Friday, October 26, 2012

Detroit Area Physician, Home Health Agency Owner and Patient Recruiter Convicted in $14.5 Million Medicare Fraud Scheme

WASHINGTON – A federal jury in Detroit today convicted a physician, a home health agency owner and a patient recruiter for their participation in a $14.5 million Medicare fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan; Robert Foley III, Special Agent in Charge of the FBI Detroit Field Office; and Special Agent in Charge Lamont Pugh, III of the HHS Office of Inspector General (HHS-OIG), Office of Investigations Detroit Office.

Dr. Pramod Raval, 59, was found guilty in U.S. District Court for the Eastern District of Michigan of one count of conspiracy to commit health care fraud and one count of conspiracy to solicit or receive health care kickbacks in exchange for referring patients to two Detroit area home health care companies, Patient Choice Home Healthcare Inc. and All American Home Care Inc.

Chiradeep Gupta, 38, a physical therapist and part-owner of All American, was found guilty of one count of conspiracy to commit health care fraud, one count of conspiracy to commit money laundering and three substantive counts of money laundering.

Richard Shannon, 39, a patient recruiter, was found guilty of one count of conspiracy to commit health care fraud.

The defendants were charged in a superseding indictment returned March 27, 2012.  Sixteen other individuals who worked at or were associated with Patient Choice and All American have previously pleaded guilty. 

According to evidence presented at trial, the defendants and their co-conspirators caused the submission of false and fraudulent claims to Medicare through Patient Choice and All American, two home health care companies located in Oak Park, Mich., that purported to provide skilled nursing and physical therapy services to Medicare beneficiaries in the greater Detroit area.

The evidence showed that the defendants and their co-conspirators used patient recruiters, who paid Medicare beneficiaries to sign blank documents for physical therapy services that were never provided and/or medically unnecessary.  The owners of Patient Choice and All American paid physicians to sign referrals and other therapy documents necessary to bill Medicare.  Physical therapists and physical therapist assistants  provided through contractors would then create fake medical records using the blank, pre-signed forms obtained by the patient recruiters to make it appear as if physical therapy services were actually rendered, when, in fact, the services had not been rendered.

According to evidence presented at trial, Raval referred both patients from his own practice and patients brought into the scheme by recruiters to Patient Choice and All American in exchange for kickbacks. Gupta provided to Patient Choice and All American physical therapists and physical therapist assistants who created fake patient files using blank, pre-signed forms obtained by patient recruiters, to make it appear as if the physical therapy services billed to Medicare had actually been given.  Gupta also doctored and directed the doctoring of fake patient files.  The evidence at trial showed that Gupta laundered the proceeds of the fraud through multiple shell companies.  Shannon paid patients in cash in order to obtain their signatures on blank physical therapy forms used to create fake therapy documents.

Vishnu Meda, a physical therapist assistant at Patient Choice and All American, was acquitted today of one count of conspiracy to commit health care fraud.

The case was prosecuted by Assistant Chief Gejaa T. Gobena and Trial Attorneys Catherine K. Dick and Niall M. O’Donnell of the Criminal Division’s Fraud Section.  The investigation was led by the FBI and HHS-OIG, and was brought by the Medicare Fraud Strike Force, a joint effort of the U.S. Attorney’s Office for the Eastern District of Michigan and the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Miami Area Assisted Living Facility Owners Plead Guilty for Roles in $63 Million Fraud Scheme

WASHINGTON – Two owners of Miami area assisted living facilities (ALF) pleaded guilty today in connection with a health care fraud scheme involving defunct Miami area health provider Health Care Solutions Network Inc. (HCSN), announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Acting Special Agent-in-Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office.

Raymond Rivero, 55, of Homestead, Fla., and Ivon Perez, 50, of Miami, each pleaded guilty before U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida to one count of conspiracy to solicit and receive cash kickbacks. Rivero, who was the owner of Miami-based God Is First ALF, and Perez, who was the owner of Kayleen and Denis Care Corp, admitted to participating in a fraud scheme that was orchestrated by the owners and operators of HCSN, which operated purported partial hospitalization programs (PHPs), a form of intensive mental health treatment for severe mental illness.

Earlier this week, the owner of another ALF in the Miami area that was involved in the HCSN fraud scheme pleaded guilty for his role in the scheme. On Oct. 22, 2012, Daniel Martinez, 45, of Homestead, the owner of Mi Renacer ALF, pleaded guilty before Judge Altonaga to one count of soliciting and receiving cash kickbacks.

According to an indictment unsealed on May 2, 2012, HCSN obtained Medicare beneficiaries to attend HCSN for purported PHP treatment that was unnecessary and, in many instances, not provided.  HCSN obtained those beneficiaries by paying kickbacks to owners and operators of ALFs or by otherwise recruiting them from ALFs and nursing homes.  Rivero, Martinez and Perez pleaded guilty to referring Medicare and/or Florida Medicaid beneficiaries to HCSN in exchange for cash bribes.

According to court documents, ALF residents referred by Rivero, Martinez and Perez were not qualified to be placed in HCSN’s PHP and were only selected because they had Medicare or state of Florida Medicaid benefits.  In some cases, ALF patients suffered from dementia, Alzheimer’s disease or mental retardation or were otherwise unable to benefit from the purported mental health services.

According to court documents, from 2004 through 2011, HCSN billed Medicare and Medicaid approximately $63 million for purported mental health services.

Perez also pleaded guilty before Judge Altonaga in another criminal case to a second count of conspiracy in connection with accepting kickbacks from Superstar Home Health Care Inc. for purported home health services to her ALF residents.

In another related case, a former HCSN employee, Sarah Da Silva Keller, 28, was sentenced by U.S. District Judge Marcia G. Cooke in the Southern District of Florida to a 24 month prison term and ordered to pay $1,067,300 in restitution to the Medicare program. In June 2012, Keller pleaded guilty to an information charging one count of conspiracy to commit health care fraud.

According to court documents, Keller falsified patient attendance and medical records for Medicare beneficiaries who attended HCSN for mental health treatment.  The falsified records were then utilized to submit fraudulent billing to the Medicare program. According to Keller’s plea agreement, Keller’s participation in the fraud resulted in more than $2.4 million in fraudulent billing to the Medicare program.
The cases are being prosecuted by Special Trial Attorney William Parente and Trial Attorney Allan J.

Medina of the Criminal Division’s Fraud Section.  The Superstar Home Health case is being prosecuted by Assistant U.S. Attorney Eric Morales of U.S. Attorney’s Office for the Southern District of Florida. These cases were investigated by the FBI and HHS-OIG and were brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion.  In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Thursday, October 25, 2012

Federal Authorities Arrest 12 People Involved in Operation of Nine Illegal Marijuana Storefronts in Orange and Los Angeles Counties

SANTA ANA, California – A dozen people associated with a chain of nine marijuana stores that operated across Orange and Los Angeles counties were arrested this morning on federal drug trafficking charges. The 12 arrested are among 14 people named in a 14-count indictment returned last week by a federal grand jury.

The indictment outlines a narcotics-trafficking conspiracy led by John Melvin Walker, who owned and operated nine marijuana stores in cities across the two counties. The conspiracy count alleges that the 14 defendants participated in a scheme that distributed, at the very least, a ton of marijuana through the storefronts.

The nine marijuana stores allegedly operated by Walker were Alternative Herbal Health in Long Beach, Safe Harbor Collective in Dana Point, Garden Grove Alternative Care in Garden Grove, Santa Ana Superior Care in Santa Ana, Belmont Shore Natural Care in Long Beach, Santa Fe Compassionate Health Care in Santa Fe Springs, Costa Mesa Patients Association in Costa Mesa, the Whittier Collective in Whittier, and APCC (also known as the “San Juan Capistrano Store”) in San Juan Capistrano. Most of the stores previously were the subject of search warrants executed in 2010 and 2011. Most of the nine stores are now closed, but several are believed to still be in operation, including Belmont Shore Natural Care.

The investigation in this case revealed that the nine marijuana stores generated tens of millions of dollars in income, with the indictment alleging that in 2009 alone Safe Harbor Collective had profits of approximately $2.4 million.

The indictment alleges that Walker failed to report any income generated at the marijuana stores to federal tax authorities and that he instructed his bookkeeper “to destroy all records pertaining to income generated at the marijuana [stores] shortly after they were generated and not to create records that fully identified Walker’s connection to the marijuana [stores].” One of the managers of Belmont Shore Natural Care communicated to Walker that “they should shred documents related to cash intake at Belmont Shore Natural Care at the end of the night,” according to the indictment.

The charges in the indictment include conspiracy (to distribute marijuana and to maintain drug-involved premises) and maintaining drug-involved premises near schools. Additionally, Walker is charged with being a felon in possession of firearms (including a handgun, a 12-gauge shotgun, and an AK-47) after previously being convicted in state court on cocaine and marijuana charges. When authorities seized the weapons from Walker’s home last year, they also seized approximately $390,000 in cash.

Furthermore, Walker and his security manager are charged with possessing firearms in furtherance of drug trafficking, a crime that carries a mandatory five-year sentence to run consecutively to any other sentence given to the defendants.

The defendants named in the indictment are:
John Melvin Walker, also knows an “Pops,” 56, of San Clemente, the owner/operator of the nine marijuana stores;
Ryan Aparicio Mondragon, 30, Westminster, who managed Santa Ana Superior Care and who is currently being sought by authorities;
Danielle Pamela Stebel, also known as “Mob Queen,” 25, of Long Beach, who helped manage Belmont Shore Natural Care;
Nicholas Einar Lattu, also known as “Dragon 6,” 28, of Long Beach, who owned Shadow Ops Security, a company that provided security services to the marijuana stores, and who is currently being sought by authorities;
Ryan Scott Hunt, 36, of Fullerton, who managed Garden Grove Alternative Care;
Perry Brooks Forehand, also known as “Bucky,” 33, of Mission Viejo, the manager of Safe Harbor Collective;
Nicholas Martin Butier III, 32, of Lakewood, who was the manager of Alternative Herbal Health;
Sierra Marina Serhan, also known as “Happy Chick,” 33, of Long Beach, who helped manage Belmont Shore Natural Care;
Alvin Wesley Walker, 29, of Long Beach, who is believed to be John Walker’s nephew and who helped manage Belmont Shore Natural Care;
John Eugene Scandalios, 59, of Lakewood, who allegedly supplied marijuana to Santa Fe Compassionate Health Care;
Karen Lee Leto, 70, of Huntington Beach, who allegedly helped manage Costa Mesa Patients Association;
Craig Lawrence Leto, 49, of Newport Beach who is Karen Leto’s son and who allegedly helped manage Costa Mesa Patients Association;
Michael Alan Nixon, 33, of Long Beach, who allegedly supplied marijuana to Santa Fe Compassionate Health Care;
Alan David Nixon, 59, of Long Beach, who is Michael Nixon’s father and who allegedly managed Santa Fe Compassionate Health Care.

The 12 defendants arrested this morning are expected to be arraigned on the indictment this afternoon in United States District Court in Santa Ana.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

All 14 defendants charged in the indictment are named in count one – the conspiracy charge – which carries a mandatory minimum sentence of 10 years in federal prison and a maximum statutory sentence of life without parole.

The investigation into John Walker’s chain of marijuana stores was conducted by the Orange County Sheriff’s Department; the Drug Enforcement Administration; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the California Franchise Tax Board; the California Board of Equalization; and the Orange County District Attorney’s Office.


Greenbelt, Maryland – U.S. District Judge Alexander Williams, Jr., sentenced Garrett L. Farmer, age 30, of Bladensburg, Maryland, today to 15 years in prison followed by two years of supervised release for being a felon in possession of a firearm. Farmer is an armed career criminal based on three previous felony convictions.

The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Steven L. Gerido of the Bureau of Alcohol, Tobacco, Firearms and Explosives - Baltimore Field Division; and Acting Special Agent in Charge Robert Brisolari of the Drug Enforcement Administration - Washington Field Division.

According to Farmer’s plea agreement, on May 8, 2009, Farmer was arrested in the parking lot of his apartment building in Bladensburg, and a search warrant was executed at his apartment. Officers recovered a 9 mm pistol, loaded with 15 rounds of ammunition, including one in the chamber, located inside the bedroom closet; white powder drug residue on a plate, in close proximity to the firearm in the closet, along with a knife and razor; white powder drug residue and a razor, located on a plate on the bedroom night stand, next to numerous small, unused, plastic baggies; loose marijuana on top of a shoe box in the bedroom, which contained a number of small, unused, plastic baggies; and $7,755 cash located in the freezer.

Farmer had previously been convicted of attempted distribution of cocaine, attempted possession with intent to distribute cocaine, and attempted robbery, and was prohibited from possessing a gun.

United States Attorney Rod J. Rosenstein commended the ATF and DEA for their work in this investigation and expressed his appreciation to the U.S. Attorney’s Office for the District of Columbia for their assistance. Mr. Rosenstein thanked Assistant United States Attorneys Emily Glatfelter and Cheryl L. Crumpton, who prosecuted the case.

10 Things to Keep in Mind When Teaching Your Kids about Stranger Danger

The Federal Bureau of Investigation’s National Crime Information Center estimates that roughly 2,000 children are reported missing every day. Luckily, the vast majority of missing children are found and their cases are resolved within hours; of those who aren’t immediately found, up to 49% are later found to have been abducted by a non-custodial parent or relative. 27% are kidnapped by an acquaintance, leaving only 24% at the hands of complete strangers. While the term “Stranger Danger” has a catchy ring to it, it’s actually a bit misleading because less than ¼ of all abducted children are taken by a stranger. This makes it extremely important to teach children about more than just stranger avoidance.

Read On:

Wednesday, October 24, 2012

ATF National Response Team Activated To Investigate Howard Johnson Inn Fire

OCEAN SPRINGS, Miss. – Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) National Response Team (NRT) along with ATF special agents from the Gulfport Field Office have been activated by request from the Fort Bayou Volunteer Fire Department, the Mississippi State Fire Marshal’s Office and the Jackson County Fire Department to investigate the Oct. 17 fire at the Howard Johnson Inn, located at 7412 Tucker Road, in Ocean Springs, Miss. The NRT will arrive today to conduct an assessment of the fire scene and formulate an investigative plan with state and local investigators.

The fire scene consists of a three story buildings with a combined area of approximately 30,000 square feet. The roof of the buildings was destroyed but no deaths or injuries were reported.

ATF is investigating the fire jointly with the Mississippi State Fire Marshal’s Office, the Fort Bayou Volunteer Fire Department and the Jackson County Sheriff’s Department. “We will work together in partnership to determine the origin and cause of this fire”, said Joel Lee, ATF Resident Agent in Charge of the ATF Gulfport Field Office. He estimates total loss of the business to be approximately $4 million.

In 1978, ATF developed the NRT to investigate in partnership with federal, state and local investigators in meeting the challenges faced at the scenes of significant arson and explosives incidents. The NRT consists of one team administratively organized into three geographic regions to cover the United States. Each team can respond within 24 hours to work jointly with state and local law enforcement/fire service personnel in onsite investigations.

The responding NRT component typically has 20 members, including veteran special agents who have post blast and fire origin-and-cause expertise; forensic chemists; explosives enforcement officers; fire protection engineers; accelerant detection canines; intelligence support, computer forensic support and forensic audit support. The teams work alongside state and local officers in reconstructing the scene, identifying the seat of the blast or origin of the fire, conducting interviews and sifting through debris to obtain evidence related to the bombing/arson. In addition to investigating hundreds of large fire and explosives scenes, the NRT has also been activated to scenes such as the 1993 World Trade Center bombing, the Oklahoma City Murray Federal Building bombing and the 9/11 Pentagon crash site, as well as explosions at explosives and ammunition manufacturing operations. The NRT is also deployed to support the safety and security at the Olympics and other major sporting events in the United States; presidential inaugurations and national political conventions; and major international conferences.

This is the 737th activation of the NRT and first in fiscal year 2013.

Former San Juan County, New Mexico, Sheriff’s Deputy Pleads Guilty to Violating Civil Rights of Man by Assaulting Him with a Flashlight

R. Dale Frazier, 57, of Flora Vista, N.M., pleaded guilty today in U.S. District Court in Albuquerque, N.M., to a federal civil rights charge in connection with the unlawful assault and beating of Dovovan Tanner with a flashlight.
On June 27, 2012, Frazier was indicted by a federal grand jury on one count of violating Tanner’s right to be free from the unreasonable use of force by a police officer.   According to the indictment, the assault on Tanner resulted in bodily injury and involved the use of a dangerous weapon.
The federal investigation revealed that on March 17, 2011, the defendant used his department-issued Maglight flashlight to strike Tanner in the head, neck and body after encountering Tanner and his brother outside a bar in Farmington, N.M.   Frazier struck Tanner two times in the head and neck with his flashlight while Tanner was on the hood of his police vehicle.   Frazier stuck Tanner an additional three times with his flashlight while Tanner was on the ground.   The assault of Tanner was captured on Frazier’s police dash camera.  
  “This guilty plea is an acknowledgment of the fact that the defendant in this case abused his law enforcement powers when he unnecessarily assaulted a person in his custody,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division..   “While law enforcement officers are always permitted to take reasonable steps to defend themselves and others from harm, our Constitution prohibits gratuitous assaults by officers.   The Justice Department continues to vigorously prosecute these abuses of power.”
“The public places great trust in law enforcement officers to use their authority the right way – and only the right way,” said Kenneth J. Gonzales, U.S. Attorney for the District of New Mexico. “When they intentionally abuse that authority, they will be held accountable.  Today, by pleading guilty to a federal felony offense, Dale Frazier was held accountable for seriously violating a young man’s civil rights by using excessive force against him on St. Patrick’s Day in 2011.”
“Law enforcement officers who violate the civil rights of those they have sworn to serve seriously damage the public's confidence in our government institutions,” said Carol K.O. Lee, Special Agent in Charge of the Albuquerque Division of the FBI.  “The Albuquerque FBI Division, in close partnership with the U.S. Justice Department's Civil Rights Division, the U.S. Attorney's Office and law enforcement throughout New Mexico, will continue to thoroughly investigate all reports of civil rights violations.”
These guilty pleas were the result of a cooperative effort between the U.S. Attorney’s Office for the District of New Mexico and the Justice Department’s Civil Rights Division.   This case was investigated by the Albuquerque Division of the FBI.    It is being prosecuted by Assistant U.S. Attorneys Mark Baker and Roberto Ortega for the District of New Mexico and Trial Attorney Sheldon L. Beer of the Civil Rights Division of the Department of Justice.

October is Domestic Violence Awareness Month

by Tech. Sgt. Ian Carrier
914th Airlift Wing Public Affairs

10/22/2012 - NIAGARA FALLS AIR RESERVE STATION, N.Y. -- Some enemies are unseen, faceless killers, but they affect us all as a community and as a military family.

Domestic violence is an enemy as real as any we face on the battlefield. It can harm our families, our neighbors and our fellow service-members. By affecting readiness, domestic violence has the potential to diminish the security of our nation.

This October is the 26th observance of Domestic Violence Awareness Month and 18 years since the passing of the Violence Against Women Act. The United States Congress designated October as the National Domestic Violence Awareness Month in 1989.

Niagara Falls Air Reserve Station has a new weapon in its arsenal in the fight against domestic violence with the arrival of Sexual Assault Response Coordinator Tamekia Slaughter. Nikki, as she prefers to be called, previously worked at the Veteran's Affairs hospital in Buffalo as a substance abuse social worker and Veteran's Court liaison.

"Basically, the purpose (of Domestic Violence Awareness Month) is to make the community aware that domestic abuse is a problem and to make people aware of things you can do to stay safe," said Slaughter. "It's something that the community is aware of, but it's taboo. It's something that people really don't talk about. We want to take the taboo out of it for the victims and help them be aware of things they can do and we want people to get involved."

Literature has been made available in the dining hall on base here so that people can have easy access to it and can take the information without having to go to the SARC office. Fact sheets have also been made available during commander's calls.

"There is no need for victims to suffer in silence, there is help out there. There are a lot of deaths that occur due to domestic violence, and I want to be a resource to help prevent this," said Slaughter.

All military members and civilian employees are required to report suspected cases of child abuse and domestic abuse. Two types of reporting options available to military members, their families and civilians are unrestricted and restricted reporting.

For unrestricted reporting, victims who want an official investigation should contact the service member's command, law enforcement or the Family Advocacy Program. The incident will be fully investigated and the victim will have access to victim advocacy services and FAP clinical services.

Restricted reporting gives the victim the option to report an incident of domestic abuse to a victim advocate, a supervisor of a victim advocate or health care provider. They can then receive victim advocacy services and medical care without starting a law enforcement investigation or without having the victim's or alleged offender's commander notified.

In an October 1, Presidential Proclamation made this year, President Obama stated, "While government must do its part, all Americans can play a role in ending domestic violence. Each of us can promote healthy relationships, speak out when we see injustice in our communities, stand with survivors we know, and change attitudes that perpetuate the cycle of abuse. We must also ensure that survivors of domestic violence know they are not alone, and that there are resources available to them. I encourage victims, their loved ones, and concerned citizens to learn more by calling the National Domestic Violence Hotline at 1-800-799-SAFE, or by visiting"

For help or information at Niagara Falls ARS, call the SARC office at 716-236-2576.

Tuesday, October 23, 2012

Department of Health and Human Services Employee Sentenced in North Carolina to Prison for Theft of Government Funds

WASHINGTON – An employee of the Department of Health and Human Services (HHS) was sentenced today in Asheville, N.C., to six months in prison for stealing $114,494 in government funds, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and Special Agent in Charge Elton Malone of the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG), Office of Investigations, Special Investigations Branch.

Jihan S. Cover, 34, of Arden, N.C., was sentenced today by U.S. District Judge Martin Reidinger in the Western District of North Carolina.  In addition to her prison term, Cover was ordered to forfeit $114,494, pay $114,494 in restitution to HHS and serve three years of supervised release, including six months of home confinement, following her prison term.

Cover pleaded guilty to one count of theft on Aug. 22, 2011.

According to court documents, Cover worked as a purchasing agent with the National Institutes of Health (NIH), National Cancer Institute (NCI), a subdivision of HHS, from approximately 2006 through December 2011.  Cover’s sole job function involved procuring authorized items and services for NIH/NCI using assigned government credit cards.

According to plea documents, between June 2009 and December 2010, Cover, who received regular training in the proper use of government credit cards, used and caused to be used NIH/NCI credit cards assigned to her to complete over 250 unauthorized personal transactions totaling approximately $114,494.
During this period of time, according to her plea, Cover used and caused to be used her NIH/NCI purchase cards to make over 170 personal purchases totaling approximately $16,000 from for items that included toys, exercise equipment, books, clothes and other personal times.  Almost all of these items were shipped to Cover’s residence in Arden.  In addition, Cover admitted using her NIH/NCI purchase cards to pay off over $29,000 in balances she accrued with various cash advance and payday loan vendors.
According to plea documents, Cover also used and caused to be used her NIH/NCI purchase cards to make more than $47,000 in payments to personal accounts she caused to be created on PayPal, an online payment website.  Cover directed over $46,000 from these PayPal accounts to be deposited into bank accounts that she controlled.  Plea documents also revealed that in an effort to conceal her misuse of assigned purchase cards, Cover created additional PayPal accounts associated with email accounts that she controlled and which she selected to resemble the name of a legitimate NIH/NCI vendor.  In this manner, Cover made over $11,000 in additional hidden payments to these PayPal accounts.

According to court documents, Cover also engaged in additional fraudulent personal transactions totaling approximately $11,000.

In addition, Cover admitted that she further sought to conceal her actions by submitting various dispute forms to the bank servicing her purchase cards, claiming that she did not recognize certain charges or did not authorize them, when, in fact, she knowingly made or caused to be made the personal charges.  During her plea hearing, Cover admitted that in or about January and June 2011, she lied to investigators, claiming that she had satisfied personal transactions made with her NIH/NCI purchase cards using her personal bank account, which in fact she knew she had not.  Previously, when confronted by her supervisor at NIH/NCI regarding suspicious transactions, Cover claimed falsely that she had been the victim of identity theft, when in fact she knew that she had caused the transactions.

This case is being prosecuted by Trial Attorney Eric G. Olshan of the Criminal Division’s Public Integrity Section.  This case was investigated by the HHS Office of Inspector General.

President of Costa Rican Company Sentenced to 60 Years in Prison for Half-Billion Dollar Fraud Scheme with Thousands of Victims Worldwide

WASHINGTON – The president of a Costa Rican company that sold reinsurance bonds to life settlement companies was sentenced today in Richmond, Va., to 60 years in prison for carrying out a half-billion-dollar fraud scheme that affected more than 3,500 victims throughout the United States and abroad, announced U.S. Attorney for the Eastern District of Virginia Neil H. MacBride and Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division. 

Minor Vargas Calvo, 61, a citizen and resident of Costa Rica, is the majority owner of Provident Capital Indemnity (PCI) Ltd., an insurance and reinsurance company registered in the Commonwealth of Dominica and doing business in Costa Rica.  He was convicted on April 30, 2012, of one count of conspiracy to commit mail and wire fraud, three counts of mail fraud, three counts of wire fraud and three counts of money laundering.

 “Mr. Vargas masterminded a criminal reinsurance company that fraudulently claimed to guarantee almost half a billion dollars of life settlement investments sold to thousands of investors worldwide,” said U.S. Attorney MacBride. “Many of these investors lost their life savings because of the worthless guarantees PCI made.  Mr. Vargas mistakenly believed that he could avoid punishment for the countless lives he destroyed because he operated his scheme from a non-extradition country.  But, this prosecution demonstrates our resolve and ability to pursue justice on behalf of U.S. victims regardless of where the fraudsters may be hiding.”
“Mr. Vargas’s reinsurance company was a house of cards, built on a foundation of deception and lies,” said Assistant Attorney General Breuer.  “He reaped millions in profit from his scheme to sell nearly $500 million worth of guarantee bonds to more than 3,500 victims, and then spent his spoils on his soccer team and himself.  Today’s sentence reflects the determination of our agents and prosecutors to bring sham artists like Mr. Vargas to justice.”
According to court records and evidence at trial, PCI sold financial guarantee bonds to companies selling life settlements, or securities backed by life settlements, to investors.  These bonds were marketed to PCI’s clients as a way to alleviate the risk of insured beneficiaries living beyond their life expectancy.  PCI’s clients, in turn, typically explained to their investors that the financial guarantee bonds ensured that the investors would receive their expected return on investment irrespective of whether the insured on the underlying life settlement lived beyond his or her life expectancy.
Evidence at trial showed that Vargas and PCI’s purported independent auditor for PCI, Jorge Castillo, 57, of New Jersey, used lies and omissions to mislead PCI’s clients and investors regarding PCI’s ability to pay claims when due on the financial guarantee bonds that PCI issued.  Vargas caused Castillo to prepare audited financial statements that falsely claimed that PCI had entered into reinsurance contracts with major reinsurance companies. These false claims, which were supported by a letter from Castillo stating that he conducted an audit of PCI’s financial records, were used to assure PCI’s clients that the reinsurance companies were backstopping the majority of the risk that PCI had insured through its financial guarantee bonds. The fraudulent financial statements PCI distributed also showed significant assets and relatively small liabilities.
From 2004 through 2010, PCI sold at least $485 million of bonds to life settlement investment companies located in various countries, including the United States, the Netherlands, Germany, Canada and elsewhere. PCI’s clients, in turn, sold investment offerings backed by PCI’s bonds to thousands of investors around the world. Purchasers of PCI’s bonds were required to pay up-front payments of six to 11 percent of the underlying settlement as “premium” payments to PCI before the company would issue the bonds.
Evidence at trial showed that Vargas spent more than $23 million of his ill-gotten gains on his professional soccer teams in Costa Rica, his unrelated companies, his family and himself.  Due, in part, to these expenditures, when it came time to make good on PCI’s promises to pay bond holders, Vargas resorted to yet more lies to justify PCI’s inability to do so.
Castillo, who was a PCI employee prior to becoming PCI’s “outside auditor,” pleaded guilty on Nov. 21, 2011, to conspiring to commit mail and wire fraud, which carries a maximum penalty of 20 years in prison.  Castillo is scheduled to be sentenced on Nov. 30, 2012.  In addition, PCI pleaded guilty on April 18, 2012, to conspiring to commit mail and wire fraud.  PCI was sentenced on Sept. 6, 2012, to one year of probation.
This investigation is being conducted by the U.S. Postal Inspection Service, Internal Revenue Service-Criminal Investigation and FBI, with assistance from the Virginia State Corporation Commission, the Texas State Securities Board and the New Jersey Bureau of Securities.  This case is being prosecuted by Assistant U.S. Attorneys Michael S. Dry and Jessica Aber Brumberg of the Eastern District of Virginia and Assistant Chief Albert B. Stieglitz Jr. of the Criminal Division’s Fraud Section.
The U.S. Securities and Exchange Commission (SEC) conducted a parallel investigation and in January 2011 filed a parallel civil enforcement action against PCI, Vargas and Castillo.   The department thanks the SEC for its assistance in this matter.

The investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia specifically.  The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force, an interagency national task force.

President Obama established the Financial Fraud Enforcement Task Force (FFETF) in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud de