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Category: Taxation

  • MIL-OSI Security: San Francisco Tow Company Operator Charged with Insurance Fraud and Money Laundering

    Source: US FBI

    Jose Badillo and a Co-Defendant Are Accused of Submitting a Fraudulent Auto Insurance Claim and Pocketing the Proceeds

    SAN FRANCISCO – Jose Vicente Badillo and Jessica Elizabeth Najarro appeared in federal court today to face mail fraud, wire fraud, and money laundering charges related to a scheme to defraud an auto insurance company, announced United States Attorney Ismail J. Ramsey; FBI Special Agent in Charge Robert K. Tripp; and IRS Criminal Investigation (CI) Acting Special Agent in Charge Michael Mosley of the Oakland Field Office. The case has been assigned to the Hon. Rita F. Lin, United States District Judge.

    According to an indictment returned by a federal grand jury on July 9, 2024, Badillo, 28, and Najarro, 30, both of San Francisco, conspired to defraud an insurance company by submitting a fraudulent insurance claim on a wrecked car that Badillo purchased in June 2019. The indictment alleges that, when Badillo bought the car, it was undrivable, with severe front-end damage and a non-functioning engine. Nevertheless, the indictment says, Najarro obtained an insurance policy on, and later took title to, the car before falsely reporting to the insurance company in July 2019 that she had been in a single-car accident in it in San Francisco. The indictment further alleges that Najarro spoke with, and made materially false statements and misrepresentations to, an insurance representative in another state, after which the insurance company processed and approved her claim and sent her an insurance reimbursement check for $34,037.48. The indictment alleges that the full amount of the insurance reimbursement check was deposited a few days later into a Wells Fargo Bank account controlled by Badillo.

    The indictment also alleges that, at the time of the offenses in 2019, Badillo owned and/or controlled at least two companies engaged in the business of towing vehicles: Jose’s Towing, LLC, and Auto Towing, LLC, both of which operated out of San Francisco.

    Both defendants are charged with one count each of (i) conspiracy to commit mail and wire fraud, in violation of 18 U.S.C. § 1349; (ii) mail fraud, in violation of 18 U.S.C. §§ 1341 and 2; (iii) wire fraud, in violation of 18 U.S.C. §§ 1343 and 2; and (iv) money laundering, in violation of 18 U.S.C. §§ 1957 and 2.

    Badillo and Najarro were arrested in San Francisco on August 8, 2024, and released on a $50,000 bond at their initial appearances later that day. Both defendants are next scheduled to appear in court on August 12, 2024, at 10:30 a.m., before the Hon. Lisa J. Cisneros for arraignment and identification of counsel.

    An indictment merely alleges that crimes have been committed, and both defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Badillo and Najarro each face a maximum sentence of 20 years in prison, and a fine of $250,000 or twice the gross gain or loss, whichever is greater, plus restitution, if appropriate, on each of Counts 1 through 3, which charge mail fraud, wire fraud, and conspiracy to commit the same, in violation of 18 U.S.C. §§ 1341, 1343, 1349, and 2. They face a maximum sentence of 10 years in prison, and a fine of $250,000 or twice the amount of criminally derived property involved in the transaction, whichever is greater, plus restitution, if appropriate, on Count 4, which charges money laundering, in violation of 18 U.S.C. §§ 1957 and 2. The court also may order an additional term of supervised release to begin after any prison term as part of the sentence for either or both defendants. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

    This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) investigation. OCDETF identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.

    Assistant U.S. Attorneys Kyle F. Waldinger and Galen A. Phillips are prosecuting the case with the assistance of Amala James and Carolyn Jusay Caparas. The prosecution is the result of a lengthy investigation by the FBI and IRS CI.
     

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  • MIL-OSI Security: San Francisco Tow Company Operator Charged in Second Insurance Fraud Case

    Source: US FBI

    Jose Badillo and His Co-Defendants Are Accused of Submitting Fraudulent Auto Insurance Claims Regarding Multiple Vehicles

    SAN FRANCISCO – Jose Vicente Badillo, Kirill Afanasyev, Jason Naraja, and Jaime Respicio have been charged in an indictment with various crimes related to two schemes to defraud auto insurance companies, announced United States Attorney Ismail J. Ramsey; FBI Special Agent in Charge Robert K. Tripp; and IRS Criminal Investigation (IRS-CI) Acting Special Agent in Charge Michael Mosley of the Oakland Field Office. The case has been assigned to the Hon. James Donato, United States District Judge.

    According to an indictment returned by a federal grand jury on August 20, 2024, Afanasyev, 36, Badillo, 28, both of San Francisco, and Respicio, 38, of Pleasant Hill, California, conspired to defraud an auto insurance company by submitting a fraudulent insurance claim on a wrecked car that Afanasyev purchased in May 2019. The Indictment alleges that, when Afanasyev bought the car, it was undrivable, with significant front-end damage. Nevertheless, the Indictment says, Respicio obtained an insurance policy on, and later took title to, the car before Afanasyev, posing as Respicio, falsely reported to the insurance company in August 2019 that Respicio had been in a single-car accident in it in San Francisco. The Indictment further alleges that Afanasyev made materially false statements and misrepresentations to the insurance company, after which the insurance company processed and approved the claim and sent Respicio an insurance reimbursement check for $47,856.34. The Indictment alleges that Badillo participated in this scheme to defraud by agreeing to falsely document that his towing company had towed the wrecked car from the purported accident location.

    The Indictment alleges that Afanasyev, Badillo, and Naraja, 37, of Hayward, California, engaged in a second conspiracy and scheme to defraud another insurance company by submitting a fraudulent insurance claim regarding an accident involving multiple vehicles that had been staged by Badillo in San Mateo County. Specifically, the Indictment alleges that Badillo and Afanasyev planned the staged accident in which Badillo loaded a vehicle carrier with four vehicles (several of which were inoperable or had pre-existing damage) and purposefully drove them off the road on Guadalupe Canyon Parkway in San Mateo County in August 2019. The Indictment alleges that, after Badillo reported this “accident” to his insurance company, Badillo, Afanasyev, Naraja, and another individual all made false or misleading statements to an insurance company representative. The Indictment alleges that the insurance company ultimately denied Badillo’s claim as fraudulent but nevertheless paid one of Badillo’s towing companies $5,210 for its recovery, towing, and storage of vehicles involved in the staged accident.

    The Indictment also alleges that, at the time of the offenses in 2019, Badillo owned and/or controlled at least two companies engaged in the business of towing vehicles: Jose’s Towing, LLC, and Auto Towing, LLC, both of which operated out of San Francisco.

    In the first conspiracy and scheme to defraud, Afanasyev, Badillo, and Respicio are charged with one count each of (i) conspiracy to commit mail fraud and wire fraud, in violation of 18 U.S.C. § 1349; (ii) mail fraud, in violation of 18 U.S.C. §§ 1341 and 2; and (iii) wire fraud, in violation of 18 U.S.C. §§ 1343 and 2. Afanasyev and Respicio are also charged with one count of money laundering, in violation of 18 U.S.C. §§ 1957 and 2.

    In the second conspiracy and scheme to defraud, Afanasyev, Badillo, and Naraja are charged with (i) one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349; and (ii) four counts of wire fraud, in violation of 18 U.S.C. §§ 1343 and 2.

    Naraja and Respicio were arrested in Hayward and Pleasant Hill, respectively, on August 27, 2024, and released on $50,000 bonds at their initial appearances on August 28, 2024. Naraja is next scheduled to appear in court on August 29, 2024, at 10:30 a.m., before the Hon. Lisa J. Cisneros for arraignment and identification of counsel. Respicio is next scheduled to appear in court on September 5, 2024, at 10:30 a.m., before the Hon. Alex G. Tse for arraignment and identification of counsel. Badillo was previously arrested and made his initial appearance in another insurance fraud case on August 8, 2024. He is scheduled to appear before the Hon. Lisa J. Cisneros for arraignment and identification of counsel in both cases on August 30, 2024, at 10:30 a.m. Afanasyev’s initial appearance and arraignment has been scheduled for September 9, 2024, at 10:30 a.m. before the Hon. Alex G. Tse.

    An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Afanasyev, Badillo, and Respicio each face a maximum sentence of 20 years in prison, and a fine of $250,000 or twice the gross gain or loss, whichever is greater, plus restitution, if appropriate, on each of Counts 1 through 3, which charge mail fraud, wire fraud, and conspiracy to commit the same, in violation of 18 U.S.C. §§ 1341, 1343, 1349, and 2. Afanasyev and Respicio face a maximum sentence of 10 years in prison, and a fine of $250,000 or twice the amount of criminally derived property involved in the transaction, whichever is greater, plus restitution, if appropriate, on Count 4, which charges money laundering, in violation of 18 U.S.C. §§ 1957 and 2. Similarly, Afanasyev, Badillo, and Naraja each face a maximum sentence of 20 years in prison, and a fine of $250,000 or twice the gross gain or loss, whichever is greater, plus restitution, if appropriate, on each of Counts 5 through 9, which charge wire fraud and conspiracy to commit the same, in violation of 18 U.S.C. §§ 1343, 1349, and 2. The court also may order an additional term of supervised release to begin after any prison term as part of the sentence for any or all of the defendants. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

    This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) investigation. OCDETF identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.

    Assistant U.S. Attorneys Kyle F. Waldinger and Galen A. Phillips are prosecuting the case with the assistance of Amala James and Carolyn Jusay Caparas. The prosecution is the result of a lengthy investigation by the FBI and IRS-CI. The U.S. Attorney’s Office, the FBI, and IRS-CI appreciate the assistance and support of the San Francisco Police Department in this insurance fraud investigation.
     

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  • MIL-OSI Security: San Francisco Resident Sentenced to One Year in Prison for Stealing More Than $340,000 in Funds Intended for Low-Income Families

    Source: US FBI

    SAN FRANCISCO – Gregory Finkelson was sentenced to one year in prison for theft of government property in connection with his fraudulent receipt of hundreds of thousands of dollars in low-income housing benefits, announced United States Attorney Ismail J. Ramsey; Federal Bureau of Investigation (FBI) Special Agent in Charge Robert K. Tripp; U.S. Department of Housing and Urban Development (HUD) Office of the Inspector General (OIG) Special Agent in Charge Mark Kaminsky; and IRS Criminal Investigation (IRS-CI) Special Agent in Charge Michael Mosley of the Oakland Field Office. Finkelson’s sentence was imposed by the Honorable James Donato, United States District Judge, on September 9, 2023.

    The Section 8 Certificate Program is a rent subsidy program funded by HUD and administered in San Francisco by the San Francisco Housing Authority (SFHA). The program is intended to help low- and moderate-income families afford housing, and it has income limits and other eligibility requirements that applicants must meet to qualify for assistance.

    In his plea agreement, Finkelson, 64, admitted that, between approximately August 2006 and February 2020, he wrongfully claimed $341,455 in Section 8 Program subsidies by falsely reporting that he did not own his San Francisco residence, which he bought using a straw purchaser, and that he was merely an employee of a company that he in fact owned and operated out of his residence. Specifically, Finkelson admitted that he used the name of a Russian national living in Russia to purchase his San Francisco home, claiming, wrongfully, that she was his landlord and that he made rent payments to her. Finkelson also admitted he opened several bank accounts, including in the Russian national’s name, and that he used these bank accounts to conceal his use of the ill-gotten Section 8 Program subsidies. He then used the funds he fraudulently obtained to benefit himself, including by funding his business, paying his credit card bills, and making payments on a timeshare in Hawaii. His residence is now worth $2.4 million.

    In a memorandum filed for the sentencing, the government noted that Finkelson continued his fraudulent conduct even after SFHA acted to terminate his Section 8 subsidies. Because of his conduct, the government argued, Finkelson deprived low-income families actually in need of housing over the entire period of his scheme. According to the government, Finkelson’s actions damaged public trust in the government’s role as a fiduciary for taxpayer dollars.

    Finkelson was indicted by a federal grand jury on July 25, 2023. He pleaded guilty on May 7, 2024, to theft of government property and aiding and abetting, in violation of 18 U.S.C. §§ 641 and 2.

    In addition to the one-year term of imprisonment, Judge Donato further sentenced Finkelson to a three-year period of supervision following his release from prison and ordered Finkelson to pay $341,455 in restitution, which represents the total amount he admitted he stole from the government. Finkelson was ordered to surrender into custody on September 16, 2024.

    Assistant United States Attorneys Christiaan Highsmith and Kevin Yeh are prosecuting the case with the assistance of Claudia Hyslop. The prosecution is the result of a joint investigation by the FBI, HUD OIG, and IRS-CI, with assistance from SFHA.
     

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  • MIL-OSI Security: Nevada Resident Pleads Guilty to COVID-19 Fraud Scheme

    Source: US FBI

    LAS VEGAS – A Nevada woman pleaded guilty Monday to fraudulently seeking over $1 million in COVID-19 Paycheck Protection Program (PPP) loans.

    According to court documents, Karen Chapon, aka Karen Hannafious, 53, submitted six fraudulent PPP loan applications to three financial institutions for her companies. From April 2020 to July 2020, Chapon made multiple false statements about her companies’ respective business operations and payroll expenses, and submitted false documents to support the loan applications, including false federal tax filings. As part of the loan applications, Chapon falsely stated that she had not been convicted of a felony in the past five years, but in fact, she pleaded guilty to felony fraud offenses in 2016. She received four loans totaling approximately $596,931. Chapon used fraudulently obtained funds for her own benefit, including the purchase of a Mercedes Benz SUV.    

    Chapon pleaded guilty to one count of bank fraud. U.S. District Judge James C. Mahan scheduled sentencing for November 29, 2023. She faces a maximum statutory penalty of 30 years in prison, a five-year term of supervised release, restitution, and a fine. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

    The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a federal law enacted March 29, 2020. It is designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects resulting from the COVID-19 pandemic. One source of relief provided by the CARES Act is the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.

    The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent. Businesses must use PPP loan proceeds for payroll costs, interest on mortgages, rent and utilities. The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses.

    Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division; U.S. Attorney Jason M. Frierson for the District of Nevada; Special Agent in Charge Spencer L. Evans for the FBI; Inspector General J. Russell George for the Treasury Inspector General for Tax Administration (TIGTA); and Special Agent in Charge Weston King for the U.S. Small Business Administration Office of Inspector General (SBA-OIG), Western Region, made the announcement.

    This case was investigated by the FBI, TIGTA, and SBA-OIG. Trial Attorneys Lucy Jennings and Jennifer Bilinkas of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jessica Oliva of the District of Nevada are prosecuting the case.

    In May 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the department’s response to the pandemic, please visit www.justice.gov/coronavirus.

    Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.

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  • MIL-OSI Security: Former Owner of Collapsed Nursing Home Empire Admits $38 Million Tax Fraud Scheme

    Source: US FBI

    NEWARK, N.J. – A New York man today admitted his role in a $38 million employment tax fraud scheme involving nursing homes he owned across the country, U.S. Attorney Philip R. Sellinger announced.

    Joseph Schwartz, 64, of Suffern, New York, pleaded guilty before U.S. District Judge Susan D. Wigenton in Newark federal court to two counts of an indictment charging him with willfully failing to pay over employment taxes withheld from employees of his company, and willfully failing to file an annual financial report (Form 5500) with the Department of Labor for the employee 401K Benefit Plan Schwartz sponsored.

    “Schwartz ran a vast, multistate nursing home empire, but cheated taxpayers out of more than $38 million so he could line his own pockets. Having admitted his crime, he will now be held accountable. My office will continue to work with our law enforcement partners to prosecute those who willfully participate in tax fraud schemes.”

    U.S. Attorney Philip R. Sellinger

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

    Schwartz, an insurance broker and operator of Skyline Management Group LLC (Skyline), with headquarters in New Jersey, willfully failed to pay employment taxes relating to numerous health care and rehabilitation facilities that Skyline operated in 11 states.

    According to the indictment, Schwartz was required to collect, truthfully account for, and pay over to the IRS trust fund taxes withheld from the pay of employees of Skyline and related companies. From October 2017 through May 2018, Schwartz caused taxes to be withheld from employees’ pay but failed to then pay over more than $38 million in employment taxes to the IRS. As an administrator of the Skyline 401K plan, Schwartz further had an obligation to file an annual Form 5500 financial report with the Secretary of Labor for calendar year 2018, but knowingly and willfully failed to file the report.

    The employment tax fraud count is punishable by a maximum penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, whichever is greatest. The failure to file a Form 5500 related to the retirement plan count carries a maximum potential penalty of 10 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for April 10, 2025.

    U.S. Attorney Sellinger credited special agents of the IRS-Criminal Investigation, under the direction of Special Agent in Charge Jenifer L. Piovesan in Newark; and investigators with the Department of Labor-Employee Benefits Security Administration, under the direction of Regional Director Thomas Licetti in the New York Regional Office; and special agents of the FBI, under the direction of Acting Special Agent in Charge Nelson I. Delgado, with the investigation leading to today’s guilty plea.

    The government is represented by Assistant U.S. Attorneys Kendall Randolph and Daniel H. Rosenblum of the Criminal Division in Newark and Trial Attorney Shawn Noud of the Justice Department’s Tax Division.

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  • MIL-OSI Security: West New York Financial Advisor Sentenced to 41 Months in Prison for Role in Multimillion-Dollar Health Care Fraud Conspiracy

    Source: US FBI

    CAMDEN, N.J. – A West New York financial advisor was sentenced today to 41 months in prison for 11 counts of defrauding public health insurance plans out of more than $4 million and transacting in the criminal proceeds, U.S. Attorney Philip R. Sellinger announced.

    Kaival Patel, 55, of West New York, New Jersey, was convicted on Dec. 7, 2023, of one count of conspiracy to commit wire fraud and health care fraud, four counts of health care fraud, one count of conspiracy to commit money laundering by transacting in criminal proceeds, and five counts of money laundering by transacting in criminal proceeds following an 11-day trial before U.S. District Judge Robert B. Kugler. U.S. District Judge Edward S. Kiel imposed the sentence today in Camden federal court.

    “This defendant lined his own pockets by taking advantage of health insurance plans for New Jersey state and local government employees, defrauding them of millions of dollars by conspiring to obtain reimbursements for medically unnecessary compound prescription medications. Together with our law enforcement partners, we will continue to investigate and prosecute those who abuse and defraud the health care system.”

    U.S. Attorney Philip R. Sellinger

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

    Compounded medications are specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient. Compounded medications require a prescription from a physician.

    Patel created and operated a company called ABC Healthy Living LLC to market compound prescription medications. Patel and his conspirators learned that certain state and local government employees had insurance that would reimburse up to thousands of dollars for a one-month supply of certain compound medications such as vitamins, scar creams, pain creams, libido creams, and acid reflux medications. Patel and a conspirator approached Patel’s family member, a medical doctor who owns and operates a clinic in Newark, New Jersey, and convinced him to authorize prescriptions for the compound medications for patients who had no medical need for the prescriptions. Patel received commissions for the compound medication prescriptions.

    Patel and his conspirators paid a group of corrections officers to go to Patel’s family member’s medical practice for the purpose of receiving fraudulent prescriptions. Patel conspired with a compounding pharmacist to add unnecessary ingredients to the compound medications to further increase their cost and augment his illicit profits. Patel engaged in a series of financial transactions to receive proceeds from the health care fraud and wire fraud conspiracy.

    To date, approximately 48 people have been convicted or pleaded guilty in the overarching conspiracy.

    In addition to the prison term, Judge Kiel sentenced Patel to three years of supervised release and ordered him to pay restitution of $4.72 million.

    U.S. Attorney Sellinger credited special agents of the FBI’s Atlantic City Resident Agency, under the direction of Acting Special Agent in Charge Nelson I. Delgado in Newark; special agents of IRS – Criminal Investigation, under the direction of Special Agent in Charge Jenifer L. Piovesan in Newark; and the U.S. Department of Labor, Office of Inspector General, Northeast Region, under the direction of Special Agent in Charge Jonathan Mellone, with the investigation leading to the sentencing.

    The government is represented by Assistant U.S. Attorneys Daniel A. Friedman of the Criminal Division and R. David Walk Jr., Deputy Chief of the Criminal Division.

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  • MIL-OSI Security: Executive of Louisiana Compounding Pharmacy Admits Defrauding State Health Benefits Programs

    Source: US FBI

    CAMDEN, N.J. – The former vice president of sales of a Louisiana compounding pharmacy today admitted conspiring to use the Louisiana pharmacy to defraud New Jersey and military health benefits programs, Attorney for the United States Vikas Khanna announced.

    Christopher Casseri, 56, of Baton Rouge, Louisiana, pleaded guilty before U.S. District Judge Edward S. Kiel to one count of conspiring to commit health care fraud. Casseri was previously charged with Christopher Kyle Johnston, 45, of Mandeville, Louisiana, Trent Brockmeier, 62, of Pigeon Forge, Tennessee, in a 24-count indictment with conspiracy to commit health care fraud and wire fraud and a second conspiracy to commit identity theft by using individuals’ personal identifying information without their consent. Johnston and Brockmeier were charged with additional charges of conspiring to commit money laundering and substantive counts of money laundering for transactions involving the over $43 million in illicit profits they realized from the scheme. The charges against Johnston and Brockmeier remain pending and they are scheduled to proceed to trial in January 2025.

    According to court documents and statements made in Court:

    Central Rexall was a retail pharmacy in Louisiana that prepared compounded medications, which are supposed to be specialty medications mixed by a pharmacist to meet the specific medical needs of an individual patient. In 2013, Johnston and Brockmeier entered into an agreement with Central Rexall Chief Executive Officer Hayley Taff, who pleaded guilty on Aug. 12, 2020, to conspiracy to commit health care fraud, to take over the management of the pharmacy and expand the compounding business in exchange for 90 percent of the profits.  Brockmeier became chief operating officer of Central Rexall and Johnston became general counsel. They hired Casseri as vice president of sales to manage Central Rexall’s outside sales force.

    Johnston, Brockmeier, and Casseri learned that certain insurance plans administered by an entity referred to in the indictment as the “Pharmacy Benefits Administrator” would reimburse thousands of dollars for a one-month supply of certain compounded medications – including pain, scar, and antifungal creams, as well as vitamin combinations. The health plans for New Jersey state and local government and education employees, including teachers, firefighters, municipal police officers, and state troopers, had this insurance coverage, as did TRICARE, which insures current and former members of the armed forces and their families.

    The three conspirators designed compounded medications and manipulated the ingredients in the medications in order to obtain high insurance reimbursements rather than serve the medical needs of patients. To determine which ingredients and combinations resulted in the highest insurance reimbursements, Johnston, Brockmeier, and Casseri had Central Rexall employees send the Pharmacy Benefits Administrator false prescription claims to test out different combinations of ingredients, but the prescriptions did not exist. By trial and error, Johnston, Brockmeier, and Casseri designed compounded medications with combinations of ingredients that were chosen solely based on the amount of money that insurance would pay rather than on the medications’ ability to serve the medical needs of patients. At their direction, Central Rexall sent compounded medications to patients based solely on financial gain, without any research or testing showing that the combination of ingredients was effective.

    When the Pharmacy Benefits Administrator would stop covering one combination, the conspirators would develop a compounded medication with a different combination of ingredients based solely on the insurance reimbursement and without considering the medical necessity or effectiveness of the new combination. Central Rexall then would send that new compounded medication to patients, even though the new combination of ingredients was not medically equivalent to the combination originally prescribed for the patients and without telling the patients or their doctor about the differences.

    The outside sales force retained and directed by Johnston, Brockmeier, and Casseri used various methods to get doctors to prescribe these medications and patients to accept them, including having prescriptions signed without the patient seeing a doctor or knowing about the medications, having medications or refills ordered with the patients’ knowledge, and paying patients to accept the medications and paying doctors to prescribe them.

    Casseri and his conspirators caused over $46 million in fraudulent insurance claims for compounded medications that were not medically necessary.

    Casseri faces a maximum penalty of five years in prison and a $250,000 fine. Sentencing is scheduled for March 18, 2025.

    Attorney for the United States Khanna credited agents of the FBI’s Atlantic City Resident Agency, under the direction of Acting Special Agent in Charge Nelson I. Delgado in Newark; special agents of IRS – Criminal Investigation, under the direction of Special Agent in Charge Jenifer L. Piovesan in Newark; and the U.S. Department of Labor Office of Inspector General, Northeast Region, under the direction of Special Agent in Charge Jonathan Mellone, with the investigation leading to the guilty plea.

    The charges and allegations against Johnston and Brockmeier are merely accusations, and they are presumed innocent unless and until proven guilty.

    The government is represented by R. David Walk Jr., Deputy Chief of the Criminal Division and Assistant U.S. Attorney Daniel A. Friedman of the Criminal Division in Camden.

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  • MIL-OSI Security: Somerset County Man Sentenced to 87 Months in Prison for Defrauding New Jersey Traumatic Brain Injury Fund of Millions of Dollars and Committing Tax Evasion

    Source: US FBI

    TRENTON, N.J. – A Somerset County, New Jersey, man was sentenced today to 87 months in prison for conspiracy to commit healthcare fraud, five acts of healthcare fraud, and four counts of tax evasion, U.S. Attorney Philip R. Sellinger announced.

    C.R. Kraus, 58, of Manville, New Jersey was convicted in April 2024 of all 10 counts of an indictment following a trial before U.S. District Judge Zahid N. Quraishi in Trenton federal court. In January 2023, Kraus’s conspirators, Harry Pizutelli and Maritza Flores, pleaded guilty to conspiracy to commit healthcare fraud and tax evasion relating to defrauding the New Jersey Traumatic Brain Injury Fund (TBI Fund) of millions of dollars for their own personal benefit. Both are awaiting sentencing.

    “This defendant stole millions of dollars earmarked for victims of traumatic brain injuries. Stealing resources intended to help New Jersey residents who are already coping with serious challenges is especially egregious. This office will never relent in holding such criminals accountable. Today, this defendant learned the price of his criminal acts.”

    U.S. Attorney Philip R. Sellinger

    “C.R. Kraus was intent on defrauding the Traumatic Brain Injury Fund by making false claims that he treated patients who suffer from such maladies,” FBI – Newark Acting Special Agent in Charge Nelson I. Delgado said. “This not only took away valuable resources from other deserving patients but enabled Kraus and his co-conspirators to benefit substantial monetary gain, to the tune of more than $4 million. The FBI investigative team worked to put a stop to their fraudulent behavior, and bring to justice criminals who use the healthcare system as a personal piggy bank.”

    “Motivated entirely by greed, C.R. Kraus and his co-conspirators stole millions of dollars from a government program meant to aid individuals with life-altering injuries,” Special Agent in Charge Jenifer L. Piovesan, IRS Criminal Investigation, Newark Field Office, said. “Today’s sentence reinforces IRS-CI’s dedication to investigating financial crimes and ensuring bad actors are held accountable for their misconduct.”

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

    The TBI Fund is a publicly funded program run by the New Jersey Division of Disability Services, a component of the New Jersey Department of Human Services. The TBI Fund’s purpose is to provide New Jersey residents who have suffered a traumatic brain injury with services and support in order to maximize their quality of life when funding from insurance, personal resources, or other programs is unavailable to meet their needs. Services funded by the TBI Fund include physical, occupational, and speech therapy; service coordination; assistive technology; cognitive therapy; neuropsychological services; pharmaceuticals; wheelchair ramp installation and other home modifications; and general home management and maintenance.

    After a prospective patient applies for services, TBI Fund personnel review the application and, if approved, the patient is authorized to secure designated services from a third-party vendor. Once a patient receives services approved by the TBI Fund, the vendor or service provider submits an invoice to the TBI Fund for payment. When an invoice is received, TBI Fund personnel review the invoice to ensure that the patient had been approved to receive the services. If the invoice is approved, an internal payment voucher is generated, authorized by TBI Fund personnel, and then submitted to the New Jersey Department of the Treasury for payment, which issues a check directly to the vendor.

    Pizutelli was the manager of the TBI Fund and was responsible for its day-to-day operation. He supervised, managed, and oversaw the process by which third-party vendors were paid for services rendered to eligible TBI Fund beneficiaries. From 2009 through June 2019, Pizutelli, Kraus, and Flores conspired to defraud the TBI Fund by misappropriating more than $4 million in fraudulent vendor payments for purported services that were never actually provided. Pizutelli orchestrated the distribution of fraudulent vendor payments to Flores and Kraus by generating and processing false invoices and internal payment vouchers. Pizutelli generated these invoices and vouchers to give the appearance that Flores and Kraus had provided approved services to eligible patients when, in fact, they had not provided any services. Pizutelli then approved and transmitted the internal payment vouchers so that his conspirators received vendor payments.

    Pizutelli orchestrated these fraudulent payments to maintain and further romantic and/or sexual relationships with Flores, including more than $940,000 in fraudulent distributions to Flores and more than $3.245 million in fraudulent distributions to Kraus. To obscure their fraudulent conduct, Flores and Kraus also evaded the payment of substantial amount of income taxes by making material misstatements and omissions on their federal income tax returns and significantly underreporting the income they had derived from the fraudulent scheme.

    In addition to the prison term, Judge Quraishi sentenced Kraus to three years of supervised release and ordered restitution of $4.19 million.

    U.S. Attorney Sellinger credited special agents of the FBI, Newark Division, Red Bank Resident Agency, under the direction of Acting Special Agent in Charge Delgado, and special agents of IRS – Criminal Investigation, under the direction of Acting Special Agent in Charge Jenifer L. Piovesan, with the investigation leading to the guilty verdict. He also thanked the New Jersey Attorney General’s Office, Division of Law, and the New Jersey Department of Human Services, for its assistance.

    The government is represented by Eric A. Boden, Attorney-in-Charge in Trenton, and Assistant U.S. Attorney Eric Suggs of the U.S. Attorney’s Office Trenton Branch Office.

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  • MIL-OSI Security: Jury Convicts Self-Described Civil Rights Activist from Toledo of Wire Fraud and Money Laundering

    Source: US FBI

    TOLEDO – Sir Maejor Page, 35, of Toledo, was found guilty of wire fraud and three counts of money laundering by a jury after a six-day trial before U.S. District Judge Jeffrey Helmick.

    According to court documents and testimony, in 2016, Page created a Facebook page for “Black Lives Matter of Greater Atlanta” (“BLMGA”) and registered this organization as a domestic non-profit with the Georgia Secretary of State Corporation’s Division. In 2017, the IRS approved Page’s request granting BLMGA tax-exempt status under Section 503(c)(3) of the tax code, but dissolved this status in 2019. Page nonetheless accepted donations after falsely portraying BLMGA to the public as a legitimate charity engaged in social justice work, when in fact, it was not. Instead, Page used the money that individual donors gave to BLMGA not for social justice causes, but rather to buy items for his own personal use, such as a house and furniture. Page also committed money-laundering crimes when he bought these items with the donations that he fraudulently obtained.

    “The United States Attorney’s Office prioritizes the prosecution of white-collar criminal conduct, particularly conduct involving deceptive schemes that selfishly exploit a charitable donor’s goodwill for personal gain,” said United States Attorney Rebecca C. Lutzko, for the Northern District of Ohio. “The donors to BLMGA thought they were giving their hard-earned money to a cause they believed in. But instead of using it to support that cause, Page used it for himself. The jury’s verdict is a warning to every fraudster that when you misrepresent how donations or other money given to you in trust will be used, you will be prosecuted and punished.”

    “Preying on the generosity of the public for personal gain is cold and calculated,” said FBI Cleveland Special Agent in Charge Greg Nelsen. “The FBI and it’s white-collar crime division along with our federal, state, and local partners will continue to aggressively find and investigate criminals who believe they can deceive others through shady business practices.”

    No sentencing date has been set.

    This case was investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorneys Gene Crawford and Rob Melching.

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  • MIL-OSI Security: Fifteen Gang Members Indicted for Drug Trafficking and Firearms Possession

    Source: US FBI

    CLEVELAND – Federal, state, and local law enforcement officials announce the unsealing of a superseding indictment charging 15 members of the Fully Blooded Felons, a criminal street gang that was active in Northeast Ohio and in the Ohio prison system. The gang members were charged for their roles in a drug trafficking conspiracy involving their importing and distributing fentanyl, methamphetamine, cocaine, and buprenorphine in Northeast Ohio, and their illegal possession of firearms. Three defendants have been in federal custody since December 2023. Authorities have arrested several newly charged defendants. They transported several of them to federal court in Cleveland, while the others are in custody elsewhere.

    This announcement is made by United States Attorney Rebecca C. Lutzko, FBI Special Agent in Charge Gregory Nelsen, and Cleveland Division of Police Chief Dorothy Todd.

    “The indictment alleges that Raven Mullins and other members of the Fully Blooded Felons operated an open-air drug market, distributing the deadliest types of drugs sold on Cleveland’s streets. This organization is charged not only with peddling such poisons in Cleveland’s Cedar Estates neighborhood, but also with actively plotting to recruit persons to infiltrate the Ohio prison system to distribute drugs there so gang members could reap the profits,” said United States Attorney Rebecca C. Lutzko. “This indictment and these arrests are a product of the dedication, cooperation, and tireless efforts of Northern District of Ohio federal, state, and local law enforcement partners who, working together, identified and disrupted this criminal organization. Because of these efforts, the many law-abiding members of the Cedar Estates neighborhood have a real opportunity to come together and make positive changes.”

    “This operation and subsequent arrests underscore the FBIs mission to investigate, disrupt, and dismantle gangs not only in the larger cities across America, but also right here in northern Ohio,” said FBI Cleveland Special Agent in Charge Greg Nelsen. “Identifying criminal networks takes careful coordination and collaboration. We are proud to partner with the agencies that make up the FBI Safe Streets Gang Task Force, which includes the Cleveland Division of Police, Ohio Adult Parole Authority, and the Ohio Investigative Unit. In addition, the United States Marshals Service, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and Cleveland’s Third District played a major role in this operation. We thank them as well as our other federal, state, and local partners who work seamlessly together to protect our communities and keep offenders off the streets.”

    The following defendants are charged in the 33-count superseding indictment:

    Raven Mullins, aka Dunny, aka Dun, 34, Cleveland, Ohio
    Henry Burchett, aka Noodles, aka Noo, 39, Cleveland, Ohio
    Cortez Tyree, aka Seed, 34, Cleveland, Ohio
    Rodney Linson, aka Scrap, 37, Willoughby Hills, Ohio
    Elijah Johnson, aka Loon, 36, Unknown
    Demarcus Elliott, aka Moo, 37, Westlake, Ohio
    Dontez Hammond, aka Donny, 35, Cleveland, Ohio
    Jeffrey Lee, aka Fatty, 23, Cleveland, Ohio
    Jerrell Jones-Ferrell, aka Ruga, 25, Cleveland, Ohio
    Jerry Mullins, aka B. Money, 32, Cleveland, Ohio
    Devonte Johnson, aka D Nut, aka Nut, 31, Cleveland, Ohio
    Jerome Williams, aka Jay, 29, Cleveland, Ohio
    Christepher Horton, aka Cam, aka Killa, 40, Erie, Pennsylvania
    Deeundra Perkins, aka Drizzy, 32, Unknown
    Deon Blackwell, aka White Boy, 37, Cleveland, Ohio

    The defendants were all charged in a conspiracy to distribute and possess with intent to distribute controlled substances. Additionally, six defendants were charged with possession with intent to distribute controlled substances offenses, five defendants were charged with illegal possession of firearms, and five defendants were charged with possessing firearms in furtherance of drug trafficking crimes. One defendant was charged with interstate travel in aid of racketeering, and 11 defendants were charged with using a communications facility to facilitate a felony drug offense.

    The superseding indictment alleges that between as early as January 2022, and continuing through April 2, 2024, the defendants did knowingly and intentionally conspire with each other to distribute and possess with the intent to distribute mixtures and substances containing fentanyl, a Schedule II controlled substance, methamphetamine, a Schedule II controlled substance, cocaine, a Schedule II controlled substance, cocaine base (“crack”), a Schedule II controlled substance, and buprenorphine, a Schedule III controlled substance.

    According to court documents, Raven Mullins and other defendants operated an organized gang hierarchy that committed violent acts, possessed and transferred firearms, and distributed controlled substances in Northeast Ohio. The Fully Blooded Felons used two apartments at the Cedar Estates in Cleveland, Ohio, to store controlled substances and firearms and to distribute different controlled substances to customers. Subordinate gang members used a grassy area immediately adjacent to the Cedar Estates, and the area surrounding the 28th Street Liquor Store, to distribute controlled substances to customers at the direction of Raven Mullins and other high-ranking members. The superseding indictment alleges that Elijah Johnson travelled to Texas and Arizona to obtain kilogram quantities of pills containing fentanyl, which he then supplied to Fully Blooded Felon members for distribution in Northeast Ohio. Additionally, the superseding indictment alleges that the Fully Blooded Felons operated a drug smuggling and distribution ring inside numerous Ohio state prisons and federal detention centers.

    An indictment is only a charge 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.

    If convicted, each defendant’s sentence will be determined by the Court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases, the sentence will not exceed the statutory maximum, and, in most cases, it will be less than the maximum.

    This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) Strike Force Initiative, which provides for the establishment of permanent multi-agency task force teams that work side-by-side in the same location. This co-located model enables agents from different agencies to collaborate on intelligence-driven, multi-jurisdictional operations to disrupt and dismantle the most significant drug traffickers, money launderers, gangs, and transnational criminal organizations.

    The specific mission of the OCDETF Cleveland Strike Force is to disrupt and dismantle major criminal organizations and subsidiary organizations, including criminal gangs, transnational drug cartels, racketeering organizations, and other groups engaged in illicit activities that present a threat to public safety and national security and are related to the illegal smuggling and trafficking of narcotics or other controlled substances, weapons, humans, or the illegal concealment or transfer of proceeds derived from such illicit activities in the Northern District of Ohio. The OCDETF Cleveland Strike Force consists of agents and officers from the Federal Bureau of Investigation, the Drug Enforcement Administration, the Bureau of Alcohol, Tobacco, Firearms, and Explosives, Homeland Security Investigations, the United States Marshals Service, the U.S. Postal Inspection Service, the Internal Revenue Service, the U.S. Border Patrol, and the Cleveland Division of Police. The prosecution is being led by the Office of the United States Attorney for the Northern District of Ohio.

    The investigation preceding the superseding indictment was conducted by the Federal Bureau of Investigation, Safe Streets Task Force, the Cleveland Division of Police’s Third District and Gang Impact Unit, the Drug Enforcement Administration, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Ohio State Highway Patrol, the Ohio Adult Parole Authority, the Ohio Department of Rehabilitation and Correction, and the Ohio Investigative Unit. The United States Marshals Service coordinated the arrests of those defendants apprehended.

    This case is being prosecuted by Assistant U.S. Attorneys Robert J. Kolansky and Paul E. Hanna, with assistance from Trial Attorneys Brian W. Lynch and Alyssa Levey-Weinstein of the Justice Department’s Violent Crime and Racketeering Section.

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  • MIL-OSI Security: Global Cryptocurrency Exchange BitMEX Fined $100 Million for Violating Bank Secrecy Act

    Source: US FBI

    Company Willfully Flouted U.S. Anti-Money Laundering Laws to Boost Revenue

    Matthew Podolsky, Attorney for the United States, Acting under Authority Conferred by 28 U.S.C. § 515, announced that HDR GLOBAL TRADING LTD., a/k/a “BITMEX”, was sentenced today to a fine of $100 million for violating the Bank Secrecy Act by willfully failing to establish, implement, and maintain an adequate anti-money laundering (“AML”) and know-your-customer (“KYC”) program.

    Attorney for the United States Matthew Podolsky said:  “Anti-money laundering and know-your-customer rules protect Americans from fraud, combat money laundering, and prevent the financing of terrorist activity.  It is critical that all financial institutions, including cryptocurrency exchanges, comply with these rules to protect our country’s economy and national security.  Today’s sentence sends a clear message that companies that willfully violate these rules and refuse to implement AML/KYC programs will face consequences.”   

    According to the allegations in the Information and other filings and statements made in court:

    Arthur Hayes, Benjamin Delo, and Samuel Reed founded BITMEX in or about 2014, and Gregory Dwyer became BITMEX’s first employee in 2015 and later its Head of Business Development.  BITMEX, which has long serviced and solicited business from U.S. traders and operated through U.S. offices, was required to register with the Commodity Futures Trading Commission (“CFTC”) and to establish and maintain an adequate AML program.  AML programs ensure that financial institutions, such as BITMEX, are not exploited for illicit purposes and serve to protect the integrity of the U.S. financial system and national security more broadly.

    BITMEX and its executives knew that because BITMEX served U.S. customers, it was required to implement an AML program that included a KYC component but chose to flaunt those requirements, requiring only that customers provide an email address to use BITMEX’s services.  Indeed, senior executives each knew that customers residing in the U.S. continued to access BITMEX’s trading platform through at least in or about 2018, and that BITMEX policies nominally in place to prevent such trading were toothless or easily overridden to serve BITMEX’s bottom line goal of obtaining revenue through the U.S. market without regard to U.S. criminal laws.  Corporate executives took affirmative steps purportedly designed to exempt BITMEX from the application of U.S. laws like AML and KYC requirements, despite knowing of BITMEX’s obligation to implement such programs by operating in the U.S.  As part of BITMEX’s willful evasion of U.S. AML laws, the company lied to a bank about the purpose and nature of a subsidiary to allow BITMEX to pump millions of dollars through the U.S. financial system.

    Hayes, Delo, and Reed, BITMEX’s three founders and top executives, and Dwyer, another top executive, all previously entered guilty pleas for violating the Bank Secrecy Act and were sentenced in 2022.  The corporation entered a guilty plea on July 10, 2024, and was sentenced today.

    *                *                *

    In addition to the fine, BITMEX was sentenced to two years’ probation.       

    Mr. Podolsky praised the outstanding investigative work of the Federal Bureau of Investigation’s New York Money Laundering Investigation Squad.

    The prosecution is being handled by the Office’s Illicit Finance & Money Laundering Unit.  Assistant U.S. Attorneys Jessica Greenwood and Thane Rehn are in charge of the prosecution. 

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  • MIL-OSI Security: Columbus Man Faces 20 to 23 Years in Prison as Part of Narcotics Guilty Plea Involving Killing of Another Columbus Resident

    Source: US FBI

    COLUMBUS, Ohio – A Columbus man pleaded guilty in U.S. District Court today to a drug crime and admitted to his role in the killing of a local man. The defendant is one of nearly two dozen individuals charged in a case involving a large-scale drug and human trafficking ring.

    Dustin A. Speakman, 34, pleaded guilty to conspiracy to distribute and possess with intent to distribute controlled substances within 1,000 of an elementary school. As part of his plea, Speakman admitted to his role in the death of one victim which occurred during the time he was operating a drug distribution house. His plea includes a sentencing recommendation of 20 to 23 years in prison.

    Speakman, who is also known as “Dawg,” is one of 23 defendants charged in a narcotics and human trafficking case that involves at least two deaths.

    According to court documents, from 2008 until June 2022, lead defendants Patrick Saultz and Cordell Washington ran a large-scale drug trafficking organization in Columbus that included sex trafficking, labor trafficking, and money laundering.

    Court documents detail that the drug trafficking organization brought large quantities of fentanyl, heroin, cocaine, crack cocaine, methamphetamine, oxycodone, alprazolam and marijuana into Columbus. These drugs were sold or used to coerce individuals into sexual activity for some members of the drug ring and their profit.

    Speakman joined the drug trafficking organization after being released from jail in 2022, where he was housed with Saultz. Speakman was a mid-level drug distributor for the group out of residences on South Ogden and South Warren.

    As part of his guilty plea, Speakman admitted to severely beating one of his drug runners in May 2022 and then providing him with free drugs to make up for the attack. Witnesses said the male was beaten by Speakman and then given cocaine and fentanyl as compensation. Shortly after, the victim began to seize and foam at the mouth and did not respond to Narcan. The victim was driven to an alley near Grant Hospital where he was found unconscious by Columbus Fire Department personnel with severe trauma to the face and head. His cause of death was ultimately determined to be blunt force trauma caused by Speakman.

    “Any loss of life is significant,” said U.S. Attorney Kenneth L. Parker. “Our office will continue to work to hold perpetrators of illegal drug trafficking accountable and secure justice for victims of violent and drug-related deaths.”

    As of today, 18 of the 23 defendants have pleaded guilty. One defendant, Carmela Brooks, has been sentenced and received a term of imprisonment of five years.

    U.S. Attorney Parker commended the investigation coordinated by Ohio Attorney General Dave Yost’s Ohio Organized Crime Investigations Commission Central Ohio Human Trafficking Task Force, which includes Columbus Division of Police Chief Elaine Bryant; Shawn Gibson, Acting Special Agent in Charge, Homeland Security Investigations (HSI); and Orville O. Greene, Special Agent in Charge, U.S. Drug Enforcement Administration (DEA). Other agencies that have assisted the task force with the investigation include the Franklin County Sheriff’s Office, HIDTA Task Force, IRS-Criminal Investigation, FBI, Ohio Bureau of Criminal Investigations (BCI), Ohio National Guard Counter Drug Task Force, Pickerington Police Department, New Albany Police Department, and the Fairfield County Sheriff’s Office SWAT Team.

    Assistant United States Attorneys Timothy Prichard and Emily Czerniejewski are representing the United States in this case.

    This investigation is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation. OCDETF identifies, disrupts and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach. More information about OCDETF can be found at https://www.justice.gov/OCDETF.

    # # #

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  • MIL-OSI Security: Co-Leader of Large-Scale Narcotics and Human Trafficking Ring Pleads Guilty

    Source: US FBI

    COLUMBUS, Ohio – A leader in a case with 23 defendants involved in narcotics and human trafficking conspiracies pleaded guilty in federal court here today to drug, gun, human trafficking, and money laundering crimes.

    From 2008 until June 2022, Cordell Washington, 37, of Pickerington, ran a large-scale drug trafficking organization in Columbus with co-defendant Patrick Saultz. Their operations also included sex trafficking, labor trafficking, fraud and money laundering.

    A multi-agency law enforcement task force initially announced the case in July 2022 after a federal grand jury indicted 11 defendants for distributing bulk amounts of fentanyl, cocaine and crack cocaine within 1,000 feet of a Columbus elementary school. In October 2022, the government added 12 defendants and 28 new charges. 

    Court documents detail that the drug trafficking organization brought large quantities of fentanyl, heroin, cocaine, crack cocaine, methamphetamine, oxycodone, alprazolam and marijuana into Columbus. These drugs were sold or used to coerce individuals into sexual activity for some members of the drug ring and their profit.

    It is alleged that Saultz began distributing heroin, cocaine and crack cocaine from his residences on Vida Place and South Hague Street in Columbus as early as 2008. The drug trafficking organization sold drugs out of more than 20 Columbus residences to customers and distributed larger amounts to regional drug traffickers who then trafficked those narcotics to places such as West Virginia and the Northern District of Ohio.

    Most of the alleged drug dealing took place within 1000 feet of Burroughs Elementary School in Columbus at a residence on South Burgess. For example, one of Washington and Saultz’s numerous subordinates sold approximately $18,000 worth of narcotics per day from the location on South Burgess.

    The case also involves the overdose death of at least one individual and the violent death of a second victim.

    As part of his plea, Washington admitted to labor trafficking male drug addicts. The defendant provided the men with their drug of choice after the men completed construction or cleaning projects at residences owned by the drug trafficking organization. The men were recruited by Washington and some completed the work for him under serious threat of harm.

    Washington would provide the addicts with advances on small amounts of drugs so they were well enough to perform physical labor. If Washington was not pleased with their work product, he would not complete the final drug payment and would threaten violence against them.

    Washington used numerous methods to launder the group’s drug trafficking proceeds, including establishing front businesses that purported to be rental, repair and construction companies.

    Washington pleaded guilty to conspiring to distribute and possessing with intent to distribute controlled substances within 1,000 feet of an elementary school, possessing a firearm in furtherance of a drug trafficking crime, labor trafficking and concealment money laundering. He faces a mandatory minimum of at least 15 years and up to life in prison.

    As part of this case, local, state, and federal law enforcement officers have executed more than 20 search warrants at various locations throughout Central Ohio and seized more than $1.7 million in alleged drug proceeds. For example, while executing a search warrant at Car-Go storage units, law enforcement officials discovered approximately one million in bulk United States currency. Searches of additional residences yielded 47 firearms, diamonds, Rolex watches and additional bulk amounts of cash.

    As of today, 21 of the 23 defendants have pleaded guilty. One defendant, Carmella Brooks, has been sentenced and received a term of imprisonment of five years.

    U.S. Attorney Kenneth L. Parker commended the investigation coordinated by Ohio Attorney General Dave Yost’s Ohio Organized Crime Investigations Commission Central Ohio Human Trafficking Task Force, which includes Columbus Division of Police Chief Elaine Bryant; Shawn Gibson, Acting Special Agent in Charge, Homeland Security Investigations; and Orville O. Greene, Special Agent in Charge, U.S. Drug Enforcement Administration. Other agencies that have assisted the task force with the investigation include the Franklin County Sheriff’s Office, HIDTA Task Force, IRS-Criminal Investigation, FBI, Ohio Bureau of Criminal Investigations (BCI), Ohio National Guard Counter Drug Task Force, Pickerington Police Department, New Albany Police Department, and the Fairfield County Sheriff’s Office SWAT Team.

    Assistant United States Attorneys Timothy Prichard and Emily Czerniejewski are representing the United States in this case.

    This investigation is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) operation. OCDETF identifies, disrupts and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach. More information about OCDETF can be found at https://www.justice.gov/OCDETF.

    # # #

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  • MIL-OSI Security: Medina and Cleveland Men Charged with Fraudulently Obtaining $4.2 Million in COVID Relief Funds

    Source: US FBI

    CLEVELAND – A federal grand jury in Cleveland returned a 13-count indictment charging two individuals for their alleged roles in a scheme to fraudulently obtain approximately $4.2 million in COVID-19 relief funds guaranteed by the U.S. Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Joseph Oloyede, 61, of Medina, Ohio and Edward Oluwasanmi, 61, of Willoughby, Ohio are charged with conspiracy to commit wire fraud, wire fraud, and money laundering offenses.

    According to the indictment, from in or around April 2020, and continuing through on or about February 28, 2022, Oloyede and Oluwasanmi devised a scheme to defraud the SBA and financial institutions by obtaining COVID-19 relief funds from the SBA’s Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP) under false pretenses. The indictment states that Oloyede and Oluwasanmi submitted PPP and EIDL loan applications containing false information for entities under their control and submitted falsified tax and wage documents to support these applications. The indictment alleges that they obtained approximately $1.2 million in SBA funds for Oluwasanmi’s entities and $1.7 million for Oloyede’s entities. Oloyede is also alleged to have submitted falsified PPP and EIDL loan applications in the names of other co-conspirators and confederate borrowers and their businesses, obtaining approximately $1.3 through those applications, for a total of at least $4.2 million obtained through the fraud.

    An indictment is only a charge 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. If convicted, the Defendant’s sentence will be determined by the Court after review of factors unique to this case, including the Defendant’s prior criminal record, if any, the Defendant’s role in the offense, and the characteristics of the violation. In all cases, the sentence will not exceed the statutory maximum, and in most cases, it will be less than the maximum.

    This investigation was conducted by the U.S. Department of Transportation – OIG, as part of the Pandemic Response Accountability Committee Fraud Task Force, Cleveland FBI, and IRS – Criminal Investigation. This case is being prosecuted by Assistant U.S. Attorney Edward Brydle.

    MIL Security OSI –

  • MIL-OSI Security: December Federal Grand Jury 2024-B Indictments Announced

    Source: US FBI

    United States Attorney Clint Johnson today announced the results of the December Federal Grand Jury 2024-B Indictments.

    The following individuals have been charged with violations of United States law in indictments returned by the Grand Jury. The return of an indictment is a method of informing a defendant of alleged violations of federal law, which must be proven in a court of law beyond a reasonable doubt to overcome a defendant’s presumption of innocence.

    Terrance Frank Buffalomeat. Second Degree Burglary in Indian Country; Simple Assault. Buffalomeat, 20, of Hominy and a member of the Osage Nation, is charged with breaking into Midwest Wraps with intent to steal. He is further charged with assaulting a victim. The FBI and the Tulsa Police Department are the investigative agencies. Assistant U.S. Attorney Adam Goodrum is prosecuting the case. 24-CR-392

    Mark Verron Callshim, Jr. Robbery in Indian Country; Carrying, Using, and Brandishing a Firearm During and in Relation to a Crime of Violence (superseding). Callshim, 37, of Tulsa and a member of the Ponca Tribe of Indians of Oklahoma, is charged with taking something of value by force, violence, and intimidation. He is further charged with brandishing a firearm in relation to a crime of violence. The FBI and the Tulsa Police Department are the investigative agencies. Assistant U.S. Attorney Mike Flesher is prosecuting the case. 24-CR-159

    Tony Deanglio Davis. Felon in Possession of a Firearm. Davis, 50, of Tulsa, is charged with possessing a firearm, knowing he was previously convicted of felonies. The Bureau of Alcohol, Tobacco, Firearms and Explosives and the Tulsa Police Department are the investigative agencies. Assistant U.S. Attorney Mike Flesher is prosecuting the case. 24-CR-393

    Keith Edward Enyart; Jennifer Barger Enyart. Child Neglect in Indian Country (Counts 1 & 4); Child Abuse in Indian Country (Counts 2 & 5); Assault with a Dangerous Weapon with Intent to Do Bodily Harm in Indian Country (Count 3). Keith Enyart, 52, a member of the Wyandotte Nation, and Jennifer Enyart, 44, of Wyandotte, are charged with willfully failing to provide appropriate medical care and supervision to protect a child under their care. They both are charged with willfully harming the safety and welfare of the minor victim. Jennifer is additionally charged with intentionally assaulting the minor child by tasing his testicles. The FBI is the investigative agency. Assistant U.S. Attorney Stephanie N. Ihler is prosecuting the case. 24-CR-394

    Sarai Jamila Nyasha Freeman. Passing and Uttering Counterfeit Obligations and Securities (Counts 1 & 2); Aggravated Identity Theft (Counts 3 & 4); Failure to Appear (Count 5) (superseding). Freeman, 40, of Aurora, Colorado, is charged with forging and cashing counterfeit U.S. Treasury checks. She is further charged with using the victim’s last name and social security number without lawful authority. Additionally, Freeman failed to appear for trial, knowing she was required under the conditions of her pretrial release. The U.S. Treasury Inspector General for Tax Administration and the Treasury Inspector General are the investigative agencies. Assistant U.S. Attorney David D. Whipple is prosecuting the case. 24-CR-220

    Grant Stephen Goers. Coercion and Enticement of a Minor (Counts 1, 3, & 4); Production of Child Pornography (Count 2). Goers, 23, of Greenwood, Arkansas, is charged with knowingly persuading and enticing three separate minor victims under 18 years old to engage in sexual activity. He is further charged with enticing a minor victim to produce sexually explicit material. Homeland Security Investigations, the Tulsa Police Department, the Sand Springs Police Department, and the Tahlequah Police Department are the investigative agencies. Assistant U.S. Attorney Ashley Robert is prosecuting the case. 24-CR-395

    Diana May Harjo. Assault Resulting in Serious Bodily Injury in Indian Country. Harjo, 39, of Tulsa and a member of the Sac and Fox Nation, is charged with assaulting the victim, which resulted in serious bodily injury. The FBI and the Tulsa Police Department are the investigative agencies. Assistant U.S. Attorney Michele W. Hulgaard is prosecuting the case. 24-CR-403

    Ricky Troy Juarez. Second Degree Murder in Indian Country. Juarez, 32, of Tulsa and a member of the Choctaw Nation of Oklahoma, is charged with unlawfully killing Shane Thompson, Sr., with malice aforethought. The FBI and Tulsa Police Department are the investigative agencies. Assistant U.S. Attorney Eric O. Johnston is prosecuting the case. 24-CR-404

    Jose Jesus Lozano-Gonzalez. Unlawful Reentry of a Removed Alien; Felon in Possession of a Firearm and Ammunition; Alien Unlawfully in the United States in Possession of a Firearm and Ammunition. Lozano-Gonzalez, 25, a Mexican national, is charged with unlawfully reentering the United States after having been previously removed in Feb. 2022. Further, Lozano-Gonzalez unlawfully possessed a firearm and ammunition, knowing he was previously convicted of felonies in Oklahoma. U.S. Immigration and Custom’s Enforcement and Removal Operations is the investigative agency. Assistant U.S. Attorney Christian Harris is prosecuting the case. 24-CR-374

    Stuwart Raymon Owens. Felon in Possession of a Firearm and Ammunition. Owens, 39, of Tulsa, is charged with possessing a firearm and ammunition, knowing he was previously convicted of felonies. The Bureau of Alcohol, Tobacco, Firearms and Explosives and the Tulsa Police Department are the investigative agencies. Assistant U.S. Attorney John W. Dowdell is prosecuting the case. 24-CR-405

    Rudi Reyes-Rosales. Unlawful Reentry of a Removed Alien. Reyes-Rosales, 30, a Mexican national, is charged with unlawfully reentering the United States after having been previously removed in July 2021. U.S. Immigration and Custom’s Enforcement and Removal Operations is the investigative agency. Assistant U.S. Attorney Thomas E. Buscemi is prosecuting the case. 24-CR-396

    Kyle Thomas Smith. Felon in Possession of a Firearm and Ammunition. Smith, 33, of Claremore, is charged with possessing a firearm and ammunition, knowing he was previously convicted of felonies. The Bureau of Alcohol, Tobacco, Firearms and Explosives and the Tulsa Police Department are the investigative agencies. Assistant U.S. Attorney John Brasher is prosecuting the case. 24-CR-406

    Ryan Blake Still. Failure to Register as a Sex Offender. Still, 33, transient, is charged with knowingly failing to register
    as a sex offender from June 2024 through July 2024 after previously being convicted of Sexual Abuse of a Minor in 
    Indian County in 2021. The U.S. Marshal Service is the investigative agency. Assistant U.S. Attorney Michele Hulgaard is prosecuting the case. 24-CR-407

    Marcos Javier Suazo-Otero; Marcos Javier Suazo-Mancilla. Drug Conspiracy; Possession of Methamphetamine with Intent to Distribute; Possession of Cocaine with Intent to Distribute; Maintaining a Drug-Involved Premises; Unlawful Reentry of a Removed Alien; Possession of Firearms in Furtherance of a Drug Trafficking Crime. Suazo-Otero, 46, and Suazo-Mancilla, 23, both Mexican nationals, are charged with conspiring to distribute methamphetamine from Jan. 2024 through Nov. 2024. They are further charged with maintaining a residence for drug distribution. Suazo-Otero knowingly possessed methamphetamine with intent to distribute and is additionally charged with unlawfully reentering the United States after having been previously removed in Aug. 2018. Lastly, Suazo-Mancilla knowingly possessed cocaine with intent to distribute and possessed firearms while drug trafficking. The Drug Enforcement Administration, the Tulsa Police Department, and the Tulsa County Sheriff’s Office are the investigative agencies. Assistant U.S. Attorney David A. Nasar is prosecuting the case. 24-CR-397

    Aristride Villatoro-Izaguirre. Unlawful Reentry of a Removed Alien. Villatoro-Izaguirre, 32, a Honduran national, is charged with unlawfully reentering the United States after having been previously removed in Feb. 2018. U.S. Immigration and Custom’s Enforcement and Removal Operations is the investigative agency. Assistant U.S. Attorney Adam Goodrum is prosecuting the case. 24-CR-398

    MIL Security OSI –

  • MIL-OSI Security: DOJ Announces Coordinated Law Enforcement Action to Combat Health Care Fraud Related to COVID-19

    Source: US FBI

    Federal charges in the Western District of Arkansas involve wire fraud and money laundering related to the theft of federal healthcare funds

    FORT SMITH – The Department of Justice today announced criminal charges against 14 defendants, including 11 newly-charged defendants and three who were charged in superseding indictments, in seven federal districts across the United States for their alleged participation in various health care fraud schemes that exploited the COVID-19 pandemic and resulted in over $143 million in false billings.

    “The multiple health care fraud schemes charged today describe theft from American taxpayers through the exploitation of the national emergency,” said Deputy Attorney General Lisa O. Monaco. “These medical professionals, corporate executives, and others allegedly took advantage of the COVID-19 pandemic to line their own pockets instead of providing needed health care services during this unprecedented time in our country. We are committed to protecting the American people and the critical health care benefits programs created to assist them during this national emergency, and we are determined to hold those who exploit such programs accountable to the fullest extent of the law.”

    As part of the national takedown, Billy Joe Taylor, 42, of Lavaca, Arkansas, was charged by criminal complaint with health care fraud in connection with an alleged scheme to defraud the United States of over $88 million, including over $42 million in false and fraudulent claims during the COVID-19 health emergency that were billed in combination with claims that were submitted for testing for COVID-19 and other respiratory illnesses. Taylor, the owner and operator of Vitas Laboratories LLC and Beach Tox LLC, two testing laboratories, allegedly used access to beneficiary and medical provider information from prior laboratory testing orders to submit fraudulent claims for urine drug tests and other laboratory tests, including respiratory pathogen panel and COVID-19 tests, that were not actually ordered or performed. The complaint also alleges that hundreds of claims were submitted for beneficiaries after they had died or otherwise ceased providing samples.

    “While the COVID-19 pandemic was raging, and Americans were suffering from the economic and health crisis brought on by this pandemic, these defendants were allegedly scheming to steal millions of dollars set aside to help ailing Americans through COVID-19 testing and other federal health-care programs,” said Acting U.S. Attorney David Clay Fowlkes.  “This case demonstrates the importance of investigating and prosecuting those who would seek to line their own pockets by stealing funds set aside to help those struggling with the symptoms of COVID-19 and other health ailments.”  

    Additionally, the Center for Program Integrity, Centers for Medicare & Medicaid Services (CPI/CMS) separately announced today that it took adverse administrative actions against over 50 medical providers for their involvement in health care fraud schemes relating to COVID-19 or abuse of CMS programs that were designed to encourage access to medical care during the pandemic.

    “Medical providers have been the unsung heroes for the American public throughout the pandemic,” said FBI Director Christopher Wray. “It’s disheartening that some have abused their authorities and committed COVID-19 related fraud against trusting citizens. The FBI, along with our federal law enforcement and private sector partners, are committed to continuing to combat healthcare fraud and protect the American people.”

    The defendants in the cases announced today are alleged to have engaged in various health care fraud schemes designed to exploit the COVID-19 pandemic. For example, multiple defendants offered COVID-19 tests to Medicare beneficiaries at senior living facilities, drive-through COVID-19 testing sites, and medical offices to induce the beneficiaries to provide their personal identifying information and a saliva or blood sample. The defendants are alleged to have then misused the information and samples to submit claims to Medicare for unrelated, medically unnecessary, and far more expensive laboratory tests, including cancer genetic testing, allergy testing, and respiratory pathogen panel tests. In some cases, and as alleged, the COVID-19 test results were not provided to the beneficiaries in a timely fashion or were not reliable, risking the further spread of the disease, and the genetic, allergy, and respiratory pathogen testing was medically unnecessary, and, in many cases, the results were not provided to the patients or their actual primary care doctors.  The proceeds of the fraudulent schemes were allegedly laundered through shell corporations and used to purchase exotic automobiles and luxury real estate.

    “It’s clear fraudsters see the COVID-19 pandemic as a money-making opportunity — creating fraudulent schemes to victimize beneficiaries and steal from federal health care programs,” said Deputy Inspector General for Investigations Gary L. Cantrell of  Health and Human Services – Office of Inspector General (HHS-OIG). “Our agency and its law enforcement partners are aggressively and effectively investigating these egregious crimes, which is made equally clear given the results of this takedown. We will continue to support the unprecedented COVID-19 public health effort by holding accountable people who use deceptive tactics to profit from the pandemic.”

    In another type of COVID-19 health care fraud scheme announced today, defendants are alleged to have exploited policies that were put in place by CMS to enable increased access to care during the COVID-19 pandemic. For example, pursuant to the COVID-19 emergency declaration, telehealth regulations and rules were broadened so that Medicare beneficiaries could receive a wider range of services from their doctors without having to travel to a medical facility. The cases announced today include first in the nation charges for allegedly exploiting these expanded policies by submitting false and fraudulent claims to Medicare for sham telemedicine encounters that did not occur. As part of these cases, medical professionals are alleged to have offered and paid bribes in exchange for the medical professionals’ referral of medically unnecessary testing.

    The law enforcement action today also includes the third set of criminal charges related to the misuse of Provider Relief Fund monies. The Provider Relief Fund is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a federal law enacted March 2020 designed to provide needed medical care to Americans suffering from COVID-19.

    The Fraud Section is prosecuting the cases in the following districts: Western District of Arkansas, Northern District of California, Middle District of Louisiana, Central District of California, Southern District of Florida, District of New Jersey, and the Eastern District of New York.

    Today’s enforcement actions were led and coordinated by Assistant Chief Jacob Foster and Trial Attorneys Rebecca Yuan and Gary A. Winters of the National Rapid Response Strike Force of the Health Care Fraud Unit of the Criminal Division’s Fraud Section, in conjunction with the Health Care Fraud Unit’s Medicare Fraud Strike Forces (MFSF) in Miami, Los Angeles, the Gulf Coast, and Brooklyn, as well as the U.S. Attorneys’ Offices for the Northern District of California, Western District of Arkansas, and Middle District of Louisiana.

    The case here in the Western District of Arkansas is being prosecuted by Senior Litigation Counsel James Hayes and Trial Attorney D. Keith Clouser of the National Rapid Response Strike Force, and Assistant U.S. Attorney Kenneth Elser of the U.S. Attorney’s Office for the Western District of Arkansas.

    The MFSF is a partnership among the Criminal Division, U.S. Attorneys’ Offices, the FBI and HHS-OIG. In addition, U.S. Postal Inspection Service, Internal Revenue Service Criminal Investigation, Veterans Affairs Office of Inspector General, Department of Defense Office of Inspector General, Federal Deposit Insurance Corporation, Louisiana Medicaid Fraud Control Unit, and other federal and state law enforcement agencies participated in the law enforcement action.

    The law enforcement action was brought in coordination with the Health Care Fraud Unit’s COVID-19 Interagency Working Group, which is chaired by the National Rapid Response Strike Force and organizes efforts to address illegal activity involving health care programs during the pandemic.

    The Fraud Section leads the Medicare Fraud Strike Force. Since its inception in March 2007, the Medicare Fraud Strike Force, which maintains 15 strike forces operating in 24 federal districts, has charged more than 4,200 defendants who have collectively billed the Medicare program for nearly $19 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

    The Department of Justice needs the public’s assistance in remaining vigilant and reporting suspected fraudulent activity. To report suspected fraud, contact the National Center for Disaster Fraud (NCDF) at (866) 720-5721 or file an online complaint at: https://www.justice.gov/disaster-fraud/webform/ncdf-disaster-complaint-form. Complaints filed will be reviewed at the NCDF and referred to federal, state, local, or international law enforcement or regulatory agencies for investigation.

    To learn more about the department’s COVID response, visit: https://www.justice.gov/coronavirus. For further information on the Criminal Division’s enforcement efforts on PPP fraud, including court documents from significant cases, visit the following website: https://www.justice.gov/criminal-fraud/ppp-fraud.

    Related court documents may be found on the Public Access to Electronic Records website @ www.pacer.gov

    An indictment, complaint, or information is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

    ###

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  • MIL-OSI Security: Two Men Plead Guilty to Acting as Illegal Agents of the PRC Government and Bribery

    Source: US FBI

    John Chen and Lin Feng Furthered the PRC Government’s Transnational Repression Campaign Against the Falun Gong by Bribing a Purported IRS Official

    Damian Williams, the United States Attorney for the Southern District of New York, announced that JOHN CHEN and LIN FENG pled guilty to acting as unregistered agents of the government of the People’s Republic of China (“PRC”) and bribing an Internal Revenue Service (“IRS”) agent in connection with a plot to target U.S.-based practitioners of Falun Gong — a spiritual practice banned in the PRC.  CHEN pled guilty yesterday before U.S. Magistrate Judge Andrew E. Krause and is scheduled to be sentenced on October 30, 2024, before U.S. District Judge Nelson S. Román.  FENG pled guilty today before Judge Krause and will be sentenced on October 31, 2024, before Judge Román.

    U.S. Attorney Damian Williams said: “John Chen and Lin Feng brazenly attempted to bribe an undercover agent they believed to be an IRS agent here in the United States on behalf of the PRC Government in order to harass and intimidate the Falun Gong, a target of PRC repression.  Efforts such as this to repress free speech by targeting critics of the PRC in the United States will not be tolerated.  This Office remains committed to thwarting malicious transnational repression attempts by foreign influences on American soil.”

    According to Indictment and other court documents:

    From at least approximately January 2023 to May 2023, CHEN and FENG worked inside the United States at the direction of the PRC Government, including an identified PRC Government official (“PRC Official-1”), to further the PRC Government’s campaign to repress and harass Falun Gong practitioners.  The PRC Government has designated the Falun Gong as one of the “Five Poisons,” or one of the top five threats to its rule.  In China, Falun Gong adherents face a range of repressive and punitive measures from the PRC Government, including imprisonment.

    As part of the PRC Government’s campaign against the Falun Gong, CHEN and FENG engaged in a PRC Government-directed scheme to manipulate the IRS’s Whistleblower Program in an effort to strip the tax-exempt status of an entity run and maintained by Falun Gong practitioners (“Entity-1”).  After CHEN filed a defective whistleblower complaint with the IRS (the “Chen Whistleblower Complaint”), CHEN and FENG paid $5,000 in cash bribes, and promised to pay substantially more, to a purported IRS agent who was, in fact, an undercover officer (“Agent-1”) in exchange for Agent-1’s assistance in advancing the complaint.  Neither CHEN nor FENG notified the Attorney General that they were acting as agents of the PRC Government in the United States.

    In the course of the scheme, CHEN, on a recorded call, explicitly noted that the purpose of paying these bribes, which were directed and funded by the PRC Government, was to carry out the PRC Government’s aim of “toppl[ing] . . . the Falun Gong.”  During a call intercepted pursuant to a judicially authorized wiretap, CHEN and FENG discussed receiving “direction” on the bribery scheme from PRC Official-1, deleting instructions received from PRC Official-1 in order to evade detection, and “alert[ing]” and “sound[ing] the alarm” to PRC Official-1 if CHEN and FENG’s meetings to bribe Agent-1 did not go as planned.  CHEN and FENG also discussed that PRC Official-1 was the PRC Government official “in charge” of the bribery scheme targeting the Falun Gong.

    As part of this scheme, CHEN and FENG met with Agent-1 in Newburgh, New York, on May 14, 2023.  During the meeting, CHEN gave Agent-1 a $1,000 cash bribe as an initial, partial bribe payment.  CHEN further offered to pay Agent-1 a total of $50,000 for opening an audit of Entity-1, as well as 60% of any whistleblower award from the IRS if the Chen Whistleblower Complaint were successful.  On May 18, 2023, FENG paid Agent-1 a $4,000 cash bribe at John F. Kennedy International Airport as an additional partial bribe payment in furtherance of the scheme. 

    *                *                *

    CHEN, 71, of Chino, California, and FENG, 44, a PRC citizen and resident of Los Angeles, California, each pled guilty to one count of acting as an unregistered agent of a foreign government, which carries a maximum sentence of 10 years in prison, and one count of bribing a public official, which carries a maximum sentence of 15 years in prison.

    The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

    Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation’s New York and Los Angeles Field Offices and Counterintelligence Division and the Office of the U.S. Treasury Inspector General for Tax Administration.  Mr. Williams also thanked the Department of Justice’s National Security Division, Counterintelligence and Export Control Section for their assistance.

    The case is being handled by the Office’s White Plains Division and National Security and International Narcotics Unit.  Assistant U.S. Attorneys Qais Ghafary, Michael D. Lockard, and Kathryn Wheelock are in charge of the case, with assistance from Trial Attorney Christina Clark of the Counterintelligence and Export Control Section.

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  • MIL-OSI Security: Owner of South Gate-Based Tattoo Removal Business Pleads Guilty to Health Care Fraud Scheme That Recruited Paraplegics

    Source: US FBI

    LOS ANGELES – The owner of a tattoo removal business in South Gate pleaded guilty today to federal criminal charges for recruiting paraplegics in a health care fraud scheme that netted more than $1.7 million and for cheating on his taxes.

    Joseph Tusia, 60, of Leominster, Massachusetts, pleaded guilty to a two-count information charging him with health care fraud and tax evasion.

    According to his plea agreement, Tusia operated a laser tattoo removal business in South Gate and 10 durable medical equipment supply companies (DMEs) in California, Nevada, and Massachusetts. Tusia controlled the tattoo removal companies and the DMEs but intentionally withheld his name from bank accounts and state registrations to evade tax liability.

    On December 30, 2015, Tusia and a co-schemer submitted an application to Anthem Blue Cross (“Anthem”) for a small group health insurance plan. Anthem’s small group plan permitted benefits and health coverage for permanent employees who worked full-time. Despite the eligibility requirements, Tusia caused to be submitted to Anthem the names of nine individuals purported to be full-time employees of Tattoo Removal and a person who was a dependent of the Tusia. None of these purported employees were employed by Tattoo Removal or eligible for health insurance coverage under Tattoo Removal’s plan with Anthem. 

    According to his plea agreement, Tusia identified the Purported Tattoo Removal Employees from his friends and associates who were paraplegic and required medical supplies, knowing and expecting that the Purported Tattoo Removal Employees would purchase their medical supplies from the DMEs that were controlled by Tusia and his associates.

    From March 2016 to June 2020, Tusia and his co-schemers submitted fraudulent claims to Anthem on behalf of the DMEs for medical supplies provided to the purported employees, knowing that none of them were eligible for coverage. As a result of these fraudulent claims, Anthem paid the DMEs controlled by Tusia approximately $1,731,215.

    Tusia also admitted in his plea agreement to knowingly and willfully failing to report income he received from the DMEs in tax years 2017 through 2020, totaling more than $1,573,644. Tusia admitted that he failed to pay tax to the IRS and that he took affirmatives steps to evade paying taxes, such as by creating the DMEs and opening bank accounts for the DMEs in the names of his associates and co-schemers.

    United States District Judge George Wu scheduled a December 5 sentencing hearing, at which time Tusia will face a statutory maximum sentence of 10 years in federal prison on the health care fraud count, and up to five years in federal prison for the tax evasion count.

    The United States Department of Labor – Employee Benefits Security Administration, the FBI, and IRS Criminal Investigation are investigating this matter.

    Assistant United States Attorney Jeff Mitchell of the Major Frauds Section is prosecuting this case.

    MIL Security OSI –

  • MIL-OSI Security: Member of Multimillion-Dollar Ponzi Scheme Involving Off-the-Road Tires Pleads Guilty

    Source: US FBI

    COLUMBUS, Ohio – A member of a $50 million, multi-state Ponzi scheme conspiracy pleaded guilty in federal court here today. 

    John K. Eckerd, Jr., 60, of Dallas, admitted to conspiring to commit wire fraud and tax crimes. In total, Eckerd received at least $14 million from the tire sales scheme. Eckerd’s plea agreement includes a sentence recommendation of 36 to 109 months in prison.

    Conspiring with previously convicted and sentenced defendant Jason E. Adkins, 47, of Jackson, Ohio, Eckerd and others participated in a multi-million-dollar Ponzi scheme.

    According to court documents, Eckerd and other members of the conspiracy portrayed to investors that they were in the business of buying and selling off-the-road tires. Off-the-road tires are over-sized tires that are used on earth moving equipment and/or mining equipment.

    Eckerd recruited investors and represented to investors that he worked with Adkins in tire sales. Few if any transactions were completed as designed. Instead, investor funds were used for the personal use of Eckerd and other members of the conspiracy, and to repay other victims. On multiple occasions, investors who were solicited by Eckerd invested in purported tire deals and then either lost money in tire deals that fell apart or were paid back some or all of their investments with other victims’ money, or both.

    Eckerd also conspired with Adkins to evade the payment of income taxes. Beginning in mid-2016, Eckerd made attempts with Adkins to re-classify payments from Adkins as loans, to avoid tax consequences. He also concealed income through shell entities and nominees. Eckerd has admitted evading the payment of $1,028,454 in taxes.

    A final restitution amount will be set by the Court at sentencing. The plea includes the forfeiture of $14 million, which will be satisfied in part by the forfeiture of Eckerd’s home in McKinney, Texas.

    Kenneth L. Parker, United States Attorney for the Southern District of Ohio; Karen Wingerd, Special Agent in Charge, Internal Revenue Service (IRS) Criminal Investigation; and Elena Iatarola, Special Agent in Charge, Federal Bureau of Investigation (FBI), Cincinnati Division, announced the guilty plea entered today before U.S. District Judge Algenon L. Marbley, Jr. Assistant United States Attorneys S. Courter Shimeall, Peter K. Glenn-Applegate and David J. Twombly are representing the United States in this case.

    # # #

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  • MIL-OSI Security: New USAO Task Force to Target Government Contract Fraud

    Source: US FBI

    CLEVELAND – The U.S. Attorney’s Office for the Northern District of Ohio is spearheading a new, interagency Supply Chain Oversight and Procurement Enforcement (SCOPE) Task Force, created in 2024, to ensure supply chain integrity and prevent procurement fraud. The task force will serve to support the work of the Government Supply Chain Investigations Unit (GSCIU), led by the Department of Homeland Security – Homeland Security Investigations (HSI), based in Washington, D.C.

    The GSCIU investigates procurement and government contract fraud in connection with military, law enforcement, and public health and safety. Examples include investigations into substandard or fraudulent vaccines or medications that are supplied to veterans through Veterans Affairs. Other investigations have focused on faulty electronics and software provided to NASA or the military supply chain, and counterfeit and faulty armor and munitions provided to law enforcement and military personnel.

    “As the first of its kind in the district, this task force brings together the USAO’s white collar crime unit, Homeland Security Investigations, and numerous other federal investigative agencies to address large-scale supply chain and procurement fraud in government contracting,” said U.S. Attorney Rebecca Lutzko for the Northern District of Ohio. “We also must be vigilant about products entering the government supply chain stemming from prohibited sources or foreign countries of concern, which presents a national security issue that may potentially sabotage or compromise systems put in place to protect our country, our servicemen and servicewomen, and our citizens.” 

    The task force will hold its first meeting in early February. Topics of discussion will emphasize public health and safety, vaccine and medicine fraud, counterfeit goods, intellectual property theft, and national security. Regional federal agencies that have committed to the USAO-NDOH-led task force include the FBI, NASA, HSI, NCIS, Intellectual Property Rights Center, Defense Criminal Investigative Services, Air Force Office of Special Investigations, Veterans Affairs, General Services Administration, Customs and Border Protection, IRS-Criminal Investigation, U.S. ARMY, and Defense Finance Accounting Service.

    MIL Security OSI –

  • MIL-OSI Security: USAO’s Organized Crime and Drug Enforcement Task Force Unit Ends 2024 with Notable Achievements

    Source: US FBI

    CLEVELAND – The Organized Crime and Drug Enforcement Task Force (OCDETF) Unit of the United States Attorney’s Office (USAO) for the Northern District of Ohio is responsible for prosecuting criminal organizations whose members violate federal laws in any of the 40 northern counties in the state of Ohio that the district serves.

    As an independent component of the U.S. Department of Justice, OCDETF is the largest anti-crime task force in the country. Its mission is to disrupt and dismantle criminal organizations using a nationwide strategy, led by prosecutors, that combines targeting, coordination, intelligence-sharing, and directed resourcing to have the greatest impact in disrupting the operations of organized crime.

    The task force approach facilitates coordination among various federal and local agencies to solve crimes, with agents and officers working side-by-side in the same location, led by a federal prosecutor. This co-located model enables agents from different agencies to share information and collaborate on intelligence-driven, multi­-jurisdictional operations to disrupt and dismantle large-scale criminal operations. Such criminal networks include all forms of transnational crime, including but not limited to drug cartels, racketeering organizations, and other groups engaged in illicit activities that present a threat to public safety and national security.  They may involve, among other illegal activity, the illegal smuggling and trafficking of narcotics or other controlled substances, weapons, humans, or the illegal concealment or transfer of proceeds derived from such illicit activities in the Northern District of Ohio.

    In the Northern District of Ohio, agents and officers from the FBI, DEA, ATF, Homeland Security Investigations, USMS, U.S. Postal Inspection Service, Internal Revenue Service, and USBP investigate OCDETF cases with ties to the District, working with task force officers from numerous local law enforcement agencies, including the Cleveland Division of Police. Prosecutions are led by the Office of the United States Attorney for the Northern District of Ohio.

    “No one group or agency can effectively combat organized crime, and particularly transnational organized crime, while working in a silo. The OCDETF framework allows our federal investigative agents to coordinate with each other and local law enforcement, sharing both resources and intelligence,” said U.S. Attorney Rebecca Lutzko for the Northern District of Ohio. “This model allows us to come together and build the best cases possible that put the members of large-scale criminal networks behind bars and bring their criminal operations to a halt.”

    Notable operations and cases prosecuted by the OCDETF Unit in 2024 include:

    U.S. v. Ojeda-Elenes, et al. – Four individuals, including two individuals with direct connections to the Sinaloa Cartel based in Culiacán, Mexico, were sentenced to prison for a drug conspiracy involving more than 240 pounds of fentanyl and nearly 100 pounds of cocaine.

    U.S. v. Mullins, et al. –Twenty-one members and associates of a Cleveland-based, violent street gang known as the Fully Blooded Felons were arrested and charged between December 2023 and November 2024. The defendants are alleged to have committed numerous federal crimes, including Racketeer Influenced and Corrupt Organizations (RICO) conspiracy, murder in aid of racketeering, kidnapping in aid of racketeering, assault in aid of racketeering, firearms violations, conspiracy, and drug trafficking.  To date, three defendants have pled guilty.

    U.S. v. Whittaker, et al. – Fifteen people in Lorain County were charged in a 19-count indictment after authorities seized large quantities of fentanyl that included more than 42,000 fentanyl pills.

    U.S. v. Bryant, et al. – According to court documents, Brandon Bryant was one of 24 members of a large-scale fentanyl trafficking organization that operated on Cleveland’s eastside between September 2019 and February 2022. He was sentenced to more than 30 years in prison after pleading guilty to conspiracy to distribute and possess with intent to distribute controlled substances, distribution of controlled substances, possession with intent to distribute controlled substances, and use of a communications facility in furtherance of a drug felony. Bryant was also ordered to serve a lifetime term of supervised release following his release from prison. The other 23 co-defendants have also been convicted and sentenced. Some of the more notable prison sentences for his co-defendants include the following: Devon Fair, 35 years; Ramel Drew, 27 years; and Branea Bryant, 24 years.

    U.S. v. Lumbus et al. – Eleven people were charged in an international drug trafficking conspiracy that involved the importation of fentanyl, synthetic opioids, and synthetic cannabinoids into the United States, and the distribution of those drugs in Ohio and other states.

    To report crimes, visit https://tips.fbi.gov/home.

    MIL Security OSI –

  • MIL-OSI Security: Los Angeles Director and Writer Charged with $11 Million Fraud in Connection with Streaming Science Fiction Television Show

    Source: US FBI

    Carl Erik Rinsch Used the Stolen Funds to Speculate on Securities and Cryptocurrency

    Matthew Podolsky, the Acting United States Attorney for the Southern District of New York, and Leslie Backschies, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of a seven-count Indictment charging CARL ERIK RINSCH for engaging in a scheme to defraud a subscription video on-demand streaming service (“Streaming Company-1”) in connection with a planned science fiction television show called “White Horse.”  RINSCH was arrested today in West Hollywood, California, and will be presented later today in the Central District of California.  The case is assigned to U.S. District Judge Jed S. Rakoff.

    Acting U.S. Attorney Matthew Podolsky said: “As alleged, Carl Erik Rinsch orchestrated a scheme to steal millions by soliciting a large investment from a video streaming service, claiming that money would be used to finance a television show that he was creating. But that was fiction. Rinsch instead allegedly used the funds on personal expenses and investments, including highly speculative options and cryptocurrency trading. Rinsch’s arrest is a reminder that this Office and our partners at the FBI remain vigilant in the fight against fraud and will bring those who cheat and steal to justice.”

    FBI Assistant Director Leslie Backschies said: “Carl Rinsch allegedly stole more than $11 million from a prominent streaming platform to finance lavish purchases and personal investments instead of completing a promised television series. The FBI will continue to reel in any individual who seeks to defraud businesses.”

    As alleged in the Indictment:[1]

    RINSCH is a film and television writer and director who partially completed a science fiction television show called “White Horse.”  In 2018, RINSCH reached an agreement with Streaming Company-1 in which Streaming Company-1 would both pay RINSCH for the existing episodes of White Horse and also fund completion of the rest of the show.  Between 2018 and 2019, Streaming Company-1 paid approximately $44 million for White Horse.

    Between late 2019 and early 2020, RINSCH demanded even more money from Streaming Company-1 to complete White Horse.  Streaming Company-1 ultimately agreed to pay another $11 million, and transferred those funds to a company RINSCH controlled on or about March 6, 2020.  The entirety of those funds was to be spent on the completion of White Horse.

    But RINSCH did not use those funds to complete White Horse.  Instead, within days, RINSCH began transferring the funds he received through a number of different bank accounts before consolidating them in a personal brokerage account.  RINSCH then used those funds to make a number of personal and speculative purchases of securities.  His trading was unsuccessful, and in less than two months after receiving $11 million from Streaming Company-1, RINSCH had lost more than half of those funds.

    Even after losing most of the $11 million, RINSCH still did not spend the remaining funds he had stolen on White Horse.  Instead, he used the money to speculate on cryptocurrency, and on personal expenses and luxury items, including approximately $1,787,000 on credit card bills; approximately $1,073,000 on lawyers to sue Streaming Company-1 for even more money, and for lawyers related to his divorce; approximately $395,000 to stay at the Four Seasons hotel and at various luxury rental properties; approximately $3,787,000 on furniture and antiques, including approximately $638,000 to purchase two mattresses and approximately $295,000 on luxury bedding and linens; approximately $2,417,000 to purchase five Rolls-Royces and one Ferrari; and approximately $652,000 on watches and clothing.

    *               *                *

    RINSCH, 47, of Los Angeles, California, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison; one count of money laundering, which carries a maximum sentence of 20 years in prison; and five counts of engaging in monetary transactions in property derived from specified unlawful activity, each of which carries a maximum sentence of 10 years in prison. 

    The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

    Mr. Podolsky praised the outstanding work of the FBI and Internal Revenue Service – Criminal Investigation. 

    The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jackie Delligatti, David A. Markewitz, and Kevin Mead are in charge of the prosecution.

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

    [1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitutes only allegations, and every fact described therein should be treated as an allegation.

    MIL Security OSI –

  • MIL-OSI Security: Mexican National Sentenced to Prison for Drug Conspiracy Involving More Than 240 Pounds of Fentanyl and Nearly 100 Pounds of Cocaine

    Source: US FBI

    CLEVELAND – Ronald Rendon-Luna, 37, a Mexican national residing in Painesville, Ohio, has been sentenced to 151 months in prison by U.S. District Chief Judge Sara Lioi, after he pled guilty to engaging in a drug-trafficking conspiracy and possession with intent to distribute controlled substances and being an alien in possession of firearms. He was also ordered to serve three years of supervised release.

    According to court documents, the Cartel, Gangs, Narcotics and Laundering Task Force of the FBI-Cleveland Division conducted a long-term drug-trafficking investigation that led to the arrest and successful prosecution of Rendon-Luna and three other co-conspirators, including two individuals with direct connections to the Sinaloa Cartel based in Culiacán, Mexico.

    During the investigation, law enforcement officials discovered that, from about June 2022 through January 2023, the leader of the conspiracy, Nefer Ojeda-Elenes, 32, of Upland, California, conspired with Rendon-Luna to use residences in Cleveland and Painesville, and two storage units in Cleveland and Middleburg Heights, to store illegal drugs and proceeds from the sales of the illegal substances. Rendon-Luna, on behalf of Ojeda-Elenes, traveled to area hotels to meet a third co-conspirator, Cameron Harris, 29, of Dayton, who further distributed the drugs in the Dayton, Ohio area. A fourth individual, Trino Alexander Briceno-Matheus, 31, of Miami Beach, Florida, also participated in the conspiracy and is known to have met with Rendon-Luna at an area hotel to pick up approximately $149,640 in proceeds earned from illegal drug activities.

    This organization was responsible for distributing approximately 111 kilograms of fentanyl, and approximately 42 kilograms of cocaine during the course of the conspiracy.

    “These criminals used their Mexican Cartel connections to bring millions of doses of fentanyl—each one potentially fatal—into our communities and distribute those poisons across our state,” said U.S. Attorney Rebecca Lutzko for the Northern District of Ohio. “Every day, dangerous drugs like the fentanyl and cocaine that these defendants imported and peddled on our streets destroy lives. Those who seek to expand their illegal drug trade to our District should know that we will use all tools available to stop them from endangering our residents’ lives and the safety of our neighborhoods.”

    During a federal search warrant executed at the related residences and storage units, law enforcement officials found illegal drugs in a storage unit, and confiscated several weapons, including an AK-47 and an AR-15 from Rendon-Luna’s Painesville home.

    Rendon Luna’s co-conspirators were previously sentenced.

    Ojeda-Elenes was sentenced Sept. 17, 2024, to 228 months in prison after pleading guilty to conspiracy and possession with intent to distribute a controlled substance. He was also ordered to serve five years of supervised release.

    Harris was sentenced Aug. 20, 2024, to 151 months in prison after pleading guilty to conspiracy and possession with intent to distribute a controlled substance. He was also ordered to serve five years of supervised release.

    Briceno-Matheus was sentenced July 23, 2024, to 30 months in prison and three years of supervised release after pleading guilty to conspiracy and possession with intent to distribute controlled substances, and interstate transportation in aid of racketeering.

    This case was investigated by the FBI-Cleveland Division, with assistance from the Cleveland Division of Police, U.S. Border Patrol (USBP), U.S. Coast Guard Investigative Services, Moreland Hills Police Department, Ohio Bureau of Criminal Investigation & Identification, Ohio State Highway Patrol, Bedford Police Department, Internal Revenue Service, Parma Police Department, Solon Police Department, Ohio Adult Parole, Ottawa County Drug Task Force, Shaker Heights Police Department, Cuyahoga County Sheriff’s Office, Brooklyn Police Department, North Royalton Police Department, Greater Cleveland Regional Transit Authority Police Department, Lake County Sheriff’s Office, Painesville Police Department, Ohio Narcotics Intelligence Center, Ohio HIDTA, U.S. Marshals Service (USMS), and the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF).

    This prosecution is part of an Organized Crime Drug Enforcement Task Force (OCDETF) Strike Force Initiative, which provides for the establishment of permanent multi-agency task force teams that work side-by-side in the same location. This co-located model enables agents from different agencies to collaborate on intelligence-driven, multi­-jurisdictional operations to disrupt and dismantle the most significant drug traffickers, money launderers, gangs, and transnational criminal organizations.

    The specific mission of the OCDETF Cleveland Strike Force is to disrupt and dismantle major criminal organizations and subsidiary organizations, including criminal gangs, transnational drug cartels, racketeering organizations, and other groups engaged in illicit activities that present a threat to public safety and national security and are related to the illegal smuggling and trafficking of narcotics or other controlled substances, weapons, humans, or the illegal concealment or transfer of proceeds derived from such illicit activities in the Northern District of Ohio. The OCDETF Cleveland Strike Force is composed of agents and officers from the FBI, DEA, ATF, Homeland Security Investigations, USMS, U.S. Postal Inspection Service, Internal Revenue Service, and USBP, along with task force officers from numerous local law enforcement agencies, including the Cleveland Division of Police. Prosecutions are led by the Office of the United States Attorney for the Northern District of Ohio.

    The case was prosecuted by Assistant U.S. Attorney Marc Bullard for the Northern District of Ohio.

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  • MIL-OSI Security: Lavaca Man Sentenced in $134 Million COVID-19 Health Care Fraud and Money Laundering Scheme

    Source: US FBI

    FORT SMITH – A Lavaca, Arkansas, man was sentenced today to 15 years in prison followed by three years of supervised release and ordered to pay $29,835,825.99 in restitution for conspiracy to commit health care fraud and money laundering.

    Billy Joe Taylor, age 44, pleaded guilty to conspiracy to commit health care fraud and money laundering on October 27, 2022. According to court documents, Taylor and his co-conspirators submitted more than $134 million in false and fraudulent claims to Medicare in connection with diagnostic laboratory testing, including urine drug testing and tests for respiratory illnesses during the COVID-19 pandemic, that were medically unnecessary, not ordered by medical providers, and not provided as represented. Taylor and his co-conspirators obtained medical information and private personal information for Medicare beneficiaries, and then misused that confidential information to repeatedly submit claims to Medicare for diagnostic tests. According to court documents, Taylor and his co-conspirators received more than $38 million from Medicare on those fraudulent claims.

    U.S. Attorney David Clay Fowlkes for the Western District of Arkansas; Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division; Special Agent in Charge James A. Dawson, of the FBI’s Little Rock division; Special Agent in Charge Jason Meadows of the Department of Health and Human Services-Office of Inspector General (HHS-OIG), Dallas Regional Office; and Special Agent in Charge Christopher Altemus of the IRS-Criminal Investigation, Dallas Field Office, made the announcement

    The FBI, HHS-OIG, and IRS-Criminal Investigation investigated the case.

    First Assistant U.S. Attorney Kenneth Elser of the U.S. Attorney’s Office for the Western District of Arkansas and Senior Litigation Counsel Jim Hayes and Trial Attorney D. Keith Clouser of the Criminal Division’s Fraud Section’s National Rapid Response Strike Force prosecuted the case.

    The Fraud Section leads the Criminal Division’s efforts to combat health care fraud through the Health Care Fraud Strike Force Program. Since March 2007, this program, comprised of 15 strike forces operating in 25 federal districts, has charged more than 5,000 defendants who collectively have billed federal health care programs and private insurers more than $24 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with the Office of the Inspector General for the Department of Health and Human Services, are taking steps to hold providers accountable for their involvement in health care fraud schemes. More information can be found at https://www.justice.gov/criminal-fraud/health-care-fraud-unit.

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  • MIL-OSI Security: Father and Son Admit Role in International Market Manipulation Scheme Related to New Jersey Deli

    Source: US FBI

    CAMDEN, N.J. – A father and son today admitted to orchestrating a large-scale market manipulation scheme related to two publicly traded companies, U.S. Attorney Philip R. Sellinger announced.

    Peter Coker, Sr., 82, of Chapel Hill, North Carolina, and Peter Coker, Jr., 56, formerly of Hong Kong, China, both pleaded guilty before U.S. District Judge Christine P. O’Hearn to securities fraud and conspiracy to commit securities fraud.

    James Patten, 65, of Winston-Salem, North Carolina previously pleaded guilty to the same charges.

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

    From 2014 through September 2022, Peter Coker Sr., Peter Coker Jr., and Patten conspired to enrich themselves through a scheme to manipulate securities prices via a pattern of coordinated trading, which injected inaccurate information into the marketplace, creating false impressions of supply and demand for these securities.

    As part of the securities fraud scheme, the defendants targeted two publicly traded companies—Hometown International Inc. and E-Waste Corp.—which were both traded on the OTC Link Alternative Trading System, also known as the OTC Marketplace. The OTC Marketplace is an alternative trading system that contains three tiers of markets, which are largely based on the quality and quantity of the listed companies’ information and disclosures.

    Coker Sr., Coker Jr., and Patten took steps to gain control of both entities’ management and stock with the ultimate intention of entering reverse mergers, a transaction through which an existing public company merges with a private operating company. A successful reverse merger would allow the defendants to sell shares of each entity at a significant profit.

    In or around 2014, two New Jersey residents began the process of opening a local deli in Paulsboro, New Jersey. One of the individuals discussed his interest in opening the deli with Patten, a long-time friend, who suggested the creation of Hometown International, an umbrella corporation, under which the deli would operate as a wholly owned subsidiary. Unbeknownst to the deli owners, after Hometown International was formed, Patten and his associates began positioning Hometown International as a vehicle for a reverse merger that would yield substantial profit to them.

    Around October 2019, Hometown International began selling shares on the OTC Marketplace. Shortly thereafter, Patten, Coker Sr., and Coker Jr. undertook a calculated scheme to gain control of Hometown International’s management and its shares from the deli owners. Coker Sr., Coker Jr., and Patten took similar actions to gain control of E-Waste Corporation’s stock and management.

    Once the defendants gained control of Hometown International and E-Waste’s shares, they arranged for the transfer of millions of shares of stock to a number of nominee entities, including entities controlled by Coker Jr., in an effort to mask their control of the shares.

    In addition, the defendants transferred shares to family members, friends, and associates and gained control over their trading accounts by obtaining their log-in information in order to conceal the defendants’ involvement. The defendants then used those accounts to commit a number of coordinated trading events, often referred to as match and wash trades, to trade in Hometown International and E-Waste Corp.’s stock on both sides of the transaction.

    These tactics artificially inflated the price of Hometown International and E-Waste’s stock by giving the false impression that there was a genuine market interest in the stock. Their scheme had the ultimate impact of artificially inflating Hometown International’s stock by approximately 939 percent and E-Waste’s stock by approximately 19,900 percent.

    The securities fraud count carries a maximum penalty of 20 years in prison and a $5 million fine. The conspiracy to commit securities fraud carries a maximum penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense whichever is greatest.

    Judge O’Hearn scheduled Coker, Jr.’s sentencing for April 2, 2025 and Coker Sr.’s sentencing for May 13, 2025.

    U.S. Attorney Sellinger credited special agents of the FBI’s Philadelphia Division, under the direction of Special Agent in Charge Wayne A. Jacobs, and special agents of IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge Jenifer L. Piovesan in Newark, with the investigation. He also thanked special agents from FBI Charlotte, FBI Los Angeles, FBI San Francisco, FBI Denver, and FBI Knoxville, for their assistance.

    The government is represented by Lauren E. Repole, Chief of the Economic Crimes Unit, and Assistant U.S. Attorney Aaron Webman of the Economic Crimes Unit. 
     

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  • MIL-OSI Security: Mastermind of $5 Million Unemployment Fraud Scheme and Accomplices Sentenced to Prison

    Source: US FBI

    NEWS RELEASE SUMMARY – August 28, 2024

    SAN DIEGO – David Constantin, mastermind of a scheme to steal more than $5 million in California unemployment benefits intended to help workers affected by the pandemic, was sentenced in federal court today to five years in prison and was ordered to pay $ $5,178,276 in restitution to the state.

    The co-mastermind of the scheme, Constantin Bobi Sandu, charged separately, was sentenced in 2023 to 40 months in prison.

    According to Constantin’s plea agreement, between July 2020 and August 2022, Constantin and Sandu conspired with 213 co-conspirators to fraudulently obtain at least $5,178,276 in California unemployment insurance benefits.

    Thirteen other defendants were charged on the same indictment as Constantin with wire fraud and money laundering related to the unemployment fraud scheme.  Four of the defendants were sentenced on July 31, 2024, and ordered to pay restitution to the state of California. They are:

    • Eduard Buse, 34 months and $244,050;
    • Constantin Iosif Constantin, 32 months and $281,000;
    • Leonard Miclescu, 15 months and $34,650; and
    • Filip Nicolae, 13 months and $26,250.

    Additional defendants include:

    • Florentina Sima, wife of Buse, who was sentenced on May 29, 2024 to 15 months in custody and $28,350 in restitution; and
    • Florin Nicolae, who pleaded guilty and is scheduled to be sentenced on August 30, 2024, at 9 a.m.

    According to admissions in their plea agreements, these defendants submitted fraudulent applications to the California Economic Development Department, falsely claiming to be United States citizens who had been employed full time prior to the pandemic, and who had earned substantial income. To substantiate these claims, the defendants submitted false documents, including fake Forms W-2 purporting to be from their prior employers, phony health insurance cards, and fake utility bills to support their claimed residence in California.

    These defendants caused the California Employment Development Department to pay out hundreds of thousands of dollars in fraudulent benefits to individuals who were not entitled to those benefits. Many of them laundered their fraudulent proceeds by transferring funds to Romania. 

    In some cases, while claiming that they needed the funds to take care of their families, the defendants used the proceeds of the fraud to purchase luxury items. Buse, for example, purchased a 2020 BMW for more than $100,000 and shipped it to Romania.

    Other defendants are being sought by the United States so that they can be held accountable. 

    This case is being prosecuted by Assistant U.S. Attorneys Jessica Adeline Schulberg and Valerie H. Chu.

    DEFENDANTS                                             Case Number 23CR2090-RBM                               

    David Constantin, Aka Vlad Alexandru         Age: 28           Transient, Romanian

    Eduard Buse                                                    Age: 31           Transient, Romanian

    Leonard Miclescu                                           Age: 49           Transient, Romanian

    Constantin Iosif Constantin                            Age: 31           Transient, Romanian

    Florentina Sima                                              Age: 30           Transient, Romanian

    Filip Nicolae                                                   Age: 31           Transient, Romanian

    Florin Nicolae                                                 Age:  34          Transient, Romania

    *Additional defendants are not in custody and their names are redacted

    SUMMARY OF CHARGES

    Title 18, U.S.C.  § 1349 and 1343 – Conspiracy to Commit Wire Fraud

    Maximum penalty: Thirty years in prison, a fine of $1 million or both;

    Title 18 U.S.C. § 1943 – Wire Fraud

    Maximum penalty: Thirty years in prison, a fine of $1 million or both;

    Title 18 U.S.C. § 1956(a)(2)(A) — Laundering Monetary Instruments

    Maximum penalty: Twenty years in prison and $500,000 fine or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer, whichever is greater;

    Title 18 U.S.C. § 1956(a)(2)(B)(i) – Laundering Monetary Instruments

    Maximum penalty: Twenty years in prison and $500,000 fine or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer, whichever is greater;

    Title 18 U.S.C. §§ 981(a)(1)(C) and 982(a)(1), and Title 28, U.S.C. § 2461(c) – Criminal Forfeitures 

    INVESTIGATING AGENCIES

    Federal Bureau of Investigation

    San Diego Police Department Economic Crimes Unit

    IRS Criminal Investigation

    California Employment Development Department Investigative Division

    Department of Labor Office of Investigator General

    U.S. Department of Homeland Security

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  • MIL-OSI Security: Former Oakland Mayor Sheng Thao, Thao’s Longtime Partner, and Two Local Businessmen Charged with Bribery Offenses

    Source: US FBI

    OAKLAND – An eight-count indictment was unsealed today charging former Oakland Mayor Sheng Thao, her longtime romantic partner Andre Jones, and local businessmen David Trung Duong and Andy Hung Duong with bribery offenses, and charging Andy Duong with making false statements to government agents.

    According to the indictment filed Jan. 9, 2025, in the weeks leading up to the City of Oakland mayoral election in November 2022 and following her election as mayor, Thao promised to take official actions as the mayor of Oakland to benefit David Duong and Andy Duong, in exchange for the Duongs providing various benefits to Thao and Jones.  David Duong was the president and CEO of a recycling company that provided residential recycling collection services to Oakland households, and was also the chairman and co-owner of a housing company formed to develop and manufacture prefabricated modular homes.  Andy Duong, David Duong’s son, was an employee of the recycling company and also a founder and co-owner of the housing company.

    The indictment describes that Thao promised to commit the City of Oakland to purchase housing units from the Duongs’ housing company, extend the City’s contract with the Duongs’ recycling company, and appoint city officials selected by the Duongs.  In exchange, David and Andy Duong promised to and did fund a $75,000 negative mailer campaign targeting Thao’s opponents in the mayoral election, and made $95,000 in payments to Jones for a no-show job with their housing company, with the promise of additional payments, all intended for the benefit of Thao and Jones.

    Once Thao became Mayor of Oakland in January 2023, she allegedly took steps in furtherance of the corrupt relationship with the Duongs, including using her influence to help appoint a high-level City of Oakland official selected by David and Andy Duong, and requesting that members of her staff meet with and tour the Duongs’ housing company.

    Thao allegedly benefitted from the payments that the Duongs made to Jones.  Financial records indicate that before Jones began receiving payments as a result of the bribery scheme, Thao either paid the entirety of or split with Jones the rent for their shared residence.  However, starting in January 2023, soon after Jones began receiving payments as part of the bribery scheme, Jones began paying the entirety of their rent.  In addition, beginning in January 2023, Jones increased his contribution to, or paid the entirety of, shared bills with Thao, including household utility bills and mobile phone bills.

    Defendants allegedly took steps to conceal their bribery scheme by, among other actions: at Thao’s direction, making the bribe payments to Jones to avoid a paper trial to Thao; misrepresenting that Jones had a legitimate job with the Duongs’ housing company to mask the bribery payments; creating false invoices for the bribe payments from the Duongs’ recycling company; and failing to disclose benefits received on California Form 700, Statement of Economic Interests.

    “The public deserves honesty and transparency from City Hall.  When elected officials agree to a pay-to-play system to benefit themselves rather than work for the best interests of their constituents, that breaches the public trust,” said First Assistant United States Attorney Patrick D. Robbins.  “This indictment reaffirms the U.S. Attorney’s Office’s commitment to root out, investigate, and prosecute corruption in our local governments.”

    “Our communities are entitled to leaders who act in their best interest, free from the shadow of corruption,” said FBI Acting Special Agent in Charge Dan Costin.  “Today’s actions demonstrate our resolute determination to protect the integrity of our government and ensure accountability for those who betray the public’s trust.”

    “To protect the public trust, Postal Inspectors worked closely with the U.S. Attorney’s Office and our partners at the FBI and IRS Criminal Investigation (CI) to investigate and prosecute those individuals responsible for fraud schemes committed against a government agency, businesses, and the public,” said San Francisco Division Inspector in Charge Stephen M. Sherwood of the U.S. Postal Inspection Service (USPIS).

    “The alleged crimes committed against the citizens of Oakland by former Mayor Thao and her co-conspirators are a clear breach of public trust and cannot be tolerated,” said IRS Criminal Investigation Oakland Field Office Special Agent in Charge Linda Nguyen.  “Public corruption schemes are rooted in greed and typically leave a money trail behind.  IRS-CI specializes in following that trail and building cases that lead to justice.”

    The indictment charges each defendant with one count of conspiracy to commit bribery in violation of 18 U.S.C. § 371; one count of bribery concerning programs receiving federal funds in violation of 18 U.S.C. § 666(a)(1)(B) or 18 U.S.C. § 666(a)(2); one count of conspiracy to commit honest services mail and wire fraud in violation of 18 U.S.C. § 1349; one count of honest services mail fraud in violation of 18 U.S.C. §§ 1341, 1346; and two counts of honest services wire fraud in violation of 18 U.S.C. §§ 1343, 1346.  Andy Duong was also charged with one count of making false statements to government agents in violation of 18 U.S.C. § 1001(a)(2).

    An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.

    If convicted, defendants face a maximum sentence of 20 years in prison for each count under 18 U.S.C. § 1349, 18 U.S.C. § 1341, and 18 U.S.C. § 1343, a maximum sentence of 10 years in prison for each count under 18 U.S.C. §§ 666(a)(1)(B) and (a)(2), and a maximum of five years in prison for the count under 18 U.S.C. § 371.  Andy Duong faces a maximum sentence of five years in prison for the count under 18 U.S.C. § 1001.  Any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

    The defendants are scheduled to make their initial federal court appearance in Oakland at 10:30 a.m. on Jan. 17, 2025, before U.S. Magistrate Judge Kandis A. Westmore.

    Assistant U.S. Attorneys Molly K. Priedeman, Abraham Fine, and Lloyd Farnham are prosecuting the case with the assistance of Amala James and Madeline Wachs.  The prosecution is the result of an investigation by the FBI, USPIS, and IRS-CI.

    Sheng Thao Indictment
     

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  • MIL-OSI Security: Five Men Convicted for Operating Major Illegal Streaming Service

    Source: US FBI

    Jetflicks Generated Millions in Revenue at Expense of Television Program Copyright Owners

    LAS VEGAS – A federal jury in Las Vegas convicted five men this week for their roles in running one of the largest unauthorized streaming services in the United States, which generated millions of dollars in subscription revenue while causing substantial harm to television program copyright owners.

    According to court documents and evidence presented at trial, beginning as early as 2007, Kristopher Dallmann, Douglas Courson, Felipe Garcia, Jared Jaurequi, and Peter Huber operated an online, subscription-based streaming service known as Jetflicks. The Jetflicks group used sophisticated computer scripts and software to scour pirate websites for illegal copies of television episodes, which they then downloaded and hosted on Jetflicks servers. The group reproduced hundreds of thousands of copyrighted television episodes without authorization, amassing a catalog larger than the combined catalogues of Netflix, Hulu, Vudu, and Amazon Prime. Dallmann and his co-conspirators made millions of dollars streaming and distributing this catalogue of stolen content to tens of thousands of paid subscribers.

    “The defendants operated Jetflicks, an illicit streaming service they used to distribute hundreds of thousands of stolen television episodes,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “Their scheme generated millions of dollars in criminal profits, while causing copyright owners to lose out. These convictions underscore the Criminal Division’s commitment to protecting intellectual property rights by prosecuting digital piracy schemes and bringing offenders to justice.”

    “The defendants conspired to operate an online streaming service that unlawfully reproduced and distributed thousands of copyrighted television programs for their own personal gain,” said U.S. Attorney Jason M. Frierson for the District of Nevada. “This case is another example of our steadfast commitment to combat intellectual property theft and to hold accountable those who violate intellectual property rights laws.”

    “The defendants ran a platform that automated the theft of TV shows and distributed the stolen content to subscribers,” said Assistant Director in Charge David Sundberg of the FBI Washington Field Office. “When complaints from copyright holders and problems with payment service providers threatened to topple the illicit multimillion-dollar enterprise, the defendants tried to disguise Jetflicks as an aviation entertainment company. Digital piracy is not a victimless crime. As these convictions demonstrate, the FBI will indeed investigate those who illegally profit from the creative works of others.”

    The jury convicted Dallman, Courson, Garcia, Jaurequi, and Huber of conspiracy to commit criminal copyright infringement. The jury also convicted Dallmann of two counts of money laundering by concealment and three counts of misdemeanor criminal copyright infringement. Courson, Garcia, Jaurequi, and Huber each face a maximum penalty of five years in prison, and Dallmann faces a maximum penalty of 48 years in prison. A sentencing date has not yet been set. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

    The FBI Washington Field Office investigated the case, with assistance from the FBI Las Vegas Field Office.

    Trial Attorneys Michael Christin, Christopher Merriam, and Matthew Lamberti of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorneys Jessica Oliva and Edward Veronda for the District of Nevada are prosecuting the case, with assistance from the CCIPS Paralegal Edie Britman.

    ###

     

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  • MIL-OSI Security: Philadelphia Man Sentenced for Carrying Out Scheme to Defraud Lucas County Auditor of More Than $622,000

    Source: US FBI

    TOLEDO, Ohio – A Pennsylvania man has been sentenced to 57 months in prison after pleading guilty to an organized scheme that defrauded the Lucas County Auditor of more than $622,000. From March 2018 through November 2020, Darren Barr, age 39, of Philadelphia, Pennsylvania, collaborated with others to carry out a plan to obtain money by pretending to be legitimate vendors with which the county was approved to do business.

    In addition to his prison sentence, U.S. District Judge James G. Carr for the Northern District of Ohio ordered Barr to serve three years of supervised release and pay $622,793.62 in restitution.

    During the investigation, law enforcement officials discovered that the fraudsters used information found on public websites to obtain specific details about approved government vendor businesses. Among the information they gathered, were the names of the Lucas County employees who were responsible for paying vendors. Using the data they found, Barr and his co-conspirators created email accounts to look like those of the approved businesses. They also opened fraudulent bank accounts with forged State of Pennsylvania and Internal Revenue Service corporate documents. After each step of the scheme was in place, Barr and his co-conspirators carried out their plan.

    First, legitimate invoices were sent to the county employees from the false vendor emails they controlled. Instructions in the email directed the employees to submit payment to any one of the fraudulent corporate bank accounts created by Barr and his co-conspirators. Because they believed the emails to be from legitimate vendors, the employees submitted payments to the sham bank accounts controlled by the scammers.

    As soon as payments were received into the fraudulent accounts, Barr would quickly transfer the money into other bank accounts he and his co-conspirators controlled in an attempt to try and conceal their activities.

    This case was investigated by the FBI Cleveland Division. The case was prosecuted by Assistant U.S. Attorney Robert Melching for the Northern District of Ohio.

    To report fraud, visit justice.gov/criminal/criminal-fraud/report-fraud.

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  • MIL-OSI Security: Owners of Local Real Estate Investment Company Indicted in Federal Court for Fraud

    Source: US FBI

    PORTLAND, Ore.—An indictment was unsealed in federal court today charging the owners of a local real estate investment company with defrauding individual investors and commercial lenders out of more than $18 million.

    Robert D. Christensen, 54, of Sherwood, Oregon, and Anthony M. Matic, 55, of Damascus, Oregon, have been charged in a 21-count indictment with conspiracy to commit wire fraud, wire fraud, and money laundering.

    According to the indictment, from approximately January 2019 through June 2023, Christensen and Matic are alleged to have devised and carried out a scheme wherein they convinced individual investors to fund the purchase and renovation of undervalued residential real estate properties. After renovating the properties, Christensen and Matic claimed they would rent the properties to generate income and then refinance them to extract their increased value from the renovations. The pair further misled investors into believing they would be repaid their full principal investment along with interest as high as eight to fifteen percent and a large lump sum payout, all within periods as short as 30 to 90 days.

    Christensen and Matic’s scheme failed to generate the promised returns almost immediately and they began using new investments to repay earlier investors to keep their business afloat. When they were unable to raise enough money from new investors, Christensen and Matic are alleged to have devised a separate scheme to defraud commercial lenders. By December 2020, the pair began submitting loan applications with false financial information to different commercial lenders and, based on their misrepresentations, received millions of dollars in loans.

    In total, Christensen and Matic’s two schemes defrauded individual investors out of more than $11 million and commercial lenders out of more than $7 million.

    Christensen and Matic made their initial appearances in federal court today before a U.S. Magistrate Judge. Both were arraigned, pleaded not guilty, and released on conditions pending a 7-day jury trial scheduled to begin on October 29, 2024.

    Conspiracy to commit wire fraud and wire fraud are punishable by up to 20 years in federal prison and three years’ supervised release. Money laundering in punishable by up to 10 years in federal prison and three years’ supervised release. All three charges may also result in fines of up to $250,000 or twice the gross gains or losses resulting from the offense.

    This case was investigated by the FBI and IRS Criminal Investigation. It is being prosecuted by Assistant U.S. Attorney Robert Trisotto.

    An indictment is only an accusation of a crime, and defendants are presumed innocent unless and until proven guilty.

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