Mobile Man Sentenced to Nearly Four Years in Prison for Conning $260,000 from Three Women

BIRMINGHAM—A federal judge today sentenced a Mobile man to nearly four years in prison in connection with a con scheme totaling more than $260,000 that he ran on at least three women he met in an upscale Birmingham steakhouse, announced U.S. Attorney Joyce White Vance and FBI Special Agent in Charge Richard D. Schwein, Jr.
Julian Pearson Burke, 56, pleaded guilty in October to two counts of wire fraud and one count of interstate transportation of stolen goods. U.S. District Judge L. Scott Coogler sentenced Burke to 45 months in prison on the charges and ordered him to pay the victims $264,300 in restitution. Burke had agreed to the restitution as part of his plea agreement with the government. Judge Coogler ordered Burke into custody immediately following today’s hearing.
Between October 2010 and October 2011, Burke struck up friendships with at least three women he met at a restaurant in the Summit Shopping Center on U.S. 280. He convinced all three to give him tens of thousands of dollars for him to invest, according to court documents. Instead of investing the money, Burke spent it at pawnshops and casinos. He never returned any money to the three women.
Burke pleaded guilty to transporting stolen goods across state lines for receiving a $100,000 investment check from a woman, identified by the initials C.W., and converting it to personal use by endorsing and negotiating the check at the Imperial Palace of Mississippi casino in Biloxi. The woman believed she was investing in the Admiral Semmes Hotel in Mobile.
According to Burke’s plea agreement and other court documents, he carried out his wire fraud scheme as follows:
Burke owned two businesses, Burke Construction and Computer Converters, and maintained business accounts for both at the Mississippi-based Hancock Bank.
In October 2010, Burke met a woman, identified by the initials D.G., at the Birmingham restaurant and built a friendship. In February 2011, he asked D.G. to invest with him by loaning money to pawnshops. On February 7, 2011, she wired $18,000 from her bank account to the Computer Converters account, which held $313 before her deposit. The next day, Burke transferred $18,200 from the Computer Converters account to the Burke Construction account. The same day, he wrote two $9,150 checks to Quik Pawn in Mobile to buy back a 17-carat platinum watch and a men’s diamond pinky ring he previously had pawned there for $7,500 each.
In April 2011, Burke convinced D.G. to invest $86,000 more with him, claiming he was publishing academic coloring books for children and would roll her previous investment, plus interest, into the project. She thought she would get back the $110,000, plus interest, within six months. In July 2011, D.G. wired another $20,300 to the Burke Construction account for the coloring book project. Burke never returned any of D.G.’s money. He also cashed a $59,921 check at Grand Casino of Mississippi on the same day the $86,000 was deposited into the previously overdrawn construction company account.
The third victim in the case is identified in court documents by the initials, S.H. Burke met her at the Birmingham restaurant in February 2011. He convinced S.H. to invest with him in buying a pawnshop, with the understanding that she would earn 15 percent interest within 60 days. On October 24, 2011, S.H. wired $40,000 to the Burke Construction bank account, which was overdrawn until the deposit arrived. That same day, Burke withdrew $35,000 cash and transferred $2,000 to the Computer Converters account.
The FBI investigated the case, which Assistant U.S. Attorney Robin Beardsley Mark prosecuted.

Three Individuals Sentened in Scheme to Smuggle Heroin into State Prison

WASHINGTON—A former correctional officer, a correctional nurse, and an associate of another former correctional officer were sentenced today in the District of Puerto Rico for attempting to smuggle and deliver heroin into Bayamón State Penitentiary.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Rosa Emilia Rodríguez-Vélez of the District of Puerto Rico made the announcement.
Former correctional officer Angel López-Reverón, 39, of Hatillo, Puerto Rico, and former correctional nurse Victoria Rivera, 49, of Corozal, Puerto Rico, pleaded guilty on November 20, 2013, to a one-count indictment charging them separately with attempt to distribute a controlled substance. Lopez and Rivera were each sentenced to serve 37 months in prison by U.S. District Judge Francisco A. Besosa.
López-Reverón was paid $1,000 to provide a package of heroin to an inmate at the Bayamón State Penitentiary, where López-Reverón worked as a correctional officer. On September 15, 2010, López-Reverón met with an undercover agent, whom he believed was a drug dealer, and was given what he believed to be a package of heroin. He delivered the purported heroin to an inmate in the prison that same day.
Separately, Rivera was also paid $1,000 to provide package of heroin to an inmate at the Bayamón State Penitentiary, where Rivera worked as a nurse. On July 1, 2010, Rivera met with an undercover agent, whom she believed was a drug dealer, and was given what she believed to be a package of heroin. She delivered the purported heroin to an inmate in the prison that same day.
Antonio Román-Medina, 39, of Isabela, Puerto Rico, was also sentenced today to serve 24 months in prison by U.S. District Judge Carmen C. Cerezo. He pleaded guilty on December 17, 2013, to conspiracy to distribute a controlled substance.
Román-Medina and a co-conspirator, William Joel Medina, were paid $4,000 to deliver a package of heroin to an inmate at the Medical Center in San Juan. On September 9, 2009, Román-Medina and Medina met with an undercover agent, whom they believed was a drug dealer, and were given what they believed to be a package of heroin. Román-Medina delivered the purported heroin to the inmate that same day.
William Joel Medina, a former correctional officer with the Puerto Rico Department of Corrections, pleaded guilty and was sentenced to serve 37 months in prison for the same scheme.
The cases were investigated by the FBI’s San Juan Division. The cases were prosecuted by Trial Attorney Menaka Kalaskar of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorneys Hector Ramírez-Carbó and Justin R. Martin of the District of Puerto Rico.

Businessman Pleads Guilty to Conspiring to Violate Federal and District of Columbia Campaign Finance and Tax Laws

WASHINGTON—Jeffrey E. Thompson pleaded guilty today to felony charges stemming from a scheme in which he and his companies secretly channeled more than $3.3 million in illegal contributions to at least 28 political candidates and their campaigns, including people running for the offices of president of the United States and mayor of the District of Columbia.
The guilty plea was announced by U.S. Attorney Ronald C. Machen Jr.; Valerie Parlave, Assistant Director in Charge of the FBI’s Washington Field Office; and Richard Weber, Chief of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Thompson, 58, of Washington, D.C., pleaded guilty in the U.S. District Court for the District of Columbia, to two conspiracy charges. One is a federal offense: conspiring to violate federal campaign finance laws and to submit false filings to the Internal Revenue Service. The other is a District of Columbia offense: conspiring to violate District of Columbia campaign finance laws by defrauding the District of Columbia’s Office of Campaign Finance.
The guilty plea calls for Thompson to cooperate fully in an ongoing investigation. The plea is contingent upon the approval of the Honorable Colleen Kollar-Kotelly. A sentencing date has not yet been set.
In his guilty plea, Thompson admitted, among other things, to secretly channeling more than $668,800 to pay for campaign activities for a person identified in court documents as “Mayoral Candidate A,” a candidate in the 2010 mayoral race in the District of Columbia. He also admitted secretly channeling $608,750 to pay for efforts on behalf of a candidate in the 2008 presidential primary. In addition, he admitted secretly supporting others through illegal corporate contributions, excessive and unreported contributions, and conduit contributions.

***

“Election after election, Jeff Thompson huddled behind closed doors with corrupt candidates, political operatives, and businessmen, devising schemes to funnel millions of dollars of corporate money into local and federal elections,” said U.S. Attorney Machen. “Today’s guilty plea pulls back the curtain on years of widespread corruption. With Mr. Thompson’s cooperation, we have the opportunity to hold many wrongdoers accountable and to usher in a new era of honesty, integrity, and transparency in D.C. politics.”
“Today, Mr. Thompson took responsibility for organizing a lengthy conspiracy that illegally channeled more than $3 million into federal and local campaigns dating back to the 2006 election cycle,” said Assistant Director in Charge Parlave. “The message we are sending today is clear. While the temptation to undermine the election process may be strong, you will not get away with it. Together with our law enforcement partners, the FBI will be unwavering in combating corruption in the District of Columbia.”
“Jeffrey Thompson engaged in behavior that blatantly ignored and directly circumvented clearly established campaign financing laws, but his egregious behavior did not stop there. Thompson then directed TCBA, a company under his control, to file false corporate income tax returns and submit false documents to the IRS to cover his misdeeds” said IRS-CI Chief Weber. “Today’s actions involving Mr. Thompson serve as a strong reminder of the commitment of IRS Criminal Investigation and our law enforcement partners to aggressively pursue those attempting to undermine the public’s trust.”
“Jeffrey Thompson engaged in behavior that blatantly ignored and directly circumvented clearly established campaign financing laws, but his egregious behavior did not stop there. Thompson then directed TCBA, a company under his control, to file false corporate income tax returns and submit false documents to the IRS to cover his misdeeds” said IRS-CI Chief Weber. “Today’s actions involving Mr. Thompson serve as a strong reminder of the commitment of IRS Criminal Investigation and our law enforcement partners to aggressively pursue those attempting to undermine the public’s trust.”

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Thompson is the former chairman, chief executive officer, and majority owner of Thompson, Cobb, Bazilio and Associates (TCBA), a corporation that provided accounting, management, consulting, and tax services. He also is the former chairman, chief executive officer, and owner of D.C. Healthcare Systems, Inc. (DCHSI), an investment holding and for-profit corporation. In his guilty plea today, he admitted using funds from those corporations to secretly finance campaign contributions and activities from at least 2006 until 2012.
TCBA received millions of dollars under contracts with District of Columbia and federal government entities. DCHSI owned D.C. Chartered Health Plan, Inc. (Chartered), a corporation that contracted with the District of Columbia government to provide managed care services to a substantial number of District of Columbia residents. Chartered’s contract with the District of Columbia, paid primarily by the federal government, totaled about $300 million each year.
Five others have pleaded guilty since 2012 to charges involving Thompson’s illegal spending. Two others have pleaded guilty in a related investigation involving the 2010 mayoral election.
If accepted by the court, Thompson’s plea calls for a sentence of up to 18 months in prison on the federal offense and a sentence of up to six months of incarceration for the District of Columbia offense. If the government determines at the time of sentencing that Thompson has complied with his obligations under the plea agreement, the U.S. Attorney’s Office will request that the court dismiss the federal charge, leaving Thompson subject to up to six months in prison on the District of Columbia offense, to be followed by up to three years of supervised release.

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According to a statement of offense signed by the government as well as the defendant, Thompson and others carried out a scheme to use TCBA and DCHSI to disburse excessive and unreported contributions to pay for campaign services and campaign materials in coordination with and in support of political candidates, such as get-out-the-vote efforts. The nature of these coordinated, or in-kind, contributions, also known as “shadow campaigns,” took several forms, including the distribution and dissemination of campaign materials in support of political candidates and their campaign committees.
Additionally, Thompson solicited individuals, including relatives, friends, employees, independent contractors, and the senior management of TCBA, to make conduit contributions in their names and the names of their relatives to campaign committees for federal and District of Columbia candidates, as well as a political action committee. He assured these individuals that he would arrange to pay for and otherwise reimburse the contributions. Thompson used personal and corporate money to advance funds and reimburse individuals for the political contributions that they made in their names and the names of their relatives.
In some cases, he authorized and directed TCBA to make payments variously designated as salary, bonus payments, advances on bonuses, and consultant fees, all designed to disguise the fact that the funds were actually reimbursements for contributions.
According to the statement of offense, Thompson and others took actions that caused TCBA to file false corporate income tax returns and submit false documents to the IRS. Thompson and a TCBA controller caused TCBA to wrongfully deduct TCBA’s reimbursements to conduit contributors on tax returns for the years 2007 through 2010. Also, he and two TCBA officers knowingly executed false promissory notes to conceal TCBA’s activities, and caused the false documents to be submitted to the IRS during an audit of the company.

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District of Columbia Campaigns: More Than $2.29 Million
According to the statement of offense, from 2006 until 2011, Thompson secretly provided more than $1.3 million for the off-the-books, or “shadow campaigns,” on behalf of seven candidates seeking office in the District of Columbia. He also secretly spent more than $130,000 for a voter registration drive on behalf of one candidate and agreed to pay another candidate $200,000—along with other benefits—to withdraw from the 2006 mayoral race.
The largest such shadow campaign financed “Mayoral Candidate A” in the 2010 mayoral election. During the primary election cycle for mayor of the District of Columbia, from May 2010 through September 2010, Thompson used TCBA and DCHSI to funnel over $668,800 to pay for campaign services and materials in support of a shadow campaign for “Mayoral Candidate A,” who was challenging the incumbent mayor.
Most of this money went for a get-out-the-vote effort for the primary. For example, using funds provided by Thompson and in consultation with a volunteer advisor for the candidate, individuals were paid to manage field operations and transportation related to the shadow campaign. Among other things, these individuals worked directly with, shared canvassing information with, shared workspace with, and coordinated operations with employees and agents of the official campaign for “Mayoral Candidate A,” including those managing get-out-the-vote efforts.
The money also paid for expenses such as the hiring of the candidate’s official campaign driver; the leasing of a luxury sport utility vehicle to take the candidate to campaign-related and other events; and the purchase of posters, yard signs, T-shirts, and other campaign materials.
In addition to the 2010 mayoral race, the statement of offense says that Thompson funded shadow campaigns for candidates running in the 2006 mayoral election; the 2007 special election for the Ward 4 seat on the Council of the District of Columbia; the 2008 election for an At-Large seat on the D.C. Council; the 2010 elections for Ward 1 and Ward 6 of the D.C. Council, and the 2011 special election for an at-large seat on the D.C. Council.
According to the statement of offense, Thompson secretly spent about $278,000 for a shadow campaign for a person described as “Mayoral Candidate B,” a candidate in the 2006 mayoral primary. In that same race, according to the statement of offense, Thompson agreed to pay a competing candidate $200,000 to drop out and endorse “Mayoral Candidate B.” Thompson also entered into a $150,000 consulting agreement with the competing candidate on behalf of TCBA.
Also, between 2006 and 2011, Thompson utilized at least 75 conduits to make contributions to at least 15 mayoral and D.C. Council candidates in excess of $500,000.

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Federal Campaigns: More Than $1 Million
From February 2008 through May 2008, according to the statement of offense, Thompson used TCBA and DCHSI to funnel about $608,750 to fund a shadow campaign for a candidate running for president of the United States.
The money was used for, among other things, the hiring of a marketing services company, as well as for street teams and canvassers who supplemented the campaign’s official activities in Texas, Pennsylvania, Indiana, North Carolina, and Puerto Rico.
The services included assembling and organizing paid street teams and canvassers to disseminate and distribute campaign materials prepared by the presidential campaign, including posters, lawn signs, pamphlets and stickers. The agreed-upon goal of these efforts was to raise the campaign’s visibility during the 2008 presidential primary election cycle.
Thompson also secretly provided $50,000 to help a civic organization pay for a lawsuit in Texas challenging the two-step voting process in that state, in which voters were allowed to vote twice, once in a primary and once in a caucus. He also provided $150,000 for a political demonstration organized by the civic organization in Washington, D.C. The funds for the lawsuit and the demonstration were to assist the campaign of the preferred presidential candidate.
However, there is no indication that the presidential candidate was personally aware of Thompson’s illicit activities.
Also, between 2006 and 2012, Thompson utilized at least 32 conduits to make contributions to at least 13 federal candidates and a political action committee of at least $250,000.

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In announcing the plea, U.S. Attorney Machen, Assistant Director in Charge Parlave and Chief Weber commended the work of those who investigated the case from the FBI’s Washington Field Office and IRS-CI.
They also expressed appreciation for the work of Assistant U.S. Attorneys Michael K. Atkinson, Loyaan A. Egal, Ellen Chubin Epstein, Lionel André, Jonathan P. Hooks, Ephraim “Fry” Wernick and Ted Radway, of the Fraud and Public Corruption Section of the U.S. Attorney’s Office for the District of Columbia, who are prosecuting the case.

Doctor Admits Taking Bribes in Test Referral Scheme with New Jersey Clinical Lab

NEWARKJ—An internist with a practice in Montclair, New Jersey, admitted today accepting bribes in exchange for test referrals as part of a long-running scheme operated by Biodiagnostic Laboratory Services LLC (BLS), of Parsippany, New Jersey; its president; and numerous associates, U.S. Attorney Paul J. Fishman announced.
Charles Goldberg, 60, of West Orange, New Jersey, pleaded guilty before U.S. District Judge Stanley R. Chesler in Newark federal court to an information charging him with one count of accepting bribes.
Including Goldberg, 23 people—12 of them physicians—have pleaded guilty in connection with the bribery scheme, which its organizers have admitted involved millions of dollars in bribes and resulted in more than $100 million in payments to BLS from Medicare and various private insurance companies.
According to documents filed in these and related cases and statements made in court:
Goldberg admitted accepting bribes of $1,800 per month through a sham lease agreement with BLS, which identified the waiting room, bathroom, and one examination room in Goldberg’s office as being leased.
The bribery count to which Goldberg pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine. He will be sentenced on a date to be determined. As part of his guilty plea, Goldberg agreed to forfeit $58,000, representing the bribes he received from BLS.
The BLS investigation has recovered more than $7 million to date through forfeiture.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; U.S. Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge Thomas O’Donnell; IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen; and inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge Maria L. Kelokates, with the ongoing investigation leading to today’s guilty pleas.
The government is represented by Senior Litigation Counsel Andrew Leven, Assistant U.S. Attorney Joseph Minish, and Jacob T. Elberg, Chief of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark, as well as Assistant U.S. Attorney Barbara Ward of the office’s Asset Forfeiture and Money Laundering Unit.
U.S. Attorney Paul J. Fishman reorganized the health care fraud practice at the New Jersey U.S. Attorney’s Office shortly after taking office, including creating a stand-alone Health Care and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of health care fraud offenses. Since 2010, the office has recovered more than $535 million in health care fraud and government fraud settlements, judgments, fines, restitution, and forfeiture under the False Claims Act; the Food, Drug, and Cosmetic Act; and other statutes.

Former Police Officer Admits Guilt in Robbery Plan

PHILADELPHIA—Former Philadelphia Police Officer Jeffrey Walker pleaded guilty today to a scheme in which he planned to rob a drug dealer while on official duty. Walker pleaded to attempted robbery that interferes with interstate commerce and carrying a firearm during and in relation to a crime of violence.
Walker told a cooperating witness (CW) that he wanted the CW to help him identify a drug dealer so that Walker could conduct a car stop for suspected drug violations or plant drugs in the car. On May 21, 2013, the CW informed Walker of a car parked outside a bar on West Girard Avenue. Walker drove up to the car, placed drugs inside the car, and then followed the driver when that person left the bar. When the car was pulled over, Philadelphia Police, including Walker, took the key to the driver’s home. Walker and the CW went to the driver’s home. When they exited the home, Walker was arrested and was in possession of $15,000 that he had taken from the house.
U.S. District Court Judge Eduardo C. Robreno scheduled a sentencing hearing for May 21, 2014. Walker faces an advisory sentencing guideline range of up to 10 years in prison.
The case was investigated by the FBI and Philadelphia Police Department. It is being prosecuted by Assistant United States Attorney Anthony Wzorek.

Final Defendant Convicted in Advance Pay Scheme That Bilked Entrepreneurs of Millions

PHILADELPHIA—Matthew McManus, 45, of Glenside, Pennsylvania, was convicted today for his role in an advance fee fraud scheme that defrauded hundreds of victims searching for commercial financing. McManus was charged with five other defendants, all of whom have pleaded guilty. Their scheme defrauded more than 1,900 victims out of more than $26 million. A sentencing hearing is scheduled for May 21, 2014. McManus faces a potential advisory guideline sentence of 15 years in prison with a statutory maximum possible sentence of 105 years in prison.
Defendant Andrew Bogdanoff, of Scottsdale, Arizona, was the founder and chairman of Remington Financial Group (later renamed Remington Capital) and ran the company with defendant McManus until 2008 in Arizona and Pennsylvania. After McManus left the company in 2008, defendant Shayne Fowler, also of Scottsdale, replaced McManus as Bogdanoff’s right-hand man. Defendant Joel Nathanson, of San Diego, California, was one of Remington’s most proficient employees and helped Remington defraud many victims. Defendant Frank Vogel, of Rochester Hills, Michigan, was a Michigan‑based broker who referred numerous victims to Remington in exchange for large kickbacks. Aaron Bogdanoff, also of Scottsdale, was also charged in the conspiracy.
Between 2005 and 2011, the defendants fraudulently induced hundreds of people to pay Remington fees in excess of $10,000 a piece based on false representations that Remington had lenders and/or investors ready to provide financing for the victims’ projects. To facilitate this fraud, the defendants issued each victim a “letter of interest,” commonly referred to as an LOI. Almost every LOI Remington issued stated that Remington had a lender or investor interested in financing the victim’s project. Remington issued an LOI to every victim even though no Remington employee had spoken to any funding source and Remington knew that it was unlikely to find funding for the project.
The LOI was written to fraudulently lead victims to believe that Remington either was an actual lender or had spoken to lenders that had already expressed interest in the customer’s project. Neither was true. Additionally, the financing terms Remington included in the LOI were unrealistic and were used solely to induce customers to pay Remington’s advance fees. In addition to the false representations in the LOI, the defendants and other Remington employees also told victims the following lies to further induce victims to pay Remington’s fees: a) Remington had five investors or lenders interested in their project; b) Remington was the actual lender for the project; c) Remington funded or “closed” 80 percent of its deals; d) the victim would get funding for the project once the advance fee was paid and/or; e) Remington would provide funding through its funding source Northbridge. After a customer paid Remington’s fee, McManus and Andrew Bogdanoff instructed Remington employees to find problems with the projects so that Remington could blame its failure to provide financing on the victim. The defendants did this to help protect Remington from civil and criminal complaints.
After the FBI and IRS conducted search warrants in Arizona and Colorado in March 2011, defendant Matthew McManus attempted to distance himself from the fraudulent scheme by obstructing justice and lying to federal agents. He was convicted of these charges as well.
Some of the defendants used sophisticated means to perpetuate the fraud. For instance, in 2010, defendants Fowler and Andrew Bogdanoff used Remington’s website to advertise an anti‑fraud policy and stated falsely that Remington had recently provided information to the Federal Bureau of Investigation and local law enforcement authorities about a suspected e-mail scam. Remington posted this information to ensure that if potential customers used an Internet search engine to search for allegations about Remington’s fraud, they would be directed to Remington’s website rather than third‑party Internet sources that contained negative information about Remington.
The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigations with assistance from the Pennsylvania Securities Commission. It is being prosecuted by Assistant United States Attorney David Axelrod.

Former Cook County Commissioner Moreno Sentenced to 11 Years in Prison for Public Corruption Schemes

CHICAGO—Former Cook County Commissioner JOSEPH MARIO MORENO was sentenced today to 11 years in federal prison for engaging in a series of public and personal corruption schemes over a span of three years. Moreno pleaded guilty on July 1, 2013, to conspiracy to commit extortion after he was initially charged in late June 2012, about 18 months after he left public office.
Moreno, 61, of Chicago, a lawyer who served more than 16 years as an elected county commissioner until December 2010, was sentenced to 132 months in prison, and he was ordered to forfeit $100,000 and pay a total of more than $138,000 in restitution by U.S. District Judge Gary Feinerman. Moreno was ordered to begin serving his sentence on April 21.
“Mr. Moreno was not a reluctant participant in these schemes; he was an eager participant,” Judge Feinerman said, adding that Moreno “embraced them with gusto and pursued them with vigor.”
Moreno “repeatedly pursued his own interests at the expense of those he was supposed to serve. . . . [H]e extorted a reputable business and corrupted the highest levels of Cook County government, the Town of Cicero, and a private hospital. He also evaded taxes and suborned perjury so he could reduce his child support obligations. And when he was confronted about his crimes, he obstructed justice by providing the government with false invoices in an effort to conceal his criminal conduct,” Assistant U.S. Attorneys Christopher J. Stetler and Megan C. Church wrote in a government sentencing memo.
Notably, they argued, Moreno conceived a motto of governing that captured his corrupt approach to public office: “I don’t want to be a hog. I just want to be a pig. Hogs get slaughtered. Pigs get fat.”
Moreno pleaded guilty to conspiracy to extort an unnamed company that was awarded a contract to help improve Cook County Hospital’s revenue cycle into using his friend and co-defendant, Ron Garcia, and his business, Chicago Medical Equipment & Supply, Inc., as a minority subcontractor in return for a $100,000 bribe. Garcia forgave a $100,000 mortgage loan to Moreno in exchange for Moreno’s efforts to steer the lucrative sub-contract to Garcia’s company, and Moreno tried to disguise the bribe by claiming that he had repaid the purported loan.
In pleading guilty, Moreno also agreed that he sought to obtain orders of Dermafill bandages from Cook County in return for kickbacks while he and his staffer, co-defendant and former Chicago Alderman Ambrosio Medrano, were Cook County officials; sought to obtain approval for a waste-transfer station in return for kickbacks while a Town of Cicero official; and evaded his federal income taxes between 2007 and 2010 by misreporting the income from his law office.
According to sentencing documents, between 2008 and 2010, Moreno engaged in those schemes, as well as five other schemes to:

• enrich himself through kickbacks in return for passing a “green” resolution while a Cook County Commissioner;
• obtain medical transcription business from Cook County in return for kickbacks concealed as legal fees;
• obtain orders of Dermafill bandages from a private hospital by bribing a hospital official; enrich himself through kickbacks while a Town of Cicero official;
• reduce his child-support obligations by suborning perjury during a court hearing. 

Medrano, 60, of Chicago, the former alderman who later worked on Moreno’s countystaff, was sentenced last month to a total of 13 years in federal prison after pleading guilty in one case involving Moreno and being convicted at trial last year in a separate corruption case that stemmed from the same FBI undercover investigation.
Garcia, 54, of Homer Glen, and two other co-defendants, Gerald W. Lombardi, 61, of Darien, and his son, Jerry A. Lombardi, 34, of Downers Grove, who were agents of Chasing Lions, LLC, a disabled-veterans-owned business in Lisle that sold the Dermafill bandages, pleaded guilty to their roles in the scheme and are awaiting sentencing. A sixth co-defendant, Stanley Wozniak, 51, of Chicago, is awaiting the disposition of charges.
The Moreno sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; and James C. Lee, Special Agent in Charge of the Internal Revenue Service Criminal Investigation Division.

Former Puerto Rico Correctional Officer Sentenced in Scheme to Smuggle Heroin into State Prison

A former correctional officer at the Puerto Rico Department of Corrections was sentenced to serve 37 months in prison for attempting to smuggle heroin into the prison where he worked, Bayamón State Penitentiary, in exchange for a $3,000 payment.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Rosa Emilia Rodríguez-Vélez of the District of Puerto Rico made the announcement.
Luis Lebron-Lebron, 38, of Maunabo, Puerto Rico, pleaded guilty on October 29, 2013, to a one-count indictment charging him with attempt to distribute a controlled substance. Lebron-Lebron was sentenced by U.S. District Judge José A. Fusté .
On September 9 and 10, 2010, Lebron agreed to introduce 1/8 of a kilogram of heroin to an inmate at the Bayamón State Penitentiary, where Lebron worked as a correctional officer. Lebron was paid $3,000 to make that delivery. On September 10, 2010, Lebron met with an undercover agent whom he believed was a drug dealer and was given what he believed to be 1/8 of a kilogram of heroin. He delivered the purported heroin to an inmate in the prison that same day.
The case was investigated by the FBI’s San Juan Division. The case was prosecuted by Trial Attorney Menaka Kalaskar of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Hector Ramirez-Carbó of the District of Puerto Rico.

Staten Island Man Charged in Manhattan Federal Court in Multi-Million-Dollar Scheme Related to Purchase of Maxim Magazine

Preet Bharara, the United States Attorney for the Southern District of New York; Steven G. Hughes, the Special Agent in Charge of the New York Office of the United States Secret Service; and George Venizelos, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (FBI), announced that Calvin Darden, Jr. was arrested yesterday in connection with two schemes in which he defrauded victims of more than $8 million and attempted to defraud another victim of approximately $20 million. In one scheme, Darden tricked several lenders into providing more than $8 million in financing for the potential acquisition of Maxim Magazine and related assets. In the other scheme, Darden obtained $500,000 from a Taiwan-based company by falsely claiming that he was arranging for the New York Knicks to play an exhibition game in Taiwan. Darden surrendered yesterday to the Secret Service and is expected to be presented later today in Manhattan federal court before U.S. Magistrate Judge Andrew J. Peck.
Manhattan U.S. Attorney Preet Bharara said, “As alleged, Calvin Darden, Jr. sought to mislead and deceive his victims at virtually every opportunity, and he used the full spectrum of fraudulent devices, including false documents, ’spoofed’ e-mails, and outright impersonation. This office has zero tolerance for those who allegedly engage in this type of conduct, especially when it is to the tune of millions of dollars.”
Secret Service Special Agent in Charge Steven Hughes said, “Partnerships fostered by the Secret Service’s Electronic Crimes Task Force have allowed our agency to focus resources and respond quickly to criminal activity such as this. The investigation and subsequent arrest in this case is another example of how the Secret Service strives to combat fraud and provide a secure cyber environment.”
FBI Assistant Director in Charge George Venizelos said, “Like we’ve seen time and time again, the defendant was up to the same worn-out tricks in an elaborate scheme of fake e-mails, fictitious bank accounts, and fabricated statements all to rip off unwitting investors. Everyone deserves the right to make an honest living, but not by lying, cheating, or at the expense of others. Today, Mr. Darden finds himself under arrest and in trouble with the law.”
According to the allegations contained in the criminal complaint unsealed today in Manhattan federal court:
Darden carried out two separate schemes in which he concocted an elaborate set of lies that included, among other things, phony e-mails, fabricated bank account statements, and his repeated impersonation of his father (a former corporate executive who sits on the board of directors of several publicly traded corporations in the United States) during phone calls and in e-mails to defraud multiple victims of more than $8 million and to attempt to defraud another victim of approximately $20 million.
The Maxim Fraud Scheme
In connection with the potential purchase of Maxim Magazine (Maxim) by a media company (the media company) associated with Darden and his father, Darden attempted to secure financing from various lenders, lying extensively to them to trick them into funding the media company’s purchase of Maxim.
As part of the scheme, in order to trick one of the lenders into believing they would receive sufficient collateral for their loan, Darden provided the lender with a fabricated bank account statement. The fabricated statement purported to be for an account held by his father and purported to show his father’s holdings in the stocks of at least three publicly traded companies for which Darden’s father serves as a director. His father’s alleged stock holdings in these companies were supposed to serve as collateral for the loans. In truth, however, the bank account statement was fake. In addition, Darden created and sent to a lender a phony e-mail that purported to be from an employee of a bank verifying his father’s stock holdings.
Further, after one of the lenders put approximately $5.5 million in escrow pending the transfer of collateral, Darden paid a Russia-based e-mail “spoofing” service to send an unauthorized and fraudulent e-mail to the escrow agent to secure the release of the funds. Specifically, Darden had the spoofing service send an e-mail that appeared to come from the lender’s e-mail account and that authorized the escrow agent to release the escrow money. As Darden well knew, however, the lender did not send the e-mail and did not authorize the release of the funds. Based on its receipt of the e-mail, the escrow agent released approximately $4.9 million of the lender’s money towards the media company’s purchase of Maxim.
Darden also provided certain lenders with bogus e-mails purporting to be from senior executives of certain companies, including at least one publicly held corporation for which Darden’s father is a member of the board of firectors. In one bogus e-mail, the senior executive purportedly verified the stock holdings of Darden’s father that were supposed to be provided as collateral for the loan. Separately, when another lender conditioned its $20,000,000 loan on the creation of a cable channel based in part on Maxim, Darden provided the lender with a bogus e-mail purporting to be from a senior executive of a cable television company confirming that the company was interested in creating a cable channel in connection with the media company’s purchase of Maxim. In fact, both e-mails were completely fabricated and had not been authored or authorized by either of the executives who purportedly wrote them.
Additionally, as a part of the scheme, Darden repeatedly impersonated his father during phone calls and in e-mails and forged his father’s signature on documents related to the potential purchase of Maxim.
The NBA Fraud Scheme
In a separate scheme, Darden tricked a particular company located in Taiwan into paying him $500,000 by falsely and fraudulently representing that, through a particular company purportedly operated in part by his father, he would arrange an NBA exhibition game in Asia involving the New York Knicks.
As part of that scheme, Darden falsely represented to the victim company that he and his father had meetings and discussions with, among others, the owners of the New York Knicks and NBA officials about an exhibition game in Asia. As he did in the Maxim fraud scheme, Darden also impersonated his father in multiple e-mail communications with the victim company and forged his father’s signature on documents.

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Darden, 39, of Staten Island, New York, is charged with two counts of wire fraud, each of which carries a maximum term of 20 years in prison.
Mr. Bharara praised the outstanding investigative work of the Secret Service and FBI.
The case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorney James Pastore, Jr. is in charge of the prosecution. Assistant U.S. Attorney Andrew Adams is handling the forfeiture aspects of the case.
The charges contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Florida Attorney Sentenced to Six Months in Prison for Laundering Purported Stock Fraud Proceeds

Michael J. Scaglione, Esq., an attorney in Coral Gables, Florida, was sentenced today in federal court in Brooklyn, New York, to six months in prison, to be followed by four months of home detention with electric monitoring to be served during a two-year term of supervised release. As part of the sentence, Scaglione was ordered to perform 200 hours of community service and to forfeit approximately $31,950 to the government. In October 2013, Scaglione pleaded guilty to a money laundering charge for laundering over $750,000, which he believed were the proceeds of a penny stock fraud scheme. In July 2013, Scaglione was arrested after taking possession of $500,000 in cash from an undercover federal agent posing as a criminal stock promoter in connection with a government sting operation.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Toni Weirauch, Special Agent in Charge, United States Internal Revenue Service, Criminal Investigation, New York (IRS).
“Abusing his position as an attorney by laundering money, Scaglione not only violated the code of ethics by which he was bound—he also broke the law. Those attorneys who seek to misuse the trust that is instilled in them by the public to perpetrate crime are on notice that they will be held accountable for their crimes,” stated United States Attorney Lynch. Ms. Lynch thanked the FBI and the IRS for their work on this investigation.
From approximately February to July 2013, Scaglione exploited his position as an attorney to launder money through an escrow account for an undercover law enforcement agent who posed as a corrupt stock promoter. Scaglione believed that the undercover agent was a middleman for a network of corrupt stock brokers who fraudulently inflated prices of worthless stock in exchange for high commissions. Scaglione agreed to launder what he believed were proceeds of this stock fraud through his attorney escrow account to hide that money from the United States Securities and Exchange Commission and the IRS. In total, Scaglione funneled over $750,000, including $88,000 in cash given to him in a Federal Express box in the lobby of a Miami Beach hotel, through the escrow account into the undercover agent’s bank account in Long Island, New York. Scaglione carefully structured the movement of these funds to avoid triggering financial reporting requirements. In exchange, Scaglione collected more than $25,000 in fees. In recorded conversations, Scaglione assured the undercover agent that their conversations were “completely privileged” and that his money was “safe” with Scaglione. When the undercover agent explained to Scaglione that he did not “want to go to jail,” Scaglione stated to the undercover agent that the escrow account was “tight as can be.” On the day of his arrest, Scaglione accepted an additional $500,000 in cash from the undercover agent, which Scaglione believed to be proceeds from the stock fraud, at a hotel in Miami Beach, Florida.
The government’s case is being prosecuted by Assistant United States Attorney Jacquelyn Kasulis.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
Defendant:
Michael J. Scaglione
Age: 42
Residence: Miami Springs, Florida

Queens Foundry Owner Pleads Guilty in Manhattan Federal Court to Orchestrating $11 Million Scheme to Sell Fake Jasper Johns Sculpture

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Brian Ramnarine pled guilty yesterday to fraud charges arising from his attempt to sell a bronze sculpture that he falsely represented to be a genuine work of art by Jasper Johns, as well as his sales of bronze sculptures that he falsely represented to be the work of two other artists, Robert Indiana and Saint Clair Cemin. Ramnarine pled guilty yesterday before U.S. District Court Judge John G. Koeltl on the fifth day of a jury trial.
Manhattan U.S. Attorney Preet Bharara said, “Brian Ramnarine is a serial fraudster who attempted to peddle not one but multiple fake sculptures in three separate fraud schemes—the last two of which occurred after he had already been arrested and was facing charges for the first. Ramnarine now stands convicted and, with his admission of guilt, will pay for his fraud.”
According to the Indictment to which Ramnarine pled guilty, evidence presented at trial, and statements made during the plea proceeding:
In 1960, Johns created a painting titled “Flag,” which he gave to fellow artist and friend Robert Rauschenberg. Years later, Johns made a mold (the “Flag” mold) from that painting in order to make a sculpture. In 1990, Johns provided the “Flag” mold to Ramnarine, who owned a Queens, New York foundry. Johns instructed Ramnarine to use the “Flag” mold to make a wax cast. Ramnarine completed the wax cast and gave it to Johns, but he never returned to Johns the “Flag” mold from which the wax cast was made.
In 2010, Ramnarine began representing to various members of the art world that he owned a bronze sculpture, titled “Flag,” that was an authorized Jasper Johns work of art created in 1989 (the purported 1989 bronze sculpture). In an effort to identify a purchaser for the purported 1989 bronze sculpture, he showed it to a representative of an auction house who specialized in the sale of rare art and to an art dealer. Around the same time, Ramnarine also attempted to sell the purported 1989 bronze sculpture directly to an art collector. At Ramnarine’s direction, several art brokers were in frequent contact with the art collector and with the art collector’s representative regarding the possible sale of what was represented to be a genuine and authorized Jasper Johns work of art. Through an art broker to whom Ramnarine had shown the purported 1989 bronze sculpture, Ramnarine informed the art collector’s representative that he would sell it for approximately $11 million.
After the art collector expressed doubts about the authenticity of the purported 1989 bronze sculpture, Ramnarine provided false and fraudulent documents and information in an effort to deceive the art collector into believing that the artwork was genuine. For example, Ramnarine stated that the purported 1989 bronze sculpture was a gift from Johns. To support that assertion, Ramnarine provided an art broker with a letter dated August 23, 1989, purportedly from Johns, along with other documents that falsely and fraudulently reflected that the Ppurported 1989 bronze sculpture was a genuine Johns work of art and that it was owned by Ramnarine.
In truth, the purported 1989 bronze sculpture was a fake. Johns never authorized its production nor did he transfer ownership to Ramnarine. Instead, against Johns’s earlier instructions and without authorization, Ramnarine used the original “Flag” mold provided by Johns to make the purported 1989 bronze sculpture, dated it “1989,” and forged Johns’s signature on the back of the sculpture.
Ramnarine was arrested in November 2012 on charges arising from his attempt to sell the purported 1989 bronze sculpture. Shortly after his arrest and while he was on bail, Ramnarine engaged in two new schemes to defraud an online art gallery located in Queens (the gallery). In particular, Ramnarine sold to the gallery two fake sculptures, titled “Two” and “Orb,” that he falsely claimed had been made and authorized by Robert Indiana and numerous fake sculptures that he falsely claimed had been made and authorized by Saint Clair Cemin. The gallery paid Ramnarine tens of thousands of dollars for the phony sculptures.

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Ramnarine, 59, of Queens, New York, pled guilty to three counts of wire fraud. He faces a maximum sentence of 20 years on count one, and a maximum sentence of 30 years on each of counts two and three because those offenses were committed while Ramnarine was on bail. Ramnarine is scheduled to be sentenced by Judge Koeltl on May 30, 2014, at 10:00 a.m.
Mr. Bharara praised the FBI for its outstanding work in the investigation. He also thanked the Port Authority of New York/New Jersey Police Department and the New York State Police for their assistance.
The case is being handled by the Complex Frauds Unit of the United States Attorney’s Office. Assistant United States Attorneys Zachary Feingold and Daniel B. Tehrani are in charge of the prosecution.

Rochester Man Sentenced in Large-Scale Tax Refund Scheme

ROCHESTER, NY—U.S. Attorney William J. Hochul, Jr. announced today that Juan Marie Delvalle, 26, of Rochester, New York, who was convicted of conspiracy to commit tax fraud in connection with a large nationwide tax refund scheme, was sentenced by U.S. District Court Judge David G. Larimer to 12 months in prison and ordered to pay restitution of $1,644,202 to the Internal Revenue Service.
Assistant U.S. Attorney Richard A. Resnick, who handled the case, stated that from February 1, 2011 to October 31, 2011, Delvalle was involved in a scheme to obtain income tax refunds by the filing of fraudulent federal income tax returns with the Internal Revenue Service. Specifically, stolen identities were utilized to file the fraudulent federal income tax returns, and the wages and related tax withholdings reported on the federal income tax returns were fabricated in order to obtain the refunds. Most of the returns were filed in the names and Social Security numbers of individuals residing in Puerto Rico without their knowledge. Refund checks issued as a result of the fraudulent returns were sent to various addresses in Rochester and other locations in the country.
Approximately 600 federal returns with Rochester-area addresses were filed by a company in Bronx, New York. These 600 tax returns claimed tax refunds totaling $3,555,302, of which $1,644,202 was paid out by the IRS. The refund checks were sent by the IRS to various locations in the Rochester area. Delvalle participated in the scheme by retrieving many of the refund checks that were sent to Rochester and forwarding the money to individuals in the New York City area who were responsible for filing the false tax returns. The defendant was paid a fee for his participation in the scheme.
The sentencing is the culmination of a joint investigation on the part of the Federal Bureau of Investigation, under the direction of Special Agent in Charge Brian P. Boetig, and the Internal Revenue Service-Criminal Investigations, under the direction of Toni M. Weirauch, Special Agent in Charge.

Investment Manager Sentenced to 188 Months for Investment Fraud Scheme

Earlier today, Aleksander Efrosman, the investment manager of Century Maxim Fund, Inc. and AJR Capital, Inc., was sentenced to a term of imprisonment of 188 months following his conviction for wire fraud. Efrosman, who fled the United States, was extradited from Poland and pleaded guilty on October 18, 2012. In addition to the prison term, Efrosman was ordered to pay restitution of approximately $4 million.
The sentence was announced by Loretta E. Lynch, United Attorney for the Eastern District of New York; George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office; and Philip R. Bartlett, U.S. Postal Inspector in Charge, New York Division.
“This case proves the old adage: ‘You can run, but you cannot hide.’ Aleksander Efrosman stole over $5 million from unsuspecting investors and fled the country, then engaged in a globetrotting effort to escape justice. But the coordinated efforts of law enforcement resulted in his capture. Today, Efrosman has finally been held to account for his betrayal of his clients’ trust,” stated United States Attorney Lynch. “As proved again today, this office will relentlessly pursue and prosecute the perpetrators of investment fraud schemes.” Ms. Lynch extended her grateful appreciation to the Federal Bureau of Investigation and the Postal Inspection Service for their assistance in this case.
From January 2004 through June 2005, working from offices in Brooklyn and Staten Island, Efrosman defrauded investors by soliciting investments purportedly for the purpose of trading in the stock market and the foreign currency exchange market. Efrosman falsely told investors that he had a history of profitable trading and that the investments would be protected by a “stop-loss” mechanism which ensured that no trade lost more than 3 percent. Based on these misrepresentations, Efrosman raked in over $5 million from more than 100 investors. Efrosman did not invest the funds as promised, but instead used the funds for his personal benefit, including gambling over $3 million at the Foxwoods casino.
Efrosman fled the United States in 2005 with millions of dollars of investor funds. He first traveled to Cozumel, Mexico, then to Panama and ultimately to Poland, where he assumed the identity of “Mikhail Grosman” and obtained a high-quality fraudulent Russian passport. In the meantime, federal agents in the United States pursued leads as to Efrosman’s whereabouts. In a coordinated multinational effort, law enforcement authorities in Austria, the Czech Republic, and Poland tracked, located, and ultimately arrested Efrosman in Krakow, Poland on May 28, 2010.
The sentence was imposed by United States District Judge Nicholas G. Garaufis at the federal courthouse in Brooklyn, New York.
The government’s case was prosecuted by Assistant United States Attorney Daniel Spector.
The Defendant:
ALEKSANDER EFROSMAN
Age: 51

Two More Defendants Plead Guilty in Manhattan Federal Court in Scheme to Exert Control Over the Waste-Hauling Industry

Preet Bharara, the United States Attorney for the Southern District of New York, announced that Scott Fappiano and Anthony Bazzini pled guilty today in Manhattan federal court in connection with their roles in an illegal scheme to exert control over the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. Fappiano and Bazzini, who were among 32 defendants charged in January 2013 in connection with the scheme, pled guilty today before U.S. District Judge P. Kevin Castel. Fappiano and Bazzini are the 20th and 21st defendants to plead guilty in this matter.
Manhattan U.S. Attorney Preet Bharara said, “With today’s pleas, we have convicted nearly two-thirds of the defendants originally charged in this case, and we will not rest until all responsible for this scheme to control the waste-hauling industry in New York City and beyond are made to answer for their numerous crimes.”
According to the Indictment against Fappiano and Bazzini, other documents filed in Manhattan federal court, and statements made at related court proceedings:
Fappiano, who is an associate of the Gambino crime family, and Bazzini, who is a made member of the Gambino crime family, participated in a scheme, along with other members and associates of three different organized crime families of La Cosa Nostra (LCN)—the Genovese, Gambino, and Luchese crime families—to control various waste disposal businesses in the New York City metropolitan area and multiple counties in New Jersey. Members of the scheme engaged in various crimes including extortion, loansharking, mail and wire fraud, and stolen property offenses. As part of their involvement in the scheme, Fappiano and Bazzini made threats of bodily harm to a cooperating government witness (CW-1) who owned a waste hauling company in an effort to obtain payments from CW-1.
Fappiano, 52, of Staten Island, New York, pled guilty to one count of communicating a threat of bodily harm in interstate commerce and faces a maximum sentence of five years in prison. Fappiano is scheduled to be sentenced by Judge Castel on May 8, 2014, at 10:30 a.m.
Bazzini, 54, of Glen Head, New York, pled guilty to one count of communicating a threat of bodily harm in interstate commerce and faces a maximum sentence of five years in prison. Bazzini is scheduled to be sentenced by Judge Castel on May 8, 2014, at 11:30 a.m.
Two other defendants have also recently pled guilty in connection with this case. Anthony Cardinalle, 61, of Saddle River, New Jersey, pled guilty on December 20, 2013, before Judge Castel to participation in a racketeering conspiracy and participation in an extortion conspiracy. He faces a maximum sentence of 40 years in prison and is scheduled to be sentenced on May 23, 2014, at 11:00 a.m. Charles Giustra, 52, of Staten Island, New York, pled guilty on December 23, 2013, before Magistrate Judge Gabriel W. Gorenstein to using a facility of interstate commerce in furtherance of a narcotics transaction. He faces a maximum sentence of eight years in prison and is scheduled to be sentenced by U.S. District Judge Colleen McMahon on March 25, 2014, at 4:00 p.m.
The charges against the remaining defendants are merely accusations, and these defendants are presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the Westchester County Police Department.
The prosecution of this case is being handled by the Office’s Organized Crime Unit. Assistant United States Attorneys Brian R. Blais, Natalie Lamarque, and Patrick Egan are in charge of the prosecution. Assistant United States Attorney Micah Smith of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

Charges Filed Against Former Warehouse Manager of a Prescription Drug Wholesale Distribution Company for Role in False Prescription Drug Pedigree Scheme Involving More Than $49 Million in Diverted Prescription Drugs

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (FBI), announced today the unsealing of a criminal complaint (the complaint) against Stephen Cox, the former warehouse manager of a prescription drug wholesale distribution company (the wholesaler), for his alleged participation in a scheme to falsify pedigrees for prescription drugs sold to pharmacies all over the country, including at least six pharmacies in New York City. The prescription drugs were diverted from illegal sources and made to appear, through pedigrees falsely documenting their transaction histories, as though they were obtained legitimately from authorized distributors through licensed wholesalers. The defendant allegedly, through the wholesaler, based in St. George, Utah, conspired with others to sell to pharmacies more than $49 million worth of illegally obtained prescription drugs through several wholesale distribution companies controlled by co-conspirators, some of whom have pled guilty pursuant to cooperation agreements with the government. Cox surrendered to the FBI this morning in New York City in connection with the charges announced today and was presented in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis this afternoon.
The complaint is a result of the continuing investigation into a scheme that defrauded Medicaid out of more than $500 million through the diversion of prescription drugs. On July 17, 2012, 48 defendants were charged in connection with United States v. Viera, et al., 11 Cr. 1072 (DLC); all but five of whom have been arrested and have pled guilty.
Manhattan U.S. Attorney Preet Bharara said, “As alleged, in his position as a warehouse manager for a prescription drug wholesaler, defendant Stephen Cox played an integral role in a multi-million-dollar prescription drug diversion scheme by helping his employer to falsify the pedigrees of second-hand prescription drugs and dispense them to pharmacies across the country. People in need of medicine walk into a pharmacy to untainted, safe prescription drugs; they should not walk out with black market pills, a risk the alleged conduct makes very real.”
FBI Assistant Director in Charge George Venizelos said, “Every operation has a conductor whose job it is to ensure all players work together and all parts are delivered on time. As alleged, Stephen Cox acted as a conductor in this massive Medicaid fraud, working with his co-conspirators to manage the shipment and delivery of illegally obtained prescription drugs to the tune of more than $49 million. By providing advice on how to falsify required FDA documents, he continued to defraud the Medicaid system, which is funded by tax dollars to provide healthcare to lower income individuals, and put at risk those unwitting customers who would eventually purchase these secondhand pills. The FBI remains committed to working with our law enforcement partners on our Health Care Fraud Task Force to ensure the public’s safety and investigate those who seek to defraud government program.”
The following allegations are based on the complaint and other publicly filed documents in the Viera case:
For years, a large network of individuals operated a nation-wide scheme to illegally launder and resell second-hand prescription drugs (typically HIV/AIDs drugs) purchased from Medicaid beneficiaries on street corners and out of bodegas in and around New York City. The drugs had been dispensed in manufacturers’ bottles with pharmacy patient labels affixed to them. Once they purchased the second-hand drugs, the conspirators, who often held the drugs in uncontrolled and unsanitary conditions, used solvents to dissolve the adhesive on the patient labels to remove them and make the bottles look like new bottles, straight from the manufacturer. Once enough bottles were collected, the New York-based conspirators sold them, through Florida-based groups, to individuals in Texas, who operated several corrupt wholesale companies, such as those identified in the complaint.
The wholesaler, through Cox and others, purchased more than $49 million worth of prescription drugs that they knew had been purchased illegally by the corrupt wholesale companies run from Texas. Cox and others then sold them to unsuspecting pharmacies all over the United States, including to some pharmacies in New York City, which, in turn, sold and dispensed the second-hand drugs to unsuspecting patients who were unaware that their medications had previously been dispensed and may have had diminished efficacy or contained contaminants.
Federal law requires prescription drug wholesalers to create and maintain transaction histories, or “pedigrees,” that correctly document each transaction involving prescription drugs. Cox and an uncharged co-conspirator who owned the wholesaler (CC-1) instructed co-conspirators affiliated with the corrupt wholesale companies how to falsify these pedigrees to create paperwork that concealed from FDA inspectors and pharmacies purchasing the drugs that the drugs were illegally obtained and previously had been dispensed. Backed by these false pedigrees, the wholesaler sold illegally obtained prescription drugs to pharmacies all over the country, including to the six in Manhattan and the Bronx referred to in the complaint.
From at least 2009 through November 4, 2011, Stephen Cox, the defendant, worked for CC-1 at the wholesaler as its warehouse manager. At the wholesaler, Cox received by fax from co-conspirators lists of prescription drugs available from unlicensed sources. Cox communicated with co-conspirators concerning orders and shipments of prescription drugs from unlicensed sources and passed along instructions to co-conspirators concerning how to construct false pedigrees. At the wholesaler and at two subsequent corrupt wholesale distribution companies, Cox received and inspected shipments of prescription drugs from unlicensed sources and facilitated the sale of those drugs to pharmacies all around the country, ultimately to be dispensed to unsuspecting patients. Cox is the first individual associated with a wholesale distribution company that sold directly to pharmacies to be charged as part of this ongoing investigation.

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Cox, 34, of Sugarland, Texas, is charged with one count of conspiracy to defraud the United States, falsify pedigrees, and commit misbranding offenses, which carries a maximum sentence of five years in prison. He is also charged with six counts of pedigree falsification relating to prescription drugs the wholesaler sold to six pharmacies in Manhattan and the Bronx, each of which carries a maximum sentence of three years in prison.
Mr. Bharara praised the efforts of the FBI’s Health Care Fraud Task Force. The New York FBI Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force is composed of agents, officers, and investigators from the FBI, New York City Police Department, the New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management Inspector General, U.S. Food and Drug Administration, New York State Attorney General’s Office, New York State Office of Medicaid Inspector General, New York State Health and Hospitals Inspector General, and the National Insurance Crime Bureau.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Jason A. Masimore, Russell Capone, and Edward B. Diskant are in charge of the prosecution. Assistant U.S. Attorney Alexander Wilson of the Office’s Asset Forfeiture Unit is responsible for the forfeiture of assets.
The charges contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Members of Multi-State Theft Scheme Sentenced in New Jersey for Conspiracy to Sell Stolen Pharmaceuticals

NEWARK—Three Florida men were sentenced today in New Jersey federal court for their roles in conspiring to possess and sell prescription medication taken from stolen tractor trailers, New Jersey U.S. Attorney Paul J. Fishman announced.
Ernesto Romero-Vidal a/k/a “Bemba,” 48, was sentenced to 80 months in prison; Rocke R. Lopez-Batista a/k/a “El Nino,” 28, was sentenced to 40 months in prison; and Ariel Garcia, 40, was sentenced to 18 months in prison.
All three defendants previously pleaded guilty before U.S. District Judge William J. Martini to separate informations charging them with conspiracy to possess stolen prescription medicine. Romero-Vidal also pleaded guilty to three additional counts of conspiring to receive and sell stolen goods, including pharmaceuticals belonging to drugmakers Bayer, Perrigo, and Sandoz Inc.
According to documents filed in this case and statements made in court:
During their guilty plea proceedings, Romero-Vidal, Lopez-Batista, and Garcia admitted that from September 2009 through October 2009, they conspired with others to possess prescription respiratory medicine manufactured by Mylan Inc. that was taken from a stolen tractor trailer in Tampa, Florida, on September 8, 2009.
On October 20, 2009, Tapanes and a conspirator delivered samples of the stolen prescription medicine to a confidential source in Elizabeth, New Jersey. Nine days later, Tapanes and Garcia delivered a tractor trailer containing the stolen medicine to a confidential source. Later that same day, Tapanes, Lopez-Batista, and Garcia were present at a meeting in Garcia’s home during which the confidential source provided them with a cash payment of $140,000 for the stolen medicine. Romero-Vidal received a payment of $4,000 from the confidential source in connection with his role for brokering this sale.
Romero-Vidal also admitted he received approximately $3,500 for brokering the sale of medication stolen from a Bayer product distribution center in Olive Branch, Mississippi, on March 23, 2009, and $5,000 as partial payment towards the delivery of stolen Perrigo products—stolen along with a tractor trailer in Dallas on March 3, 2010—to New Jersey.
He also admitted participating in the sale of Sandoz Inc. prescription respiratory medicine to two separate groups of buyers. The Sandoz products were stolen along with another tractor trailer in Chambersburg, Pennsylvania, on December 2, 2009.
In addition to the prison term, Judge Martini sentenced each defendant to pay $264,900 in restitution. The judge also ordered Garcia to serve three years of supervised release and Lopez-Batista and Romero-Batista each to serve a year of supervised release.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen; and detectives of the North Bergen Police Department, under the direction of Chief Robert J. Dowd, with the investigation.
The government is represented by Senior Litigation Counsel Leslie Faye Schwartz and Assistant U.S. Attorney Jane H. Yoon of the U.S. Attorney’s Office Criminal Division in Newark.

Waynesboro Chiropractor Pleads Guilty

The United States Attorney’s Office for the Middle District of Pennsylvania announced that a Waynesboro, Pennsylvania chiropractor has pleaded guilty to charges stemming from a bogus automobile accident personal injury claim.
According to United States Attorney Peter J. Smith, Lawrence S. Herman, age 47, a resident of Frederick, Maryland, and the owner/operator of Herman Chiropractic in Waynesboro, Pennsylvania, pleaded guilty to a one count Information charging him with false statements in health care matters. Herman entered his guilty plea today in United States District Court in Harrisburg before the Honorable Sylvia Rambo in Harrisburg. The plea was entered by Herman pursuant to a plea agreement with the government.
The charges stem from a claim Herman submitted to the USAA insurance company in May 2012 for injuries allegedly suffered in an August 16, 2011 automobile accident in Maryland. In May 2012, Herman supported his claim with records indicating he was treated by a chiropractor for neck and back injuries between August 2011 and January 2012. When USAA did not immediately honor the claim, Herman hired a Baltimore area law firm to demand $60,000 from USAA for reimbursement of his chiropractic treatment expenses and for pain and suffering.
During the guilty plea hearing, Herman admitted the chiropractic treatment records were false and were created, at his direction, by a chiropractor who worked for him in his Waynesboro office. To conceal the fact the chiropractor was his employee, the fraudulent treatment records were submitted to USAA under a fictitious business letterhead created by Herman.
Assistant U.S. Attorney Kim Douglas Daniel stated during the hearing that Herman was not injured in the accident and in fact participated in several 5K, 10K, half-marathon, and marathon foot races during the period when Herman was supposedly being treated for his injuries in late 2011.
The case was investigated by the Harrisburg Office of the FBI and is being prosecuted by Assistant United States Attorney Kim Douglas Daniel.
A sentence following a finding of guilty is imposed by the Judge after consideration of the applicable federal sentencing statutes and the Federal Sentencing Guidelines.
In this case, the maximum penalty under the federal statute is five years’ imprisonment, a term of supervised release following imprisonment, and a fine. Under the Federal Sentencing Guidelines, the judge is also required to consider and weigh a number of factors, including the nature, circumstances and seriousness of the offense; the history and characteristics of the defendant; and the need to punish the defendant, protect, the public and provide for the defendant’s educational, vocational, and medical needs. For these reasons, the statutory maximum penalty for the offense is not an accurate indicator of the potential sentence for a specific defendant.

New Jersey Turnpike Authority Employee Admits Stealing at Least $1.5 Million

NEWARK—A former claims manager for the New Jersey Turnpike Authority today admitted devising a scheme that led to the theft of at least $1.5 million from the authority and various insurance companies, U.S. Paul J. Fishman announced.
Gerardo A. Blasi, 55, of Clifton, New Jersey, pleaded guilty before U.S. District Judge Kevin McNulty to an information charging him with using the mails as part of a scheme to defraud the Turnpike Authority and certain insurance companies and to obtain money and property by false and fraudulent pretenses, representations, and promises.
According to the documents filed in this case and statements made in court:
From May 2009 until June 2013, while working as the claims manager for the New Jersey Turnpike Authority (NJTA), it was Blasi’s job to negotiate and recover the costs of repairs from insurance companies of motorists who caused damage to property belonging to the NJTA. With the assistance of representatives from two New Jersey-based insurance claims adjusting companies, Blasi inflated the costs to repair the damages done to NJTA property by insured motorists. The inflated claims were submitted to the motorists’ insurance companies and payment was directed through the mail to the one of the New Jersey-based claims adjusting companies instead of to the NJTA. Payments for actual costs were passed on to the NJTA, and Blasi and his conspirators shared the difference between the inflated costs and the payments for actual costs sent to the NJTA.
Despite a NJTA policy of not attempting to recover on damages caused by motorists who died from accidents on the Turnpike, Blasi continued to process those claims. Because the NJTA was unaware that Blasi had processed the claims, he was able to share the entire payment sent by the insurance company between himself and one of his conspirators. Blasi and others defrauded the NJTA and various insurance companies of at least $1.5 million.
The charge to which Blasi pleaded guilty is punishable by a maximum potential penalty of 20 years in prison and a $250,000 fine. Sentencing is scheduled for March 19, 2014.
U.S. Attorney Fishman credited special agents from the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, with the investigation leading to today’s plea. He also thanked the New Jersey Turnpike Authority, under the direction of Executive Director Veronique Hakim, for its cooperation during the investigation.
The government is represented by Assistant U.S. Attorney David L. Foster of the U.S. Attorney’s Office, Special Prosecution’s Division.

Pennsylvania Woman Charged with Millions of Dollars in Fraudulent Sales of Telecom Equipment

NEWARK, NJ—A Pennsylvania woman was indicted by a federal grand jury today for her role in a long-running, large-scale scheme involving the fraudulent sale of telecommunications equipment belonging to a company she worked for as a consultant, U.S. Attorney Paul J. Fishman announced.
Juanita L. Berry, 45, of Philadelphia, Pennsylvania, was charged in an indictment with three counts of wire fraud that allegedly caused losses of at least $3.5 million.
According to the indictment and other documents filed in this case:
From 2008 to 2011, Berry worked as a consultant for an Indiana company that installed and removed telecommunications systems, first as a sales representative and later as the company’s vice president for major accounts. Initially, Berry worked out of the company’s Levittown, Pennsylvania facility and, later, out of its Dayton, New Jersey facility. The “brains” of the telecommunications systems the company installed and removed were the electronic circuit boards of varying complexity that range in price between several hundred to tens of thousands of dollars.
Berry owned a company named J. Starr Communications Inc. (J. Starr), through which she arranged her consulting agreement and allegedly operated her fraudulent scheme.
Without the knowledge or authorization of the telecommunications company’s management, Berry sold both used cards and new cards with other telecommunications equipment owned by the company as though such equipment belonged to her or J. Starr. She then pocketed the proceeds from such fraudulent sales. Berry deceived employees at the Levittown and Dayton facilities into thinking that the shipments of used cards were part of the telecommunications company’s normal course of business.
Berry allegedly deceived the company’s management in Indiana and other company employees on site about her activities by altering internal project reports and blaming others for the missing cards. Berry deceived a company in Florida that purchased the equipment into thinking that she or her company J. Starr had title to that equipment. Between 2008 and 2011, the Florida company that purchased the cards from Berry or J. Starr wired in excess of $3.5 million in payment to J. Starr’s bank account.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford, for the investigation leading to today’s charges.
The government is represented by Assistant U.S. Attorney Bohdan Vitvitsky of the U.S. Attorney’s Office Economic Crime Unit in Newark.
The charges and allegations contained in the indictment are merely accusations and the defendant is presumed innocent unless and until proven guilty.

Former Wichita Police Officer Sentenced in Scheme to Pay Bribe

WICHITA—A former officer of the Wichita Police Department has been sentenced to a year on federal probation after pleading guilty in a scheme to pay a bribe as part of an unsuccessful effort to keep from losing her job, U.S. Attorney Barry Grissom.
Former officer Joletta Vallejo, 35, Wichita, Kansas, pleaded guilty to one count of conspiracy to commit wire fraud. Vallejo was employed by the police department from January 9, 2006 to August 24, 2012. In her plea, she admitted that on October 16, 2011, two citizens approached her to make a report that they were victims of an aggravated robbery, aggravated kidnaping, aggravated battery, and attempted first-degree murder. Vallejo did not follow the police department’s policies in responding and filing their complaints.
As a result of her failure to follow department policies, Vallejo was investigated by the police department’s Professional Standards Bureau. When she was interviewed, she lied to the investigators. When she became aware she was going to be fired, she and co-defendant Patrick Melendrez devised a scheme to attempt to keep her job.
On August 22, 2012, Vallejo created a Google Voice number in the name of Melendrez. They used that number to call and text one of the citizens to offer him money to recant the statements he had made to police about Vallejo’s conduct. The citizen’s response was part of an undercover investigation.
Co-defendant Patrick Melendrez was sentenced to two years on probation. Co-defendant Courtney Foster is awaiting trial.
Grissom commended the Wichita Police Department, the FBI, and Assistant U.S. Attorney Debra Barnett for their work on the case.