Three Indicted in $1 Million Mortgage Fraud Scheme

Two mortgage brokers and one real estate appraiser were indicted yesterday in federal court in St. Paul for allegedly orchestrating a mortgage fraud scheme in which they induced lenders to loan more than $1 million to purchasers to buy properties at inflated prices. The excess money was then shared among those involved in the scheme. The indictment charges John Anthony Spencer, age 30, of Albertville; Patrick Arthur Dols, age 37, of Minneapolis; and Bryan Joseph Lenton, age 31, of Oakdale, with one count of conspiracy to commit mortgage fraud through interstate wire and 10 counts of wire fraud. In addition, Spencer was charged with one count of money laundering. The properties involved included six single-family homes in north Minneapolis, five residential condominium units located on

Fisk Avenue

in St. Paul, and four condo units located on

Dayton Avenue

in St. Paul.

Specifically, in September of 2005, Spencer, a mortgage broker at Minnesota One, allegedly agreed to assist the unnamed co-conspiring owner of the

Fisk Avenue

condos in fraud involving the sale of those five units. Then, in December of 2005, Spencer purportedly recruited Lenton, a real estate appraiser, to appraise each of the units at substantially more than their actual value. After that, Spencer reportedly recruited a straw buyer to purchase the units with loan proceeds provided based on a fraudulent loan application made by Spencer and Dols, another mortgage broker. Spencer also allegedly arranged for $227,800 in bogus payments to AC Standard Construction for purported work on two of the five units. In reality, however, no works was done. In fact, AC Standard Construction was nothing more than a sham company through which those involved in the fraud received kickbacks.

In April of 2006, Spencer purportedly engaged in similar conduct with an unnamed coconspiring real estate developer who had been unable to sell six single-family homes in north Minneapolis at their true market value. Again, Lenton allegedly appraised each of the homes for far more than they were worth. Then, two purchasers were reportedly recruited to buy the properties, again with loan proceeds fraudulently brokered by Spencer and Dols. In addition, Spencer allegedly purchased 10 properties from that same real estate developer with borrowed funds and pocketed $77,106.58 in kickbacks.

Also in April of 2006, Spencer allegedly conducted the same scam with the condominium owner of the

Dayton Avenue

units. After the closing on each of the four units, Spencer allegedly caused more than $320,000 to be paid into an account, which was then used to pay out more kickbacks.

If convicted, the defendants face a potential maximum penalty of five years in prison on the conspiracy charge and 20 years on each wire fraud count. Spencer faces an additional potential 10 years on the money laundering count. All sentences will be determined by a federal district court judge.

This case is the result of an investigation by the Internal Revenue Service-Criminal Investigation Division and the Federal Bureau of Investigation. It is being prosecuted by Assistant United States Attorney David J. MacLaughlin.

An indictment is a determination by a grand jury that there is probable cause to believe that offenses have been committed by a defendant. A defendant, of course, is presumed innocent until he or she pleads guilty or is proven guilty at trial.

United States Marshal for the Eastern District of Wisconsin announces the arrest of Gary Amaya

MILWAUKEE – Kevin A. Carr, United States Marshal for the Eastern District of Wisconsin, announced the arrest of Gary Amaya.

Amaya was arrested today by authorities in El Salvador. The US Marshals, the US Department of State, and the Federal Bureau of Investigation (FBI) worked closely over the past several weeks once the investigation focused on the country of El Salvador, where some of Amaya’s relatives reside. Amaya was deported by El Salvadoran Immigration Officials, and escorted to the United States by Deputy US Marshals.

Amaya had been charged in Milwaukee County with Cocaine Distribution, Aggravated Battery and Bail Jumping. On August 19, 2009 Amaya was convicted in Milwaukee County Court of Aggravated Battery and Mayhem. Amaya was then scheduled to be sentenced on October 29, 2009, but jumped bail.

The Milwaukee Police Department, the Milwaukee County District Attorney’s Office and the US Marshals began the search in October of 2009. The US Attorney’s Office assisted the US Marshals in obtaining an Unlawful Flight to Avoid Prosecution warrant (UFAP) on October 16, 2009 when leads were developed out of state.

Marshal Carr stated that “this is a good example of the multi-agency approach necessary to bring international fugitives to justice”.

Amaya now awaits extradition proceedings in Texas before being brought back to Wisconsin to face sentencing in connection with the charges.  For more information about the U.S. Marshals, visit http://www.usmarshals.gov

2 illegal aliens sentenced for transporting, harboring an alien resulting in death

HOUSTON - Two illegal aliens from Mexico were sentenced on Wednesday to 27 and 51 months imprisonment, respectively, for conspiring to transport and harbor an illegal alien within the United States resulting in his death. The sentences were announced by U.S. Attorney José Angel Moreno. The case was investigated by the U.S. Immigration and Customs Enforcement (ICE) Office of Homeland Security Investigations (HSI).

Aburto-Gamino, 48, and Guzman-Villa, 28, pleaded guilty to the felony immigration offense on June 16. At that hearing, the government established that relatives and friends of the victim received a series of phone calls from alien smugglers demanding the payment of smuggling fees for him and also informed them that he was very ill. On April 27, 2009, the Brazoria County Sheriff's Office responded to a call that a body had been found in Brazoria County and upon inspecting the body, a Honduran driver's license was found identifying the deceased.

ICE HSI special agents initiated an investigation based on information collected from phone numbers used by the smugglers, leading to surveillance at a trailer park in the 13000 block of Hooper in Harris County, Texas. A traffic stop of a vehicle leaving one of the trailers was conducted and agents made contact with co-defendant, Mary Jesse Cuadros, who allowed the agents to search her trailer. While waiting for agents to return from the location of the traffic stop with Cuadros, an agent maintaining surveillance at her residence saw Aburto-Gamino and another co-defendant Lucero Aburto arrive in a vehicle at the location. Aburto, having received a phone call from Cuadros that agents were on the way, ran into the trailer to warn the occupants. Agents arrived at the trailer and arrested Aburto-Gamino and Aburto.

Inside the trailer, agents discovered a "pollo" list, a slang term used to describe ledgers used by alien smugglers about smuggled aliens, contact numbers to obtain smuggling fees, and fees paid to the smugglers. The list contained the names of 27 illegally smuggled aliens. A pistol and numerous cell phones were also discovered.

Agents also obtained consent from Cuadros to search a second trailer. They discovered trash bags and maroon curtains which matched those used to wrap the body of the victim.

Subsequent interviews with several of the defendants determined that the victim was brought to the location by an unidentified smuggler and that he was extremely ill on arrival. Aburto purchased a drink for the victim who drank it, went into a bathroom, collapsed and died. The Galveston County Medical Examiner's Office conducted an autopsy but was unable to determine the cause of death.

Through the interviews with the aliens, Guzman-Villa was identified as having been an alien smuggler for at least two years with his wife, Cuadros, and stepfather, Aburto-Gamino. It was also determined that Guzman-Villa dumped the victim's body on the side of the road.

Cuadros has already pleaded guilty to the conspiracy and is scheduled for sentencing on Jan. 13. She faces up to life imprisonment and not more than a fine of $250,000. Aburto was charged with misprision of a felony and was sentenced on Aug. 20, to time served, about 15 months. He has been placed into deportation proceedings. Both Aburto-Gamino and Guzman-Villa face deportation after they complete their sentences.

The case was investigated by ICE HSI agents with the assistance of the Houston Police Department and Brazoria County Sheriff's Office. Assistant U.S. Attorney Doug Davis, Southern District of Texas, prosecuted the case.

Two Engineers Found Guilty of Stealing Goodyear Trade Secrets

WASHINGTON – A federal jury convicted Clark Alan Roberts, 47, and Sean Edward Howley, 39, both former engineers with Wyko Tire Technology Incorporated, located in Greenback, Tenn., of stealing trade secrets from the Goodyear Tire and Rubber Company, Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney William C. Killian for the Eastern District of Tennessee announced today.

After a one-week trial, the jury found Roberts and Howley guilty of one count of conspiracy to commit trade secret theft, one count of trade secret theft, one count of unlawful photographing of trade secrets, three counts of transmittal of trade secrets, one count of possession of trade secrets, two counts of wire fraud and one count of conspiracy to commit wire fraud.

"Unable to create an effective design on their own, these engineers stole trade secrets from a competitor in order to fulfill a contract," said Assistant Attorney General Breuer. "We will not allow the hard work and resources businesses put into product development to be compromised by individuals who unlawfully obtain protected secrets."

"The ruling in this case will send a message that complicated trade secret violations will be aggressively investigated and prosecuted by U.S. Attorney’s Offices and the Department," said U.S. Attorney Killian.

According to the evidence presented in court, Wyko secured a $1.2 million contract in early 2007 with the Haohua South China Guilin Rubber Company Limited (HHSC), a Chinese tire manufacturing company located in Guilin, Peoples Republic of China, to supply tire building equipment for use in producing radial "off the road" (OTR) tires, which are used on very large earth moving and mining equipment. Wyko was in the business of making tire building equipment for Goodyear and other tire manufacturers. One of the pieces of equipment that Wyko agreed to sell to HHSC was called a swab down device, which is used during the manufacture of a giant OTR tire. However, Wyko had never built a swab down device before and was having difficulty in the spring of 2007 completing their design of the swab down device.

On May 30 and 31, 2007, Roberts and Howley, traveled to a Goodyear tire manufacturing facility located in Topeka, Kan., to service Wyko equipment located in the Goodyear plant with the intention of taking photographs of Goodyear’s swab down device to assist them with completing their design even though they knew Goodyear protected the swab down device as a trade secret. On May 31, 2007, the defendants used a cell phone camera to surreptitiously take seven unauthorized photographs of a Goodyear swab down device, without the knowledge or permission of Goodyear. The defendants then emailed the unauthorized photographs to employees at a Wyko subsidiary located in Dudley, England, who used the trade secret information contained in the photographs to complete a similar piece of tire building equipment for the HHSC contract.

The defendants are scheduled to be sentenced on the 10 felony counts by U.S. District Court Judge Thomas Phillips on April 14, 2011. The defendants face a maximum of 10 years in prison for each trade secret count, 20 years in prison for each wire fraud count and $2.5 million in fines.

The case was prosecuted by Trial Attorney Thomas S. Dougherty of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney D. Gregory Weddle of the U.S. Attorney’s Office for the Eastern District of Tennessee. The case was investigated by the FBI’s Knoxville Division.

Three New Orleans Police Officers Found Guilty in the Post-Katrina Shooting and Burning of Henry Glover

WASHINGTON- A federal jury in New Orleans convicted three current and former New Orleans Police Department (NOPD) officers, David Warren, Greg McRae and Lt. Travis McCabe, in relation to the post-Katrina shooting death of Henry Glover, and the subsequent burning of Glover’s remains and obstruction of justice.

The jury found former NOPD Officer David Warren guilty of a civil rights violation, resulting in death, for the Sept. 2, 2005, shooting of civilian Henry Glover, as well as use of a firearm during a crime of manslaughter. The jury heard evidence that defendant Warren shot Glover in the back as Glover was running away from him. In a separate charge, the jury found Warren guilty of using a firearm in the commission of a crime of violence. Warren faces a possible life sentence for the civil rights shooting crimes, and up to 15 years imprisonment for the firearms manslaughter.

Evidence presented at trial established that Officer Warren, while stationed on a second floor lookout, shot Henry Glover, who was a floor below him and running away. Glover’s brother and a friend flagged down a passing motorist, "Good Samaritan" William Tanner, who put the wounded Glover in his car to try to get medical attention for him. However, when the group of men drove up to a makeshift police station seeking help for Glover, police officers surrounded the men at gunpoint, handcuffed them, and let Henry Glover die in the back seat of the car. McRae then drove off with Tanner’s car, with Glover’s body inside, and burned both the body and the car with traffic flare.

The jury convicted current Officer McRae, who was one of the officers at the makeshift station, on two counts of civil rights violations. One of the civil rights counts charged that he willfully used fire to destroy a civilian’s property by burning and destroying Tanner’s car, and the other civil rights count charged that he willfully deprived Glover’s family members of their right to seek redress in the courts for his death. The jury also convicted McRae on one count of obstruction of justice and one count of using fire in the commission of a felony. McRae faces a possible sentence of 50 years in prison.

The jury also convicted NOPD Lt. Travis McCabe, who obstructed justice by writing and submitting a false report about the shooting of Henry Glover. McCabe was also convicted for lying to the FBI and committing perjury by lying to a federal grand jury convened to investigate Glover’s death. McCabe faces a maximum sentence of 30 years in prison.

The jury acquitted Lt. Dwayne Scheuermann, who was accused of aiding and abetting the burning of the car, and Lt. Robert Italiano, who was accused of participating in the cover up.

"Instead of upholding their oath to protect and serve the people of New Orleans in the days after Hurricane Katrina, these officers violated the law and the public trust," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "And while some officers broke through the thin blue line and told the truth under oath, others were rightly convicted for obstructing justice. Today's verdict brought a measure of justice to the Glover family and to the entire city."

"Today’s verdicts send a powerful message that no one is above the law, and that those who are sworn to protect our citizens are never, under any circumstances, relieved of their sacred responsibilities under our constitution. We will continue to do everything in our power—and use every law and weapon in our arsenal of justice to make certain that our police never abuse power they wield. Today is an important step forward for the courageous Glover family and the people of New Orleans, and an important move toward the city’s healing and rebuilding," said Jim Letten, U.S. Attorney for the Eastern District of Louisiana.

David Welker, FBI Special Agent In Charge for Louisiana, said, "Today’s verdict demonstrates the continued diligence and commitment of the FBI to aggressively and fairly pursue civil rights violations, with the goal of bringing to justice those who abuse the very citizens they are entrusted to protect and serve."

During the course of the month-long trial, jurors heard from 65 witnesses, including all five of the defendants. Jurors deliberated for three days before returning their verdict.

This case was investigated by the New Orleans Field Office of the FBI, and was prosecuted by Trial Attorney Jared Fishman of the Justice Department’s Civil Rights Division, and Assistant U.S. Attorneys Tracey Knight and Michael Magner for the Eastern District of Louisiana.

St. Paul Man Sentenced to 15 Years in Federal Prison for Sex Trafficking a Minor

Earlier today, a 28-year-old St. Paul man was sentenced in federal court in St. Paul for transporting a girl from Minnesota to Illinois for the purpose of having her commit commercial sex acts. United States District Court Judge Paul A. Magnuson sentenced Byronte Juwann Reed, also known as Santana, to 180 months in prison on one count of the sex trafficking of a minor. Reed was indicted on June 9, 2009, and pleaded guilty on October 13, 2010.

In his plea agreement, Reed admitted meeting the victim, who was younger than 18, in June of 2008, and recruiting her to commit sexual acts in exchange for money. From June of 2008 through July of 2008, the girl lived with Reed and others so she could participate in the commercial sex trade. Reed also admitted transporting the girl from Minneapolis to Chicago, Illinois, in order for her to engage in commercial sex. In addition, Reed agreed that physical force was used to ensure that the victim would participate in the sexual activity.

Following today's sentencing, St. Paul Police Chief Thomas Smith said, "This investigation was the result of the strong, ongoing partnerships developed by the St. Paul Police Department's Gerald D. Vick Human Trafficking Task Force. Working closely with the FBI and the U.S. Attorney's Office, the task force and its partners were able to successfully prosecute this individual." The investigation of this case was also assisted by the Minneapolis Police Department and the Chicago Police Department. It was being prosecuted by Assistant U.S. Attorney LeeAnn K. Bell.

The Gerald D. Vick Human Trafficking Task Force was named for the slain St. Paul police officer who dedicated his professional life to eradicating the trafficking and prostitution of people. The task force was established with federal funds and is comprised of investigators from the Federal Bureau of Investigation, U.S. Immigration and Customs Enforcement, the police departments of Minneapolis and St. Paul, the sheriff's offices of Hennepin and Ramsey counties, and other agencies.

Branford Man Pleads Guilty to Federal Child Pornography Charge

David B. Fein, United States Attorney for the District of Connecticut, announced that MICHAEL HOLM, 32, of Oak Street, Branford, pled guilty today before United States Magistrate Judge Donna F. Martinez in Hartford to one count of possession of child pornography.

According to court documents and statements made in court, on May 29, 2008, agents assigned to the Connecticut Computer Crimes Task Force conducted a court-authorized search at HOLM’s residence and seized a computer. Subsequent forensic analysis of the computer has revealed between 150 and 300 images of child pornography, including images of children under the age of 12 years engaged in acts of bondage and bestiality.

HOLM is scheduled to be sentenced by Chief United States District Judge Alvin W. Thompson on February 28, 2011, at which time HOLM faces a maximum term of imprisonment of 10 years and a fine of up to $250,000.

HOLM is released on a $50,000 bond with several conditions, including that he have no unsupervised contact with children under the age of 18.

This case is being investigated by the United States Secret Service and the Connecticut Computer Crimes Task Force, which includes federal, state and local law enforcement agencies. The case is being prosecuted by Assistant United States Attorney Ray Miller.

The Connecticut Computer Crimes Task Force investigates crimes occurring over the Internet, including computer intrusion, Internet fraud, copyright violations, Internet threats and harassment, and online crimes against children. The Task Force also provides computer forensic review services for participating agencies. The Task Force is housed in the main FBI office in New Haven, Connecticut. For more information about the Task Force, please contact the FBI at 203-777-6311.

U.S. Attorney Fein noted that this prosecution is part of the U.S. Department of Justice’s Project Safe Childhood Initiative, which is aimed at protecting children from sexual abuse and exploitation. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

To report cases of child exploitation, please visit www.cybertipline.com.

U.S. Fire Administration Releases 2009 Fire Estimate Summary Series

EMMITSBURG, MD - The Federal Emergency Management Agency’s (FEMA) United States Fire Administration (USFA) issued the 2009 Fire Estimate Summary Series today which presents basic information on the size and status of the fire problem in the United States as depicted through data collected in USFA’s National Fire Incident Reporting System.  The data summary series was developed by USFA’s National Fire Data Center and is further evidence of FEMA’s commitment to sharing information with the American public, fire departments, and first responders around the country to help them keep their communities safe. 

"Each fire estimate summary is a great resource for communities to quickly get basic data on fire issues that are currently impacting our nation’s firefighters and communities," said Glenn Gaines, Acting U.S. Fire Administrator.  "Please join with USFA in using the information presented in this series to help prevent further loss of life and property."

Individual summaries are issued as part of the Fire Estimate Summary Series and address the size of a specific fire or fire-related issue as well as highlight important data trends.  As part of this series, seventeen summaries have been issued presenting basic information on the leading causes of residential building and nonresidential building fires, deaths, injuries, and dollar losses for 2009 and highlighting overall trends in these leading causes for the 5-year period of 2005 to 2009.  Additional new and updated fire estimate summaries will be periodically released under this series as future year data become available.

The complete Fire Estimate Summary Series is available at www.usfa.dhs.gov/statistics/estimates/.

Justice Department Reaches Settlement with National Mortgage Lender to Resolve Allegations of Lending Discrimination

Settlement Provides $2 Million to African-American Borrowers Who Paid Higher Interest Rates

WASHINGTON – PrimeLending, a national mortgage lender with 168 offices in 32 states at the end of 2009, has agreed to pay $2 million to resolve allegations that it engaged in a pattern or practice of discrimination against African-American borrowers between 2006 and 2009.

The settlement was filed today in conjunction with a complaint made by the Justice Department in federal court in Dallas, where PrimeLending is headquartered.   Brought under the federal Fair Housing Act and Equal Credit Opportunity Act, the complaint alleges African-American borrowers nationwide were charged higher prices on retail loans made through PrimeLending’s branch offices.

“Charging borrowers more to obtain a home loan based on their race is absolutely intolerable, but it is a practice that occurred all too often during the past decade and stripped a vast amount of wealth from communities of color,” said Thomas E. Perez, Assistant Attorney General in charge of the Justice Department’s Civil Rights Division. “We will be vigilant to ensure that this type of discriminatory practice does not continue in the current credit market. Vigorous enforcement of fair lending laws is a top priority, and we will continue aggressively to pursue compensation for the victims of such discrimination.”

“Illegal and unfair lending takes an immediate toll on families and communities.  Moreover, its harm, if unchecked, damages economic opportunities for the next generation,” said John Trasviña, Assistant Secretary for Fair Housing and Equal Opportunity.  “HUD joins the Department of Justice to take every step to ensure that all people are fairly served by lending institutions.”

“The Federal Reserve rigorously enforces the fair lending laws.  There is no place for racial or other illegal discrimination in our credit markets,” said Elizabeth A. Duke, Member, Board of Governors of the Federal Reserve System.  “We expect lenders that we supervise to be fully committed to fair lending and to have controls in place to prevent illegal discrimination.”

Between 2006 and 2009, PrimeLending charged African-American borrowers higher annual percentage rates of interest for prime fixed-rate home loans and for home loans guaranteed by the Federal Housing Administration and Department of Veterans Affairs than it charged to similarly-situated white borrowers.   PrimeLending gave its employees wide discretion to increase their commissions by adding “overages” to loans, which increased the interest rates paid by borrowers.   This policy had a disparate impact on African-American borrowers. The Justice Department for more than a decade has identified the charging of overages as a means by which lending discrimination can occur.

During the period when the discrimination occurred, PrimeLending was rapidly increasing its lending operations, becoming one of the nation’s 20 largest FHA lenders by 2009.   PrimeLending did not have monitoring in place to ensure that it complied with the fair lending laws, even as it grew to originate more than $5.5 billion in loans per year.

This case resulted from a referral by the Board of Governors of the Federal Reserve to the Justice Department’s Civil Rights Division in 2009.   PrimeLending’s owner, PlainsCapital Bank of Lubbock, Texas, is a member of the Federal Reserve System.   PrimeLending cooperated fully with the Justice Department’s investigation into its lending practices and agreed to settle this matter without contested litigation.

In addition to paying $2 million to the victims of discrimination, the settlement requires PrimeLending to have in place loan pricing policies, monitoring and employee training that ensure discrimination does not occur in the future.   It also incorporates provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and regulations recently enacted by the Federal Reserve that restrict loan officer compensation based on the terms or conditions of a particular transaction.  PrimeLending began at the start of this year to implement policies to prevent discrimination, which include requiring employees to provide legitimate non-discriminatory reasons in order to adjust loan prices.  These policies will be strengthened by generally banning overages beginning next spring.    

The Civil Rights Division and other agencies involved in this matter are part 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. One of the task force’s key initiatives, led by the Department of Housing and Urban Development, the Department of Justice and the Federal Reserve Board, is to ensure that discrimination does not occur when borrowers receive FHA loans. For more information on the task force, visit www.stopfraud.gov.

A copy of the complaint and settlement order with PrimeLending, as well as additional information about fair lending enforcement by the Justice Department, can be obtained from the Justice Department website at www.justice.gov/fairhousing .

Leader of Mortgage Fraud Ring Sentenced to More Than Six Years in Prison and Ordered to Forfeit $2.5 Million

BIRMINGHAM—A federal judge today sentenced the leader of a mortgage fraud ring in Jefferson County to six-and-a-half years in prison, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Patrick Maley and Department of Housing and Urban Development Acting Inspector General Michael Stephens.

U.S. District Judge Inge P. Johnson sentenced TIMOTHY WAYNE JOHNSON, 45, of Bessemer, on two counts of making false statements on a loan application, two counts of mail fraud against a financial institution, and one count of false statements to federal agents. Judge Johnson also ordered the defendant to forfeit $2.5 million to the government as proceeds of illegal activity. JOHNSON pleaded guilty to the charges and consented to the forfeiture in July.

“Mortgage fraud continues to threaten the communities and financial institutions within our district, and throughout the country,” Vance said. “This defendant is responsible for the largest mortgage fraud scheme prosecuted, thus far, in northern Alabama. This conviction should send the message that these frauds will be sought out and prosecuted to the fullest extent of the law. Fraud in loan applications will not be tolerated. We are pleased with the result of this prosecution, but there is much more to accomplish,” she said.

“Mortgage fraud and white collar crimes strike at the economic heart of the American system,” Stephens said. “The Inspector General’s Offices of HUD and the Social Security Administration work collaboratively with the FBI to investigate these crimes. We use a variety of investigative and analytical techniques to identify those who engage in mortgage fraud. To the extent that we can uncover and prosecute these activities, it is to everyone’s benefit,” he said. “This joint prosecutorial effort by the U.S. Attorney’s Office and law enforcement agencies has helped send a strong message that those who seek to unlawfully profit by committing acts of mortgage fraud will be vigorously prosecuted.”

“Mortgage fraud has a direct negative impact on property values, potentially making all of us victims,” Maley said. “I encourage anyone with information on possible fraud to report it to the FBI, so it can be investigated and rooted out.”

JOHNSON’S mortgage fraud scheme involved more than 40 real estate transactions that caused financial institutions to approve $2.5 million in loans that were fraudulently obtained through false statements and documents made by JOHNSON. The loans were on properties in Fairfield, East Lake, inner-city Birmingham and Bessemer, and about 75 percent of those mortgages have been foreclosed. JOHNSON created and controlled nearly every aspect of the mortgage fraud scheme and enlisted the participation of at least 10 other individuals who have been convicted for their conduct in the scheme, according to the government’s sentencing memorandum.

Government documents in the case outline JOHNSON’S illegal scheme as follows: As the center of the fraud, JOHNSON would approach people attempting to sell their homes and discover what price they wanted. He would do minimal work on the homes, have them appraised, and then attach a “mechanics lien” against the property for the difference between the appraised value and what the owner wanted for the house. Johnson would then proceed to find buyers, spreading the word that he could help individuals improve their credit or get approved for a mortgage loan.

His means of helping people secure loans often involved the creation of fraudulent letters purporting to show that the loan applicant received monthly disability payments from the Social Security Administration. Once loans were issued, based on false credit or disability income claims, Johnson would be paid the amount of the liens he placed on the properties.

This case was investigated by the FBI, and the Inspector General’s Offices of HUD and the Social Security Administration. Assistant U.S. Attorney Patrick Carney prosecuted the case.

This prosecution is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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.

Gary, Indiana Wastewater Treatment Operator and Managers Charged with Conspiracy and Violating the Clean Water Act

WASHINGTON—United Water Services Inc., the former contract operator of the Gary Sanitary District wastewater treatment works in Gary, Indiana, and two of its employees were charged today with conspiracy and felony violations of the Clean Water Act in a 26-count indictment returned by a federal grand jury, the Justice Department announced today.

United Water Services Inc., and employees Dwain L. Bowie, and Gregory A. Ciaccio, have been charged with manipulating daily wastewater sampling methods by turning up disinfectant treatment levels shortly before sampling, then turning them down shortly after sampling.

United Water Services entered into a 10-year contract to operate the Gary Sanitary District wastewater treatment works in 1998, in exchange for $9 million annually. United Water’s contract was renewed in May 2008. As contract operator, United Water handled the operation and maintenance of the treatment works, and was responsible for environmental compliance. To ensure compliance with the discharge permit, United Water was required to take periodic representative wastewater samples, including a daily sample to determine the concentration of E. coli bacteria in the wastewater.

According to the indictment, the defendants conspired to tamper with E. coli monitoring methods by turning up levels of disinfectant dosing prior to E. coli sampling. The indictment states that the defendants would avoid taking E. coli samples until disinfectants had reached elevated levels, which in turn were expected to lead to reduced E. coli levels. Immediately after sampling, the indictment alleges, the defendants turned down disinfectant levels, thus reducing the amount of treatment chemicals they used.

Dwain Bowie was United Water’s Project Manager for the Gary facility beginning in 2002, and was in charge of the Gary operation. Gregory Ciaccio joined Bowie’s staff in July 2003, and eventually was made the Plant Superintendent, in charge of day-to-day operations.

The Clean Water Act makes it a felony to tamper with required monitoring methods at a permitted facility like the Gary Sanitary District. If convicted, Bowie and Ciaccio face up to five years in prison on the conspiracy count and two years on each of the Clean Water Act counts, as well as a criminal fine of up to $250,000 for each count. The company may also face fines and/or probation.

The allegations in the indictment are mere accusations and all persons are presumed innocent until and unless proven guilty beyond a reasonable doubt in a court of law.

The case was investigated by the Northern District of Indiana Environmental Crimes Task Force, including agents from the Criminal Investigation Division of the U.S. Environmental Protection Agency, the FBI, and the Indiana State Police. The case is being prosecuted by the U.S. Attorney’s Office for the Northern District of Indiana and the Justice Department’s Environmental Crimes Section.

South Dakota Man Convicted of Producing Child Pornography

United States Attorney Brendan V. Johnson announced that Phillip C. Running, age 23, of Parmelee, South Dakota, was convicted of two counts of production of child pornography as a result of a federal jury trial in Pierre, South Dakota. These charges carry a mandatory minimum sentence of 10 years’ imprisonment up to 20 years’ imprisonment, a $250,000 fine, or both. Restitution may also be ordered. Running was indicted by a federal grand jury for production of child pornography on August 17, 2010. The charges stem from incidents in which Running videotaped two minor children engaging in sexually explicit conduct on or about between June 2001 and May 2002.

The investigation was conducted by the Federal Bureau of Investigation and the South Dakota Division of Criminal Investigation. Assistant United States Attorney Jay Miller prosecuted the case. A presentence investigation was ordered, and a sentencing date was set for March 1, 2011. The defendant was remanded to the custody of the United States Marshal.

Written in Blood: The History of Law Enforcement

Sergeant Kevin S. Foster, Fort Worth Police Department (Ret.) is the 1106th Police Officer included on Police-Writers.com. His book, Written in Blood: The History of Fort Worth's Fallen Lawmen, Volume 1, 1861-1909, is the 20th law enforcement history book written by a state or local law enforcement official. All of the history books can be accessed at: http://www.police-writers.com/law_enforcement_history.html

According to the book description of Written in Blood: The History of Fort Worth's Fallen Lawmen, Volume 1, 1861-1909, “Another line of duty death” is a chilling headline that serves as an obituary for too many “first responders.” In 2002 Fort Worth joined the ranks of other communities across the nation in building a memorial to its fallen heroes, an elaborate, million-dollar Police and Firefighters Memorial, dedicated in 2009, that recognized fifty-eight policemen going back to the city’s beginnings. Written in Blood is a more inclusive version of that idea because it covers more than just members of the Police Department; it is about the men from all branches of local law enforcement who died defending law and order in the early years: policemen, sheriffs, constables, “special officers,” and even a police commissioner. All were larger-than-life characters who took an oath to “preserve and protect” and therefore deserve to be remembered.”

http://www.police-writers.com/ now lists 1106 law enforcement officials from 471 departments and their 2420 books.

Chesapeake Woman Pleads Guilty in Foreclosure Rescue Mortgage Fraud Scheme

NORFOLK, VA—Shanita Lacy, age 34, of Chesapeake, Virginia, pleaded guilty today in Norfolk federal court to conspiring to commit mail and wire fraud in connection with a scheme to fraudulently obtain home mortgages.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, made the announcement after Lacy's plea was accepted by United States Senior District Judge Henry Coke Morgan, Jr. Lacy faces a maximum penalty of 30 years in prison and a fine of $1,000,000 when she is sentenced on March 18, 2011.

According to court documents, Lacy admitted that, during 2007 and 2008, she conspired with others to fraudulently obtain eight mortgage loans worth $1,549,170. Through her Virginia Beach business known as Clean Slate Financial Services, Lacy targeted homeowners in financial distress with false promises of credit repair and action to enable them to save their homes from foreclosure. Lacy then oversaw the sale of the homes at inflated prices to straw buyers, who Lacy helped to obtain mortgage loans based upon falsified income and down payment data. At or soon after the closings, Lacy liquidated and made off with the homeowners' equity. Soon thereafter, the straw buyers defaulted on the mortgage loans and the homes were foreclosed upon.

This case was investigated by the Federal Bureau of Investigation. Assistant United States Attorney Robert J. Krask is prosecuting the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney's Office for the Eastern District of Virginia at http://www.usdoj.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.

Turkish National Salih Acarbulut Indicted in Chattanooga for Alleged $12 Million Ponzi Scheme

CHATTANOOGA, TN—A federal grand jury in Chattanooga recently returned a 19-count indictment against Salih Acarbulut, a Turkish national who formerly resided in Chattanooga, Tenn., charging him with wire fraud and money laundering. The indictment alleges Acarbulut defrauded more than 100 victims of at least $12 million. No date has been set for his appearance in Chattanooga or for trial.

Acarbulut is a fugitive and believed to have left the United States. Any information as to his whereabouts should be provided to the U.S. Secret Service at 423-752-5125 or to the Internal Revenue Service (IRS) at 423-855-6081.

The indictment alleges that Acarbulut devised a so-called Ponzi scheme from at least as early as 2005 and continuing until about May 2008, which was headquartered in Chattanooga. A Ponzi scheme promises investors exorbitant returns on their money. Initial investors receive large returns which come not from true profits, but from other investor’s funds. Later investors are duped by these false returns, invest, and are ultimately defrauded of their money. In this case, Acarbulut allegedly represented himself to be an experienced and successful foreign currency trader. He guaranteed up to a 48 percent annual return, paid monthly, on investments. Through this scheme the indictment alleges Acarbulut stole at least $12 million from his investors.

The indictment also charges that Acarbulut promoted the scheme by conducting financial transactions with funds from his crime, that is, moneylaundering. Criminally derived proceeds were also spent in amounts over $10,000. Each of these transactions constitutes a separate violation of the money laundering statute.

If convicted on all counts, the defendant faces a total of 330 years in prison and $6 million in fines. The maximum penalty for each violation of the wire fraud statute is 20 years in prison and a $250,00 fine. The maximum penalty for each count of promoting the scheme through money laundering is a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than 20 years, or both. The maximum penalty for each count of laundering criminally derived proceeds is 10 years in prison and a $250,000 fine. Restitution may also be ordered to any victims of the fraud.

This investigation was conducted bythe IRS Criminal Investigation Division, the U.S. Secret Service, and theFederal Bureau of Investigation. Assistant U.S. Attorney Gary S. Humble represents the United States.

The public is reminded that an indictment is a form of accusation and is not evidence of guilt. The defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

Gainesville Man Sentenced to 240 Months Prison for Distribution of Child Pornography

GAINESVILLE, FL—Arthur Brent Stanley, age 62, of Waldo, Florida, was sentenced Monday to 240 months in federal prison followed by a lifetime on supervised release for the receipt, distribution, and possession of child pornography. Evidence introduced at Stanley’s sentencing established that between February 17, 2010, and June 30, 2010, Stanley used a peer-to-peer file sharing program to receive and distribute child pornography over the Internet. A federal search warrant was executed at Stanley’s business, “Crocodile Creek Signs,” at the Waldo Flea Market on June 30, 2010. That search warrant found that Stanley was in possession of computers containing over 60,000 images and videos of child pornography. A number of the images depicted children as young as infants, and involved sadistic and masochistic conduct. Defendant Stanley was living in Waldo, Florida under the alias “Stanley Yates” after having fled from California in 1982 from charges related to the sexual exploitation of a 10-year-old child.

Ms. Marsh praised the work of the North Florida Internet Crimes Against Children Task Force, the Gainesville Police Department, the Federal Bureau of Investigation, and the Alachua County Sheriff’s Office, whose joint investigation led to Stanley’s conviction and sentence.

This case was brought as part of Project Safe Childhood, a nationwide initiative launched by the Department of Justice in May 2006, to combat the growing epidemic of child sexual exploitation and abuse. Led by United States Attorneys’ Offices and the Criminal Division's Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.

This case was prosecuted by Assistant United States Attorney Frank Williams.

Shalimar Man Sentenced to 25 Years for Production of Child Pornography

PENSACOLA, FL—On Friday afternoon, a Shalimar man was sentenced to 25 years in federal prison for the production, advertisement, transportation, receipt, and possession of child pornography, announced United States Attorney Pamela C. Marsh, Northern District of Florida.

Between November 2008 and June 2010, Aaron C. Dawkins, 28, of Shalimar, Florida, was actively involved in the world of online child pornography. The investigation into his activities began when an undercover police officer in Toronto, Canada, learned that Dawkins was sharing child pornography on a publicly-available peer-to-peer file sharing network. When the officer contacted authorities in the United States, the Federal Bureau of Investigation and U.S. Immigration and Customs Enforcement got involved and were able to download child pornography directly from Dawkins over the Internet.

During the execution of a search warrant at Dawkins' Shalimar home in June, investigators seized electronic media containing thousands of images and videos of child pornography. In addition to the child pornography, Dawkins’ computer contained numerous "chats" with others involved in online child exploitation. A forensic review of a digital camera card possessed by Dawkins revealed images he took of himself engaged in sexual acts with a child of approximately 2 years of age.

Dawkins pled guilty in August before United States District Judge M. Casey Rodgers. Upon completion of his 25-year prison sentence, Dawkins will be on supervised release for life.

Ms. Marsh praised the work of U.S. Immigration and Customs Enforcement, the Federal Bureau of Investigation, the Okaloosa County Sheriff's Office, the Pensacola Police Department and the other members of the Northwest Florida Internet Crimes Against Children Task Force whose joint investigation led to the conviction and sentence. The case was prosecuted by Assistant United States Attorney David L. Goldberg.

Louisville Men Sentenced for Liquor Theft

LEXINGTON, KY—Three Louisville men were sentenced yesterday for stealing more than $400,000 worth of liquor.

Vladimir Naranjo-Nieto, 37, Michael Prieto-Cruz, 32, and Efren Rodriguez-Hernandez, 28, were sentenced by United States District Court Judge Karen K. Caldwell for conspiracy and unlawful possession of stolen property. Naranjo-Nieto and Prieto-Cruz received 30 months each, while Rodriguez-Hernandez received 23 months.

All three defendants previously pleaded guilty and admitted that in September of 2009 they, along with two other co-defendants, stole two trailers that contained full loads of liquor belonging to L.J. Rogers Trucking Company in Jeffersonville, Ind.

The two other co-defendants, Juan D. Perez-Gonzales and Mijail Zerquera, were previously sentenced to 23 months each.

One trailer contained products from Jim Beam Brands and the other contained products from Brown-Forman. The cargoes were cosigned for shipment to distributors in North Carolina and Kansas. The combined value of both trailers of liquor totaled approximately $425,000.

The men planned to transport the liquor to New York for resale.

The men drove the trailers from Indiana to Louisville. Once in Louisville, the men attempted to conceal the L.J. Rogers Trucking logos on the trailers by covering them with white paint.

On September 20, 2009, Perez-Gonzales and Zerquera each drove a truck with a stolen trailer of liquor from Louisville into Mt. Sterling, Ky. and were eventually arrested at a truck stop.

Under federal law, the defendants must serve 85 percent of their prison sentence, and, upon release, will be under the supervision of the United States Probation Office for three years.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky; Michael Welch, Special Agent in Charge, Federal Bureau of Investigation (FBI), Indianapolis, Ind. Field Office; Elizabeth Fries, Special Agent in Charge, FBI, Louisville Field Office; and Rodney Brewer, Commissioner, Kentucky State Police (KSP), jointly made the announcement.

The investigation was conducted by the FBI in New Albany, Indiana, the FBI and KSP Criminal Enterprise Task Force based in Kentucky, and the Kentucky State Police. The United States was represented by Assistant United States Attorney Robert M. Duncan, Jr.

ATF Offers $10K Reward for Information on Retail Gun Theft

Two Clerks Shot as Robbers Steal 6 Firearms from Savannah Pawn Shop

ATLANTA — A reward of up to $10,000 for information leading to the arrest and convictions of those responsible for a recent firearms armed robbery at Welsh Pawn Shop, a federally licensed gun dealer in Savannah, Ga. was announced today by Gregory K. Gant, Special Agent in Charge of the Atlanta Field Division, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Savannah/Chatham County Crime Stoppers has pledged a reward of up to $2,500 for the arrest of those responsible for the robbery. The owners of Welsh Pawn have also announced an additional reward of $5,000 for information leading to the arrest of the perpetrators. This crime has triggered a joint investigation between ATF and the Savannah—Chatham Metro Police Department.

“The people of Savannah deserve a safe community. Unfortunately, there are a few violent individuals whose illegal activities threaten to diminish our quality of life. Gun thieves play a critical and deadly role in the chain of violence. ATF will continue to partner with state and local law enforcement agencies to solve this crime,” Gant said.

The armed robbery occurred around 10 a.m., Friday, at the business located at

2800 Skidaway Rd., Savannah, Ga.

The suspects walked into the business, asked workers to view a few items, then started shooting. Two clerks were shot and received non life—threatening injuries. The robbers smashed glass cases and removed several items to include six firearms. The clerks could only identify the robbers as two black males, wearing dark clothing and baseball caps.

Investigators are seeking the public’s help with identifying the subjects involved and providing information on the location of any or all of the stolen firearms. Anyone with information is encouraged to call ATF’s toll-free, 24—hour hotline at 1—888—ATF—TIPS (1—888—283—8477) or Savannah/Chatham County Crime Stoppers at (912) 234—2020. Callers can remain anonymous.

More information about ATF and its programs is available at www.atf.gov.

Ozark Man Pleads Guilty to Selling False Aircraft Inspection Labels

SPRINGFIELD, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced that an Ozark, Missouri man pleaded guilty in federal court today to creating and selling false aircraft inspection labels.

Joseph J. Fisk, 58, of Ozark, pleaded guilty before U.S. Magistrate Judge James C. England to the charge contained in a July 28, 2010, federal indictment. Fisk is the owner of Air & Marine Radio, LLC, in Ozark.

From March to September 2009, Fisk created fraudulent FAA inspection labels on his computer. The fraudulent labels represented a satisfactory annual or 100-hour inspection of an aircraft and contained the forged signature of James F. Probst, who holds an FAA Inspection Authorization certificate, without his knowledge or consent. Probst had never seen or performed an annual inspection on any aircraft with which the fraudulent labels were associated.

Fisk admitted that he placed the fraudulent labels in the logbooks of 10 to 12 aircraft, the records of which he did not maintain. Fisk also sold the false labels to multiple parties for $100 per label on multiple occasions, knowing that the labels would be placed in aircraft maintenance logbooks in violation of federal law.

The FAA has established rules for inspections of aircraft to ensure the safety of the flying public. FAA rules require an annual or 100-hour inspection be performed by the holder of an FAA Inspection Authorization certificate.

Under federal statutes, Fisk is subject to a sentence of up to 10 years in federal prison without parole, plus a fine up to $250,000. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

This case is being prosecuted by Assistant U.S. Attorney Robyn L. McKee. It was investigated by the Federal Aviation Administration, the U.S. Department of Transportation - Office of Inspector General, and the FBI.

Robbery of Wells Fargo Bank Branch in Atlanta

ATLANTA—Special Agent in Charge (SAC) Brian D. Lamkin, FBI Atlanta, requests the assistance of the public in identifying and locating the individual responsible for today’s armed robbery of the Wells Fargo Bank, located at 2280 Cascade Road, Atlanta, Georgia.

On Tuesday, December 7, 2010, at approximately 9:40 a.m., a lone black male entered the Wells Fargo Bank, located at

2280 Cascade Road, Atlanta, Georgia

, and, after initially being waited on by a customer service representative, discreetly announced a robbery. The robber, wearing an Ace-type medical bandage around his face and a sling on his left arm, displayed a weapon that he pulled from the arm sling, stating "you know what time it is." The robber then forced the bank employee to multiple teller stations where she was made to place money in a blue bag that he provided. During this process, the robber then openly displayed the weapon, a silver semi-automatic handgun, for the rest of the bank occupants to see.

After obtaining an undisclosed amount of money, the robber departed the bank without further incident. No vehicle associated with the robber was observed.

The robber is described as being a black male, 25-35 years in age, 5-‘6” to 5’8” in height, small build, weighing 140-145 lbs. He was wearing a dark blue with light blue striped rugby style long sleeved shirt, and an Ace bandage around his face with an additional bandage over his nose.

Wells Fargo Bank has announced a reward of up to $10,000 for information leading to the arrest and conviction of this individual.

Anyone with information regarding this matter should contact the Atlanta office FBI at tel. (404) 679-9000.

Kos Pharmaceuticals to Pay More Than $41 Million to Resolve Kickback and Off-Label Promotion Allegations

WASHINGTON -- Kos Pharmaceuticals, a subsidiary of Abbott Laboratories, has agreed to pay more than $41 million to resolve criminal and civil liability arising from conduct relating to its drugs Advicor and Niaspan, the Justice Department announced today.

According to the agreement reached with the government, the Delaware-based company will pay more than $38 million to settle civil allegations under the False Claims Act. Specifically, the civil settlement resolves allegations that Kos offered and paid doctors, other medical professionals, physician groups and managed care organizations, illegal kickbacks in the form of money, free travel, grants, honoraria and other valuable goods and services, in violation of the Anti-Kickback Statute to get them to prescribe or recommend Niaspan and Advicor.

In addition, the United States contends that Kos promoted the sale and use of Advicor for use as first-line therapy for management of mixed dyslipidemias (a disruption of the lipids in the blood). Such an off-label use was not approved by the Food and Drug Administration nor was it a medically-accepted indication for which the United States and state Medicaid programs provided coverage for Advicor. The federal share of the civil settlement is $33,705,310 and the state Medicaid share is $4,454,432.

As part of today’s resolution, Kos also has entered into a deferred prosecution agreement and agreed to the filing of a criminal information in U.S. District Court for the Middle District of Louisiana charging the company with one count of conspiracy to violate the Anti-Kickback Statute. According to the criminal information, Kos conspired to violate the statute by agreeing to pay physicians kickbacks in exchange for their writing prescriptions for Kos drugs.

Specifically, two doctors proposed that they would endorse the use of Kos products, including Advicor, for the treatment of cholesterol in exchange for a series of payments. Between January 2002 and June 2006, one of the doctors wrote 4,130 prescriptions for Kos products. According to the court documents, some of those prescriptions were paid for by Medicare and Medicaid. From 2002 to 2004, Kos made a series of payments to the two doctors or a third party intermediary in the form of “sponsorship” of continuing medical education classes conducted by the doctors and purported speakers’ fees. Kos has agreed to pay a $3.36 million criminal fine as a condition of the deferred prosecution agreement.

The department agreed to enter into a deferred prosecution agreement with Kos based in part on the company’s undertaking of a thorough internal investigation of misconduct; its reporting of information from the investigation to the department on a regular basis; its continued and ongoing cooperation with the department’s investigation of the matter; and in recognition of the remedial measures undertaken by the company.

“Pharmaceutical companies that pay kickbacks to medical professionals take from the taxpayers and undermine the integrity of choices that doctors make for their patients,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “We will work with our federal partners to ensure that important health care decisions are based on sound medicine, not illegal payments.”

“Today’s resolution exemplifies the strong commitment of the Criminal Division, the Civil Division, and the U.S. Attorneys’ Offices to work collaboratively to ensure that kickbacks and off-label drug promotions are prosecuted to the fullest extent of the law,” said Assistant Attorney General Lanny A. Breuer of the Criminal Division. “As this case shows, pharmaceutical companies that don’t play by the rules will face serious criminal and civil consequences.”

The civil settlement resolves two lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens with knowledge of fraud to bring civil actions on behalf of the United States and share in any recovery. As a part of today’s resolution, the whistleblowers, all former employees of Kos, will receive payments totaling more than $6.4 million from the federal share of the civil recovery.

“Today’s resolution of claims against Kos underscores one of the key purposes of the Anti-Kickback law–that is, to ensure that the judgment exercised by health care providers in treating Medicare and Medicaid patients is not influenced by illegal payments,” said James L. Santelle, U.S. Attorney for Eastern District of Wisconsin.

“Kos Pharmaceuticals made illegal payments to physicians and participated in an unlawful marketing scheme,” said Stephanie A. Finley, U.S. Attorney of the Western District of Louisiana. “This settlement reflects the commitment of the U.S. Attorney's Office to aggressively investigate and pursue healthcare providers who seek public funds through unlawful methods.”

“This resolution reflects our office’s continued commitment to combat health care fraud at all levels,” said Donald J. Cazayoux Jr., U.S. Attorney for the Middle District of Louisiana. “We greatly appreciate our partners in the Criminal Division who led the effort on the criminal side.”

“Paying kickbacks to doctors and marketing drugs for off-label purposes will simply not be tolerated," said Daniel R. Levinson, Inspector General of the Department of Health and Human Services. "Kos, which currently does not sell any products that are reimbursed by federal health care programs, has agreed that, should it seek to sell such products anytime in the next five years, the company will enter into a formal compliance program with OIG.”

The criminal case was handled by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Middle District of Louisiana. The Justice Department’s Civil Division, the U.S. Attorney for the Eastern District of Wisconsin and the U.S. Attorney’s Office for the Western District of Louisiana handled the civil lawsuits, with assistance from the Office of Inspector General for Health and Human Services and the National Association of Medicaid Fraud Control Units.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the FCA, which the Justice Department has used to recover almost $4.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act since January 2009 have topped $5.8 billion.