years. Western Union documents indicate that its employees fought to keep this agent – as well as several other high-volume independent agents in New York City – working for Western Union because of the high volume of their activity. This action today will ensure that Western Union effectively controls its agents and prevents the use of its money transfer system for illegal purposes.”

“Western Union’s failure to comply with anti-money laundering laws provided fraudsters and other criminals with a means to transfer criminal proceeds and victimize innocent people,” said Acting U.S. Attorney Lappen. “Western Union has agreed to forfeit $586 million, the largest forfeiture ever imposed on a money services business, and has agreed to take specific steps to ensure that it complies with the law in the future. This office will continue to vigorously enforce the anti-money laundering laws and regulations, which are necessary to prevent those engaged in fraud, terrorism, human trafficking, drug dealing and other crimes from using companies like Western Union to further their illegal activity.”

“Western Union, the largest money service business in the world, has admitted to a flawed corporate culture that failed to provide a checks and balances approach to combat criminal practices,” said U.S. Attorney Ferrer. “Western Union’s failure to implement proper controls and discipline agents that violated compliances policies enabled the proliferation of illegal gambling, money laundering and fraud-related schemes. Western Union’s conduct resulted in the processing of hundreds of millions of dollars in prohibited transactions. Today’s historic agreement, involving the largest financial forfeiture by a money service business, makes it clear that all corporations and their agents will be held accountable for conduct that circumvents compliance programs designed to prevent criminal conduct.”

“The U.S. Postal Inspection Service has been at the forefront of protecting consumers from fraud schemes for many years,” said Inspector in Charge Bosch. “When private businesses participate in the actions that Western Union was involved in, it makes it easier for criminals to victimize innocent citizens. Our commitment to bringing these criminals to justice will not waiver, and we look forward to facilitating compensation to victims.”

“Los Angeles-defendant Wang’s company was considered to be among the largest Western Union agents in the United States as over $310 million was sent to China in a span of five years, half of which was illegally structured and transmitted using false identification,” said Assistant Director in Charge Fike. “Rather than ensuring their high volume agents were operating above-board, Western Union rewarded them without regard to the blatant lack of compliance and illegal practices taking place. This settlement should go a long way in thwarting the proceeds of illicit transactions being sent to China to fund human smuggling or drug trafficking, as well as to interrupt the ease with which scam artists flout U.S. banking regulations in schemes devised to defraud vulnerable Americans.”

“As a major player in the money transmittal business, Western Union had an obligation to its customers to ensure they offered honest services, which include upholding the Bank Secrecy Act, as well as other U.S. laws,” said Chief Weber. “Western Union’s blatant disregard of their anti-money laundering compliance responsibilities was criminal and significant. IRS-CI special agents – working with their investigative agency partners – uncovered the massive AML compliance failures and is proud to be part of this historic criminal resolution.”

“Today’s announcement of this significant settlement highlights the positive result of HSI’s collaboration with our partner agencies to hold Western Union accountable for their failure to comply with bank secrecy laws that preserve the integrity of the financial system of the United States,” said Special Agent in Charge Miller. “As a result of this settlement, Western Union now answers for these violations. I thank the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau for their partnership in this investigation.”

According to admissions contained in the deferred prosecution agreement (DPA) and the accompanying statement of facts, between 2004 and 2012, Western Union violated U.S. laws—the Bank Secrecy Act (BSA) and anti-fraud statutes—by processing hundreds of thousands of transactions for Western Union agents and others involved in an international consumer fraud scheme.

As part of the scheme, fraudsters contacted victims in the U.S. and falsely posed as family members in need or promised prizes or job opportunities. The fraudsters directed the victims to send money through Western Union to help their relative or claim their prize. Various Western Union agents were complicit in these fraud schemes, often processing the fraud payments for the fraudsters in return for a cut of the fraud proceeds.

Western Union knew of but failed to take corrective action against Western Union agents involved in or facilitating fraud-related transactions. Beginning in at least 2004, Western Union recorded customer complaints about fraudulently induced payments in what are known as consumer fraud reports (CFRs). In 2004, Western Union’s Corporate Security Department proposed global guidelines for discipline and suspension of Western Union agents that processed a materially elevated number of fraud transactions. In these guidelines, the Corporate Security Department effectively recommended automatically suspending any agent that paid 15 CFRs within 120 days. Had Western Union implemented these proposed guidelines, it could have prevented significant fraud losses to victims and would have resulted in corrective action against more than 2,000 agents worldwide between 2004 and 2012.

Court documents also show Western Union’s BSA failures spanned eight years and involved, among other things, the acquisition of a significant agent that Western Union knew prior to the acquisition had an ineffective AML program and had contracted with other agents that were facilitating significant levels of consumer fraud. Despite this knowledge, Western Union moved forward with the acquisition and did not remedy the AML failures or terminate the high-fraud agents.

Similarly, Western Union failed to terminate or discipline agents who repeatedly violated the BSA and Western Union policy through their structuring activity in the Central District of California and the Eastern District of Pennsylvania. The BSA requires financial institutions, including money services businesses such as Western Union, to file currency transaction reports (CTRs) for transactions in currency greater than $10,000 in a single day. To evade the filing of a CTR and identification requirements, criminals will often structure their currency transactions so that no single transaction exceeds the $10,000 threshold. Financial institutions are required to report suspected structuring where the aggregate number of transactions by or on behalf of any person exceeds more than $10,000 during one business day. Western Union knew that certain of its U.S. Agents were allowing or aiding and abetting structuring by their customers. Rather than taking corrective action to eliminate structuring at and by its agents, Western Union, among other things, allowed agents to continue sending transactions through Western Union’s system and paid agents bonuses. Despite repeated compliance review identifying suspicious or illegal behavior by its agents, Western Union almost never identified the suspicious activity those agents engaged in in its required reports to law enforcement

Finally, Western Union has been on notice since at least December 1997, that individuals use its money transfer system to send illegal gambling transactions from Florida to offshore sportsbooks. Western Union knew that gambling transactions presented a heightened risk of money laundering and that through at least 2012, certain procedures it implemented were not effective at limiting transactions with characteristics indicative of illegal gaming from the United States to other countries.

Western Union entered into a DPA in connection with a two-count felony criminal information filed today in the Middle District of Pennsylvania charging Western Union with willfully failing to maintain an effective AML program and aiding and abetting wire fraud. Pursuant to the DPA, Western Union has agreed to forfeit $586 million and also agreed to enhanced compliance obligations to prevent a repeat of the charged conduct, including creating policies and procedures:

for corrective action against agents that pose an unacceptable risk of money laundering or have demonstrated systemic, willful or repeated lapses in compliance;
that ensure that its agents around the world will adhere to U.S. regulatory and AML standards; and
that ensure that the company will report suspicious or illegal activity by its agents or related to consumer fraud reports.

In a related case, Western Union agreed to settle charges by the FTC in a complaint filed today in the U.S. District Court for the Middle District of Pennsylvania, alleging that the company’s conduct violated the FTC Act. The complaint charges that for many years, fraudsters around the world have used Western Union’s money transfer system even though the company has long been aware of the problem and that some Western Union agents have been complicit in the fraud. The FTC’s complaint alleges that the Western Union declined to put in place effective anti-fraud policies and procedures and has failed to act promptly against problem agents. The Western Union has identified many of the problem agents but has profited from their actions by not promptly suspending and terminating them.

In resolving the FTC charges, Western Union agreed to a monetary judgment of $586 million and to implement and maintain a comprehensive anti-fraud program with training for its agents and their front line associates, monitoring to detect and prevent fraud-induced money transfers, due diligence on all new and renewing company agents, and suspension or termination of noncompliant agents.

The FTC order prohibits the Western Union from transmitting a money transfer that it knows or reasonably should know is fraud-induced, and requires it to:

block money transfers sent to any person who is the subject of a fraud report;
provide clear and conspicuous consumer fraud warnings on its paper and electronic money transfer forms;
increase the availability of websites and telephone numbers that enable consumers to file fraud complaints; and
refund a fraudulently induced money transfer if the company failed to comply with its anti-fraud procedures in connection with that transaction.

In addition, consistent with the telemarketing sales rule, Western Union must not process a money transfer that it knows or should know is payment for a telemarketing transaction. The company’s compliance with the order will be monitored for three years by an independent compliance auditor.

Since 2001, the department has charged and convicted 29 owners or employees of Western Union agents for their roles in fraudulent and structured transactions. The U.S. Attorney’s Office for the Middle District of Pennsylvania has charged and convicted 26 Western Union agent owners and employees for fraud-related violations; the U.S. Attorney’s Office for the Central District of California has secured a guilty plea from one Western Union agent for BSA violations, and the U.S. Attorney’s Office for the Eastern District of Pennsylvania has secured guilty pleas for BSA violations of two other individuals associated with Western Union agents for BSA violations.

USPIS’s Philadelphia Division’s Harrisburg, Pennsylvania, Office; the FBI’s Los Angeles Field Office; IRS-CI; HSI; FRB-CFPB OIG; Department of Treasury OIG; the Broward County, Florida Sheriff’s Offices; and Department of Labor investigated the case. Trial Attorney Margaret A. Moeser of the Criminal Division’s Money Laundering and Asset Recovery Section’s Bank Integrity Unit, Assistant U.S. Attorney Kim Douglas Daniel of the Middle District of Pennsylvania, Assistant U.S. Attorney Gregory W. Staples of the Central District of California, Assistant U.S. Attorneys Judy Smith and Floyd Miller of the Eastern District of Pennsylvania and Assistant U.S. Attorney Randy Katz of the Southern District of Florida are prosecuting the case. Asset forfeiture attorneys in each U.S. Attorney’s Office and the Money Laundering and Asset Recovery Section provided significant assistance in this matter. The department appreciates the significant cooperation and assistance provided by the FTC in this matter.

Persons who believe they were victims of the fraud scheme should visit the Department of Justice’s victim website at https://www.justice.gov/criminal-afmls/remission for instructions on how to request compensation through the Victim Asset Recovery Program.

The Victim Compensation Program, operated by the Money Laundering and Asset Recovery Section, is composed of a team of experienced professionals, including attorneys, accountants, auditors and claims analysts. In hundreds of cases, the Victim Compensation Program has successfully used its specialized expertise to efficiently convert forfeited assets to victim recoveries.

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Public Corruption: John L. Sampson Sentenced To 5 Years For Obstruction Of Justice And Making False Statements

January 19, 2017 FraudsWatch Leave a comment

USA Capers Announces Former New York State Senator John L. Sampson Sentenced To 5 Years

U.S. Attorney Robert Capers, outside the Federal Court in Brooklyn, announced former New York State Senator John Sampson was sentenced to five years of incarceration following his conviction at trial of obstruction of justice in connection with his efforts to interfere with a federal criminal case against a close associate who had given Sampson an undisclosed $188,500 loan that Sampson never repaid. Sampson was also convicted of two counts of making false statements to agents of the Federal Bureau Investigation.

Former New York State Senator John L. Sampson Sentenced To 5 Years For Obstruction Of Justice And Making False Statements To The FBI

Earlier today in federal court in Brooklyn, former New York State Senator John Sampson was sentenced to five years of incarceration following his conviction at trial of obstruction of justice in connection with his efforts to interfere with a federal criminal case against a close associate who had given Sampson an undisclosed $188,500 loan that Sampson never repaid. Sampson was also convicted of two counts of making false statements to agents of the Federal Bureau Investigation. As part of the sentence, the court also imposed a fine of $75,000. Today’s proceeding was held before United States Chief District Judge Dora L. Irizarry.

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, FBI, New York Field Office.

“John Sampson abused his position as a member of the State Senate and as a member of the bar,” said United States Attorney Capers. “He repeatedly broke the law and then compounded those offenses by obstructing a federal criminal investigation. By his actions, Sampson showed that he was not fit to hold office as a state legislator or practice law. He has now been held to account for his criminal conduct.” Mr. Capers commended the FBI for its outstanding work and expressed his grateful appreciation to the Federal Deposit Insurance Corporation, Office of the Inspector General; the Public Integrity Section of the Department of Justice; and the Office of the Inspector General of the Department of Justice for their assistance in this case.

“Corrupt activity on behalf of our elected officials leaves the public feeling betrayed. Those responsible for upholding the law shouldn’t be the ones breaking it. Although this chapter ends today, the FBI will continue the very important work of investigating public corruption in all its many forms,” said FBI Assistant Director-in-Charge Sweeney.

From 1997 until his conviction by a jury on July 24, 2015, Sampson served in the New York State Senate representing the 19th Senate District in southeastern Brooklyn. From June 2009 to December 2012, Sampson was the leader of the Democratic Conference of the Senate, and from June 2009 to December 2010 he was effectively the leader of the Senate. From January 2011 to December 2012, he was the Senate Minority Leader. Sampson has also served as the chairman of the Senate Ethics Committee and the Senate Judiciary Committee.

Obstruction of Justice

As established at trial, Sampson obstructed justice by using a personal friend who was a supervisory paralegal at the U.S. Attorney’s Office in an attempt to obtain confidential law enforcement information. Specifically, Sampson requested the identity of cooperating witnesses and their statements to the government to improperly help a Queens businessman, Edul Ahmad, fight a mortgage fraud case brought by the Office against Ahmad. Sampson’s motive was to prevent the possibility of Ahmad cooperating with the government and disclosing that Sampson borrowed $188,500 from Ahmad to replenish escrow accounts from which Sampson, an attorney, had embezzled hundreds of thousands of dollars to fund his unsuccessful 2005 campaign for Kings County District Attorney. Sampson never repaid the loan to Ahmad, failed to report it on his Senate financial disclosure forms as required by law, and used his Senate office in various ways to help Ahmad. At the time of his indictment, Sampson had failed to repay over $160,000 of the embezzled funds. At present, over $80,000 of the embezzled funds remains unpaid.

Sampson also endeavored to obstruct the government’s case against Ahmad by arranging for compromised counsel to represent Ahmad’s co-conspirators and by hiring a retired FBI agent to use his connections with law enforcement to obtain confidential law enforcement information.

False Statements

In February 2012, when Ahmad showed Sampson a document related to the $188,500 loan and told Sampson that the U.S. Attorney’s Office had subpoenaed it, Sampson instructed Ahmad not to give the government the document and to lie to investigators about the document and the loan. He then took the document from Ahmad and kept it. As Chief Judge Irizarry found at today’s sentencing hearing, this conduct constituted witness tampering and evidence tampering. In July 2012, when FBI agents interviewed Sampson and showed him a copy of the document, Sampson falsely claimed he did not recall it.

During the same July 2012 interview, Sampson falsely stated to the FBI that he had never asked a Senate staff member to intervene with the New York State Department of Taxation and Finance in an effort to resolve a sales tax liability of a liquor store he owned, in violation of the New York Public Officers law.

The government’s case is being prosecuted by the Office’s Public Integrity Section. Assistant United StatesAttorneys Paul Tuchmann, Alexander A. Solomon, and Marisa Megur Seifan are in charge of the prosecution.

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Financial Fraud: Credit Suisse Made False and Irresponsible Representations About Residential Mortgage-Backed Securities

January 18, 2017 FraudsWatch Leave a comment

Credit Suisse Agrees to Pay $5.28 Billion in Connection with its Sale of Residential Mortgage-Backed Securities

The Justice Department announced today a $5.28 billion settlement with Credit Suisse related to Credit Suisse’s conduct in the packaging, securitization, issuance, marketing and sale of residential mortgage-backed securities (RMBS) between 2005 and 2007. The resolution announced today requires Credit Suisse to pay $2.48 billion as a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). It also requires the bank to provide $2.8 billion in other relief, including relief to underwater homeowners, distressed borrowers and affected communities, in the form of loan forgiveness and financing for affordable housing. Investors, including federally-insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued and underwritten by Credit Suisse between 2005 and 2007.

“Today’s settlement underscores that the Department of Justice will hold accountable the institutions responsible for the financial crisis of 2008,” said Attorney General Loretta E. Lynch. “Credit Suisse made false and irresponsible representations about residential mortgage-backed securities, which resulted in the loss of billions of dollars of wealth and took a painful toll on the lives of ordinary Americans. Under the terms of this settlement, Credit Suisse will pay $2.48 billion as a fine for its conduct. And Credit Suisse has pledged $2.8 billion in relief to struggling homeowners, borrowers, and communities affected by the bank’s lending practices. These sums reflect the huge breach of public trust committed by financial institutions like Credit Suisse.”

“Credit Suisse claimed its mortgage backed securities were sound, but in the settlement announced today the bank concedes that it knew it was peddling investments containing loans that were likely to fail,” said Principal Deputy Associate Attorney General Bill Baer. “That behavior is unacceptable. Today’s $5.3 billion resolution is another step towards holding financial institutions accountable for misleading investors and the American public.”

“Resolutions like the one announced today confirm that the financial institutions that engaged in conduct that jeopardized the nation’s fiscal security will be held accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This is another step in the Department’s continuing effort to redress behavior that contributed to the Great Recession.”

“Credit Suisse’s mortgage misconduct hurt people, including in Colorado,” said Acting United States Attorney for the District of Colorado Bob Troyer. “Unscrupulous lenders knew they could get away with shoddy underwriting when making mortgage loans, because they knew Credit Suisse would buy those defective mortgage loans and put them into securities. When those mortgages went into foreclosure, many people got hurt: families lost their homes, communities were blighted by empty houses, and investors who had put their trust in Credit Suisse’s supposedly safe securities suffered huge losses. Our office led this investigation into Credit Suisse to protect homeowners, communities, and investors across the country, including here in Colorado. Credit Suisse is paying a hefty penalty and acknowledging its misconduct, but that is not all. Years after the Great Recession, many families still struggle to afford a home, so we also crafted an agreement to bring needed housing relief to such families, including specifically in Colorado.”

This settlement includes a statement of facts to which Credit Suisse has agreed. That statement of facts describes how Credit Suisse made false and misleading representations to prospective investors about the characteristics of the mortgage loans it securitized. (The quotes in the following paragraphs are from that agreed-upon statement of facts, unless otherwise noted.):

Credit Suisse told investors in offering documents that the mortgage loans it securitized into RMBS “were originated generally in accordance with applicable underwriting guidelines,” except where “sufficient compensating factors were demonstrated by a prospective borrower.” It also told investors that the loans “had been originated in compliance with all federal, state, and local laws and regulations, including all predatory and abusive lending laws.”
Credit Suisse has now acknowledged that “Credit Suisse repeatedly received information indicating that many of the loans reviewed did not conform to the representations that would be made by Credit Suisse to investors about the loans to be securitized.” It has acknowledged that in many cases, it purchased and securitized loans into its RMBS that “did not comply with applicable underwriting guidelines and lacked sufficient factors” and/or “w[ere] not originated in compliance with applicable laws and regulations.” Credit Suisse employees even referred to some loans they securitized as “bad loans,” “‘complete crap’ and ‘[u]tter complete garbage.’”
Credit Suisse acquired some of the mortgage loans it securitized by buying, from other loan originators, “Bulk” packages containing numerous loans. For example, in December 2006, Credit Suisse purchased a “Bulk” pool of approximately 10,000 loans originated by Countrywide Home Loans. Credit Suisse selected fewer than 10 percent of these loans for due diligence review. “Reports from Credit Suisse’s due diligence vendors showed that approximately 85 percent of the loans in this sample violated Countrywide’s underwriting guidelines and/or applicable law,” but “Credit Suisse securitized over half of the loans into various RMBS it then sold to investors.” Credit Suisse did not review the remaining unsampled 90 percent of the pool to determine whether those loans had similar problems. Instead, it “securitized an additional $1.5 billion worth of unsampled—and therefore unreviewed—loans from this pool into various RMBS it then sold to investors.” A Credit Suisse manager wrote to another manager who was reviewing these loans, “Thanks for working thru this mess. If it helps, it looks like we will make a killing on this trade.”
Credit Suisse acquired other mortgage loans for securitization through its “Conduit” channel. Through this channel, Credit Suisse bought loans from other lenders one-by-one or in small packages, and also itself extended loans to borrowers as “Wholesale” loans. Approximately 25-35 percent of the loans Credit Suisse acquired from 2005 to 2007 were acquired through its mortgage “Conduit.”
Credit Suisse employees discussed in internal emails that for Conduit loans, the loan review and approval process was “‘virtually unmonitored.’” For loans Credit Suisse purchased through its Conduit, Credit Suisse told investors, ratings agencies and others, “‘Credit Suisse senior underwriters make final loan decisions, not contracted due diligence firms.’” Credit Suisse has now acknowledged, “For Conduit loans, these representations were false.”
Credit Suisse has acknowledged that “[a] September 2004 audit by Credit Suisse’s audit department gave the Conduit a C rating on an A-D scale (the second worst possible rating) and a level 4 materiality score on a 1-4 scale (the highest possible score),” and that a March 2006 evaluation by Credit Suisse of one of the third-party vendors it used to review Conduit loans “similarly reported that ‘There are serious concerns as to compliance[.]’”
Between 2005 and 2007, Credit Suisse managers made comments in emails about the quality of Conduit loans and its process for reviewing those loans. For example, a top Credit Suisse manager wrote to senior traders, “‘Of course we would like higher quality loans. That’s never been the identity of our [mortgage] conduit, and we’re becoming less and less competitive in that space.’” A senior Credit Suisse trader, discussing the “fulfillment centers” Credit Suisse used to review Conduit loans, stated in an email: ‘we make these underwriting exceptions and then we have liability down the road when the loans go bad and people point out that we violated our own guidelines. . . . The fulfillment process is a joke.’”
For example, in one instance Credit Suisse approved, through its Conduit, a purchase of over $700 million worth of loans originated by Resource Bank. Credit Suisse senior traders “referr[ed] to Resource Bank loans as ‘complete crap’ and ‘[u]tter complete garbage.’” Despite this, “Credit Suisse provided Resource Bank with financial ‘incentives’ in exchange for loan volume [and] securitized Resource Bank loans into various RMBS it then sold to investors.”
Credit Suisse has acknowledged that it also “received reports from vendors that it might have been acquiring and securitizing loans with inflated appraisals” and that its approach for reviewing the property values associated with the mortgage loans “could lead to the acceptance of inflated appraisals.” In August 2006, a Credit Suisse manager wrote to two senior traders, “How would investors react if we say that 20 percent of the pool have values off by 15 percent? If we are comfortable buying these loans, we should be comfortable telling investors.”
Credit Suisse used vendors to conduct quality control on a small subset of loans it acquired. Credit Suisse has now acknowledged that its quality control review vendors reported that “more than 25 percent of the loans that they reviewed for quality control were designated ‘ineligible’ because of credit, compliance, and/or property defects.”
Credit Suisse has now acknowledged that its “Co-Head of Transaction Management expressed concern that the quality control results could serve as a written record of defects, and sought to avoid documented confirmation of these defects.” In May 2007, a top Credit Suisse manager met with others “to discuss implementing this reduction of quality control review.” Credit Suisse’s Co-Head of Transaction Management wrote that “this change was to ‘avoid the previous approach by which a lot of loans were QC’d . . . creating a record of possible rep/ warrant breaches in deals . . . .’”
In another example, in May 2007, a Credit Suisse employee identified two wholesale loans Credit Suisse itself had originated and wrote, “‘I would think that we would want to see loans like these that seem to represent confirmed problems, especially on our own originations. Why do we have an appraisal watch list and broker oversight group if we aren’t going to review the bad ones and take action appropriately? . . . I just see so many of these cross my desk, fraud, value, etc., it’s hard to just let them go by and not do something.’” Credit Suisse’s Co-Head of Transaction Management responded, “‘I think the idea is that we don’t want to spend a lot of $ to generate a lot of QC results that give us no recourse anyway but generate a lot of negative data, so no need to order QC on each of these loans.’” The employee then stated, “‘I think the lack of interest in bad loans is scary.’”
As another example, in June 2007, a Credit Suisse employee identified 44 Wholesale loans Credit Suisse had itself originated that had gone 60 days delinquent. Credit Suisse’s Co-Head of Transaction Management wrote in response, “‘if we already know: that the loans aren’t performing . . . the only thing QC will tell us is that there were compliance errors, occupancy misreps etc. I think we already know we have systemic problems in FC/UW [fulfillment centers/underwriting] re both compliance and credit. The downside of QC’ing these 44 loans is, after we get the QC results, we will be obligated to repurchase a fair chunk of the loans from deals, assuming the loans are securitized and the QC results look like the QC we’ve done in the past. So based on a wholesale QC historical fail rate of over 35 percent (major rep defects), the avg bal of wholesale loans and the loss severities, it is reasonable to expect this QC may cost us a few million dollars.’” Credit Suisse has now acknowledged that it “did not inform investors or ratings agencies that its Wholesale loan channel had a ‘QC historical fail rate of over 35 percent (major rep defects).’”
Credit Suisse commented about the mortgage loans that accumulated in its inventory. For example,Credit Suisse’s Co-Head of Transaction Management wrote to another Credit Suisse manager that “loans with potential defects ‘pile up in inventory . . . . So my theory is: we own the risk 1 way or another. . . . I am inclined to securitize loans that are close calls or marginally non-compliant, and take the risk that we’ll have to repurchase, if we can’t put them back, rather than adding to sludge in inventory. . . .’ One of the senior traders responded, ‘Agree.’” In another instance, a Credit Suisse senior trader commented in 2007 that “‘we have almost $2.5B of conduit garbage to still distribute.’” In another instance, a Credit Suisse trader wrote to a top manager, discussing another bank to which Credit Suisse was seeking to sell loans from its inventory, and stated, “‘[The other bank] again came back with an embarrassing number of diligence kicks this month. . . . If their results are in any way representative of our compliance with our reps and warrants, we have major problems.’ But rather than holding these loans in its own inventory, Credit Suisse securitized certain of these loans into its RMBS.”

Assistant U.S. Attorneys Kevin Traskos, Hetal J. Doshi, Shiwon Choe, Ian J. Kellogg, Lila M. Bateman, and J. Chris Larson of the District of Colorado investigated Credit Suisse’s conduct in connection with RMBS, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG).

“Credit Suisse knowingly put investors at risk, and the losses caused by its irresponsible behavior deeply affected not only financial institutions such as the Federal Home Loan Banks, but also taxpayers, and contributed significantly to the financial crisis,” said Special Agent in Charge Catherine Huber of the Federal Housing Finance Agency-Office of Inspector General’s (FHFA-OIG) Midwest Region. “This settlement illustrates the tireless efforts put forth toward bringing a resolution to this chapter of the financial crisis. FHFA-OIG will continue to work with our law enforcement partners to hold those who have engaged in misconduct accountable for their actions.”

The $2.48 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. The settlement expressly preserves the government’s ability to bring criminal charges against Credit Suisse or any of its employees. The settlement does not release any individuals from potential criminal or civil liability. As part of the settlement, Credit Suisse has agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.

Credit Suisse will pay out the remaining $2.8 billion in the form of relief to aid consumers harmed by its unlawful conduct. Specifically, Credit Suisse agrees to provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country. It also agrees to provide financing for affordable rental and for-sale housing throughout the country. This agreement represents the most substantial commitment in any RMBS agreement to date to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis.

The settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered tens of billions of dollars on behalf of American consumers and investors for claims against large financial institutions arising from misconduct related to the financial crisis. The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the U.S. Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, SIGTARP, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country. The RMBS Working Group is led by Director Joshua Wilkenfeld and four co-chairs: Principal Deputy Assistant Attorney General Mizer, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, and New York Attorney General Eric Schneiderman. This settlement is the latest in a series of major RMBS settlements announced by the Working Group.

To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html.

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Healthcare Fraud: Nicholas and Gregory Melehov Have Agreed To Pay to Resolve Allegations Concerning Inflated Medicare Claims for Ambulance Transports

January 17, 2017 FraudsWatch Leave a comment

Family-Owned Ambulance Company to Pay $12.7 Million to Resolve False Claims Allegations

BOSTON – The U.S. Attorney’s Office announced that Medstar Ambulance, Inc., four of its subsidiaries, and its two owners, Nicholas and Gregory Melehov, have agreed to pay $12.7 million to resolve allegations concerning inflated Medicare claims for ambulance transports.

“Our office is committed to finding and eradicating Medicare fraud wherever it occurs,” said United States Attorney Carmen Ortiz. “While we recognize that Medicare does and should pay for medically necessary ambulance services, it is our job to ensure that ambulance providers do not take advantage of the system or the patients. This settlement is part of the office’s ongoing effort to stamp out health care fraud and return money to taxpayers.”

“We expect those who participate in the Medicare program to provide services, including ambulance services, based on the medical needs of patients rather than their desire to maximize profits,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice is committed to ensuring that those who abuse the Medicare program will be held accountable for their actions.”

“Improperly billing the government for services affects every American taxpayer,” said Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division. “The settlement with MedStar Ambulance, Inc. is a result of the FBI’s continued effort to combat inappropriate and questionable billing practices in the area of ambulance transport fraud.”

“Ambulance service companies should be focused on the needs of the patients,” said Department of Health and Human Services, Office of Inspector General Special Agent in Charge Phillip Coyne. “Billing Medicare for ambulance rides that were unnecessary or at a higher rate than could be medically justified is unacceptable. Together with our law enforcement partners we will seek out and stop this fraudulent behavior.”

The agreement resolves allegations that Medstar wrongfully billed Medicare for ambulance services that were not medically necessary or for higher levels of ambulance services than were required or provided. Medstar and its subsidiaries – Medstar EMS, Inc., MetroWest Emergency Medical Services, Inc., Fitchburg Emergency Medical and Pioneer Valley EMS, Inc. – provide ambulance services to municipalities, hospitals and skilled nursing facilities in central and western Massachusetts. The allegations came to the government’s attention when Dale Meehan, a former employee in Medstar’s billing office, filed a complaint in federal court [captioned below] alleging wrongful billing by Medstar. The government contends that after Medstar took its ambulance billing services in house around 2011, it engaged in a pattern and practice of submitting false claims to Medicare for ambulance transport services in which (1) the services did not qualify for reimbursement because the transports were not medically reasonable and necessary, and (2) Medstar billed for higher levels of ambulance transport services than were required by patients’ conditions or billed for higher levels of ambulance transport services than were actually provided.

Once Medstar became aware of the investigation in late 2014, it quickly endeavored to put in place meaningful change, including revamping its ambulance billing software and training its billing employees. Medstar has worked cooperatively with the government throughout its investigation, and has taken swift action to address past misconduct. In addition, Medstar has agreed to a corporate integrity agreement with the U.S. Department of Health and Human Services.

U.S. Attorney Ortiz; Principal Deputy AAG Mizer; FBI SAC Shaw; and HHS SAC Coyne, made the announcement. The case was handled by Assistant U.S. Attorneys Jessica Driscoll and Lisa Asiaf-Schlatz of Ortiz’s Office, and Trial Attorney Kelley Hauser of the Department of Justice’s Civil Division.

HHS Hotline: The government encourages anyone with information about the practices described above, or similar practices involving ambulance billing, to contact the Department of Health and Human Services Office of Inspector General Hotline via telephone, 1-800-HHS-TIPS (1-800-447-8477), or in writing via https://forms.oig.hhs.gov/hotlineoperations/.

United States ex rel. Meehan v. Medstar Ambulance. Inc., et al., No. 13-CV-12495-IT (D. Mass)

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Fraud, Fraud News From World

Healthcare Fraud: Baxter Healthcare Corporation (Baxter) Pay For Resolve Its Criminal And Civil Liability Arising

January 17, 2017 FraudsWatch Leave a comment

Baxter Healthcare Corporation To Pay More Than $18 Million To Resolve Criminal And Civil Liability Relating To Sterile Products

Company Failed to Follow Good Manufacturing Practices in North Carolina Facility

WASHINGTON – Healthcare company Baxter Healthcare Corporation (Baxter) has agreed to pay $18.158 million to resolve its criminal and civil liability arising from Baxter’s failure to follow current Good Manufacturing Practices (cGMP) when manufacturing sterile drug products in North Carolina, the Department of Justice announced today. Today’s resolution includes a deferred prosecution agreement and penalties and forfeiture totaling $16 million and a civil settlement under the False Claims Act (FCA) with the federal government totaling approximately $2.158 million. Baxter is a Delaware corporation and subsidiary of Baxter International Inc., headquartered in Deerfield, Illinois, with many manufacturing facilities throughout the United States and the world, including one in Marion, North Carolina (North Cove).

In a criminal information filed today in the Western District of North Carolina, the government charged that, between July 2011 and November 2012, Baxter introduced into interstate commerce drugs that were adulterated under the Federal Food, Drug, and Cosmetic Act (FDCA) because Baxter did not follow cGMP when making those products. At North Cove, Baxter manufactured large-volume sterile intravenous (IV) solutions in a clean room that had high-efficiency particulate absorption (HEPA) filters installed in the ceiling. Air was pushed into the clean room through the HEPA filters. As alleged in the information, during the relevant time period, a Baxter employee reported the presence of mold on the HEPA filters to plant management. However, Baxter continued to manufacture IV solutions in that clean room for months while the filters the employee had identified as moldy remained in place. Subsequent testing of the filters following an unannounced U.S. Food and Drug Administration (FDA) inspection revealed several mold species on the filters. There was no evidence of impact on the IV solutions from the mold found on the filters.

In a deferred prosecution agreement to resolve the charge, Baxter admitted that it distributed products in interstate commerce that were adulterated in violation of the FDCA. Under the terms of the deferred prosecution agreement, Baxter will pay a total of $16 million in monetary penalties and forfeiture and will implement enhanced compliance provisions, including periodic certifications to the government concerning its implementation of those provisions. The deferred prosecution agreement will not be final until accepted by the U.S. District Court.

“Following current Good Manufacturing Practices is essential to ensure the safety and efficacy of our drugs,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Today’s settlement shows that the government will continue to hold companies accountable for failing to fulfill this critically important responsibility.”

“Despite notification by an employee of potential contamination concerns, Baxter was poorly focused on instituting sufficient safety standards for their products,” said U.S. Attorney Jill Westmoreland Rose for the Western District of North Carolina (WDNC). “Today’s resolution reflects WDNC’s commitment to hold accountable drug companies that violate manufacturing standards and wrongly profit from those violations.”

“FDA’s manufacturing standards are designed to ensure the quality, safety, and efficacy of drugs distributed to American consumers, and FDA expects pharmaceutical companies to correct deficiencies in an expedited manner,” said Special Agent in Charge Justin Green of FDA’s Office of Criminal Investigations, Miami Field Office. “We will remain vigilant in our efforts to protect the U.S. public health from potentially dangerous products.”

In addition, Baxter will pay approximately $2.158 million to resolve allegations that the company violated the FCA by submitting false claims to the Department of Veterans Affairs based upon Baxter’s failure to follow cGMPs.

The civil settlement resolves a lawsuit filed by Christopher Wall, an employee of Baxter, under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The civil lawsuit was filed in the Western District of North Carolina and is captioned United States ex rel. Christopher Wall v. Baxter International, Inc. et al., No. 13cv42 (W.D.N.C.). Mr. Wall will receive $431,535.99 from the proceeds of the civil settlement.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $31.4 billion through False Claims Act cases, with nearly $19.6 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with Baxter was the result of a coordinated effort among the U.S. Attorney’s Office for the Western District of North Carolina and the Civil Division’s Consumer Protection Branch and Commercial Litigation Branch, with assistance from the FDA’s Office of Chief Counsel. The criminal investigation was conducted by the FDA’s Office of Criminal Investigations.

Except as to conduct admitted in connection with the deferred prosecution agreement, the claims settled by the civil agreement are allegations only and there has been no determination of civil liability.

For more information about the Consumer Protection Branch and its enforcement efforts, visit its website athttp://www.justice.gov/civil/consumer-protection-branch. For more information on the Commercial Litigation Branch’s Fraud Section, visit https://www.justice.gov/civil/fraud-section. For more information about the U.S. Attorney’s Office for the Western District of North Carolina, visit https://www.justice.gov/usao-wdnc.

Fraud, Insurance

How To Make the Right Way Liability Insurance and Asset Protection

January 16, 2017 FraudsWatch Leave a comment

When it comes to protecting personal wealth and business assets, the first thing that comes to many people’s minds is insurance. There is no question that insurance can play an important role in asset protection. Not only is it often required by law, by your lender or by your landlord, insurance can be an effective first line of defense against liability lawsuits. However, to fully protect your assets, it is critical to understand what insurance is and what it does and does not do for asset protection.

Included within most typical insurance policies such as automobile, homeowner, landlord and business insurance are three main general categories of coverage:

Liability coverage – this is the coverage to compensate the other party for bodily injury or property damage caused by you. For example, if you cause an automobile accident and the other car is damaged and the driver is injured, your liability coverage will pay for the injury of the other driver and the repair of the other car.
Property protection coverage – this is the coverage to replace or repair your property for any sudden and accidental loss or damage caused by a covered peril. For example, if your car is also damaged in the above accident, your property protection coverage will pay to repair or replace your car after you pay your deductible.
Other additional protection – this is a broad category of coverages designed to help you get by during the period when your property is being repaired like a rental car when your car is in the shop as well as other miscellaneous coverages like towing and medical expenses for you and your passengers.

Liability insurance gives you a layer of protection against lawsuit and lost of assets. However, it has a number of limitations: There are always limits on how much the insurance policy will pay for losses for which you are liable. If the court awards the person you’ve injured a judgment of $350,000 but your liability limit is just $100,000, the most the insurance policy will pay is $100,000. Guess who will have to come up with the remaining $250,000? That’s right: you! You will have to come up with the cash or face the real possibility of losing your home and/or other assets. There are many exclusions in your insurance policies. For example, any liability from an intentional or criminal act is excluded. Sexual harassment, employment discrimination or wrongful termination is typically excluded as well. Discharge of waste and other toxic materials is generally excluded. Liabilities arising from breach of contracts or agreements are typically not covered. Professional liabilities such as malpractice, errors and omissions are usually excluded unless a separate professional liability policy is in force. In other words, for a LARGE liability claim, the insurance company will try to find ways to avoid paying. So unless it is specifically and explicitly covered by the insurance policy, you are most likely on your own. In addition, any failure to disclose material facts in your application or failure to report any material changes after the policy is in force gives the insurance company a way out of paying a claim even if it is covered. Most insurance policies do not cover many more ways you can be sued. For example, you might be sued for misappropriation of other’s funds, fraud or allegation of fraud, breach of contract, slander, libel, copyright, trademark or patent infringement, divorce, accidents from a motorized speed race, a hostile working environment, a liability arising from a willful violation of an ordinance or a statute, suits from local, state or federal government agencies, just to name a few. You can’t even buy liability insurance for these risks in most cases. And if you can find insurance for these risks, they will likely cost a great deal.

There is no question that we should all carry the insurance required by law, the lender or landlord as the first line of defense against lawsuits and loss of assets. However, since there are limits on what insurance will pay and there are too many situations where insurance will not provide the coverage, you cannot rely solely on insurance to protect your assets.

Oftentimes, just having all your assets visible to an aggressive injury attorney invites lawsuits that might otherwise not be filed. There is no better way to stop a potential lawsuit from starting than to lead the injury attorney to think that there won’t be any money or assets for him to collect after spending all the time and money to go to trial even if he wins.

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