Washington, DC--(ENEWSPF)--June 1, 2015.  Two individuals pleaded guilty today for their roles at fraudulent debt relief services companies that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service (USPIS) announced.

Athena Maldonado, 30, and Christopher Harati, 31, both of Orange County, California, pleaded guilty to a one-count information alleging conspiracy in connection with debt relief companies known as Nelson Gamble & Associates (Nelson Gamble) and Jackson Hunter Morris & Knight LLP (Jackson Hunter).  According to the information filed in the case, the defendants and their co-conspirators portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors.  Clients made monthly payments expecting the money to go toward settlements.  The companies instead took an amount equal to at least 15 percent of clients’ total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees. 

“Debt relief service scams prey on vulnerable consumers trying to climb out of tough financial situations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will aggressively pursue the criminals who operate these schemes.”

Maldonado admitted that she acted as the “legal department” for both companies, and used multiple aliases when responding to complaints submitted by state attorney general offices, the Better Business Bureau and private attorneys.  Maldonado admitted that, after Nelson Gamble changed its name to Jackson Hunter, she responded to consumer complaints by falsely stating, among other things, that the two companies were not related and that Jackson Hunter could not refund money paid to Nelson Gamble.

Harati admitted that he worked as a client relations manager for the companies and handled complaint calls from clients.  He admitted he told customers that Nelson Gamble and Jackson Hunter were separate companies, falsely stated that Jackson Hunter was a nationwide law firm with years of experience and made other misrepresentations designed to convince customers to stay with the company.

The defendants each face a statutory maximum sentence of five years in prison and a $250,000 fine, or an alternate fine of twice the loss or twice the gain, whichever is greater, along with mandatory restitution.  Their sentencing dates have not been set.

On Dec. 3, 2014, a grand jury in Santa Ana, California, returned a 22-count indictment charging Jeremy Nelson, Elias Ponce and John Vartanian, all of Orange County, for mail fraud, wire fraud, and conspiracy to commit mail and wire fraud in the same fraudulent scheme.  The trial in that case is scheduled to begin on Feb. 16, 2016, in Los Angeles.

The Federal Trade Commission (FTC) brought a civil case against Nelson Gamble, Jackson Hunter and other defendants in September 2012, alleging that the defendants falsely claimed they would reduce consumers’ unsecured debt by 50 percent or more, made unauthorized charges to their bank accounts and called phone numbers listed on the National Do Not Call Registry.  For more information about debt relief firms, the FTC encourages consumers to review this page on their website.

Principal Deputy Assistant Attorney General Mizer commended the USPIS team assigned to the Civil Division’s Consumer Protection Branch for their investigative efforts, and thanked the U.S. Attorney’s Office of the Central District of California for their contributions to the case.  The case is being prosecuted by Trial Attorney Alan Phelps of the Consumer Protection Branch.

Source: justice.gov

Washington, DC--(ENEWSPF)--June 1, 2015.  First Tennessee Bank N.A. has agreed to pay the United States $212.5 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced today.  First Tennessee is headquartered in Memphis, Tennessee. 

“First Tennessee’s reckless underwriting has resulted in significant losses of federal funds and was precisely the type of conduct that caused the financial crisis and housing market downturn,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “We will continue to hold accountable lenders who put profits before both their legal obligations and their customers, and restore wrongfully claimed funds to FHA and the treasury.” 

Between January 2006 and October 2008, First Tennessee, through its subsidiary First Horizon Home Loans Corporation (First Horizon), participated in the FHA insurance program as a Direct Endorsement Lender (DEL).  As a DEL, First Tennessee had the authority to originate, underwrite and endorse mortgages for FHA insurance.  If a DEL such as First Tennessee approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, neither the FHA nor HUD reviews a loan before it is endorsed for FHA insurance.  DELs such as First Tennessee are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance, to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices and to self-report any deficient loans identified by their quality control program.  In August 2008, First Tennessee sold First Horizon to MetLife Bank N.A. (MetLife), a wholly-owned subsidiary of MetLife Inc., which thereafter originated FHA-insured mortgages under the MetLife name.  In February 2015, MetLife agreed to pay $123.5 million to resolve its False Claims Act liability arising from its FHA originations after it acquired First Horizon from First Tennessee.

“First Tennessee admitted failings that resulted in poor quality FHA loans,” said Acting U.S. Attorney John A. Horn of the Northern District of Georgia.  “While First Tennessee profited from these loans, taxpayers incurred substantial losses when the loans defaulted.  The settlement, as well as the investigation that preceded it, illustrates that the Department of Justice will closely scrutinize entities that cause financial injury to the government, and, in turn, the American taxpayer.”

The settlement announced today resolves allegations that First Tennessee failed to comply with FHA origination, underwriting and quality control requirements.  As part of the settlement, First Tennessee admitted to the following facts: From January 2006 through October 2008, it repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements.  Beginning in late 2007, First Tennessee significantly increased its FHA originations.  The quality of First Tennessee’s FHA underwriting significantly decreased during 2008 as its FHA lending increased.  Beginning no later than early 2008, First Tennessee became aware that a substantial percentage of its FHA loans were not eligible for FHA mortgage insurance due to its own quality control findings.  These findings were routinely shared with First Tennessee’s senior managers.  Despite internally acknowledging that hundreds of its FHA mortgages had material deficiencies, and despite its obligation to self-report findings of material violations of FHA requirements, First Tennessee failed to report even a single deficient mortgage to FHA.  First Tennessee’s conduct caused FHA to insure hundreds of loans that were not eligible for insurance and, as a result, FHA suffered substantial losses when it later paid insurance claims on those loans.

“Our investigation found that First Tennessee caused FHA to pay claims on loans that the bank never should have approved and insured in the first place,” said HUD Inspector General David A. Montoya.  “This settlement reinforces my commitment to combat fraud in the origination of single family mortgages insured by the FHA and makes certain that only qualified, creditworthy borrowers who can repay their mortgages are approved under the FHA program.” 

“We are pleased that First Tennessee has acknowledged facts that demonstrate its failure to comply with HUD’s requirements and has agreed to settle with the government,” said HUD General Counsel Helen Kanovsky.  “We thank the Department of Justice and HUD’s Office of Inspector General for all of their efforts in helping us to make this settlement a reality.  We hope this agreement sends a message to those lenders with whom we do business that HUD takes compliance very seriously and so should they.”

The investigation of the allegations in the government’s complaint was a coordinated effort between the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Northern District of Georgia, HUD and HUD’s Office of Inspector General.

Source: justice.gov

Washington, DC--(ENEWSPF)--June 2, 2015.  A New Jersey man was sentenced to 30 months in prison for orchestrating an eight-year scheme to falsify employment certifications to facilitate the illegal entry of Indian nationals into the United States and for filing a false tax return.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Paul J. Fishman of the District of New Jersey, Chief Richard Weber of the Internal Revenue Service–Criminal Investigation (IRS-CI) and Director Bill A. Miller of the State Department’s Diplomatic Security Service (DSS) made the announcement.

Sandipkumar Patel, 42, of Edison, New Jersey, was sentenced by U.S. District Court Judge William H. Walls of the District of New Jersey.  The court also ordered Patel to pay a fine of $50,000, and restitution in the amount of $423,452 to the IRS.

On Sept. 4, 2014, Patel pleaded guilty to a two-count information charging him with conspiring to defraud the United States and subscribing to a false federal income tax return.

According to court documents filed in connection with his plea, from 2001 until 2009, Patel sponsored the visa applications of Indian nationals by falsely claiming that he would provide employment for them in the United States.  Patel falsely certified on the visa applications that he would employ the migrants in various technical fields at several New Jersey companies, thereby facilitating their illegal entry into the United States.  Over the course of the scheme, migrants paid Patel tens of thousands of dollars for the false certifications.  To disguise the scheme, Patel issued payroll checks and other payroll forms.  Patel required the migrants to return the proceeds of the payroll checks to him and to further reimburse him for the payroll tax expenses he incurred.  Patel used the fraudulent pay stubs and payroll checks to support false applications to extend the visas, and charged the migrants fees for the visa extensions.

As a result of falsely carrying the migrant employees on his payrolls, Patel overstated his payroll expenses on his federal income tax returns by more than $1.4 million over four years, and thereby underreported his tax obligation by over $400,000 for those years. 

This case was investigated by the IRS-CI and DSS.  The case is being prosecuted by Senior Trial Attorney Hope S. Olds of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney Michael Robertson of the District of New Jersey, with assistance from the Criminal Division’s Asset Forfeiture and Money Laundering Section.

Source: justice.gov

Washington, DC--(ENEWSPF)--May 28, 2015.  A federal jury in the Eastern District of Washington returned a guilty verdict yesterday against a Spokane, Washington, man for selling industrial bleach as a miracle cure for numerous diseases and illnesses, including cancer, AIDS, malaria, hepatitis, lyme disease, asthma and the common cold, the Department of Justice announced. 

Louis Daniel Smith, 45, was convicted following a seven-day trial of conspiracy, smuggling, selling misbranded drugs and defrauding the United States. Evidence at trial showed that Smith operated a business called “Project GreenLife” (PGL) from 2007 to 2011.  PGL sold a product called “Miracle Mineral Supplement,” or MMS, over the Internet.  MMS is a mixture of sodium chlorite and water.  Sodium chlorite is an industrial chemical used as a pesticide and for hydraulic fracking and wastewater treatment.  Sodium chlorite cannot be sold for human consumption and suppliers of the chemical include a warning sheet stating that it can cause potentially fatal side effects if swallowed.

“This verdict demonstrates that the Department of Justice will prosecute those who sell dangerous chemicals as miracle cures to sick people and their desperate loved ones,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “Consumers have the right to expect that the medicines that they purchase are safe and effective.”  Mizer thanked the jury for its service and its careful consideration of the evidence.

The government presented evidence that Smith instructed consumers to combine MMS with citric acid to create chlorine dioxide, add water and drink the resulting mixture to cure numerous illnesses. Chlorine dioxide is a potent agent used to bleach textiles, among other industrial applications.  Chlorine dioxide is a severe respiratory and eye irritant that can cause nausea, diarrhea and dehydration.  According to the instructions for use that Smith provided with his product, nausea, diarrhea and vomiting were all signs that the miracle cure was working.  The instructions also stated that despite a risk of possible brain damage, the product might still be appropriate for pregnant women or infants who were seriously ill.

According to the evidence presented at trial, Smith created phony “water purification” and “wastewater treatment” businesses in order to obtain sodium chlorite and ship his MMS without being detected by the U.S. Food and Drug Administration (FDA) or U.S. Customs and Border Protection.  The government also presented evidence that Smith hid evidence from FDA inspectors and destroyed evidence while law enforcement agents were executing search warrants on his residence and business. 

Before trial, three of Smith’s alleged co-conspirators, Chris Olson, Tammy Olson and Karis DeLong, Smith’s wife, pleaded guilty to introducing misbranded drugs into interstate commerce.  Chris Olson, along with alleged co-conspirators Matthew Darjanny and Joseph Lachnit, testified at trial that Smith was the leader of PGL.

In all, the jury convicted Smith of one count of conspiracy to commit multiple crimes, three counts of introducing misbranded drugs into interstate commerce with intent to defraud or mislead and one count of fraudulently smuggling merchandise into the United States.  The jury found Smith not guilty on one out of four of the misbranded drug counts. He faces a statutory maximum of 34 years in prison at his Sept. 9 sentencing.

The case was investigated by agents of the FDA’s Office of Criminal Investigations and the U.S. Postal Inspection Service.  The case was prosecuted by Christopher E. Parisi and Timothy T. Finley of the Civil Division’s Consumer Protection Branch in Washington, D.C.

Source: justice.gov

Washington, DC—(ENEWSPF)—May 28, 2015. The Department of Justice today filed a complaint and settlement agreement in the district court of the Middle District of Alabama to protect prisoners at the Julia Tutwiler Prison for Women in Wetumpka, Alabama, from sexual victimization by correctional officers.  The agreement filed is designed to resolve the Justice Department’s findings of sexual abuse and sexual harassment at Tutwiler.

In January 2014, the Justice Department issued a findings letter concluding that Tutwiler subjects its women prisoners to a pattern and practice of sexual abuse in violation the Eighth Amendment of the U.S. Constitution.  The findings identified several systemic failures that led to the pattern of abuse, including ineffective reporting and investigations and no grievance policy.  Tutwiler also failed to hold culpable staff accountable for abuses. 

“Prisoners are entitled to be safe from sexual predation by staff, and to live in an environment free from sexual assault, sexual harassment and the constant fear of these abuses,” said the head of the Civil Rights Division, Principal Deputy Assistant Attorney General Vanita Gupta.  “Our agreement uses gender-responsive and trauma-informed principles designed to address and eliminate the culture of abuse that Tutwiler’s women prisoners have suffered from and endured for years.”

Alabama has already begun to put in place important reforms to address the department’s findings including the Governor’s creation of an agency-level position of Deputy Commissioner of Women’s Services.  Wendy Williams, Ed.D., has been appointed to the position, and is charged with implementing gender-responsive practices at Tutwiler and with leading long overdue culture change.  The department looks forward to continuing to work with the Warden, the Commissioner and the dedicated Tutwiler staff who will be part of the solution going forward. 

Alabama’s willingness to engage in this cooperative resolution also eliminates the expense of a protracted lawsuit and offers women immediate protections.  “We very much appreciate the state’s cooperation and willingness to work to bring about meaningful and sustainable change on these important issues,” said U.S. Attorney George L. Beck Jr. of the Middle District of Alabama. 

The agreement comprehensively addresses the causes of the abuses uncovered by the department’s investigation.  It draws upon gender-responsive, trauma-informed principles to build on the Prison Rape Elimination Act National Standards, which are designed to prevent, detect and respond to custodial sexual abuse and sexual harassment throughout our nation’s prisons and jails.  The agreement tailors the more generalized national standards to target the specific problems revealed at Tutwiler and to meaningfully address the harm to Tutwiler’s women prisoners.

The agreement requires Tutwiler to protect women from sexual abuse and sexual harassment by ensuring sufficient staff to safely operate Tutwiler and supervise prisoners, supplemented by a state-of-the-art camera system.  The agreement also provides safeguards to prevent staff from unnecessarily viewing prisoners who are naked or performing bodily functions.

Tutwiler must ensure that each prisoner knows of her right to be free from sexual abuse and harassment, and that each prisoner is aware of the several internal and external methods to report abuse, including a new grievance process.  Tutwiler will protect prisoners from the threat of retaliation by monitoring the housing, programming and disciplinary status of any prisoner who reports or alleges abuse.  Further, women who allege sexual abuse are entitled to unimpeded access to medical treatment and crisis intervention services.  

The agreement also has provisions directed toward staff including the requirement to   thoroughly train all staff on their duties to prevent, detect and respond to sexual abuse at Tutwiler.  Staff will also be trained on how to manage, interact and communicate appropriately with women prisoners and with their lesbian, gay, bisexual, transgender and gender nonconforming prisoners. 

The agreement requires that all sexual abuse and sexual harassment allegations are promptly, thoroughly and objectively investigated and appropriately referred for prosecutorial review, and that alleged victims are advised of the outcome of their allegations.  Tutwiler must also take appropriate disciplinary action against staff found to have engaged in sexual abuse or sexual harassment or to have violated Tutwiler’s sexual abuse and sexual harassment policies and procedures. 

Tutwiler will put in place a quality assurance program to track and analyze data to ensure that sexual abuse and harassment is being adequately prevented, detected and responded to.  Significantly, an independent monitor will evaluate Tutwiler’s progress towards meaningful reform and assist Tutwiler’s compliance efforts.  The agreement requires the monitor to provide compliance reports to the court every six months.

Tutwiler’s prisoners have already seen some changes implemented following the department’s investigation.  One current prisoner recently wrote to the Civil Rights Division to say, “[W]e thank [DOJ] for all you are doing and are looking forward to all the miraculous things to come.”

The investigation was conducted by the Civil Rights Division’s Special Litigation Section, with assistance from the U.S. Attorney’s Office of the Middle District of Alabama.  Additional information about the Civil Rights Division is available on its website at www.justice.gov/crt.   

Related Material:

Download Tutwiler Complaint (327.76 KB)

Download Tutwiler Settlement Agreement (1.88 MB)

Source: justice.gov

Settlement Provides $9 Million in Compensation to African-American and Hispanic Borrowers

Washington, DC—(ENEWSPF)—May 28, 2015. The Justice Department and Consumer Financial Protection Bureau (Bureau) filed a consent order today to resolve allegations that Provident Funding Associates (Provident) engaged in a pattern or practice of discrimination that increased loan prices for African-American and Hispanic borrowers who obtained residential mortgages between 2006 and 2011 from Provident’s nationwide network of mortgage brokers.

The settlement, which is subject to court approval, was filed in conjunction with the agencies’ complaint in the U.S. District Court for the Northern District of California.  The complaint alleges that Provident violated the Fair Housing Act and Equal Credit Opportunity Act (ECOA) by charging thousands of African-American and Hispanic borrowers higher fees on mortgage loans not based on borrower risk, but because of their race or national origin.  Provident cooperated fully with the agencies’ investigation into its lending practices and agreed to settle this matter without contested litigation. 

“The Civil Rights Division is committed to ensuring that all types of lending institutions, including wholesale mortgage lenders, comply with the fair lending laws,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “We look forward to further collaboration with the Consumer Financial Protection Bureau in protecting consumers from illegal and discriminatory lending practices.”

“The settlement demonstrates this U.S. Attorney’s office will devote the resources necessary to root out and address unfair lending practices that affect citizens of this district,” said U.S. Attorney Melinda Haag of the Northern District of California.  “The law is clear: access to mortgage loans may not be made more difficult because of an applicant’s race or national origin.  We are glad that Provident has agreed to put an end to this practice without engaging in protracted litigation.” 

“Consumers should never be charged higher fees because of their race or national origin,” said Consumer Financial Protection Bureau Director Richard Cordray.  “We will continue to root out illegal and discriminatory lending practices in the marketplace.  I look forward to working closely with our partners at the Department of Justice to ensure consumers are treated fairly.”

The lawsuit originated from a 2011 referral by the Federal Trade Commission (FTC) to the Justice Department’s Civil Rights Division.  In 2012, the Bureau joined the Justice Department’s investigation.

Under the terms of the proposed settlement, Provident will pay $9 million into a fund for the benefit of victims of its alleged mortgage lending discrimination.  The proposed settlement provides for an independent administrator to contact and disburse payments to borrowers whom the agencies identify as victims of Provident’s discrimination, at no cost to the borrowers.  Provident will pay all costs and expenses of the administrator.  Borrowers who are eligible for compensation will be contacted by the administrator.  The department will make a public announcement and post contact information on its website once the administrator begins contacting victims.

The Justice Department’s enforcement of fair lending laws is conducted by the Fair Lending Unit of the Housing and Civil Enforcement Section in the Civil Rights Division.  Since the Fair Lending Unit was established in February 2010, it has filed or resolved 39 lending matters under the Fair Housing Act, ECOA, and the Servicemembers Civil Relief Act.  The settlements in these matters provide over $1.2 billion in monetary relief for impacted communities and individual borrowers.  The Attorney General’s annual reports to Congress on ECOA enforcement highlight the department’s accomplishments in fair lending and are available at www.justice.gov/crt/publications/.

The Civil Rights Division, the U.S. Attorney’s Office for the Northern District of California, the Consumer Financial Protection Bureau, and the FTC are members of the Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.  For more information on the task force, visit www.StopFraud.gov.

A copy of the complaint, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department’s website at http://www.justice.gov/fairhousing.

Related Material:

Download Provident Complaint (119 KB)

Download Provident Consent Order (828.72 KB)

Source: justice.gov

Washington, DC--(ENEWSPF)--May 28, 2015.  Garden State Cardiovascular Specialists P.C. (Garden State), a cardiology practice which owns and operates several facilities in New Jersey under the name NJ MedCare/NJ Heart, has agreed to pay more than $3.6 million to resolve allegations that its facilities falsely billed federal health care programs for tests that were not medically necessary, announced today by U.S. Attorney Paul J. Fishman for the District of New Jersey.

The settlement announced today resolves allegations that Garden State and its principals, Jasjit Walia M.D. and Preet Randhawa M.D., submitted claims to Medicare for various cardiology diagnostic tests and procedures, including stress tests, cardiac catheterizations and external counterpulsation, which were not medically necessary. 

The allegations resolved by today’s settlement were raised in a lawsuit filed under the qui tam, or whistleblower provisions of the False Claims Act.  The act allows private citizens with knowledge of fraud to bring civil actions on behalf of the government and to share in any recovery.  The whistleblower, Cheryl Mazurek, will receive more than $648,000 as part of today’s settlement.

The settlement is the culmination of an investigation conducted by special agents of the U.S. Department of Health and Human Services Office of Inspector General, under the direction of Special Agent in Charge Scott J. Lampert.

The government is represented by Assistant U.S. Attorneys Bernard J. Cooney and Kristin L. Vassallo of the U.S. Attorney’s Office for the District of New Jersey in Newark and Trial Attorney Arthur Di Dio of the Justice Department’s Civil Division.

U.S. Attorney Fishman reorganized the health care fraud practice at the U.S. Attorney’s Office in New Jersey 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 $635 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.

The claims settled by this agreement are allegations only, and there has been no determination of liability. The qui tam case is captioned United States ex rel. Cheryl Mazurek v. Garden State Cardiovascular Specialists, P.C. et al., Civil Action No. 10-4734 (D.N.J.).

Source: justice.gov

Washington, DC--(ENEWSPF)--May 28, 2015.  A former staff member of the U.S. Senate Committee on Commerce, Science and Transportation was charged by indictment in the Eastern District of Virginia with defrauding at least three women of approximately $500,000, announced Assistant Attorney General Leslie Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia. 

The indictment charges Robert Lee Foster, 65, of De Pere, Wisconsin, with nine counts of wire fraud. 

According to the indictment, from 2008 through May 2015, Foster devised a scheme to fraudulently obtain money and property from at least three women, whom Foster targeted because of their age, health, marital or family status, or other personal circumstances.  The indictment alleges that Foster used his affiliation with the U.S. Senate to gain the victims’ trust and confidence, and that he made various false and fraudulent representations to the victims, which prompted them to send Foster money, which funds he then used for his own personal benefit. 

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

This case was investigated by the FBI.  The case is being prosecuted by Trial Attorneys Kevin Driscoll and Peter Halpern of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Jamar Walker of the Eastern District of Virginia.

Related Material:

Foster Indictment

Source: justice.gov

Washington, DC--(ENEWSPF)--June 1, 2015.  Two individuals pleaded guilty today for their roles at fraudulent debt relief services companies that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service (USPIS) announced.

Athena Maldonado, 30, and Christopher Harati, 31, both of Orange County, California, pleaded guilty to a one-count information alleging conspiracy in connection with debt relief companies known as Nelson Gamble & Associates (Nelson Gamble) and Jackson Hunter Morris & Knight LLP (Jackson Hunter).  According to the information filed in the case, the defendants and their co-conspirators portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors.  Clients made monthly payments expecting the money to go toward settlements.  The companies instead took an amount equal to at least 15 percent of clients’ total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees. 

“Debt relief service scams prey on vulnerable consumers trying to climb out of tough financial situations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will aggressively pursue the criminals who operate these schemes.”

Maldonado admitted that she acted as the “legal department” for both companies, and used multiple aliases when responding to complaints submitted by state attorney general offices, the Better Business Bureau and private attorneys.  Maldonado admitted that, after Nelson Gamble changed its name to Jackson Hunter, she responded to consumer complaints by falsely stating, among other things, that the two companies were not related and that Jackson Hunter could not refund money paid to Nelson Gamble.

Harati admitted that he worked as a client relations manager for the companies and handled complaint calls from clients.  He admitted he told customers that Nelson Gamble and Jackson Hunter were separate companies, falsely stated that Jackson Hunter was a nationwide law firm with years of experience and made other misrepresentations designed to convince customers to stay with the company.

The defendants each face a statutory maximum sentence of five years in prison and a $250,000 fine, or an alternate fine of twice the loss or twice the gain, whichever is greater, along with mandatory restitution.  Their sentencing dates have not been set.

On Dec. 3, 2014, a grand jury in Santa Ana, California, returned a 22-count indictment charging Jeremy Nelson, Elias Ponce and John Vartanian, all of Orange County, for mail fraud, wire fraud, and conspiracy to commit mail and wire fraud in the same fraudulent scheme.  The trial in that case is scheduled to begin on Feb. 16, 2016, in Los Angeles.

The Federal Trade Commission (FTC) brought a civil case against Nelson Gamble, Jackson Hunter and other defendants in September 2012, alleging that the defendants falsely claimed they would reduce consumers’ unsecured debt by 50 percent or more, made unauthorized charges to their bank accounts and called phone numbers listed on the National Do Not Call Registry.  For more information about debt relief firms, the FTC encourages consumers to review this page on their website.

Principal Deputy Assistant Attorney General Mizer commended the USPIS team assigned to the Civil Division’s Consumer Protection Branch for their investigative efforts, and thanked the U.S. Attorney’s Office of the Central District of California for their contributions to the case.  The case is being prosecuted by Trial Attorney Alan Phelps of the Consumer Protection Branch.

Source: justice.gov

Washington, DC--(ENEWSPF)--June 1, 2015.  First Tennessee Bank N.A. has agreed to pay the United States $212.5 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced today.  First Tennessee is headquartered in Memphis, Tennessee. 

“First Tennessee’s reckless underwriting has resulted in significant losses of federal funds and was precisely the type of conduct that caused the financial crisis and housing market downturn,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “We will continue to hold accountable lenders who put profits before both their legal obligations and their customers, and restore wrongfully claimed funds to FHA and the treasury.” 

Between January 2006 and October 2008, First Tennessee, through its subsidiary First Horizon Home Loans Corporation (First Horizon), participated in the FHA insurance program as a Direct Endorsement Lender (DEL).  As a DEL, First Tennessee had the authority to originate, underwrite and endorse mortgages for FHA insurance.  If a DEL such as First Tennessee approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, neither the FHA nor HUD reviews a loan before it is endorsed for FHA insurance.  DELs such as First Tennessee are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance, to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices and to self-report any deficient loans identified by their quality control program.  In August 2008, First Tennessee sold First Horizon to MetLife Bank N.A. (MetLife), a wholly-owned subsidiary of MetLife Inc., which thereafter originated FHA-insured mortgages under the MetLife name.  In February 2015, MetLife agreed to pay $123.5 million to resolve its False Claims Act liability arising from its FHA originations after it acquired First Horizon from First Tennessee.

“First Tennessee admitted failings that resulted in poor quality FHA loans,” said Acting U.S. Attorney John A. Horn of the Northern District of Georgia.  “While First Tennessee profited from these loans, taxpayers incurred substantial losses when the loans defaulted.  The settlement, as well as the investigation that preceded it, illustrates that the Department of Justice will closely scrutinize entities that cause financial injury to the government, and, in turn, the American taxpayer.”

The settlement announced today resolves allegations that First Tennessee failed to comply with FHA origination, underwriting and quality control requirements.  As part of the settlement, First Tennessee admitted to the following facts: From January 2006 through October 2008, it repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements.  Beginning in late 2007, First Tennessee significantly increased its FHA originations.  The quality of First Tennessee’s FHA underwriting significantly decreased during 2008 as its FHA lending increased.  Beginning no later than early 2008, First Tennessee became aware that a substantial percentage of its FHA loans were not eligible for FHA mortgage insurance due to its own quality control findings.  These findings were routinely shared with First Tennessee’s senior managers.  Despite internally acknowledging that hundreds of its FHA mortgages had material deficiencies, and despite its obligation to self-report findings of material violations of FHA requirements, First Tennessee failed to report even a single deficient mortgage to FHA.  First Tennessee’s conduct caused FHA to insure hundreds of loans that were not eligible for insurance and, as a result, FHA suffered substantial losses when it later paid insurance claims on those loans.

“Our investigation found that First Tennessee caused FHA to pay claims on loans that the bank never should have approved and insured in the first place,” said HUD Inspector General David A. Montoya.  “This settlement reinforces my commitment to combat fraud in the origination of single family mortgages insured by the FHA and makes certain that only qualified, creditworthy borrowers who can repay their mortgages are approved under the FHA program.” 

“We are pleased that First Tennessee has acknowledged facts that demonstrate its failure to comply with HUD’s requirements and has agreed to settle with the government,” said HUD General Counsel Helen Kanovsky.  “We thank the Department of Justice and HUD’s Office of Inspector General for all of their efforts in helping us to make this settlement a reality.  We hope this agreement sends a message to those lenders with whom we do business that HUD takes compliance very seriously and so should they.”

The investigation of the allegations in the government’s complaint was a coordinated effort between the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Northern District of Georgia, HUD and HUD’s Office of Inspector General.

Source: justice.gov

Washington, DC--(ENEWSPF)--June 2, 2015.  A New Jersey man was sentenced to 30 months in prison for orchestrating an eight-year scheme to falsify employment certifications to facilitate the illegal entry of Indian nationals into the United States and for filing a false tax return.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Paul J. Fishman of the District of New Jersey, Chief Richard Weber of the Internal Revenue Service–Criminal Investigation (IRS-CI) and Director Bill A. Miller of the State Department’s Diplomatic Security Service (DSS) made the announcement.

Sandipkumar Patel, 42, of Edison, New Jersey, was sentenced by U.S. District Court Judge William H. Walls of the District of New Jersey.  The court also ordered Patel to pay a fine of $50,000, and restitution in the amount of $423,452 to the IRS.

On Sept. 4, 2014, Patel pleaded guilty to a two-count information charging him with conspiring to defraud the United States and subscribing to a false federal income tax return.

According to court documents filed in connection with his plea, from 2001 until 2009, Patel sponsored the visa applications of Indian nationals by falsely claiming that he would provide employment for them in the United States.  Patel falsely certified on the visa applications that he would employ the migrants in various technical fields at several New Jersey companies, thereby facilitating their illegal entry into the United States.  Over the course of the scheme, migrants paid Patel tens of thousands of dollars for the false certifications.  To disguise the scheme, Patel issued payroll checks and other payroll forms.  Patel required the migrants to return the proceeds of the payroll checks to him and to further reimburse him for the payroll tax expenses he incurred.  Patel used the fraudulent pay stubs and payroll checks to support false applications to extend the visas, and charged the migrants fees for the visa extensions.

As a result of falsely carrying the migrant employees on his payrolls, Patel overstated his payroll expenses on his federal income tax returns by more than $1.4 million over four years, and thereby underreported his tax obligation by over $400,000 for those years. 

This case was investigated by the IRS-CI and DSS.  The case is being prosecuted by Senior Trial Attorney Hope S. Olds of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney Michael Robertson of the District of New Jersey, with assistance from the Criminal Division’s Asset Forfeiture and Money Laundering Section.

Source: justice.gov

Washington, DC—(ENEWSPF)—June 2, 2015. A 108-count superseding indictment unsealed today charges 37 people (see chart) as participants in a multi-state heroin trafficking organization with ties to Mexico.  The charges, which include conducting a continuing criminal enterprise, conspiracy to commit money laundering, 62 counts of money laundering and 43 substantive drug charges, were announced by U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania and Special Agent-in-Charge Gary Tuggle for the Drug Enforcement Administration (DEA). 

Members of the Laredo Drug Trafficking Organization (DTO) are charged with the distribution and attempted distribution of multi-kilogram quantities of heroin in Philadelphia. According to the indictment, since 2008, the Laredo DTO has manufactured and imported heroin from its operation in Mexico and supplied other DTOs in Philadelphia, Chicago Camden, New Jersey,  and elsewhere.

Brothers Antonio and Ismael Laredo, the alleged leaders of the Laredo DTO, are charged with engagement in a continuing criminal enterprise.  They allegedly supervised 21 defendants who are charged with participation in a conspiracy to import heroin from Mexico into the United States and conspiracy to distribute kilogram quantities of heroin manufactured in and smuggled from Mexico into the United States.  According to the superseding indictment, the Laredo DTO smuggled-in from Mexico approximately 1,000 kilograms of heroin using various concealment techniques including placing kilogram quantities of heroin in car batteries, car bumpers, concealed vehicle traps and sealed fruit and vegetable cans.  Antonio and Ismael Laredo allegedly recruited and hired couriers in the United States to transport and deliver multi-kilogram shipments of heroin, originating in Mexico, to heroin distributors affiliated with the Laredo DTO located in Philadelphia, Camden, New Jersey, Chicago, Atlanta, and New York, New York.  Defendant Antonio Marcelo Barragan allegedly served as a Mexican-based supplier of raw opium.  Defendant Alejandro Sotelo allegedly served as a stash house operator and distributor of the DTO’s product in Chicago, where he arranged trans-shipment of multi-kilogram quantities of heroin to Philadelphia, New Jersey and New York.

It is further alleged that the Laredo DTO supplied street level heroin bagging and packaging operations in Philadelphia; that heroin, in quantities ranging from 15 to 50 kilograms at a time was regularly moved between the Chicago, operation and the Philadelphia operation; and that members of the DTO, including the Laredo brothers, used violence, such as assaults and kidnapping, threats of violence, including murder and arson and firearms to protect the DTO’s product and proceeds and to prevent members from withdrawing from the organization.  The indictment alleges that the Laredo DTO supplied multi-kilogram quantities of heroin to other drug traffickers in the Philadelphia area, including the (Christian) Serrano DTO, charged elsewhere, the (Darbin and Gabriel) Vargas DTO and the Camden, New Jersey, based (Confesor) Montalvo organization, among others.

According to the indictment, members of the Laredo DTO would transport heroin shipments by various means, including car and train.  In 2012, a courier concealed three kilograms of heroin inside a car battery for transport from Mexico to Philadelphia; another shipment of four kilograms was concealed inside a car speaker box; a shipment of 7.6 kilograms of heroin was concealed in sealed fruit and vegetable cans in Texas and the couriers were directed to deliver the heroin to defendants Darbin Vargas and Gabriel Vargas, of the Vargas DTO in Philadelphia, in September 2012.  The indictment alleges that the Laredo brothers arranged for the manufacture and production of car batteries in Mexico containing concealed compartments to hold multiple kilograms of heroin which were then used to surreptitiously import heroin into the United States.

The indictment further alleges that the Laredo brothers had numerous relatives and associates set up “funnel accounts” that were used for the purpose of laundering the proceeds of the drug operation back to Mexico.  According to the indictment, using a variety of money laundering techniques, including the use of the funnel accounts, wire transfers of funds and Western Union money grams, the DTO was able to launder at least $5 million of its heroin proceeds back to Mexico, where the Laredo brothers resided.  It was further a part of the conspiracy that the Laredo brothers directed defendant Osmar Flores, doing business as Tri-Country Auto Sales Inc. in Rockford, Illinois, to collect and deposit large sums of cash representing proceeds of the Laredo DTO's heroin trafficking sales in the U.S. to the business bank account of Tri Country Auto Sales Inc.  Portions of those funds were allegedly used to purchase multiple vehicles used to transport heroin from Mexico and bulk U.S. currency from the United States to Mexico, in concealed compartments.  In addition, defendant Osmar Flores transmitted proceeds of the heroin operation back to the Laredos, both by wire transfers and bulk transfers of cash. 

“This indictment and the arrests this morning are a significant victory in our efforts to combat drug trafficking,” said U.S. Attorney Memeger.  “Because of the persistent and collaborative efforts of multiple law enforcement agencies across the country, a major supplier of heroin to the Philadelphia region is out of business.”

“Heroin is the top enforcement priority of the Drug Enforcement Administration’s Philadelphia Field Division,” said Special Agent-in-Charge Tuggle.  “Dismantling this extremely violent international drug trafficking organization ended the flow of hundreds of kilograms of Mexican based heroin into the Philadelphia region and is a direct result of DEA’s resolve to make our communities safer.  This was a cooperative effort with local, state and federal agencies.  The flow of Mexican produced heroin into southeast Pennsylvania has been significantly impacted.”

If convicted, the Laredo brothers each face a mandatory sentence of life in prison, tens to hundreds of millions of dollars in fines, as well as a criminal forfeiture judgment to the United States of up to $60 million; most of the remaining drug trafficking defendants face mandatory minimum sentences of at least 10 years in prison (see attached chart).

The case was investigated by the  DEA’s offices in Philadelphia, Camden, New Jersey, Mexico City, Mexico, Chicago and Rockford, Illinois, Newark, New Jersey, New York, New York, Tyler, Texas, Raleigh, North Carolina, Jefferson City and St. Louis, Missouri, Richmond, Virginia, and the DEA Special Operations Division; FBI in Philadelphia; U.S. Marshal Service; Homeland Security Investigations in Philadelphia and Richmond, Virginia; Immigration and Customs Enforcement; the Philadelphia Police Department; Darby Borough Police Department; SEPTA Transit Police Department; Berks County District Attorney’s Office; Bucks County District Attorney’s Office in New Jersey; the New Jersey Attorney General’s Office, Parole Board, Cherry Hill Police Department, Delaware River Port Authority Police, Camden County Prosecutor’s Office, Camden County Sherriff’s Office; in Illinois: Rockford Police Department, Will County Sheriff's Department, Skokie Police Department, Aurora Police Department, Oak Lawn Police Department, Addison Police Department, Prospect Heights Police Department, Chicago Police Department, Arlington Heights Police Department, West Chicago Police Department, Cook County Sheriff's Department and McHenry County Narcotics Task Force; in Texas: Texas Department of Safety, CID Mt. Pleasant, Mt. Pleasant Police Department; in Missouri: Missouri State Highway Patrol, Audrain County Sheriff’s Department, East Central Drug Task Force; in Virginia: the Mecklenberg County Commonwealth Attorney’s Office and the Virginia State Police; and the Orange County Sheriff’s Office in North Carolina.  Assistance was provided by the U.S. Attorney’s Offices in the Northern District of Illinois and the Eastern District of Virginia.  The case is being prosecuted by Assistant United States Attorney Joseph T. Labrum III.

Related Material:

Download Laredo DTO Defendant Chart (51.82 KB)

Download Laredo DTO Indictment (3.8 MB)

Source: justice.gov

Washington, DC—(ENEWSPF)—June 2, 2015. The Department of Justice and the U.S. Environmental Protection Agency (EPA) today announced a final settlement with Millard Refrigerated Services that resolves alleged violations of the Clean Air Act, Emergency Planning and Community Right-to-Know Act and Comprehensive Environmental Response, Compensation, and Liability Act violations for an airborne release of ammonia from Millard’s Theodore, Alabama, facility in 2010.  Millard will pay a $3 million penalty for the violations that sickened 152 people responding to the BP oil spill.

“The release of ammonia created significant health problems,” said Assistant Attorney General John C. Cruden for the Environment and Natural Resources Division.  “This settlement underscores how lapses in environmental management can have serious consequences, and today we are holding Millard accountable for this failure to ensure the safety of its workers and the surrounding community.”

“The Clean Air Act exists to protect all of us from preventable threats to our health and safety, such as what happened in this case,” said Keyon R. Brown, U.S. Attorney for the Southern District of Alabama. “On behalf of the citizens of our district, I commend the hard work of the EPA and the Department of Justice’s Environmental and Natural Resources Division in achieving such a significant settlement that vindicates these interests."

“EPA is serious about holding companies that threaten people’s health and safety accountable,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance.  “It’s imperative that companies that use and store potentially-hazardous materials like ammonia ensure their operations do not pose a health risk to their employees or the public.”  

On Aug. 23, 2010, the Millard Refrigerated Service warehouse in Theodore, Alabama, released approximately 32,000 pounds of anhydrous ammonia, to which exposure can be lethal, into the air after refrigeration equipment malfunctioned.  The ammonia travelled directly over a site where more than 800 people were working on decontaminating ships responding to the Deepwater Horizon oil spill in the Gulf of Mexico.  The Mobile, Alabama, Emergency Management Agency ordered an evacuation of the surrounding area and a one mile shelter in place situation following the ammonia release. 

One hundred fifty-two people working at the site and on ships were treated forsymptoms of ammonia exposure at hospitals in the Mobile area, four of whom were admitted into intensive care units.  One Millard employee sustained injuries after briefly losing consciousness from ammonia inhalation.

During its investigation of the warehouse after the ammonia release, EPA discovered that Millard failed to adequately address a well-known risk for ammonia production systems called hydraulic shock, which can cause catastrophic equipment failures.  These failures can lead to hazardous releases of anhydrous ammonia.  The company’s failure to address this risk, in addition to other deficiencies in its production and safety systems, amounted to 37 distinct violations of the Clean Air Act’s Risk Management Program and General Duty Clause.  These requirements compel companies that store or use potentially-hazardous substances like ammonia to identify the hazards posed by their operation, design and maintain a safe facility and minimize the consequences of any releases that might occur. The company’s failure to immediately report a release of anhydrous ammonia above the reportable quantity to the National Response Center amounted to one CERCLA violation.  The company’s failure to immediately report a release of anhydrous ammonia to the local and state emergency planning commissions and to file a follow-up reports for two releases amounted to three EPCRA violations.

EPA also discovered that Millard had two prior smaller ammonia releases caused by hydraulic shock, which should have signaled a need to take steps to prevent a catastrophic release like the one that occurred at the Theodore warehouse.  Millard sold the Theodore warehouse facility, which is no longer in operation.

The settlement was entered in the District Court in Mobile, Alabama.

To read the settlement, or for more information about the case, visit: www.justice.gov/enrd/consent-decrees

Related Material:

Download Millard Complaint (203.59 KB)

Download Millard Entered Stipulation (108.97 KB)

Source: justice.gov

Washington, DC--(ENEWSPF)--May 28, 2015.  A federal jury in the Eastern District of Washington returned a guilty verdict yesterday against a Spokane, Washington, man for selling industrial bleach as a miracle cure for numerous diseases and illnesses, including cancer, AIDS, malaria, hepatitis, lyme disease, asthma and the common cold, the Department of Justice announced. 

Louis Daniel Smith, 45, was convicted following a seven-day trial of conspiracy, smuggling, selling misbranded drugs and defrauding the United States. Evidence at trial showed that Smith operated a business called “Project GreenLife” (PGL) from 2007 to 2011.  PGL sold a product called “Miracle Mineral Supplement,” or MMS, over the Internet.  MMS is a mixture of sodium chlorite and water.  Sodium chlorite is an industrial chemical used as a pesticide and for hydraulic fracking and wastewater treatment.  Sodium chlorite cannot be sold for human consumption and suppliers of the chemical include a warning sheet stating that it can cause potentially fatal side effects if swallowed.

“This verdict demonstrates that the Department of Justice will prosecute those who sell dangerous chemicals as miracle cures to sick people and their desperate loved ones,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “Consumers have the right to expect that the medicines that they purchase are safe and effective.”  Mizer thanked the jury for its service and its careful consideration of the evidence.

The government presented evidence that Smith instructed consumers to combine MMS with citric acid to create chlorine dioxide, add water and drink the resulting mixture to cure numerous illnesses. Chlorine dioxide is a potent agent used to bleach textiles, among other industrial applications.  Chlorine dioxide is a severe respiratory and eye irritant that can cause nausea, diarrhea and dehydration.  According to the instructions for use that Smith provided with his product, nausea, diarrhea and vomiting were all signs that the miracle cure was working.  The instructions also stated that despite a risk of possible brain damage, the product might still be appropriate for pregnant women or infants who were seriously ill.

According to the evidence presented at trial, Smith created phony “water purification” and “wastewater treatment” businesses in order to obtain sodium chlorite and ship his MMS without being detected by the U.S. Food and Drug Administration (FDA) or U.S. Customs and Border Protection.  The government also presented evidence that Smith hid evidence from FDA inspectors and destroyed evidence while law enforcement agents were executing search warrants on his residence and business. 

Before trial, three of Smith’s alleged co-conspirators, Chris Olson, Tammy Olson and Karis DeLong, Smith’s wife, pleaded guilty to introducing misbranded drugs into interstate commerce.  Chris Olson, along with alleged co-conspirators Matthew Darjanny and Joseph Lachnit, testified at trial that Smith was the leader of PGL.

In all, the jury convicted Smith of one count of conspiracy to commit multiple crimes, three counts of introducing misbranded drugs into interstate commerce with intent to defraud or mislead and one count of fraudulently smuggling merchandise into the United States.  The jury found Smith not guilty on one out of four of the misbranded drug counts. He faces a statutory maximum of 34 years in prison at his Sept. 9 sentencing.

The case was investigated by agents of the FDA’s Office of Criminal Investigations and the U.S. Postal Inspection Service.  The case was prosecuted by Christopher E. Parisi and Timothy T. Finley of the Civil Division’s Consumer Protection Branch in Washington, D.C.

Source: justice.gov

Washington, DC—(ENEWSPF)—May 28, 2015. The Department of Justice today filed a complaint and settlement agreement in the district court of the Middle District of Alabama to protect prisoners at the Julia Tutwiler Prison for Women in Wetumpka, Alabama, from sexual victimization by correctional officers.  The agreement filed is designed to resolve the Justice Department’s findings of sexual abuse and sexual harassment at Tutwiler.

In January 2014, the Justice Department issued a findings letter concluding that Tutwiler subjects its women prisoners to a pattern and practice of sexual abuse in violation the Eighth Amendment of the U.S. Constitution.  The findings identified several systemic failures that led to the pattern of abuse, including ineffective reporting and investigations and no grievance policy.  Tutwiler also failed to hold culpable staff accountable for abuses. 

“Prisoners are entitled to be safe from sexual predation by staff, and to live in an environment free from sexual assault, sexual harassment and the constant fear of these abuses,” said the head of the Civil Rights Division, Principal Deputy Assistant Attorney General Vanita Gupta.  “Our agreement uses gender-responsive and trauma-informed principles designed to address and eliminate the culture of abuse that Tutwiler’s women prisoners have suffered from and endured for years.”

Alabama has already begun to put in place important reforms to address the department’s findings including the Governor’s creation of an agency-level position of Deputy Commissioner of Women’s Services.  Wendy Williams, Ed.D., has been appointed to the position, and is charged with implementing gender-responsive practices at Tutwiler and with leading long overdue culture change.  The department looks forward to continuing to work with the Warden, the Commissioner and the dedicated Tutwiler staff who will be part of the solution going forward. 

Alabama’s willingness to engage in this cooperative resolution also eliminates the expense of a protracted lawsuit and offers women immediate protections.  “We very much appreciate the state’s cooperation and willingness to work to bring about meaningful and sustainable change on these important issues,” said U.S. Attorney George L. Beck Jr. of the Middle District of Alabama. 

The agreement comprehensively addresses the causes of the abuses uncovered by the department’s investigation.  It draws upon gender-responsive, trauma-informed principles to build on the Prison Rape Elimination Act National Standards, which are designed to prevent, detect and respond to custodial sexual abuse and sexual harassment throughout our nation’s prisons and jails.  The agreement tailors the more generalized national standards to target the specific problems revealed at Tutwiler and to meaningfully address the harm to Tutwiler’s women prisoners.

The agreement requires Tutwiler to protect women from sexual abuse and sexual harassment by ensuring sufficient staff to safely operate Tutwiler and supervise prisoners, supplemented by a state-of-the-art camera system.  The agreement also provides safeguards to prevent staff from unnecessarily viewing prisoners who are naked or performing bodily functions.

Tutwiler must ensure that each prisoner knows of her right to be free from sexual abuse and harassment, and that each prisoner is aware of the several internal and external methods to report abuse, including a new grievance process.  Tutwiler will protect prisoners from the threat of retaliation by monitoring the housing, programming and disciplinary status of any prisoner who reports or alleges abuse.  Further, women who allege sexual abuse are entitled to unimpeded access to medical treatment and crisis intervention services.  

The agreement also has provisions directed toward staff including the requirement to   thoroughly train all staff on their duties to prevent, detect and respond to sexual abuse at Tutwiler.  Staff will also be trained on how to manage, interact and communicate appropriately with women prisoners and with their lesbian, gay, bisexual, transgender and gender nonconforming prisoners. 

The agreement requires that all sexual abuse and sexual harassment allegations are promptly, thoroughly and objectively investigated and appropriately referred for prosecutorial review, and that alleged victims are advised of the outcome of their allegations.  Tutwiler must also take appropriate disciplinary action against staff found to have engaged in sexual abuse or sexual harassment or to have violated Tutwiler’s sexual abuse and sexual harassment policies and procedures. 

Tutwiler will put in place a quality assurance program to track and analyze data to ensure that sexual abuse and harassment is being adequately prevented, detected and responded to.  Significantly, an independent monitor will evaluate Tutwiler’s progress towards meaningful reform and assist Tutwiler’s compliance efforts.  The agreement requires the monitor to provide compliance reports to the court every six months.

Tutwiler’s prisoners have already seen some changes implemented following the department’s investigation.  One current prisoner recently wrote to the Civil Rights Division to say, “[W]e thank [DOJ] for all you are doing and are looking forward to all the miraculous things to come.”

The investigation was conducted by the Civil Rights Division’s Special Litigation Section, with assistance from the U.S. Attorney’s Office of the Middle District of Alabama.  Additional information about the Civil Rights Division is available on its website at www.justice.gov/crt.   

Related Material:

Download Tutwiler Complaint (327.76 KB)

Download Tutwiler Settlement Agreement (1.88 MB)

Source: justice.gov

Settlement Provides $9 Million in Compensation to African-American and Hispanic Borrowers

Washington, DC—(ENEWSPF)—May 28, 2015. The Justice Department and Consumer Financial Protection Bureau (Bureau) filed a consent order today to resolve allegations that Provident Funding Associates (Provident) engaged in a pattern or practice of discrimination that increased loan prices for African-American and Hispanic borrowers who obtained residential mortgages between 2006 and 2011 from Provident’s nationwide network of mortgage brokers.

The settlement, which is subject to court approval, was filed in conjunction with the agencies’ complaint in the U.S. District Court for the Northern District of California.  The complaint alleges that Provident violated the Fair Housing Act and Equal Credit Opportunity Act (ECOA) by charging thousands of African-American and Hispanic borrowers higher fees on mortgage loans not based on borrower risk, but because of their race or national origin.  Provident cooperated fully with the agencies’ investigation into its lending practices and agreed to settle this matter without contested litigation. 

“The Civil Rights Division is committed to ensuring that all types of lending institutions, including wholesale mortgage lenders, comply with the fair lending laws,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “We look forward to further collaboration with the Consumer Financial Protection Bureau in protecting consumers from illegal and discriminatory lending practices.”

“The settlement demonstrates this U.S. Attorney’s office will devote the resources necessary to root out and address unfair lending practices that affect citizens of this district,” said U.S. Attorney Melinda Haag of the Northern District of California.  “The law is clear: access to mortgage loans may not be made more difficult because of an applicant’s race or national origin.  We are glad that Provident has agreed to put an end to this practice without engaging in protracted litigation.” 

“Consumers should never be charged higher fees because of their race or national origin,” said Consumer Financial Protection Bureau Director Richard Cordray.  “We will continue to root out illegal and discriminatory lending practices in the marketplace.  I look forward to working closely with our partners at the Department of Justice to ensure consumers are treated fairly.”

The lawsuit originated from a 2011 referral by the Federal Trade Commission (FTC) to the Justice Department’s Civil Rights Division.  In 2012, the Bureau joined the Justice Department’s investigation.

Under the terms of the proposed settlement, Provident will pay $9 million into a fund for the benefit of victims of its alleged mortgage lending discrimination.  The proposed settlement provides for an independent administrator to contact and disburse payments to borrowers whom the agencies identify as victims of Provident’s discrimination, at no cost to the borrowers.  Provident will pay all costs and expenses of the administrator.  Borrowers who are eligible for compensation will be contacted by the administrator.  The department will make a public announcement and post contact information on its website once the administrator begins contacting victims.

The Justice Department’s enforcement of fair lending laws is conducted by the Fair Lending Unit of the Housing and Civil Enforcement Section in the Civil Rights Division.  Since the Fair Lending Unit was established in February 2010, it has filed or resolved 39 lending matters under the Fair Housing Act, ECOA, and the Servicemembers Civil Relief Act.  The settlements in these matters provide over $1.2 billion in monetary relief for impacted communities and individual borrowers.  The Attorney General’s annual reports to Congress on ECOA enforcement highlight the department’s accomplishments in fair lending and are available at www.justice.gov/crt/publications/.

The Civil Rights Division, the U.S. Attorney’s Office for the Northern District of California, the Consumer Financial Protection Bureau, and the FTC are members of the Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.  For more information on the task force, visit www.StopFraud.gov.

A copy of the complaint, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department’s website at http://www.justice.gov/fairhousing.

Related Material:

Download Provident Complaint (119 KB)

Download Provident Consent Order (828.72 KB)

Source: justice.gov

Washington, DC--(ENEWSPF)--May 28, 2015.  Garden State Cardiovascular Specialists P.C. (Garden State), a cardiology practice which owns and operates several facilities in New Jersey under the name NJ MedCare/NJ Heart, has agreed to pay more than $3.6 million to resolve allegations that its facilities falsely billed federal health care programs for tests that were not medically necessary, announced today by U.S. Attorney Paul J. Fishman for the District of New Jersey.

The settlement announced today resolves allegations that Garden State and its principals, Jasjit Walia M.D. and Preet Randhawa M.D., submitted claims to Medicare for various cardiology diagnostic tests and procedures, including stress tests, cardiac catheterizations and external counterpulsation, which were not medically necessary. 

The allegations resolved by today’s settlement were raised in a lawsuit filed under the qui tam, or whistleblower provisions of the False Claims Act.  The act allows private citizens with knowledge of fraud to bring civil actions on behalf of the government and to share in any recovery.  The whistleblower, Cheryl Mazurek, will receive more than $648,000 as part of today’s settlement.

The settlement is the culmination of an investigation conducted by special agents of the U.S. Department of Health and Human Services Office of Inspector General, under the direction of Special Agent in Charge Scott J. Lampert.

The government is represented by Assistant U.S. Attorneys Bernard J. Cooney and Kristin L. Vassallo of the U.S. Attorney’s Office for the District of New Jersey in Newark and Trial Attorney Arthur Di Dio of the Justice Department’s Civil Division.

U.S. Attorney Fishman reorganized the health care fraud practice at the U.S. Attorney’s Office in New Jersey 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 $635 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.

The claims settled by this agreement are allegations only, and there has been no determination of liability. The qui tam case is captioned United States ex rel. Cheryl Mazurek v. Garden State Cardiovascular Specialists, P.C. et al., Civil Action No. 10-4734 (D.N.J.).

Source: justice.gov

Washington, DC--(ENEWSPF)--May 28, 2015.  A former staff member of the U.S. Senate Committee on Commerce, Science and Transportation was charged by indictment in the Eastern District of Virginia with defrauding at least three women of approximately $500,000, announced Assistant Attorney General Leslie Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia. 

The indictment charges Robert Lee Foster, 65, of De Pere, Wisconsin, with nine counts of wire fraud. 

According to the indictment, from 2008 through May 2015, Foster devised a scheme to fraudulently obtain money and property from at least three women, whom Foster targeted because of their age, health, marital or family status, or other personal circumstances.  The indictment alleges that Foster used his affiliation with the U.S. Senate to gain the victims’ trust and confidence, and that he made various false and fraudulent representations to the victims, which prompted them to send Foster money, which funds he then used for his own personal benefit. 

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

This case was investigated by the FBI.  The case is being prosecuted by Trial Attorneys Kevin Driscoll and Peter Halpern of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Jamar Walker of the Eastern District of Virginia.

Related Material:

Foster Indictment

Source: justice.gov

Washington, DC--(ENEWSPF)--June 1, 2015.  Two individuals pleaded guilty today for their roles at fraudulent debt relief services companies that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service (USPIS) announced.

Athena Maldonado, 30, and Christopher Harati, 31, both of Orange County, California, pleaded guilty to a one-count information alleging conspiracy in connection with debt relief companies known as Nelson Gamble & Associates (Nelson Gamble) and Jackson Hunter Morris & Knight LLP (Jackson Hunter).  According to the information filed in the case, the defendants and their co-conspirators portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors.  Clients made monthly payments expecting the money to go toward settlements.  The companies instead took an amount equal to at least 15 percent of clients’ total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees. 

“Debt relief service scams prey on vulnerable consumers trying to climb out of tough financial situations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will aggressively pursue the criminals who operate these schemes.”

Maldonado admitted that she acted as the “legal department” for both companies, and used multiple aliases when responding to complaints submitted by state attorney general offices, the Better Business Bureau and private attorneys.  Maldonado admitted that, after Nelson Gamble changed its name to Jackson Hunter, she responded to consumer complaints by falsely stating, among other things, that the two companies were not related and that Jackson Hunter could not refund money paid to Nelson Gamble.

Harati admitted that he worked as a client relations manager for the companies and handled complaint calls from clients.  He admitted he told customers that Nelson Gamble and Jackson Hunter were separate companies, falsely stated that Jackson Hunter was a nationwide law firm with years of experience and made other misrepresentations designed to convince customers to stay with the company.

The defendants each face a statutory maximum sentence of five years in prison and a $250,000 fine, or an alternate fine of twice the loss or twice the gain, whichever is greater, along with mandatory restitution.  Their sentencing dates have not been set.

On Dec. 3, 2014, a grand jury in Santa Ana, California, returned a 22-count indictment charging Jeremy Nelson, Elias Ponce and John Vartanian, all of Orange County, for mail fraud, wire fraud, and conspiracy to commit mail and wire fraud in the same fraudulent scheme.  The trial in that case is scheduled to begin on Feb. 16, 2016, in Los Angeles.

The Federal Trade Commission (FTC) brought a civil case against Nelson Gamble, Jackson Hunter and other defendants in September 2012, alleging that the defendants falsely claimed they would reduce consumers’ unsecured debt by 50 percent or more, made unauthorized charges to their bank accounts and called phone numbers listed on the National Do Not Call Registry.  For more information about debt relief firms, the FTC encourages consumers to review this page on their website.

Principal Deputy Assistant Attorney General Mizer commended the USPIS team assigned to the Civil Division’s Consumer Protection Branch for their investigative efforts, and thanked the U.S. Attorney’s Office of the Central District of California for their contributions to the case.  The case is being prosecuted by Trial Attorney Alan Phelps of the Consumer Protection Branch.

Source: justice.gov

Washington, DC--(ENEWSPF)--June 1, 2015.  First Tennessee Bank N.A. has agreed to pay the United States $212.5 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced today.  First Tennessee is headquartered in Memphis, Tennessee. 

“First Tennessee’s reckless underwriting has resulted in significant losses of federal funds and was precisely the type of conduct that caused the financial crisis and housing market downturn,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “We will continue to hold accountable lenders who put profits before both their legal obligations and their customers, and restore wrongfully claimed funds to FHA and the treasury.” 

Between January 2006 and October 2008, First Tennessee, through its subsidiary First Horizon Home Loans Corporation (First Horizon), participated in the FHA insurance program as a Direct Endorsement Lender (DEL).  As a DEL, First Tennessee had the authority to originate, underwrite and endorse mortgages for FHA insurance.  If a DEL such as First Tennessee approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, neither the FHA nor HUD reviews a loan before it is endorsed for FHA insurance.  DELs such as First Tennessee are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance, to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices and to self-report any deficient loans identified by their quality control program.  In August 2008, First Tennessee sold First Horizon to MetLife Bank N.A. (MetLife), a wholly-owned subsidiary of MetLife Inc., which thereafter originated FHA-insured mortgages under the MetLife name.  In February 2015, MetLife agreed to pay $123.5 million to resolve its False Claims Act liability arising from its FHA originations after it acquired First Horizon from First Tennessee.

“First Tennessee admitted failings that resulted in poor quality FHA loans,” said Acting U.S. Attorney John A. Horn of the Northern District of Georgia.  “While First Tennessee profited from these loans, taxpayers incurred substantial losses when the loans defaulted.  The settlement, as well as the investigation that preceded it, illustrates that the Department of Justice will closely scrutinize entities that cause financial injury to the government, and, in turn, the American taxpayer.”

The settlement announced today resolves allegations that First Tennessee failed to comply with FHA origination, underwriting and quality control requirements.  As part of the settlement, First Tennessee admitted to the following facts: From January 2006 through October 2008, it repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements.  Beginning in late 2007, First Tennessee significantly increased its FHA originations.  The quality of First Tennessee’s FHA underwriting significantly decreased during 2008 as its FHA lending increased.  Beginning no later than early 2008, First Tennessee became aware that a substantial percentage of its FHA loans were not eligible for FHA mortgage insurance due to its own quality control findings.  These findings were routinely shared with First Tennessee’s senior managers.  Despite internally acknowledging that hundreds of its FHA mortgages had material deficiencies, and despite its obligation to self-report findings of material violations of FHA requirements, First Tennessee failed to report even a single deficient mortgage to FHA.  First Tennessee’s conduct caused FHA to insure hundreds of loans that were not eligible for insurance and, as a result, FHA suffered substantial losses when it later paid insurance claims on those loans.

“Our investigation found that First Tennessee caused FHA to pay claims on loans that the bank never should have approved and insured in the first place,” said HUD Inspector General David A. Montoya.  “This settlement reinforces my commitment to combat fraud in the origination of single family mortgages insured by the FHA and makes certain that only qualified, creditworthy borrowers who can repay their mortgages are approved under the FHA program.” 

“We are pleased that First Tennessee has acknowledged facts that demonstrate its failure to comply with HUD’s requirements and has agreed to settle with the government,” said HUD General Counsel Helen Kanovsky.  “We thank the Department of Justice and HUD’s Office of Inspector General for all of their efforts in helping us to make this settlement a reality.  We hope this agreement sends a message to those lenders with whom we do business that HUD takes compliance very seriously and so should they.”

The investigation of the allegations in the government’s complaint was a coordinated effort between the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Northern District of Georgia, HUD and HUD’s Office of Inspector General.

Source: justice.gov