Recently in fraud Category

Edward Gormbley, a former Assistant Vice President at General Electric Capital Services, filed suit in Connecticut Superior Court today seeking $10 Million from GE.  Mr. Gormbley's complaint asserts that GE Capital retaliated and constructively discharged him after he complained that GE Capital fraudulently overvalued one of its largest investment assets, Momentive Performance Materials ("Momentive").

Gormbley, a "Top-Talent" employee of  GE, filed the Complaint after the Company cut his compensation, reduced his responsibilities and destroyed his professional reputation after he repeatedly expressed legitimate concerns to his superiors that GE Capital's valuation methods resulted in a grossly inflated valuation of Momentive in 2008.

Gormbley is represented in the matter  by Sanford Wittels & Heisler LLP, in Washington, D.C.   

"Mr. Gormbley repeatedly was warned to keep what he knew about GE Capital's valuation of Momentive to himself," said David Sanford. "When Gormbley refused  to play GE's games, GE swiftly and brutally  retaliated against  him."

In addition to GE Capital Services, the suit names General Electric Company, GE Equity, GE Company Chair and CEO Jeffrey Immelt, and a number of other high-ranking corporate executives as defendants.

Gormbley was hired by GE in 2000, joining its Financial Management Program.  After working in a wide range of divisions throughout the company, he joined GE Commercial Finance, a subdivision of GE Capital in 2006. Throughout  his rise through the ranks, he earned and maintained a spot on the top rung of the company's forced ranking system. His strong, positive performance also won  him a coveted position on GE's corporate audit staff. 

In mid-2008, Gormbley became concerned  because he recognized that GE's valuation of Momentive was inflated by some $2  billion. He shared these conclusions with his superiors.  They were not appreciative. 

GE's first response to Gormbley's bad  news was to ignore the message.  When Gormbley persisted in making his concerns known to an increasing circle of individuals in the company, GE's answer was to kill the messenger.

In early October 2008, while the  financial sector was in a state of turmoil, GE announced a $12 billion stock offering, touting the company's financial soundness and pledging to maintain its high quarterly dividend.  Yet, at the same time, it was becoming increasingly clear that GE Capital was in trouble.  In fact, in private meetings with Bush administration Treasury Department officials, including then-Treasury Secretary Henry Paulson, Immelt expressed concerns about GE and GE Capital's finances and financial stability.

In November and December 2008, Gormbley continued to warn GE about Momentive's declining performance and recommended that GE Equity take a write down of Momentive's valuation.  Gormbley was explicitly and implicitly  warned to stop talking about Momentive's decline and its effects on GE.  Gormbley's superiors instructed him to change his valuation methodologies for Momentive calculations and to stop "making things so difficult."

In January of 2009 Gormbley's concerns about GE's over-valuation of Momentive were confirmed.  At that time, GE Equity received  Momentive's board book verifying that the value of Momentive had plummeted.  With this written corroboration of his  concerns, Mr. Gormbley sent an email to the President of GE Capital and other senior GE officials in which he again advocated a write-down of Momentive.  In response, GE chastised Mr. Gormbley  for making the situation public and discouraged him from speaking at  meetings. 

But Gormbley would not stay silent. He  had witnessed and objected to GE Capital's overstatement of Momentive's value and its concealment and misrepresentation of faulty valuation data to internal  controllers, external auditors, and the Securities and Exchange Commission. In its February 2009 Form 10-K filing, GE chose not to include the most updated  valuation information for Momentive, thereby violating the SEC's reporting  requirements.

In response, GE Equity's leadership  initiated a campaign of retaliation that ended Gormbley's career at the company and caused him severe financial and emotional harm.  The retaliation included removing him from a team of energy investment professionals, prohibiting him from pursuing  new deals, passing him over as a board observer on an investment deal in which  he has served as lead underwriter, reducing his performance rating, cutting his  year-end bonus, removing him from the Momentive account, excluding him from  meetings essential to his performance, delaying his 2009 performance review, refusing him the opportunity to work from home or utilize flex time, and  threatening to revoke a $133,000 loan.

"GE did everything it could possibly do  to discredit me, ruin my reputation within the company and generally make my  life miserable," said Gormbley. "When I asked Human Resources to investigate the  retaliation I was being regularly subjected to, my requests were ignored.  To preserve my professional reputation and financial security, I finally had to resign."

The Complaint calculates damages at over $10 million.  

Sanford Wittels & Heisler is a law firm with offices in Washington, D.C., New York, and San Francisco that specializes in employment discrimination, wage and  hour, consumer and complex corporate class action litigation and has represented  thousands of individuals in some of the major class action cases in the  United  States. The firm also represents individual clients in employment, employment discrimination, sexual harassment, whistleblower, public accommodations, commercial, medical malpractice, and  personal injury matters

Attorneys from Houston's Ahmad, Zavitsanos & Anaipakos are representing a group of investors in a lawsuit filed against hedge fund auditors Ernst & Young after the group lost more than $17 million following the collapse of a Plano, Texas-based hedge fund that promised low-risk investments.

The lawsuit focuses on two funds sold by Plano's Parkcentral Global and was filed on behalf of Houston financial consultant Gus H. Comiskey and four Tucson, Ariz.-based entities, including the Thomas R. Brown Family Private Foundation. The now-defunct Parkcentral Global was operated by affiliates of billionaire and former presidential candidate H. Ross Perot before closing its doors after losing a total of more than $2.6 billion.

"Our clients were told that an investment in Parkcentral was designed to preserve capital.  Instead, they lost every penny in record time.  E&Y was supposed to be auditing Parkcentral, but the audited financial statements never once warned Parkcentral's investors of their impending doom," says attorney Demetrios Anaipakos, who will try the case with Amir H. Alavi.

The lawsuit includes claims that New York-based Ernst & Young falsely represented that the company fairly audited Parkcentral Global and the auditor failed in its "watchdog" role to warn relying investors of the risk of fraud and noncompliance by management.  The suit accuses Ernst & Young of fraud, negligent misrepresentation, securities fraud and conspiracy.

This month, Brown Investment Management, L.P., one of the plaintiffs in this suit against Ernst & Young, won a Delaware Supreme Court ruling that requires Parkcentral Global to disclose its former investors. Those investors could be added to the new Houston lawsuit.

The investments of the Brown foundation, Brown Investment Management and the two other family-related ventures totaled $16 million and were lost within 90 days despite a "worst case loss" estimate of 5 percent. Mr. Comiskey, like his fellow investors, lost 100 percent of his investment when Parkcentral Global went under.

Mr. Anaipakos and Mr. Alavi have handled disputes against hedge funds and private equity firms for more than a decade. This lawsuit is separate from a class action filed in the U.S. District Court for the Northern District of Texas against Parkcentral Global.

The Harris County District Court lawsuit, Brown Investment Management, L.P. v. Ernst & Young, LLP, No. 2010- 53393, was filed Aug. 25, 2010.

Ahmad, Zavitsanos & Anaipakos represents plaintiffs and defendants in securities fraud, breach of fiduciary duty and other commercial litigation matters. More information about the firm can found at http://www.azalaw.com/index.html.

A former political fundraiser, Hassan Nemazee, was sentenced today in federal court in Manhattan to 144 months in prison for defrauding Bank of America, N.A. (BofA), Citibank, N.A., and HSBC Bank USA N.A. out of $292 million in loan proceeds, announced U.S. Attorney for the Southern District of New York Preet Bharara and the FBI's New York Office Acting Assistant Director-in-Charge George Venizelos. In addition to the prison term, U.S. District Judge Sidney H. Stein ordered Nemazee to pay restitution of more than $292 million to the defrauded banks; to forfeit various real properties, corporate entities, hedge funds, securities accounts and bank accounts; and to serve three years of supervised release.

According to the superseding information to which Nemazee pleaded guilty, documents filed in court, and statements made during the guilty plea and sentencing proceedings, from 1998 to 2009, Nemazee obtained hundreds of millions of dollars in loans from BofA, Citibank, and HSBC. To obtain the loans, Nemazee misrepresented to the banks that he owned hundreds of millions of dollars in collateral, in the form of securities and other assets, which he did not own. In fact, Nemazee used fake documents, including bogus account statements, to show his supposed ownership of the collateral. The documents also contained forged signatures of persons associated with Westminster Securities Corporation, the brokerage firm at which Nemazee claimed to hold these assets, as well as Westminster's clearing firm, Pershing LLC.

The fake account statements and other documents that Nemazee provided also contained telephone numbers, supposedly for Westminster and Pershing, which were in fact assigned to "virtual offices" that Nemazee himself had established or to a cell phone that Nemazee himself had obtained. Nemazee created at least two "virtual offices" in Manhattan that held themselves out, at his direction, as being associated with Westminster and Pershing.

One of the loans from BofA, a $100 million line of credit, was guaranteed by Nemazee's longtime friend and business associate, who pledged a multi-million dollar home in Colorado as collateral on the loan, not knowing that the collateral that Nemazee was pledging did not exist. As of August 2009, Nemazee owed approximately $142 million to BofA and $74.9 million to Citibank.

In August 2009 - when Citibank began to ask questions in order to verify the existence of the purported collateral that Nemazee had pledged for the Citibank loan, and after special agents of the FBI had interviewed Nemazee about the Citibank loan - Nemazee drew down on a line of credit that he had fraudulently obtained from HSBC earlier in 2009 and used those funds to pay Citibank the $74.9 million that he owed.

Nemazee was able to continue the fraud for longer than a decade by, among other things, making partial repayments on his borrowings from BofA with proceeds of his fraud on Citibank and making partial repayments on his borrowings from Citibank with proceeds of his fraud on BofA.

Nemazee used the proceeds of his fraudulent schemes to, among other things: purchase an apartment and land in Italy; make monthly maintenance payments on a Park Avenue apartment; pay for the upkeep of a 12-acre property in Katonah, N.Y.; purchase partial interests in a private plane and a luxury yacht; make personal donations to the election campaigns of federal, state and local candidates, political action committees, and charities; and make various other investments.

Nemazee also used his political donations to enhance his reputation and standing in political circles. In 2009, Nemazee unsuccessfully attempted to capitalize on that standing by seeking nomination to a Cabinet-level position, all the while engaged in the fraud for which he was sentenced. Nemazee had previously been nominated as U.S. Ambassador to Argentina in 1999, but his nomination was withdrawn.

Nemazee, 60, of Manhattan, was ordered to surrender on Aug. 27, 2010.

Nemazee's brother-in-law, Shahin Kashanchi, 47, of Telluride, Colo., is separately charged in an indictment with aiding and abetting Nemazee's bank fraud by manufacturing the fake account statements and other documents that Nemazee used to defraud BofA, Citibank and HSBC. Kashanchi's case is pending in Manhattan federal court. The charge and allegations contained in the indictment charging Kashanchi are merely accusations, and Kashanchi is presumed innocent unless and until proven guilty.

U.S. Attorney Bharara praised the investigative work of the FBI. U.S. Attorney Bharara also thanked BofA, Citibank, HSBC, and Pershing for their assistance in the investigation.

"For over a decade, Hassan Nemazee authored a fantastic fiction, stealing $292 million by acting the part of wealthy and influential power broker," said U.S. Attorney Bharara. "In the end, justice is blind to political affiliations and powerful connections, and today, like any other defendant, Nemazee faces the stark consequences of his decision to violate the law."

"Nemazee lived like a prince, with palatial properties on two continents," said FBI New York office Acting Assistant Director-in-Charge Venizelos. "But he financed this lavish lifestyle with hundreds of millions in fraudulently obtained loans, so his empire was really a house of cards. The FBI remains determined to stop those who steal from banks through deceit and trickery."

This case was brought in coordination with President Barack Obama's Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The case is being handled by the U.S. Attorney's Office's Complex Frauds and Asset Forfeiture Units.

Preet Bharara, the U.S. Attorney for the Southern District of New York, and George Venizelos, the Special Agent-in-Charge of the New York Office of the FBI, announced today the unsealing of an indictment against fourteen members and associates of the Gambino Organized Crime Family of La Cosa Nostra (the Gambino Family) charging racketeering, murder, sex trafficking, sex trafficking of a minor, jury tampering, extortion, assault, narcotics trafficking, wire fraud, loansharking and illegal gambling.

The 14 defendants charged today are Daniel Marino, Thomas Orefice, Onofrio Modica, Dominick Difiore, Anthony Manzella, Michael Scotto, Michael Scarpaci, Thomas Scarpaci, David Eisler, Salvatore Borgia, Steve Maiurro, Keith Dellitalia, Suzanne Porcelli and  Anthony Vecchione.  Modica was arrested on April 16, 2010.  Twelve defendants were arrested early this morning by the FBI, and Maiurro remains at large.  The arrested defendants are expected to be presented in Manhattan federal court later today before U.S. Magistrate Judge Michael H. Dolinger.  The case is assigned to U.S. District Judge Lewis A. Kaplan.  The initial conference before Judge Kaplan is scheduled for April 21, 2010, at 11 a.m.

As alleged in the indictment unsealed today in Manhattan federal court, as well as the government's motion for detention filed today:

Daniel Marino is a longtime member and is currently a boss of the Gambino Family.  In that capacity, Marino has over 200 fully-inducted or "made" mafia members under his command, as well as hundreds of associates who commit crimes with and for the mafia.  Thomas Orefice and Onofrio Modica are currently soldiers of the Gambino Family acting under Marino's supervision.  Orefice and Modica each supervise crews that include Dominick Difiore, Anthony Manzella, Michael Scotto, Michael Scarpaci, Thomas Scarpaci, David Eisler and Salvatore Borgia, all of whom are charged with racketeering and racketeering conspiracy.  The indictment also charges other individuals who committed crimes with and for the Gambino Family, including Steve Maiurro, Keith Dellitalia, Suzanne Porcelli and Anthony Vecchione.  

In addition to the racketeering charges, the defendants are charged with the following crimes:

Murder of Thomas Spinelli

Marino is charged with the 1989 murder of Thomas Spinelli, a made member of the Gambino Family.  In the months leading up to Spinelli's death, concern arose in the Gambino Family about his testimony in a federal grand jury about many of the mafia's members and activities.  As a result, Marino, working with various co-conspirators, including John J. Gotti (who was then Boss of the Gambino Family) and Salvatore Gravano (who was then Underboss) set out to kill Spinelli to prevent him from further testifying.  Marino and his co-conspirators lured Spinelli to a window company in Brooklyn, where he was shot in the head and killed.  Marino then helped to dispose of Spinelli's body, which has never been found.

Murder of Frank Hydell

Marino is also charged for the 1998 murder of Frank Hydell.  In 1997, suspicion arose within the Gambino Family that Hydell, Marino's nephew, was cooperating with law enforcement which, in fact, was the case.  Based on these suspicions, various Gambino Family members and associates plotted to kill Hydell and sought Marino's approval for the hit.  Upon Marino's authorization to kill Hydell, the Gambino Family members and associates lured Hydell to a strip club in Staten Island where he was shot three times in the face and back.  He died in the strip club's parking lot.

Murder of James DiGuglielmo and Richard Sbarra

Modica is charged with the double murder of James DiGuglielmo and Richard Sbarra.  Modica and DiGuglielmo became involved in a drug-related dispute.  As a result, on Aug. 22, 1987, Modica drove his motorcycle with a shooter riding on the back to a crowded parking lot where the shooter opened fire at DiGuglielmo.  DiGuglielmo and Sbarra, an innocent bystander, were killed in the drive-by shooting.

Sex Trafficking and Sex Trafficking of A Minor

Orefice, Difiore, Manzella, Scotto, Eisler, Maiurro and Porcelli are charged with sex trafficking and sex trafficking of a minor.  From 2008 to 2009, the defendants operated a prostitution business where young women and girls -- including an underage girl who was 15 years old at the time -- were exploited and sold for sex.  The defendants first recruited various young women and girls -- ages 15 through 19 -- to work as prostitutes.  The defendants then advertised the prostitution business on Craigslist and other websites.  The defendants drove the women to appointments in Manhattan, Brooklyn, New Jersey and Staten Island to have sex with clients.  The defendants then took approximately 50 percent of the money paid to the young women.  The defendants also made the women available for sex to gamblers at a weekly, high-stakes poker games that Orefice and his crew ran.

Jury Tampering

In 1992, then-Boss John J. Gotti was on trial for federal racketeering and murder charges in the Eastern District of New York.  Modica, along with various other Gambino Family members, took part in a plot to locate the anonymous, sequestered jurors sitting on that trial.  Modica and the others eventually penetrated various security measures, and located the jury at the hotel where it was sequestered.  The plan to tamper with the jury was called off, however, when Gotti came to believe that the jury would not convict him, even without outside interference.

Extortions and Assaults

Marino is charged with extorting broad swaths of the construction industry in and around New York from at least the 1980s to the present.  Through the use of violence and threats, Marino and the Gambino Family have extorted millions of dollars annually from unions, contractors, developers and suppliers.  

Orefice, Difiore, Manzella, Scotto, Michael Scarpaci, Thomas Scarpaci, Dellitalia, Eisler and Vecchione are charged with extorting payments from various businesses and individuals through the use of violence and threats.  The defendants targeted businesses in the home heating oil industry and the financial services industry, as well as various individuals in and around New York City.

Several of the extortions resulted in serious beatings.  For example:

• In December 2005, after an extortion victim failed to make a payment, Orefice, Difiore and Dellitalia punched and used a baseball bat to beat the victim.
• In 2008, Orefice and Difiore tracked down another extortion victim who failed to make a payment, beat him viciously, and left him on the street.
• In the summer of 2009, members of Orefice's crew went to the office of a business owner in an attempt to shake him down, demanded to see their extortion victim, and, when refused, threatened the business owner's office staff.

Wire Fraud

Orefice and Manzella are charged with defrauding various high-end restaurants in New York City by inflating invoices for meat orders placed with Manzella's company and paying kickbacks to the chefs responsible for ordering the meat.  The invoices were sometimes inflated by as much as 40 percent of actual costs.  To ensure that the chefs at the restaurants would continue ordering meat from Manzella's company, and to encourage them to turn a blind eye to the scam, Orefice and Manzella kicked back about five percent of the proceeds back to them.

Narcotics Trafficking

Orefice, Difiore and Borgia are charged with trafficking in narcotics -- including cocaine, oxycontin, and marijuana -- for and on behalf of the Gambino Family.  

Loansharking

Marino, Orefice, Difiore, Scotto, Michael Scarpaci and Thomas Scarpaci are charged with making and collecting extortionate extensions of credit -- commonly known as "loansharking."  When debtors became unable to keep up their repayment obligations, the defendants threatened them.  In one series of consensually-recorded discussions about the loansharking operation, a loanshark victim was said to have been "roughed up" and put in the trunk of a car.  The participants then agreed that, if necessary, firearms, including AK-47s and AR-14s, could be obtained to help ensure repayment from debtors.  

Gambling

Marino, Orefice, Modica, Difiore, Manzella, Michael Scarpaci, Thomas Scarpaci, Eisler, Borgia and Dellitalia are charged with running illegal gambling operations for the Gambino Family.  These operations included an internet-based sports betting, or "bookmaking," operation, and a regular, high-stakes card game.

The indictment also seeks forfeiture of the proceeds of the alleged crimes, including of $20 million as to counts one and two.

U.S. Attorney Preet Bharara stated: "As today's case demonstrates, the mafia is not dead.  It is alive and kicking.  Modern mobsters may be less colorful, less flamboyant, and less glamorous than some of their predecessors, but they are still terrorizing businesses, using baseball bats, and putting people in the hospital.  Today, the Gambino Family has lost one of its leaders, and many of its rising stars have now fallen.  We will continue to work with our partners at the FBI to eradicate the mafia, and to keep organized crime from victimizing the businesses, and the people, of this City."

FBI Special Agent-in-Charge George Venizelos stated: "In some ways, this is not the Gambino family of John J. Gotti.  But while the leadership may maintain a lower profile, this case shows that it's still about making money illegally, by whatever means.  No crime seemed too depraved to be exploited if it was a money-maker, including the sexual exploitation of a 15-year-old.  In truth, despite the popular fascination, it was never really about the thousand-dollar suits.  It was -- and is -- about murder, mayhem and money."

Mr. Bharara praised the outstanding investigative work of the FBI.  Mr. Bharara also noted that the investigation is continuing.

Assistant U.S. Attorneys Elie Honig, Steve Kwok and Jason Hernandez are in charge of the prosecution.  The case is being handled by the Office's Organized Crime Unit.

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

SOURCE U.S. Department of Justice

Detroit-area resident Emma King pleaded guilty today to engaging in a fraudulent medical testing scheme, announced the Departments of Justice and Health and Human Services (HHS).

King, 61, pleaded guilty today to one count of conspiracy to commit health care fraud before U.S. District Court Judge Patrick J. Duggan in the Eastern District of Michigan.  King faces a maximum penalty of 10 years in prison and a $250,000 fine.  A sentencing date has not yet been scheduled.

According to the plea documents, beginning in approximately September 2007, King began recruiting and transporting patients to a clinic called Ritecare LLC.  Ritecare, was owned and operated by co-conspirators and had locations in Detroit and Livonia, Mich.  King admitted that she and a co-conspirator paid kickbacks to Medicare beneficiaries that she recruited and transported to Ritecare.  According to the plea documents, the owners and operators of Ritecare were the source of the funds used by King to pay the Medicare beneficiaries she recruited.  King admitted that she would keep part of the funds she received from the owners and operators of Ritecare to secure patients as a kickback for referring the Medicare beneficiaries she recruited.  Typically, the owners of Ritecare would provide $100-$150 per patient King recruited, with King retaining $50-$75 of that amount for the referral.  

According to the plea documents, the patients King recruited had to subject themselves to medically unnecessary tests to receive the money.  Per instructions from the owners and operators of Ritecare, King admitted that she instructed the patients to claim they had certain symptoms to trigger medically unnecessary tests.  Consequently, the patients' medical records contained false symptoms allowing Ritecare to deceive Medicare as to the legitimacy and medical necessity of the tests it performed.  

King admitted that she was responsible for recruiting at least 269 patients to Ritecare.  Through her recruitment efforts, King caused the submission of approximately $940,760 in false or fraudulent billings by Ritecare.  Medicare paid approximately $533,643 on those claims.

Today's guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Andrew G. Arena of the FBI's Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the HHS Office of Inspector General's (OIG) Chicago Regional Office.

The case was prosecuted by Senior Trial Attorney John K. Neal and Trial Attorney Gejaa T. Gobena of the Criminal Division's Fraud Section.  The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division's Fraud Section and the U.S. Attorney's Office for the Eastern District of Michigan.  

Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 billion.  In addition, HHS's Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

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

SOURCE U.S. Department of Justice

Thomas Joseph Petters, age 52, of Wayzata, Minn., has been sentenced to 50 years in federal prison for orchestrating a $3.7 billion Ponzi scheme. The sentence, imposed by U.S. District Court Judge Richard H. Kyle earlier this morning in St. Paul, Minn., represents the longest term of imprisonment ever ordered in a financial fraud case in Minnesota history. In ordering the prison term, Judge Kyle said, "I'm not satisfied that if he were released early, he wouldn't re-offend."

Following a month-long trial, Petters was convicted on Dec. 2, 2009, of 10 counts of wire fraud, three counts of mail fraud, one count of conspiracy to commit mail and wire fraud, one count of conspiracy to commit money laundering, and five counts of money laundering. Today, while referring to the lack of believability in Petters' trial testimony, Judge Kyle said, "It just didn't pass the smell test."

After the sentencing, U.S. Attorney B. Todd Jones said, "For years Tom Petters built his life on the shattered dreams of others. Minnesotans need to be reminded there are thousands of entrepreneurs in our state who are grounded in community values, give generously to charity, act as true mentors to other business people, are ethical stewards of investors and grow good jobs. They are not Tom Petters. Tom Petters is a fraud, and now he will pay a huge price for his self-enrichment and his deceit. The sentence imposed today by the court and the tremendous efforts made by an outstanding prosecution team in presenting this case to a jury should send a strong message to others that we in the Department of Justice are committed to investigating and vigorously prosecuting those who commit financial crimes, particularly during these tough economic times."

Ralph S. Boelter, Special Agent in Charge of the Minneapolis field office of the Federal Bureau of Investigation, added, "It is my hope that this day will mark the start of a recovery process of sorts for all those victimized by Tom Petters, and that his sentence, appropriate for the crimes committed, will serve an effective deterrent to those similarly inclined."

According to the evidence presented at trial, Petters, assisted by others, defrauded and obtained billions of dollars in money and property by inducing investors to provide Petters Company, Inc., (PCI) funds to purchase merchandise that was to be resold to retailers at a profit. However, no such purchases were made. Instead, the defendants and co-conspirators diverted the funds for other purposes, such as making lulling payments to investors, paying off those who assisted in the fraud scheme, funding businesses owned or controlled by the defendants and financing Tom Petters' extravagant lifestyle.

"In simplest terms, promoters of Ponzi schemes prey upon trusting investors and then steal their hared-earned money," said Julio LaRosa, Special Agent in Charge of the Internal Revenue Service (IRS) - Criminal Investigation Division. "This case was a blatant example of this type of fraud, and the IRS - Criminal Investigation Division, along with its law enforcement partners, worked diligently to get to the facts behind the facade and ensure that those responsible face the punishment they brought on themselves for the devastation they caused in the lives of so many."

The investigation of this case began on Sept. 8, 2008, when co-conspirator Deanna Coleman and her attorney reported to authorities that she had been assisting Petters in executing a multi-billion-dollar Ponzi scheme over the previous 10 years. Coleman claimed she, Petters and co-conspirator Robert White had fabricated business documents to entice investors into lending Petters money purportedly to buy electronic goods to be sold to big-box retailers, such as Costco and Sam's Club.

Coleman subsequently agreed to work with law enforcement. She wore a recording device to tape conversations with Petters and others to substantiate her claims as well as White and Petters' involvement in the fraud. Within the first few hours of Coleman's recorded conversations, Petters was heard admitting that purchase orders were "fake" and claiming "divine intervention" was the only explanation for how he and his co-conspirators "could have got away with this for so long." Those recorded conversations chronicled the history of the scheme as well as the conspirators' efforts to maintain it by obtaining new investor funds and lulling long-term investors. The recordings also detailed how the conspirators planned to avoid responsibility if the fraud was discovered.

On September 24, 2008, agents from the Federal Bureau of Investigation; the Internal Revenue Service, Criminal Investigation Division; and the U.S. Postal Inspection Service executed search warrants at Petters' headquarters, Petters' home, and other locations. They recovered numerous documents and evidence. Within days, PCI filed for bankruptcy. On October 3, Petters was arrested and detained after authorities learned he had been discussing fleeing the jurisdiction. He has been in custody since that time. His indictment on these charges occurred in December of 2008.

Shawn S. Tiller, Postal Inspector in Charge of the Denver Division, which includes the Twin Cities, said, "The sentencing today of Tom Petters in this $3.7 billion Ponzi scheme is reassurance that the U.S. Attorney's Office and the U.S. Postal Inspection Service will remain at the forefront of investigating cases like these, where the trust and confidence of the American public has been violated through the criminal misuse of the U.S. mail. As long as there are individuals such as Petters and those associated with his company, PCI, who continue to misuse the U.S. mail to steal the hard-earned money of investors and ruin their hopes and dreams of a secure financial future, postal inspectors will be there to ensure that justice is served."

Through Petters' scam, potential investors were provided fabricated documents that listed goods purportedly purchased by PCI from various vendors and then sold to retailers. In some instances, investors also were provided false records indicating that PCI had wired its own funds to vendors, thus giving the appearance that PCI had money invested in the deals too. In addition, investors frequently received false PCI financial statements showing the company was owed billions of dollars from retailers. To induce investors further, Petters often signed promissory notes and provided his personal guarantee for the funds received. Those who invested, however, were not paid through profits from actual transactions. Rather, they were paid with money obtained from subsequent investors and, sometimes, even their own money. PCI, which was formed in 1994, was solely owned by Petters and was used for fraudulent purposes from the start. Petters inflated and falsified purchase orders in an effort to obtain more money from investors, which, in turn, he used to pay other investors as well as his increasingly lavish personal lifestyle. When Petters could not pay an investor on time, he employed delay and evasion tactics, such as promising payment in the near future, making up excuses about slow payments from retailers, or providing checks that bounced. As the scheme progressed, Coleman, who was hired by Petters as an office manager in 1993, began fabricating PCI purchase orders and transferring funds between investors. In 1999, Petters wanted to give investors false bank statements to "verify" PCI's purported bank transactions with retailers. Therefore, Petters turned to White, his friend, who agreed to prepare the fraudulent documents. Afterward, Petters hired White and gave him the title of chief financial officer of PCI. Among other things, White was responsible for fabricating retailer purchase orders and PCI financial records. To further his scheme, Petters recruited purported vendors to assist him. In 2001, he asked business associates Larry Reynolds and Michael Catain to launder billions of dollars of investor funds through their business accounts and back to Petters and PCI. Reynolds operated Nationwide International Resources, Inc. (NIR) and previously had conducted deals involving shoes and clothing with retailers, including Petters. In 2001, Petters asked Reynolds to allow him to wire money through Reynolds's bank accounts in exchange for a percentage of the funds in "commission." Petters made a similar agreement with Catain. As a result, in early 2002, Catain created a sham company, Enchanted Family Buying Co. (EFBC), and opened a business bank account. He then directed funds from Petters through that business account and back to Petters and PCI, less a commission. EFBC did no real business. In fact, its headquarters was above Catain's car wash, just a few miles from Petters' headquarters. Between January 2003 and September 2008, approximately $12 billion flowed through the NIR account into the PCI account. During that same time period, roughly the same amount flowed through the EFBC account into PCI. Although each company was purportedly a vendor, selling hundreds of millions of dollars in merchandise, bank records revealed no vendor income from those transactions. Instead, money only flowed one way - from the companies to PCI. In April of 2001, PCI opened a new bank account that only Petters and Coleman were authorized to use. From January 2003 to September 2008, approximately $35 billion was wired into that account from investors, NIR, and EFBC. Although PCI supposedly was selling merchandise to retailers, none of the deposits into the account came from retailers. Moreover, while some funds in the account went to pay investors, other money from the account was used for bonuses for Petters' employees, most of whom did not even work for PCI. In addition, hundreds of millions of dollars went to fund Petters' companies, including Petters Warehouse Direct and RedTag. Petters also used PCI funds to employ family members, purchase real estate for family members, and fund businesses for them. Finally, millions went to Coleman and White, while Petters himself received tens of millions in account dollars. Petters continued to purchase and operate companies in an effort to maintain the facade of a successful businessman and create a false air of legitimacy that would lure new investors. The companies he bought were purchased with proceeds of the PCI fraud, and they included Fingerhut, Polaroid, and Sun Country Airlines, which, collectively, became known as Petters Group Worldwide, or PGW. Each year PCI wrote off millions of dollars in losses based on the losses it incurred from funding these other companies. However, the companies provided Petters the appearance he needed to keep the scam going. By the end of 2007, the conspirators were struggling to find new investors, and PCI was slow to pay hundreds of millions of dollars in promissory notes held by Lancelot Investment Management, which was operated by Greg Bell. Petters told Bell the slow payments were due to his retailers, who were late in paying him. As a result, Bell agreed to an extension on the payments so the notes would not go into default. In February 2008, Bell and Petters agreed Bell would receive replacement purchase orders from other retailers for the purported purchase orders held by Lancelot. Bell suggested they also exchange money so it would appear that PCI was paying its notes. Between late February 2008 and the date of the search warrants, Bell and Petters engaged in more than 80 "round trip" financial transactions intended to give the false impression that PCI was paying its obligations when due. Petters continued to lull investors even after law enforcement executed search warrants on September 24, 2008. Furthermore, on October 1, 2008, Petters suggested to White and Reynolds that they flee prior to prosecution. Coleman, White, Reynolds, Catain, and Bell already have pleaded guilty for their roles in the scheme. Sentencing dates for them, however, have not been scheduled. James Wemhoff, Petters' personal and business accountant, has pled guilty to criminal charges not related to the PCI Ponzi scheme. He has not been sentenced either. This case was the result of an investigation by the Federal Bureau of Investigation, the IRS-Criminal Investigation Division, and the U.S. Postal Inspection Service. It was prosecuted by Assistant U.S. Attorneys Joseph T. Dixon, John R. Marti, Timothy C. Rank, and John F. Docherty.

Atricure Inc., a medical device manufacturer, has agreed to pay the United States $3.76 million to resolve civil claims in connection with the alleged promotion of its surgical ablation devices, the Justice Department announced today. Surgical ablation devices use focused energy to create controlled lesions or scar tissue on a patient's heart or other organs.

The settlement resolves allegations that the West Chester, Ohio-based company marketed its medical devices to treat atrial fibrillation (the most common cardiac arrhythmia or abnormal heart rhythm), a use that is not approved by the U.S. Food and Drug Administration (FDA). Atricure also allegedly promoted expensive heart surgery using the company's devices when less invasive alternatives were appropriate, advised hospitals to up-code surgical procedures using the company's devices to inflate Medicare reimbursement, and paid kickbacks to health care providers to use its devices. The United States asserted that by engaging in this conduct, Atricure knowingly violated the Food, Drug, and Cosmetic Act and caused the submission of false and fraudulent claims in violation of the False Claims Act.

"This settlement reflects our commitment to enforce the Food, Drug, and Cosmetic Act and protect Medicare from the improper marketing practices of Atricure and other medical device manufacturers," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "We will continue to work with our partners at the Department of Health and Human Services Inspector General's Office and the FDA Office of Chief Counsel to preserve the integrity of our public health programs."

The allegations were made against Atricure in a lawsuit filed under the qui tam or whistleblower provisions of the False Claims Act, which permit private citizens, called "relators," to bring lawsuits on behalf of the United States and receive a portion of the proceeds of any settlement or judgment. The relator will receive a total of $625,000 as the statutory share of the current settlement.

"The misuse of medical devices has the potential of exposing patients to dangerous procedures and taxpayers to payment of unwarranted claims against Medicare," said Tim Johnson, United States Attorney for the Southern District of Texas. "This settlement demonstrates the government's commitment to maintaining safe and affordable health care for its citizens."

Assistant Attorney General West noted that the settlement with Atricure resulted from a coordinated effort by the Justice Department's Civil Division, the U.S. Attorney's Office for the Southern District of Texas, the Department of Health and Human Services' Office of Inspector General, and the FDA Office of Chief Counsel.

This settlement is part of the government's emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $2.2 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department's total recoveries in False Claims Act cases since January 2009 have topped $3 billion.

SOURCE U.S. Department of Justice

Tommy L. Thompson, Jr., 48, of Indianapolis, Christopher Wells, 45, of Indianapolis, Francis W. Coleman, 41, of Laurel, Md., Carl E. McCreary, 48, of Frisco City, Ala., and Fred D. Bear, Jr., 39, of Avon, Ind., were indicted in connection with an auto theft ring that allegedly stole more than 80 vehicles valued in excess of $1 million dollars. This indictment follows their arrests on Dec. 28, 2009 on a complaint filed in district court.

This indictment is the result of a seven-months long investigation by the U.S. Secret Service and the Indiana State Police with assistance by the Internal Revenue Service Criminal Investigation Division, U.S. Postal Inspection Service, Greenfield Police Department, Shelbyville Police Department, Lawrence Police Department, Muncie Police Department, Greensburg Police Department, Fishers Police Department, Clarksville Police Department, Kokomo Police Department, Brownsburg Police Department, Indianapolis Metropolitan Police Department and the Alabama Department of Safety and Alabama Bureau of Investigation.

The indictment alleges that in June 2006, Christopher Wells and Francis Coleman entered into an agreement to steal motor vehicles and use counterfeit motor vehicle titles and counterfeit vehicle identification numbers to fool state title authorities into thinking the stolen vehicles were not stolen, and could be legally sold. Wells and Coleman were purportedly joined by Thompson and McCreary in or about April 2007, and all four participated until their arrest on Dec. 29, 2009. Bear allegedly participated from March 2008 through September 2009. In furtherance of this scheme, the defendants utilized the U.S. Postal Service and Federal Express to send and receive the counterfeit documents.

According to the indictment, Coleman, Wells, Thompson and others would steal motor vehicles from both within and outside of the Southern District of Indiana. They would then locate vehicles of an identical make and model in Canada and copy those vehicles' vehicle identification number (VIN). Coleman would create counterfeit Washington, D.C., or North Carolina motor vehicle titles and VIN stickers bearing the Canadian vehicles' information. Coleman would then either drive or ship the counterfeit documents to Wells in Indianapolis, where Wells, Thompson and others would clone the vehicles. After the vehicles were cloned, either Bear or McCreary would receive the vehicles for sale.

According to Assistant U.S. Attorney Bradley P. Shepard, who is prosecuting the case for the government, all are charged with conspiracy to commit mail fraud and each faces a maximum of 20 years in prison and a $250,000 fine. Thompson remains in custody and the remaining defendants are on pre-trial release.

An indictment is only a charge and is not evidence of guilt. A defendant is presumed innocent and is entitled to a fair trial at which the government must prove guilt beyond a reasonable doubt.

A federal grand jury in Las Vegas today returned indictments against 10 Nevada-certified emissions testers for falsifying vehicle emissions test reports, the Justice Department announced.

Each defendant faces one felony Clean Air Act count for falsifying reports between November 2007 and May 2009. The number of falsifications varied by defendant, with some defendants having falsified approximately 250 records, while others falsified more than double that figure. One defendant is alleged to have falsified over 700 reports.

The individuals indicted include:

Eduardo Franco, 30

Alexander Wayne Worster, 27

William Joseph McCown, 48

Joseph DeMatteo, 52

David Eugene Nelson, 46

Louis Engene Demeo, 50

Adolpho Silva-Contreras, 47

Peter Escudero, 47

Wadji Waked, 24

Gary Smith, 47

Escudero resides in Pahrump, Nev. All other individuals are from Clark County, Nev.

The 10 defendants are alleged to have engaged in a practice known as "clean scanning" vehicles. The scheme involved entering the Vehicle Identification Number (VIN) for a vehicle that would not pass the emissions test into the computerized system, then connecting a different vehicle the testers knew would pass the test. These falsifications were allegedly performed for anywhere from $10 to $100 over and above the usual emissions testing fee.

The U.S. Environmental Protection Agency (EPA), under the Clean Air Act, requires the state of Nevada to conduct vehicle emissions testing in certain areas because the areas exceed national standards for carbon monoxide and ozone. Las Vegas is currently required to perform emissions testing.

To obtain a registration renewal, vehicle owners bring the vehicles to a licensed inspection station for testing. The emissions inspector logs into a computer to activate the system by using a unique password issued to the emissions inspector. The emissions inspector manually inputs the vehicle's VIN to identify the tested vehicle, then connects the vehicle for model year 1996 and later to an onboard diagnostics port connected to an analyzer. The analyzer downloads data from the vehicle's computer, analyzes the data and provides a "pass" or "fail" result. The pass or fail result and vehicle identification data are reported on the Vehicle Inspection Report. It is a crime to knowingly alter or conceal any record or other document required to be maintained by the Clean Air Act.

"Falsifications of vehicle emissions testing, such as those alleged in the indictments unsealed today, are serious matters and we intend to use all of our enforcement tools to stop this harmful practice. These actions undermine a system that is designed to reduce air pollutants including smog and provide better air quality for the citizens of Nevada," said Ignacia S. Moreno, Assistant Attorney General for the Justice Department's Environment and Natural Resources Division.

"The residents of Nevada deserve to know that the vast majority of licensed vehicle emission inspectors are not corrupt and are not circumventing emission testing procedures," said U.S. Attorney Bogden. "These indictments should serve as a clear warning to offenders that the Department of Justice will prosecute you if you make fraudulent statements and reports concerning compliance with the federal Clean Air Act."

"Lying about car emissions means dirtier air, which is especially of concern in areas like Las Vegas that are already experiencing air quality problems," said Cynthia Giles, Assistant Administrator for Enforcement and Compliance Assurance at EPA. "We will take aggressive action to ensure communities have clean air."

The maximum penalty for the felony violations contained in the indictments includes up to two years in prison and a fine of up to $250,000.

An indictment is merely an accusation, and a defendant is presumed innocent unless and until proven guilty in a court of law.

The case was investigated by the EPA, Criminal Investigation Division; and the Nevada Department of Motor Vehicles Compliance Enforcement Division. The case is being prosecuted by the U.S. Attorney's Office for the District of Nevada and the Justice Department's Environmental Crimes Section.

Wheaton Community Hospital, the City of Wheaton, Minn. and Dr. Stanley Gallagher (collectively WCH) have agreed to pay $846,461 to settle allegations that their hospital admission practices violated the False Claims Act, the Justice Department announced today.

This settlement resolves allegations that WCH knowingly made false claims to Medicare for unreasonable and unnecessary hospital admissions. Specifically, the government contended that, from 1998 to 2004, WCH admitted some patients and kept others admitted to acute care when doing so was not medically necessary. The defendants then billed Medicare for the cost of these hospital admissions.

"Hospitals and doctors have a responsibility to provide patients with reasonable and necessary care. When they neglect those obligations, patients and taxpayers suffer," said Tony West, Assistant Attorney General for the Justice Department's Civil Division.

The allegations against WCH arose from a lawsuit filed in federal court in Minnesota under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private individuals to file civil actions on behalf of the United States and share in any recovery. Dr. Steven Radjenovich, the whisteblower in this case, formerly practiced at Wheaton Community Hospital with Dr. Gallagher. Dr. Radjenovich will receive $203,150 as his share of the settlement with WCH.

Assistant Attorney General West thanked the Justice Department's Civil Division, the U.S. Attorney's Office for the District of Minnesota and the Department of Health and Human Services' Office of the Inspector General for their efforts in handling this investigation and settlement.

Crown Athlete Management Company, Inc. ("Crown AMG"), an athlete management, marketing, and sponsorship procurement company, has filed a multi-million dollar lawsuit against Hansen Beverage Company ("HBC"), doing business as Monster Beverage Company ("Monster") for fraud, intentional interference with contractual relations, and related claims. The lawsuit, filed in San Diego County, alleges that Monster fraudulently induced Crown AMG to enter into agreements, fraudulently concealed its true intentions to exclude Crown AMG from earning fees and commissions, and made numerous false promises to Crown AMG about potential future business opportunities.

In 2003, Scott "Hollywood" Sepkovic founded Crown AMG as a comprehensive marketing, branding, and athlete management firm. According to the lawsuit, that same year, Crown AMG was recruited by Mark Hall, President of Monster, to help market and build brand recognition for the "new" Monster Energy Drink. The Monster Energy Drink had only been launched the prior year, and had yet to establish significant brand recognition.

Over the next 6 years, Crown AMG was instrumental in building brand recognition for Monster worldwide. HBC's sales skyrocketed from $115 million in 2002 to $1.18 billion in 2008. Crown AMG believes that its efforts helped HBC land the #1( )position on the "Forbes 200 Best Small Companies" List in 2005 and 2007. Further, in July of 2006, Fortune Magazine stated that, "Since the beginning of 2004, Hansen Natural's stock [had] risen a Google-stomping 3,900% to $170."

In the lawsuit, Crown AMG alleges that Monster unlawfully interfered with Crown AMG's business by, among other things, filing lawsuits against Crown AMG clients, instructing Crown AMG's clients not to pay Crown AMG, and making false representations to Crown AMG and its clients.

"We are seeking appropriate relief from the court and will continue conducting business in the meantime," said Scott Sepkovic, President of Crown AMG. "I can only say that Crown AMG suffered and continues to suffer actual monetary loss as a result of Monster's interference with Crown AMG's relationships with many companies and individuals."

The lawsuit alleges that Monster adhered to its own motto - "Unleash the Beast" - and ignored the law by bullying its former allies into submission. The lawsuit appears intended to disabuse Monster of that belief, and seeks punitive damages to punish Monster for its alleged unlawful conduct. The lawsuit was filed on November 3, 2009, and no court determination has been reached on the merits.

Troy, Mich., resident Syed Aziz pleaded guilty today in U.S. District Court in Detroit to participating in a conspiracy to defraud the Medicare program, Assistant Attorney General Lanny A. Breuer of the Criminal Division, U.S. Attorney Terrence Berg of the Eastern District of Michigan and Daniel R. Levinson, Inspector General of the Department of Health & Human Services (HHS) announced.

In his plea today, Aziz, a licensed physical therapist, admitted that he began working in approximately May 2005 as a contract therapist for a co-conspirator, Suresh Chand. Chand owned and controlled several companies operating in the Detroit area that purported to provide physical and occupational therapy services to Medicare beneficiaries. Aziz admitted that he, Chand, and others created fictitious therapy files appearing to document physical and occupational therapy services provided to Medicare beneficiaries, when in fact no such services were provided. According to court documents, the fictitious services reflected in the files were billed to Medicare through sham Medicare providers controlled by co-conspirators.

Chand admitted to paying cash kickbacks and other inducements to Medicare beneficiaries in exchange for the beneficiaries' Medicare numbers and signatures on documents falsely indicating that they had received physical or occupational therapy. Chand pleaded guilty on Sept. 28, 2009, in U.S. District Court in Detroit to one count of conspiracy to commit health care fraud and one count of conspiracy to launder money. Aziz admitted that he was one of the licensed physical or occupational therapists from whom Chand obtained signatures on fictitious "progress notes" and other documents falsely indicating that the therapists had provided services to the Medicare beneficiaries.

Aziz also admitted that during the course of the scheme, he signed approximately 400 fictitious physical therapy files, indicating that he had provided physical therapy services to Medicare beneficiaries, when in fact he had not. Aziz admitted that he was paid between $70 and $90 for each file he falsified. Aziz also admitted that between approximately May 2005 and December 2006, he falsified physical therapy files that supported claims to the Medicare program totaling approximately $1,895,000. According to court documents, Medicare paid approximately $817,000 on those claims. Aziz admitted that throughout the conspiracy he was fully aware that Medicare was being billed for physical therapy services that he falsely indicated he had performed.

At sentencing, scheduled for Feb. 3, 2010, Aziz faces a maximum prison sentence of 10 years and a $250,000 fine.

The case is being prosecuted by Trial Attorneys John K. Neal, Gejaa T. Gobena and Benjamin Singer of the Criminal Division's Fraud Section and by Special Assistant U.S. Attorney Thomas W. Beimers of the Eastern District of Michigan. The FBI and the HHS Office of Inspector General (HHS-OIG) conducted the investigation. The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division's Fraud Section and the U.S. Attorney's Office for the Eastern District of Michigan.

Since the inception of Strike Force operations in March 2007 -- Miami (Phase One), Los Angeles (Phase Two), Detroit (Phase Three) and Houston (Phase Four) -- the Strike Force has obtained indictments of more than 331 individuals and organizations that collectively have billed the Medicare program for more than $720 million. In addition, HHS's Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Each of the Strike Force teams across the separate phases is led by a federal prosecutor from the Criminal Division's Fraud Section or the U.S. Attorney's Office. Each team has an agent from the FBI and HHS-OIG.

Porter Wright Partner Joyce Edelman was the lead attorney in litigation that resulted in the Ohio Supreme Court imposing nearly $6.4 million in fines against American Family Prepaid Legal Corporation and Heritage Marketing and Insurance Services Inc. and their co-owners, Jeffrey and Stanley Norman, and directing the companies to cease all operations in the State of Ohio. These penalties resulted from Porter Wright's representation of the Columbus Bar Association in connection with the association's efforts to curtail an illegal trust mill scheme that preyed upon Ohio's elderly population and involved the unauthorized practice of law by non-lawyers.

In a statement released today, Columbus Bar Association President Elizabeth Watters lauded Ms. Edelman and her colleagues at Porter Wright: "I want to thank Porter Wright Morris & Arthur, LLP and its team of skilled lawyers - especially Joyce Edelman - who selflessly assisted the Columbus Bar on a pro bono basis. Their hard work and support was reflected in this decision, and they did a masterful job in arguing the case to the Supreme Court's Board of Commissioners on the Unauthorized Practice of Law and the Ohio Supreme Court. The case and the decision reflect the very best aspects of the law and the legal profession at work to benefit the public and protected it from the unprincipled and the greedy."

In the lawsuit, the Columbus Bar Association alleged that, over a number of years, American Family and Heritage Marketing ran a trust mill scheme in which they and their agents convinced thousands of Ohio senior citizens to pay nearly $2,000 for allegedly discounted prepaid legal services, which were never provided. Instead, the only product customers received was a living trust and other estate planning instruments, which, in many cases, were unnecessary or inappropriate to meet the customers' legal needs. To convince customers to buy, agents used aggressive tactics during in-home presentations that took advantage of customers' advanced age. They also used marketing materials that misrepresented facts, deceptively exaggerated the disadvantages of the probate process to frighten customers into purchasing living trusts, and overstated the need for and cost of attorney services during the probate process. The combination of tactics employed by the agents created a high-pressure, deceptive sales pitch to which many vulnerable citizens fell prey. Those citizens were often further victimized as a result of the companies' follow-up visits, which pressured customers to buy follow-on products such as insurance services and deferred annuities. Because the scheme resulted in non-lawyers offering legal advice, the Columbus Bar Association stepped in to protect the public.

Approximately 40 Porter Wright lawyers, law clerks, and staff members contributed to the firm's efforts on behalf of the Columbus Bar Association. Among those, Associate Aaron Shank worked hand-in-hand with Ms. Edelman to protect the public's interest. In all, the firm has invested thousands of pro bono hours on these matters during the last several years.

Porter Wright Morris & Arthur LLP is a large regional law firm that traces its origins to 1846 in Ohio. With offices in Cincinnati, Cleveland, Columbus, and Dayton, Ohio; Washington, D.C.; and Naples, Florida, Porter Wright provides counsel to a worldwide base of clients.

SOURCE Porter Wright Morris & Arthur LLP

Three Miami-Dade County, Fla., residents have been indicted in connection with an alleged $2.3 million Medicare fraud scheme operated out of X-Press Center, a Detroit-area clinic that purported to specialize in providing injection and infusion therapies, Assistant Attorney General of the Criminal Division Lanny A. Breuer, U.S. Attorney for the Eastern District of Michigan Terrence Berg and Daniel R. Levinson, Inspector General of the Department of Health & Human Services (HHS) announced today. In addition, a former manager at X-Press Center pleaded guilty to one count of conspiracy to commit health care fraud in connection with her management of the clinic.

Juan De Oleo, 49, Rosa Genao, M.D., 50, and Ingrid Mazorra, 35, were each indicted by a grand jury in Detroit with conspiracy to commit health care fraud and five counts of substantive health care fraud. Genao and Mazorra were also charged with one count of destroying records relevant to a federal investigation. In addition, De Oleo was charged with two counts of money laundering. The superseding indictment unsealed today added De Oleo, Genao and Mazorra to a pending indictment unsealed on June 24, 2009, charging seven defendants with alleged crimes related to their involvement with X-Press Center.

According to the superseding indictment, De Oleo was a part owner of X-Press Center, Genao was a physician employed at X-Press Center, and Mazorra was the clinic's office manager. The indictment alleges that De Oleo and his co-conspirators agreed to open a fraudulent infusion and injection therapy clinic, and to split the proceeds of fraud among themselves. According to the indictment, Medicare beneficiaries received kickbacks in return for visiting the clinic and signing forms indicating that they received treatments that were medically unnecessary or never provided. The indictment also alleges that Genao and Mazorra altered, falsified and destroyed patient records to attempt to justify the medically unnecessary services that were purportedly being provided at the clinic.

The indictment alleges that De Oleo, Genao, Mazorra and their co-conspirators caused approximately $2.3 million in fraudulent billing to the Medicare program for services at X-Press Center that were medically unnecessary or never provided.

The charges of health care conspiracy and health care fraud carry a maximum sentence of 10 years in prison and a $250,000 fine, per count. The charge of destroying records carries a maximum sentence of 20 years in prison and a $250,000 fine. The money laundering charges carry a maximum penalty of 10 years in prison and a $500,000 fine, per count.

An indictment is merely a charge and defendants are presumed innocent until proven guilty.

Also today, Dulce Briceno, 57, pleaded guilty before U.S. District Judge Ursula Ungaro in the Southern District of Florida to one count of conspiracy to commit health care fraud. In pleading guilty, Briceno admitted that in approximately September 2006, she agreed to manage the clinic on a day-to-day basis in exchange for a percentage of the profits the clinic generated. Briceno admitted that during the time the clinic was open, the clinic routinely billed the Medicare program for services that were medically unnecessary or were never provided. Briceno admitted that she and her co-conspirators at the clinic had purchased only a small fraction of the medications that the clinic billed the Medicare program for providing.

Briceno admitted that Medicare beneficiaries were not referred to X-press Center by their primary care physicians, or for any other legitimate medical purpose, but rather were recruited to come to the clinic through the payment of kickbacks. In exchange for those kickbacks, Briceno admitted that the Medicare beneficiaries would visit the clinic and sign documents indicating that they had received the services billed to Medicare. According to court documents, kickbacks paid to Medicare beneficiaries at the clinic were made in the form of cash and prescriptions for narcotic drugs.

Briceno also admitted that between approximately September 2006 and March 2007, she and her co-conspirators at X-Press Center caused the submission of approximately $2.3 million in false and fraudulent claims to the Medicare program for services purportedly provided at X-Press Center. Medicare paid approximately $1.8 million on those claims.

At her sentencing, scheduled for Jan. 15, 2010, Briceno faces a maximum of 10 years in prison and a $250,000 fine. Briceno was originally charged in the Eastern District of Michigan, but after her arrest in Miami, she consented to have her case transferred to the Southern District of Florida for her plea and sentence.

The cases are being prosecuted by Trial Attorneys John K. Neal and Benjamin D. Singer of the Criminal Division's Fraud Section. The FBI and the HHS Office of Inspector General (HHS-OIG) conducted the investigation. The cases were brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division's Fraud Section and the U.S. Attorney's Office for the Eastern District of Michigan.

Since their inception in March 2007, Strike Force operations in four districts have obtained indictments of 300 individuals who collectively have falsely billed the Medicare program for more than $680 million. In addition, HHS's Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

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

Source: U.S. Department of Justice

An international computer hacker pleaded guilty today to multiple charges relating to hacking activity and credit card fraud, announced Assistant Attorney General of the Criminal Division Lanny A. Breuer, Acting U.S. Attorney for the District of Massachusetts Michael Loucks, U.S. Attorney for the Eastern District of New York Benton J. Campbell and Director of the U.S. Secret Service Mark Sullivan. More than 40 million credit and debit card numbers were stolen from major U.S. retailers as a result of the hacking activity.

Albert Gonzalez, 28, of Miami, pleaded guilty today to 19 counts of conspiracy, computer fraud, wire fraud, access device fraud and aggravated identity theft relating to hacks into numerous major U.S. retailers including TJX Companies, BJ's Wholesale Club, OfficeMax, Boston Market, Barnes & Noble and Sports Authority. Gonzalez was indicted in August 2008 in the District of Massachusetts on charges related to these hacks.

Gonzalez also pleaded guilty to one count of conspiracy to commit wire fraud relating to hacks into the Dave & Buster's restaurant chain, which were the subject of a May 2008 indictment in the Eastern District of New York. The pleas in both cases were entered before U.S. District Court Judge Patti B. Saris in federal court in Boston.

"Consumers must be able to trust that the credit and debit cards they use everyday in thousands of stores around the world are safe from unlawful access," said Assistant Attorney General Lanny A. Breuer of the Criminal Division. "Working together with U.S. Attorneys' Offices around the country and with the invaluable support of law enforcement agencies, we will continue our efforts to identify and prosecute hacking and credit card fraud."

"The investigation and prosecution of identity theft is a top priority of the Department," said Acting U.S. Attorney for the District of Massachusetts Michael Loucks. "In the past 10 years there has been a dramatic growth in the transfer and storage of credit and debit card data on computer networks. It is thus compellingly important that we work hard to investigate and prosecute the theft of personal identity data that citizens entrust to computer networks every day."

"Computer hacking and identity theft pose serious risks to our commercial, personal and financial security," stated U.S. Attorney for the Eastern District of New York Benton J. Campbell. "Hackers, including those who commit their crimes from abroad, will find no refuge from the reach of U.S. criminal justice -- they will be found, prosecuted and convicted."

"Technology has forever changed the way we do business, virtually erasing geographic boundaries," said U.S. Secret Service Director Mark Sullivan. "However, this case demonstrates that even in the cyber world, there is no such thing as anonymity. The Secret Service, in conjunction with its many law enforcement partners across the United States and around the world, continues to successfully combat these crimes by adapting our investigative methodologies. We realize our success in this investigation is due in part to the cooperation of these partners in more than a dozen international law enforcement agencies."

According to the indictments to which Gonzalez pleaded guilty, he and his co-conspirators broke into retail credit card payment systems through a series of sophisticated techniques, including "wardriving" and installation of sniffer programs to capture credit and debit card numbers used at these retail stores. Wardriving involves driving around in a car with a laptop computer looking for accessible wireless computer networks of retailers. Using these techniques, Gonzalez and his co-conspirators were able to steal more than 40 million credit and debit card numbers from retailers. Also according to the indictments, Gonzalez and his co-conspirators sold the numbers to others for their fraudulent use and engaged in ATM fraud by encoding the data on the magnetic stripes of blank cards and withdrawing tens of thousands of dollars at a time from ATMs. According to the indictments, Gonzalez and his co-conspirators concealed and laundered their fraud proceeds by using anonymous Internet-based currencies both within the United States and abroad, and by channeling funds through bank accounts in Eastern Europe.

Based on the terms of the Boston plea agreement, Gonzalez faces a minimum of 15 years and a maximum of 25 years in prison. Based on the New York plea agreement, Gonzalez faces up to 20 years in prison, which the parties have agreed should run concurrently. He also faces a fine of up to twice the pecuniary gain, twice the victims' pecuniary loss or $250,000, whichever is greatest, per count for the Boston case and a maximum fine of $250,000 for the New York case. Gonzalez also agreed to an order of restitution for the loss suffered by his victims, and forfeiture of more than $2.7 million as well as multiple items of real estate and personal property, including a condo in Miami, a 2006 BMW 330i, a Tiffany diamond ring and Rolex watches. Included in the forfeited currency is more than $1 million in cash, which Gonzalez had buried in a container in his backyard. Sentencing is scheduled for Dec. 8, 2009.

Gonzalez remains under indictment for charges brought in August 2009 by the U.S. Attorney's Office for the District of New Jersey of conspiring to hack into computer networks supporting major U.S. retail and financial organizations and steal credit and debit card numbers from those entities. Among the corporate victims named in that indictment are Heartland Payment Systems, a New Jersey-based card payment processor; 7-Eleven Inc., a Texas-based nationwide convenience store chain; and Hannaford Brothers Co. Inc., a Maine-based supermarket chain. Charges in that case remain pending. An indictment is merely an allegation and defendants are presumed innocent until and unless proven guilty in court. While Gonzalez has pleaded guilty to the Boston and New York charges, he has not pleaded guilty to charges pending in New Jersey and remains presumed innocent of those charges.

The Boston case is being prosecuted by Assistant U.S. Attorneys Stephen Heymann and Donald Cabell of the District of Massachusetts. The New York case is being prosecuted by Assistant U.S. Attorney William Campos of the Eastern District of New York, and Senior Counsel Kimberly Kiefer Peretti and Trial Attorney Evan Williams of the Criminal Division's Computer Crime and Intellectual Property Section. All of these cases are being investigated by the U.S. Secret Service.

Source: U.S. Dept. of Justice

A Connecticut Superior Court Judge has ordered UBS AG and UBS SECURITIES, LLC ("UBS") to pledge assets or post a bond in the amount of $35,573,904.53 within 10 days. The Court found "probable cause" that UBS used secret insider information obtained from its special relationship with the ratings agencies (Moody's and S&P) to commit securities fraud in the sale of Collateralized Debt Obligation ("CDO") Notes to a Connecticut hedge fund, Pursuit Partners.

In the 29-page opinion, Superior Court Judge John F. Blawie made several explosive findings, including:

• "Through direct and circumstantial evidence, Pursuit has established probable cause to sustain the validity of a claim that the UBS defendants were in possession of material nonpublic information regarding imminent ratings downgrades on the Notes it sold to the Plaintiffs, information UBS withheld from the Plaintiffs." Order, p. 28.
• "The use of the term 'triggerless', which was used by UBS to entice the Plaintiffs to purchase the same Notes they had earlier rejected, is akin to a representation by UBS that a gun being handed to the Plaintiff is not loaded, when in fact UBS knew the gun was not only loaded, but was about to go off." Order, p. 28.
• "The court takes UBS employees at their word when they referenced their Notes, these purported investment grade securities which they sold, as 'crap' and 'vomit', for UBS alone possessed the knowledge of what their product, their inventory, was truly worth. While UBS would argue that such descriptors lack a precise meaning, the true meaning of these words and the true value of UBS's wares became abundantly clear when the Plaintiffs' multi-million dollar investment was completely wiped out and liquidated by UBS shortly after the last of the Note purchases was consummated." Order, p. 28.
• "That is the difference between a risk that something might happen to change the value of an investment, which is both a fact of life and a risk shared by all parties to any securities transaction, and the undisclosed knowledge that something will happen. That type of nondisclosure, whether it is on the part of a seller or a buyer, can cross the line into actionable securities fraud, and the court finds probable cause to sustain a finding that in this instance, it did." Order, p. 28.
• "On July 11, 2007, the day that Moody's publicly announced it was putting 184 CDO tranches on review for possible downgrade, Morelli [head of the UBS syndicate desk] sent an email simply stating 'put today in your calendar.' In explaining the context of that email, the significance of that day was described to the court by Morelli as, 'Today was essentially the beginning of the end of the CDO business, meaning the bonds were getting downgraded, they were probably going to get downgraded further and we [UBS] were going to lose a lot of money.'" Order, pp. 17-18.
• "UBS failed to disclose and actively concealed the fact that based upon this change, the Notes being marketed by UBS would not maintain their investment grade rating, and would lose a significant amount of value, if not the liquidation of the entire investment." Order, p. 18.
  

The Court's Order was issued at the conclusion of a one-week hearing. The Court took testimony of various UBS employees and reviewed documents, including internal email communications within UBS, and among UBS and the ratings agencies. The evidence showed that UBS was given a private "head's up" that the ratings agencies' ratings were false, and that catastrophic downgrades were imminent months before they actually occurred. UBS had moved to dismiss all of Pursuit's claims at the same hearing, and that motion was denied as to most of the claims in a 66-page order issued by the Court earlier this Summer.

The Plaintiff, Pursuit Partners, is a Connecticut investment fund represented by the national trial firm of Burg Simpson Eldredge Hersh and Jardine, P.C. Burg Simpson has its main office in Englewood, Colorado, and is currently at the national forefront of securities litigation arising out of the 2007 CDO market collapse.

About the order, lead trial counsel Michael S. Burg said "This historic decision is what we believe is the first of many that will reveal the truth as to how American investors suffered hundreds of billions of dollars in losses due to the egregious acts of the world's largest banks and the rating agencies."

"We at Burg Simpson understand that this is only the beginning of a long hard fight," said co-trial counsel David K. TeSelle. "We are committed to this fight for as long as it takes to rightfully compensate those who trusted the banks and the rating agencies, and as a result of the breach of that trust, suffered significant losses in their retirement accounts, college funds and life's savings. It is the right thing to do."

SOURCE Burg Simpson Eldredge Hersh & Jardine, P.C.

Hansruedi Schumacher and Matthias Rickenbach, both of Switzerland, were indicted today for conspiring to defraud the United States, the Justice Department and Internal Revenue Service (IRS) announced. According to the indictment, Schumacher worked as an executive manager at Neue Zuercher Bank (NZB), a Swiss private bank located in Zurich, Switzerland. Rickenbach worked as a Swiss attorney who provided legal advice and services to U.S. clients. Both are alleged to have aided wealthy Americans conceal assets and income in Switzerland from United States authorities.

According to the indictment, Schumacher and Rickenbach helped wealthy American clients conceal their assets by establishing sham and nominee offshore entities to hide their U.S. clients' assets and income while allowing these clients to still control the assets and make investment decisions.

The indictment further alleges that Schumacher and Rickenbach regularly traveled to the United States to conduct banking and investment activities with their U.S. clients and that when they traveled they concealed their business activities in the United States by falsely representing to American authorities that they were traveling to the U.S. for personal reasons. While in the United States, the defendants would sometimes bring cash for their clients..

According to court documents, Schumacher and Rickenbach aided their wealthy American clients repatriate money back to the United States using several deceptive means. Schumacher and Rickenbach helped their clients obtain offshore credit cards and created sham loan documents. Additionally, Schumacher and Rickenbach falsified bank documents to generate the appearance that assets of their U.S. clients belonged to Swiss citizens, and they falsified documents to disguise their United States clients' repatriation of offshore funds as inheritances from foreign citizens.

According to court documents, Schumacher and Rickenbach discouraged their U.S. clients from voluntarily coming into compliance in the United States. Instead, the defendants encouraged their clients to transfer their assets from UBS, a large Swiss bank, to NZB, a smaller bank in Switzerland. The defendants told their clients that their assets and identification would be safer at NZB because they had no presence in the United States and was therefore less likely to be pressured by the American authorities to disclose the identities of their United States clients.

"The Justice Department will continue to investigate leads provided by U.S. taxpayers who have come forward to disclose foreign bank accounts and will prosecute those foreign bankers and banks who illegally helped U.S. clients evade taxes," said John A. DiCicco, Acting Assistant Attorney General of the Justice Department's Tax Division. "We encourage foreign banks to come forward and disclose their conduct immediately, before we learn about their criminal conduct from U.S. taxpayers."

"Today's Indictment is the latest prosecution in this District against foreign bankers and professionals who enabled and assisted wealthy Americans conceal their assets offshore," said Jeffrey H. Sloman, Acting U.S. Attorney for the Southern District of Florida. "As more Americans voluntarily come into compliance and face their financial obligations, more leads are being developed and new investigations are initiated. American taxpayers who sought to avoid taxes by hiding their assets in Swiss accounts are on notice that this investigation continues."

"This is another step in our ongoing effort to pursue hidden offshore assets -- no matter where they are located," said IRS Commissioner Doug Shulman. "We're in the early stages of our work to crack down on offshore tax evasion. Through our efforts, we are gaining access to more and more information on institutions and individuals involved in offshore tax evasion, and you can expect us to use all of our enforcement tools to stop this abuse. For people with hidden offshore assets, they have an opportunity to get right with the government. Time is quickly running out, and people should take advantage of our voluntary disclosure process before special provisions expire September 23."

Acting Assistant Attorney General DiCicco and Acting U.S. Attorney Sloman commended the investigative efforts of the IRS agents involved in this case. The prosecution is being handled by Senior Litigation Counsel Kevin M. Downing and Trial Attorney Michael P. Ben'Ary of the Tax Division, and Assistant U.S. Attorney Jeffrey A. Neiman.

U.S. citizens who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return. Additionally, American citizens must file a Report of Foreign Bank and Financial Accounts, or F-Bar, with the U.S. Treasury, disclosing any financial account in a foreign country with assets in excess of $10,000 for which they have a financial interest in or signature authority, or other authority over.

Source: US Dept. of Justice

Alain V. Bonavida is pleased to announce that his client, Joseph Fahs, has sought and received justice. Joseph Fahs was the first named defendant in a suit by his former employer, Georges Marciano, filed on August 13, 2007. Georges Marciano sued Mr. Fahs and four other employees alleging, among other things, fraud and conspiracy to deprive Mr. Marciano of over $400 million of money, art, wine, and other assets. The Court found that none of these employees committed the acts alleged by Mr. Marciano, dismissing Mr. Marciano's complaint against these individuals.

This firm is proud to have not only defended Mr. Fahs against Mr. Marciano's baseless lawsuit, but also to have represented Mr. Fahs in his suit against Mr. Marciano and Mr. Marciano's company, Beverly Wilshire Properties, Inc., for defamation and intentional infliction of emotional distress.

A liability trial was held in Los Angeles Superior Court on May 15 and May 18, 2009. Judge Elizabeth Allen White found that Marciano was liable for defamation and intentional infliction of emotional distress against each cross-complainant, and that he had committed those acts with the malice, oppression and/or fraud necessary to justify an award of punitive damages. Following the liability prove-up, Judge White set a jury trial for damages for July 20, 2009. After hearing hours of live testimony and reviewing dozens of exhibits, the jury found Marciano liable to each of the five cross-complainants for over $69 million in compensatory damages and $5 million in punitive damages, a total of over $74 million each. The combined value of the verdict is over $370 million.

Attorney Alain V. Bonavida made the opening statement for Joseph and was integral, along with the rest of the legal team, to the conduct and ultimate success of the trial. Bonavida made the closing argument for compensatory damages for Joseph Fahs, explaining to the jury that they now have the power to set things right - to compensate Joseph and the other cross-complainants for the damages inflicted upon them by the unremorseful Mr. Marciano.

During the trial, Mr. Marciano had an average of eight note takers and others occupying two rows of chairs in the courtroom. Mr. Marciano initially refused to appear at the trial as evidenced by his attorneys' refusal to accept a subpoena on his behalf. Marciano made a surprise appearance and voluntarily took the stand where he declared to the jury that he was on a "crusade" and would not stop until he had "justice." Asked by Mr. Bonavida if he remembered the every increasing amounts of alleged theft he suffered at the hands of Joseph and the others, he stated that if these amounts were in papers he submitted to the Court, then they were true.

Joseph Fahs' attorney, Alain V. Bonavida, explains that "when Joseph came to me for representation, I saw the fear in his face and heart and saw this as an opportunity to help someone with a kind soul. I understood the battle my client and I were in for, but I welcomed the challenge. Nearly two years later, justice was served when the jury found Mr. Marciano liable to each of five cross-complainants for over $69 million in compensatory damages and $5 million in punitive damages for a total of over $74 million for each plaintiff or a total of over $370 million. This verdict should serve as a warning to those that believe having vast resources entitles one to leverage those resources to the detriment of the innocent. Truth and justice does prevail, even against incredible odds - you just have to fight hard for it and never give up. I never gave up."

"As one of, if not the, largest defamation verdicts handed down in the country, I am proud to have been the first attorney on the case and of the work I put into defending my client and pursuing my client's rights against Mr. Marciano. During my third year of law school, I was a student attorney representing those individuals who could not afford private counsel. I won, along with my co-counsel and friend, Jonathan Blank, a trial awarding full legal and physical custody of a small child to her mother as well as child support. I was hooked on fighting for the underdog from that point on," Bonavida said.

Law Offices of Alain V. Bonavida enjoyed working the Marciano case with the talented attorneys representing the other ex-employees of Mr. Marciano/Beverly Wilshire Properties, Inc. Steven Chapnick was represented by Michael Partos and Reeve J. Segal of Cozen O'Connor. Elizabeth Tagle was represented Cheryl Deptowicz-Diaz of the Diaz Law Firm. Miriam Choi and Camille Abat were represented by R. Rex Parris and Alexander R. Wheeler of the R. Rex Parris Law Firm and David Wheeler and Jennifer L. DeLoach of Wheeler and Sheehan.

SOURCE Law Offices of Alain V. Bonavida

Thirty-two people have been indicted for schemes to submit more than $16 million in false Medicare claims in the continuing operation of the Medicare Fraud Strike Force in Houston, Deputy Attorney General David W. Ogden and Deputy Secretary Bill Corr of the Department of Health and Human Services (HHS) announced today. The Strike Force in Houston is the fourth phase of a targeted criminal, civil and administrative effort against individuals and health care companies that fraudulently bill the Medicare program.

While the indictments were returned by a grand jury in Houston, individuals were arrested today in Houston, New York, Boston and Louisiana. In addition, Strike Force agents executed 12 search warrants at health care businesses and homes across the Houston area.

The joint DOJ-HHS Medicare Fraud Strike Force is a multi-agency team of federal, state and local investigators designed to combat Medicare fraud through the use of Medicare data analysis techniques and an increased focus on community policing. The fourth phase was announced in May 2009, with agents from FBI, HHS Office of the Inspector General (HHS-OIG), the Texas Attorney General's Medicaid Fraud Control Unit (MFCU), the Drug Enforcement Administration (DEA), Office of Personnel Management, Office of the Inspector General (OPM-OIG) and the Office of the Inspector General at the Railroad Retirement Board (RRB-OIG).

"Our Medicare Strike Force is striking back against health care fraud in all its forms and wherever it occurs. We will stop fraud as its happening, using real-time data analysis of Medicare billing records," said Deputy Attorney General David W. Ogden. "Those who commit health care fraud will not be allowed to steal money from American taxpayers. Anyone operating or considering operating a health care fraud scheme around the country should take notice that they will be held accountable."

"When criminals rip off Medicare beneficiaries, we all pay the price. These false Medicare schemes and scams are costing the taxpayers millions of dollars, harming Medicare beneficiaries and driving up the cost of health care, but thanks to this new innovative partnership and the hard work of our staff on the ground, we are starting to fight back against fraud in a big way. The Administration's HEAT initiative and our Strike Forces are making a big difference in a very short amount of time, returning millions back to the Medicare Trust in just a few months," said Bill Corr, Deputy Secretary of Health and Human Services and the top HHS official on the HEAT Team. "We are also working together across the federal government on important new innovations in the way we do business on the front end, to try and prevent crime like this from happening in the first place."

The Strike Force operations in Houston are another important step of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their joint efforts to reduce and prevent Medicare and Medicaid fraud through enhanced cooperation. The HEAT taskforce, co-chaired by Deputy Attorney Ogden and Deputy Secretary Corr, is made up of top-level law enforcement agents, prosecutors and staff from both Departments and their operating divisions. In the May 2009 announcement, Attorney General Eric Holder and Secretary Kathleen Sebelius announced the expansion of the Strike Force into Detroit and Houston to build upon existing partnerships between the agencies in a heightened effort to reduce fraud and recover taxpayer dollars.

Charges were unsealed today against 32 individuals who are accused of various Medicare fraud offenses, including conspiracy to defraud the Medicare program, and criminal false claims. The Strike Force operations in Houston have identified the primary fraud schemes as those related to false billing for "arthritis kits," power wheelchairs and enteral feeding supplies.

According to the indictments, the defendants charged today participated in schemes to submit claims to Medicare for products that were in fact medically unnecessary and oftentimes, never provided. In some cases, indictments allege that beneficiaries were deceased at the time they allegedly received the items. Collectively, the physicians, company owners and executives charged in the indictments are accused of conspiring to submit more than $16 million in false claims to the Medicare program.

"Americans deserve quality healthcare and have the right to expect that money expended on Medicare is not wasted," said U.S. Attorney Tim Johnson. "We will prosecute anyone who fraudulently obtains Medicare benefits at the expense of the truly needy."

"We will protect the Medicare program and its beneficiaries by stopping those who falsely bill for power wheelchairs, orthotic devices and other supplies that are not needed," said Daniel R. Levinson, Inspector General of the Department of Health & Human Services. "Today's arrests demonstrate the significant impact of the new HEAT strike force on combating fraud and abuse in the Houston area."

"We will continue to work together to combat those who corrupt the system and wish to line their pockets with taxpayer dollars," said Special Agent in Charge Richard C. Powers, FBI Houston Field Office. "Healthcare fraud strikes at the heart of our health care system and our economy."

Texas Attorney General Greg Abbott added: "Today's arrests reflect a concerted effort to crack down on those who defraud Texas taxpayers. We will continue working with our federal partners to uncover waste, fraud, and abuse in the Medicare and Medicaid systems."

Since the inception of Strike Force operations in March 2007 with phase one in South Florida, phase two in Los Angeles in May 2008, and phase three in Detroit in March 2009, the Strike Force has obtained indictments of more than 293 individuals and organizations that collectively have billed the Medicare program for more than $674 million. In addition, HHS's Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Each of the three Houston Strike Force teams is led by a federal prosecutor from the U.S. Attorney's Office in Houston or the Criminal Division's Fraud Section. Each team has an agent from the FBI, HHS-OIG and the Texas Attorney General's MFCU. DEA, OPM-OIG and RRB-OIG also have agents on the teams.

The cases are being prosecuted by attorneys from the U.S. Attorney's Office, including Assistant U.S. Attorney Jennifer Lowery and Special Assistant U.S. Attorney Justin Blan, on detail from HHS-OIG, as well as from the Criminal Division's Fraud Section, including Assistant Chief John S. (Jay) Darden and Trial Attorneys Charles Reed, Katherine Houston, Anthony Burba and John Cunningham.

An indictment is merely an allegation, and defendants are presumed innocent until and unless proven guilty.

Source: U.S. Dept. of Justice

Tax return preparer Lawrence Sperling pleaded guilty today to aiding in the preparation of false tax returns, the Justice Department and Internal Revenue Service (IRS) announced. Sperling was scheduled to begin trial on April 14, 2009 before Judge Deborah Chasanow in Greenbelt, Md.

According to the indictment and the plea agreement, Sperling, who is a disbarred former attorney, owned and operated a tax preparation business in Silver Spring, Md., from at least 2002 through 2003. The business operated under several names, including American Tax Service, American Tax Institute, JAMAR LLC, and American Tax Professional Associates Inc. (ATPA).

According to the indictment and the plea agreement, Sperling knowingly prepared tax returns for his clients that contained false and fraudulent items, including inflated medial expenses, charitable contributions, miscellaneous employment-related expenses, and child care credits. The tax loss associated with false returns prepared by Sperling is $804,335.

According to the indictment and the plea agreement, beginning in 1988, Sperling failed to file tax returns for eleven years. In 2001, the IRS penalized Sperling and fined him $10,000 for "willful or reckless understatement of taxpayer's tax liability" with respect to his tax preparation business. The IRS sent him more than two dozen notices of taxes and penalties due, notice of intent to levy, and other warning letters.

Beginning in at least 1998, Sperling arranged for another individual (the nominee) to file the tax returns of Sperling's clients and to collect Sperling's preparation fees. The nominee subsequently held these funds in bank accounts in the nominee's name. The nominee made disbursements of these funds to Sperling or others at Sperling's request. Sperling never declared or paid taxes on these funds, although he used a portion of them to pay business expenses. As a result of this conduct, Sperling caused an additional tax loss of $130,847.

Judge Chasanow scheduled sentencing of Sperling for July 31, 2009. Sperling faces a maximum sentence of three years in prison and a fine of $250,000 for the aiding in the preparation of false returns conviction.

Acting Assistant Attorney General John A. DiCicco thanked the special agents from IRS-Criminal Investigation who investigated the case, as well as Tax Division trial attorneys Jerrod Patterson, Shawn Noud, and Tino Lisella, who prosecuted the case.

SOURCE U.S. Department of Justice

Methodist Hospital in Houston has agreed to pay the United States $9.99 million to settle allegations that it defrauded the federal Medicare program, the Justice Department announced today.

The settlement resolves allegations that Methodist improperly increased charges to Medicare patients in order to obtain enhanced reimbursement from Medicare. In addition to its standard payment system, Medicare pays supplemental reimbursement, called outlier payments, to hospitals in cases where the cost of care is unusually high. Congress enacted the supplemental outlier payment system to ensure that hospitals possess the incentive to treat inpatients whose care requires unusually high costs.

The government alleged that, between January 2001 and August 2003, Methodist improperly inflated charges for inpatient and outpatient care to make its costs for providing such care appear greater than they actually were, and thereby obtain outlier payments from Medicare that it was not entitled to receive.

"Today's settlement demonstrates the continued commitment by the Justice Department to protect Medicare when it is overcharged by hospitals," said Acting Assistant Attorney General for the Civil Division, Michael F. Hertz. "The Department has brought numerous actions against hospitals alleged to have sought excessive outlier payments, and will remain vigilant in ensuring that hospitals do not file false claims for outlier payments in the future."

"Our ultimate goal is to make certain that every Medicare dollar is used for the benefit of Medicare recipients," said Tim Johnson, acting U.S. Attorney, Southern District of Texas. "We will continue in our efforts to assure that is done."

The settlement with Methodist was the result of a coordinated effort among the Justice Department's Commercial Litigation Branch in the Civil Division; the U.S. Attorney's Office for the Southern District of Texas, Affirmative Civil Enforcement Unit; the Department of Health and Human Services, Office of Inspector General and Office of Counsel to the Inspector General; and the Centers for Medicare and Medicaid Services, in investigating and resolving the allegations.

Source: US Department of Justice

Fannie Mae Left Holding Nearly $44 Million in Unpaid Principal in Refinanced Mortgage Loans

Benton J. Campbell, the U.S. Attorney for the Eastern District of New York, announced that Leib Pinter, 64, a former executive of Olympia Mortgage Corp., was sentenced today to 97 months in prison for orchestrating a scheme to defraud Fannie Mae in connection with mortgage loans that Fannie Mae owned, but were refinanced through Olympia.

Pinter was also ordered to pay more than $43 million in restitution to the victims of his fraud scheme. The sentencing proceeding was held before U.S. District Judge Sandra L. Townes at the U.S. Courthouse in Brooklyn, and followed Pinter's plea of guilty to a wire fraud conspiracy on Sept. 11, 2008.

Olympia, formerly headquartered in Brooklyn, originated and serviced mortgage loans owned by Fannie Mae. When Olympia refinanced a Fannie Mae mortgage loan, Fannie Mae typically wire transferred the money to an Olympia bank account. Olympia was then required to pay off the underlying mortgage loan by remitting the outstanding balance to Fannie Mae. Instead, Pinter misappropriated these proceeds for the benefit of Olympia. When the fraudulent scheme was revealed, Fannie Mae held nearly $44 million in unpaid principal in refinanced mortgage loans.

"The defendant took advantage of his relationship with Fannie Mae to enrich himself and others," said U.S. Attorney Campbell. "This case is yet another example of the Justice Department's swift and vigorous response to those who have corrupted our nation's lending practices." Mr. Campbell expressed his grateful appreciation to the FBI's New York Field Office, which led the government's investigation. In May 2008, Mr. Campbell announced the formation of a task force comprised of federal, state and local law enforcement agents and investigators to address the burgeoning problem of mortgage fraud.

The government's case was prosecuted by Assistant U.S. Attorneys Jonathan E. Green and Daniel A. Spector.

SOURCE U.S. Department of Justice

Lev L. Dassin, the Acting U.S. Attorney for the Southern District of New York, and Joseph M. Demarest Jr., the Assistant Director-in-Charge of the FBI's New York Field Division, announced today that David G. Friehling, the accountant for Bernard L. Madoff Investment Securities, LLC (BLMIS), surrendered this morning on a criminal complaint charging him with securities fraud, aiding and abetting investment adviser fraud, and four counts of filing false audit reports with the U.S. Securities and Exchange Commission (SEC).

As alleged in the complaint unsealed today in Manhattan federal court:

Friehling is a CPA licensed by the State of New York and is the sole practitioner at Friehling & Horowitz, CPAs, P.C. (F&H).

BLMIS was required, under federal securities laws and regulations, to file annual certified audited financial statements with the SEC and to distribute parts of such statements to clients.

From 1991 through 2008, F&H was the accounting firm retained by BLMIS purportedly to audit BLMIS's financial statements. Friehling created BLMIS' certified and purportedly audited financial statements, including balance sheets, statements of income, statements of cash flows and reports on internal control. Friehling falsely certified that he had prepared such statements in accordance with Generally Accepted Auditing Standards (GAAS) and in conformity with Generally Accepted Accounting Principles (GAAP). Those financial statements were filed with the SEC and sent to clients of BLMIS. BLMIS paid Friehling approximately $12,000 to $14,500 per month for his services between 2004 and 2007.

Friehling failed to conduct audits that complied with GAAS and GAAP by, among other things, failing to: (a) conduct independent verification of BLMIS assets; (b) review material sources of BLMIS revenue, including commissions; (c) examine a bank account through which billions of dollars of BLMIS client funds flowed; (d) verify liabilities related to BLMIS client accounts; or (e) verify the purchase and custody of securities by BLMIS. Friehling also failed to test internal controls as required under GAAP and GAAS standards. For example, Friehling did not take any steps to test internal controls over areas such as BLMIS' redemption of client funds, the payment of invoices for corporate expenses, or the purchase of securities by BLMIS on behalf of its clients. Further, commencing at least as far back as 1995, Friehling did not maintain professional independence from his audit client, BLMIS. Specifically, Friehling and/or his wife had an account at BLMIS with a year-end net equity of more than $500,000 -- the maximum amount that, under SEC rules, he could have invested with a broker-dealer client and still maintain his independence.

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

Friehling, 49, faces a statutory maximum sentence of 105 years in prison. He will be presented later today before U.S. Magistrate Judge Theodore H. Katz in Manhattan federal court.

"Mr. Friehling is charged with crimes that represent a serious breach of the investing public's trust," said Acting U.S. Attorney Lev L. Dassin. "Although Mr. Friehling is not charged with knowledge of the Madoff Ponzi scheme, he is charged with deceiving investors by falsely certifying that he audited the financial statements of Mr. Madoff's business. Mr. Friehling's deception helped foster the illusion that Mr. Madoff legitimately invested his clients' money."

Mr. Dassin added, "Our investigation is continuing."

FBI Assistant Director-in-Charge Joseph M. Demarest stated: "David Friehling was retained and paid by Bernard Madoff to provide accounting services to his firm, but as a purportedly independent auditor, Friehling had a fiduciary responsibility to investors, and a legal obligation to regulators to report the truth. The charges unsealed today make clear that Friehling did not fulfill those duties. He did little or no testing, no verification of the 'facts' he certified. His job was not merely to rubber-stamp statements he didn't verify. Simply put, Friehling failed to do his job, and lied to investors and regulators in saying he did."

Mr. Dassin praised the investigative work of the FBI and thanked the SEC and the Rockland County District Attorney's Office for their assistance.

Assistant U.S. Attorneys Marc Litt, Lisa A. Baroni, William J. Stellmach, Barbara A. Ward and Sharon Frase are in charge of the prosecution.

SOURCE U.S. Department of Justice