Cybercrime: Djevair Ametovski Sentenced For Access Device Fraud And Aggravated Identity Theft

Financial Fraud

Operator of Global Cybercrime Marketplace Sentenced to 90 Months’ Imprisonment

Defendant’s “Codeshop” Website Sold Troves of Stolen Credit Card Data and Bank Account Logins on the Black Market

Earlier today, in federal court in Brooklyn, Djevair Ametovski, a Macedonian citizen, was sentenced by United States District Judge Eric N. Vitaliano to 90 months’ imprisonment after previously pleading guilty to access device fraud and aggravated identity theft. Those crimes related to Ametovski’s operation of “Codeshop,” a website he created for the sole purpose of selling stolen credit and debit card data, bank account credentials and personal identification information. Judge Vitaliano also ordered the defendant to forfeit $250,000 and to pay restitution in an amount to be determined by the Court at a later date. Ametovski was arrested in Ljubljana, Slovenia, in January 2014, and was extradited to the United States in May 2016.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, and David E. Beach, Special Agent-in-Charge, United States Secret Service, New York Field Office (USSS), announced the sentence.

“Ametovski and his co-conspirators were merchants of crime, stealing victims’ information and selling that information to other criminals,” stated United States Attorney Donoghue. “This Office and our law enforcement partners will tirelessly pursue cybercriminals who seek to profit at others’ expense.” Mr. Donoghue thanked the Slovenian Ministry of the Interior and Ministry of Justice, the United States Marshals Service, the U.S. Department of State Regional Security Officers in Slovenia and the Netherlands, and the Justice Department’s Office of International Affairs, for their assistance with the investigation and prosecution of the defendant.

“The sentencing of this transnational cybercriminal emphasizes the commitment of the Secret Service to disrupt and dismantle global criminal networks,” stated USSS Special Agent-in-Charge Beach. “The Secret Service will continue to work closely with our network of law enforcement partners to dismantle criminal enterprises seeking to victimize innocent people, regardless of geographic distance or borders.”

Ametovski and his co-conspirators operated Codeshop between August 2010 and January 2014, victimizing hundreds of thousands of individuals around the world by hacking into the computer databases of financial institutions and other businesses and through “phishing” scams designed to induce accountholders to unwittingly surrender private identification information. They packaged this stolen data for sale and posted it on the Codeshop website, a fully indexed and searchable website that allowed users to search by bank identification number, financial institution, country, state and card brand to find the data they wanted. The stolen data could then be used to make online purchases and to encode plastic cards to withdraw cash at ATMs. Ametovski used a network of online money exchangers and anonymous digital currencies, including Bitcoin, to reap revenues from the Codeshop website and to conceal all participants’ identities, including his own. Over the course of the scheme, Ametovski obtained and sold stolen credit and debit card data for more than 1.3 million cards.

The government’s case is being handled by the Office’s National Security & Cybercrime Section. Assistant United States Attorneys Saritha Komatireddy and David K. Kessler are in charge of the prosecution.

The Defendant:

DJEVAIR AMETOVSKI (also known as “xhevo,” “codeshop,” “sindrom” and “sindromx”)
Age: 32

E.D.N.Y. Docket No. 16-CR-409 (ENV)

Financial Fraud: Marian Annette Cluff And Alsie Cluff Jr. Pleaded Guilty To Mail Fraud And Conspiracy To Commit Tax Evasion

Financial Fraud

Charter School Victims to Receive More Than a Half-Million in Restitution

Announcement comes on the heels of National Crime Victims Rights Week

HOUSTON – More than 4,000 parents who had entrusted their children to administrators at the Varnett Charter School are set to receive payments totaling more than $600,000, announced U.S. Attorney Ryan K. Patrick along with Special Agent in Charge Perrye K. Turner of the FBI, Special Agent in Charge Neil Sanchez from the Department of Education – Office of Inspector General (ED-OIG) and Acting Special Agent in Charge Sarah Kull of IRS – Criminal Investigation (CI).

Marian Annette Cluff, 70, was the founding superintendent of The Varnett Public School, a charter school with three locations in Houston, while her husband – Alsie Cluff Jr., 69, was the facilities and operations manager. They pleaded guilty Aug. 25, 2017, to mail fraud and conspiracy to commit tax evasion charges for embezzling millions of dollars from the school.

In June 2018, U.S. District Judge Melinda Harmon sentenced Marian Cluff to 120 months imprisonment and to pay a $295,596 fine, while her husband was ordered to serve a 36-month term of imprisonment and pay a $88,678 fine. More importantly, however, was that both were also ordered to pay a total of $4,443,755.69 in restitution.

In less than a year following the sentencing hearing, the Financial Litigation Unit (FLU) of the U.S. Attorney’s Office – with the substantial assistance of the U.S. Marshal Service (USMS) – collected the total restitution ordered in the case.

In an amended order issued in March 2019, U.S. District Judge Andrew S. Hanen ordered that $604,889.76 of that amount be distributed to the identified victim parents of the school. The U.S. District Clerk’s Office has indicated that restitution payments to the parents will be handled on an expedited basis.

At the time of the sentencing, the court heard that the couple embezzled millions of dollars in funds that were intended for the operation and function of the charter school and its programs. These included “money orders” parents had submitted to pay for school field trips and student fundraisers, such as chocolate sales, book fairs, school carnivals and other school-related activities.

The Cluffs used their positions of trust and authority and diverted and concealed money received from vendors of the school, insurance companies and federal agencies into the off-book accounts for the purpose of diverting money intended for the charter school for their own personal use and benefit. The Cluffs concealed the accounts from the charter school office manager, the school’s external accountant and their income tax preparer.

Testimony at sentencing also revealed the Cluffs conspired to commit tax evasion of approximately $1,827,477.55 in tax, interest and penalties owed to the IRS. The Cluffs did not pay income taxes on the money they received as a result of the scheme.

The Cluffs were ordered to surrender to the U.S. Bureau of Prisons in August 2018 and are currently serving their sentences.

Today’s announcement comes as National Crime Victim Rights Week (NCVRW) draws to a close. Every April, the Office for Victims of Crime leads communities throughout the country in their annual observances of NCVRW. This year’s theme – Honoring Our Past. Creating Hope for the Future – celebrated the progress made by those before us as we look to a future of crime victim services that is even more inclusive, accessible and trauma-informed.

The Department of Justice’s Mega Victim Case Assistance Program (MCAP) has also conducted research in this case to identify the current addresses for parents of former students. If your child attended the Varnett Public School between 2007–2014 and you have not received any correspondence from the U.S. Attorney’s Office, please contact the Victim Witness Unit at 713-567-9445.

The FBI, IRS-CI and Ed-OIG conducted the investigation. ED-OIG, USMS, FLU, U.S. District Clerk’s Office and MCAP worked collectively to assist in the restitution matter.

Assistant U.S. Attorney Quincy L. Ollison prosecuted the criminal case.

Financial Fraud: James Campbell And Hammed Akinola Sentenced Of Conspiracy To Commit Wire Fraud

Financial Fraud

Two Sentenced for Victimizing Many Across the Nation

HOUSTON – A 53-year-old Houston man has just been ordered to prison following his conviction of conspiracy to commit wire fraud, announced U.S. Attorney Ryan K. Patrick. James Campbell and co-defendant Hammed Akinola, a Nigerian citizen, entered guilty pleas Oct. 9, 2019.

Today, U.S. District Judge David Hittner sentenced, Campbell, 53, to 90 months in prison. At a hearing April 12, 2019, Judge Hittner upwardly departed from the U.S. Sentencing Guidelines and ordered Akinola to serve 180 months in federal prison.

In handing down the sentences, Judge Hittner noted the defendants ruined the lives of many across the nation in taking or attempting to take large sums of money from approximately 45 victims. Several of such victims included individuals sending money to their title company to close on a home in which, unbeknownst to them, money was fraudulently being transferred to a bank in Houston the defendants controlled. Not only did the victims lose their money, the banks took a large hit as well.

From on or about January 2016 through November 2017, Campbell and Akinola were involved in an international wire fraud conspiracy that consisted primarily of Business Email Compromise (BEC) fraud which targeted businesses and individuals that regularly perform wire transfer payments. They compromised legitimate business e-mail accounts through social engineering or computer intrusion techniques to conduct unauthorized transfers of funds by international co-conspirators.

The international co-conspirators hacked into the victims accounts and sent what appeared to the victims to be legitimate emails from banks or title companies. The victims, tricked into thinking such emails were from the bank or title companies, would then transfer the money to the accounts the defendants controlled, not knowing they were fraudulent emails.

Akinola was working with overseas conspirators who were orchestrating the BEC victimization. Those conspirators needed domestic bank accounts where they could send the funds stolen from the BEC fraud. Akinola and Campbell agreed to work together to open bank accounts and to recruit individuals in and around the Houston area to open bank accounts in order to receive the BEC wires.

Campbell and Akinola then recruited 20 other individuals who did open bank accounts to receive fraudulent funds. The proceeds of the fraud scheme were disbursed between the account holders, Campbell, Akinola and international accomplices.

In total, the Campbell and Akinola’s activity participating in the scheme and laundering its proceeds resulted in victims’ of BEC fraud transferring or attempting to transfer $10.3 million into to accounts they controlled.

Both have been and will remain in custody pending transfer to a U.S. Bureau of Prisons facility to be determined in the near future.

The U.S. Postal Inspection Service and the FBI conducted the investigation. Assistant U.S. Attorneys Suzanne Elmilady and Melissa Annis are prosecuting the case.

Health Care Fraud: Group Of Individuals guilty For Implicated In The Forest Park Medical Center Bribery Scheme

Health Care Fraud

Seven Guilty in Forest Park Healthcare Fraud Trial

Following four days of deliberations, a federal jury returned guilty verdicts for seven individuals implicated in the Forest Park Medical Center bribery scheme Tuesday evening, announced U.S. Attorney Erin Nealy Cox.

Wilton McPherson “Mac” Burt, Jackson Jacob, Douglas Sung Won, Michael Bassem Rimlawi, Shawn Mark Henry, Mrugeshkumar Shah, and Iris Kathleen Forrest were all convicted of conspiracy to pay or receive healthcare bribes.

“The verdict in the Forest Park case is a reminder to healthcare practitioners across the District that patients – not payments – should guide decisions about how and where doctors administer treatment,” said U.S. Attorney Nealy Cox. “We are grateful to the Forest Park jury, 12 men and women who listened attentively through seven long weeks of trial. It’s obvious from the verdict that they deliberated each charge carefully, and we appreciate their service.”

Ten other defendants had already pleaded guilty in the $200 million scheme, designed to induce doctors to steer lucrative patients – particularly those with high-reimbursing, out-of-network private insurance – to the now defunct hospital.

Most of the kickbacks, which totaled more than $40 million, were disguised as consulting fees or “marketing money” doled as a percentage of surgeries each doctor referred to Forest Park.

Instead of billing patients for out-of-network co-payments, instituted by insurers to de-incentivize the high costs associated with out-of-network treatment, Forest Park allegedly assured patients they would pay in-network prices. Because they knew insurers wouldn’t tolerate such practices, they concealed the patient discounts and wrote off the difference as uncollected “bad debt.”

Hospital manager Alan Beauchamp, who testified for the government, admitted that Forest Park “bought surgeries,” and then “papered it up to make it look good.”

The verdict was as follows:

Mr. Burt, Forest Park’s managing partner, was found guilty on 10 of 12 counts, including one count of conspiracy, two counts of paying kickbacks, six counts of commercial bribery in violation of the Travel Act, and one count of money laundering. He faces up to 65 years in federal prison.

Mr. Jacob, owner of the shell companies through which some of the bribes were routed, was found guilty on four of 14 counts, including conspiracy and three counts of paying kickbacks. He faces up to 20 years in federal prison.

Dr. Won, a spinal surgeon, was found guilty on one of two counts, conspiracy. He faces up to 5 years in federal prison.

Dr. Rimlawi, a spinal surgeon who partnered with Won, was found guilty on three of four counts, including conspiracy and two counts of receiving kickbacks. He faces up to 15 years in federal prison.

Dr. Henry, a spinal surgeon who invested in FMPC, was found guilty on three of three counts, including conspiracy, commercial bribery, and money laundering. He faces up to 30 years in federal prison.

Dr. Shah, a pain management doctor, was found guilty on four of four counts, including conspiracy, two counts of paying kickbacks, and one count of commercial bribery. He faces up to 20 years in federal prison.

Ms. Forrest, a nurse who recruited and preauthorized worker’s comp requests, was convicted on two of two counts, including conspiracy and paying kickbacks. She faces up to 10 years in federal prison.

Dr. William Daniel “Nick” Nicholson, a bariatric surgeon who invested in FPMC, was found not guilty on all three counts against him.

The jury could not come to a verdict as to Ms. Carli Adele Hempel, and the judge declared a mistrial for her.

Defendants who pleaded guilty before the case went to trial include: Alan Andrew Beauchamp, Richard Ferdinand Toussaint, Jr., Wade Neal Barker, Kelly Wade Loter, David Daesung Kim, Israel Ortiz, Andrea Kay Smith, Frank Gonzales, Jr., Andrew Jonathan Hillman, and Semyon Narosov.

Sentencing dates for convicted defendants have not yet been set.

The case was investigated by the U.S. Office of Personnel Management Office of Inspector General, the Federal Bureau of Investigation, the U.S. Department of Labor Office of Inspector General, the U.S. Department of Labor Employee Benefits Security Administration, the U.S. Department of Defense – Defense Criminal Investigative Service, and Internal Revenue Service Criminal Investigation, with assistance from the Food and Drug Administration Office of Criminal Investigations.

Assistant U.S. Attorneys Andrew Wirmani, Kate Pfeifle, Marcus Busch, Mark Tindall and Gail Hayworth are prosecuting the case.

Financial Fraud: Antonio Buzaneli Sentenced Sentenced In Investment Fraud Scheme Involving Brazilian Factoring

Financial Fraud

Florida Executive Sentenced To 20 Years In Prison For Orchestrating $150 Million International Ponzi Scheme

United States Attorney Erica H. MacDonald today announced the sentencing of ANTONIO CARLOS DE GODOY BUZANELI, 57, to 240 months in prison for his role in a $150 million investment fraud scheme involving Brazilian factoring. BUZANELI, who entered his guilty plea on April 19, 2018, was sentenced today before Senior Judge Michael J. Davis in U.S. District Court in Minneapolis, Minnesota. BUZANELI’S co-conspirators, JOSE MANUEL ORDOÑEZ, JR., 48, was sentenced on January 23, 2019, to 120 months in prison and JULIO ENRIQUE RIVERA, 62, will be sentenced on April 16, 2019.

U.S. Attorney Erica MacDonald said, “Antonio Buzaneli was the primary architect of a $150 million Ponzi scheme that targeted hundreds of victims worldwide, many of whom were elderly and vulnerable. Some victims lost their retirement savings, others lost the ability to provide a college education to their children or grandchildren. For these egregious crimes, Mr. Buzaneli will spend the next 20 years behind bars. I applaud our law enforcement partners for their steadfast efforts in seeking justice for the victims.”

“No matter how complex the scheme, the FBI is committed to stopping fraudsters like these from preying on people, especially elderly investors who may have lost their life savings in this case,” said Jill Sanborn, Special Agent in Charge of the FBI’s Minneapolis Division. “We are grateful for our partners at the U.S. Attorney’s Office, the United States Postal Inspection Service and the Minnesota Commerce Fraud Bureau for thoroughly investigating this global scheme and bringing these criminals to justice; and we believe this matter further illuminates the need for citizens to be wary of those peddling these kinds of fraudulent business investments.”

“Our securities enforcement unit and the Commerce Fraud Bureau began investigating this scheme after receiving a tip about a suspicious investment opportunity being offered in Minnesota,” said Steve Kelley, Commissioner of the Minnesota Department of Commerce. “We are proud that the Commerce Fraud Bureau collaborated successfully with federal authorities, bringing to justice a far-reaching operation that deceived Minnesotans.”

According to his guilty plea, BUZANELI, along with his co-conspirators, ORDOÑEZ and RIVERA, were the principals of Providence Holdings International, Inc., a company based in Key Biscayne, Florida. BUZANELI and ORDOÑEZ became principals of Providence Financial Investments, Inc. and Providence Fixed Income Fund LLC (collectively, along with Providence Holdings International, Inc., “Providence”) in order to raise money from investors.

According to BUZANELI’s guilty plea and documents filed in court, from about 2010 until June 2016, Providence raised approximately $150 million from investors worldwide by representing that Providence would invest the money in Brazilian factoring. “Factoring” is a financial transaction in which accounts receivable are purchased at a discount. Providence’s marketing materials explained that in Brazil consumers write ten separate post-dated checks for $100 – one per month – to pay for $1,000 in retail items such as consumer electronics or groceries. The retailer then sells the post-dated checks to Providence for approximately $820, and Providence earns $180 over ten months as the checks mature. As a result, Providence claimed to make a 48 percent annual return on money invested in Brazil.

According to BUZANELI’s guilty plea and documents filed in court, Providence raised more than $64 million from U.S. investors by employing a network of brokers who sold promissory notes bearing annual interest rates between 12 percent and 24 percent. Investors were told their money would be used to factor accounts receivable in Brazil. BUZANELI, ORDOÑEZ and RIVERA provided the brokers with an Executive Memorandum to show investors that their money would be used to factor accounts receivable in Brazil. The Executive Memorandum falsely stated that funds would be used “for the sole purpose” of making loans to a Brazilian subsidiary of Providence “which will use the proceeds of the loan to acquire receivables or financial instruments such a post-dated checks and/or Duplicatas in the Brazilian Factoring Market.”

According to the defendant’s guilty plea and documents filed in court, BUZANELI and ORDOÑEZ instead used a significant amount of the investors’ funds to make Ponzi-style payments to other investors and to make commission payments to Providence’s nationwide network of brokers. BUZANELI and ORDOÑEZ also diverted investor funds to other companies they controlled, including an import/export company, a travel company, a realty company, a credit rehabilitation company, and a catering company and food truck operated by BUZANELI’S wife.

According to the defendant’s guilty plea and documents filed in court, BUZANELI and ORDOÑEZ also opened Providence offices and affiliates in locations around the world, including London, Taipei, Shanghai, Singapore, Vancouver, and Panama. For example, in 2011 and 2012, BUZANELI and ORDOÑEZ opened Providence affiliates in the Bailiwick of Guernsey and in Hong Kong, through which they raised approximately $85 million from offshore investors based on the same lies they told investors in the United States – that their money would be used to invest in Brazilian factoring. Instead, much of the investors’ money was transferred to other Providence-controlled entities around the world as well as to bank accounts controlled by BUZANELI and ORDOÑEZ, where the money was used for payments unrelated to Brazilian factoring, including to pay commissions to U.S. brokers and to make interest payments to American investors in Providence’s U.S.-based entities. As a result of the fraud scheme, Providence investors worldwide – including more than 500 victims in the United States alone – lost a total of more than $100 million.

This case was the result of an investigation conducted by the FBI, United States Postal Inspection Service, and the Minnesota Commerce Fraud Bureau. United States Attorney MacDonald would also like to thank the Securities and Exchange Commission for their assistance on this case.

Assistant U.S. Attorneys Kimberly A. Svendsen and Joseph H. Thompson prosecuted this case.

Defendant Information:

ANTONIO CARLOS DE GODOY BUZANELI, 57

Coral Gables, Fla.

Convicted:

Conspiracy to commit mail fraud, 1 count
Sentenced:

240 months in prison
$51,353,861.45 in restitution
Three years of supervised release

Health Care Fraud: Mohamad Ali And Wansa Nabi Makki Charging With Multiple Health Care Fraud Offenses

Health Care Fraud

Pharmacy Owner and Pharmacist Charged in a Scheme to Bill Insurance for Medications Not Dispensed

An indictment was unsealed today charging Mohamad Ali Makki, R.Ph. and Wansa Nabi Makki with multiple health care fraud offenses, U.S. Attorney Matthew Schneider announced today. At the same time, related criminal complaints were unsealed charging Mamoud Makki and Hossam Tanana (husband of Wansa Makki) of laundering some of the proceeds of the health care fraud scheme.

Schneider was joined in the announcement by Special Agent in Charge Timothy R. Slater of the FBI’s Detroit Division and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Chicago Regional Office.

Charged in the indictment and criminal complaints are:

Wansa Nabih Makki, 41, of Dearborn

Mohamad Ali Makki, R.Ph., 43, of Dearborn Heights

Mahmoud Makki., 36, of Dearborn

Hossam Tanana, 53 of Dearborn

According to the indictment, between January 2010 and January 2018, Wansa Makki owned and oversaw the operations of two local pharmacies, LifeCare Pharmacy in Livonia and LifeCare of Michigan in Farmington Hills. Mohamad Makki was the pharmacist-in-charge at both pharmacies. Both pharmacies were “closed door” pharmacies, meaning that they were not open to the public and only filled prescriptions for individuals associated with various care facilities. The indictment alleges that during the course of the conspiracy, Wansa Makki and Mohamad Makki billed Medicare, Medicaid and Blue Cross Blue Shield of Michigan for approximately $9.2 million dollars for medications that were never dispensed. The fraud scheme was detected by Medicare, in part, because of a huge deficit between each pharmacy’s recorded inventories and the claims that each submitted for insurance reimbursement. As part of the scheme to defraud, the defendants billed insurance companies for allegedly submitting claims for delivering over 500 medications to people who had died prior to the claimed date of delivery.

According to the indictment and related criminal complaints, proceeds of the fraud scheme were laundered by overpaying consulting and delivery companies operated by close relatives of Wansa and Mohamad Makki. For instance, according to the complaints, Hossam Tanana was previously convicted for diverting controlled substances such as oxycodone, hydrocodone (Vicodin) and alprazolam (Xanax) while being licensed as a pharmacist. Two days after being released from federal custody in April of 2012, Tanana incorporated a pharmacy consulting company. Between the date of incorporation and December of 2013, Tanana’s consulting company received over $400,000 from the LifeCare Pharmacy. LifeCare Pharmacy also paid over one million dollars to a delivery service opened by Wansa Makki’s brother, Mahmoud Makki, in a 14-month period beginning in December of 2013.

An indictment is only a charge and is not evidence of guilt. Each defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

If convicted of a health care fraud charge, the defendants face a maximum sentence of imprisonment of ten years, and a maximum fine of $250,000. In addition to any sentence imposed for health care fraud, the defendants face a mandatory and consecutive two-year sentence if convicted of aggravated identity theft.

The case was investigated by Special Agents of the HHS and FBI, with cooperation and assistance from the Michigan Department of Health and Human Services – Office of Inspector General.

The case is being prosecuted by Assistant U.S. Attorneys John Engstrom, Philip Ross and Shankar Ramamurthy.

Financial Fraud: CHARNPAL GHUMAN Is Convicted In A Bank Fraud Scheme to Prison Terms

Financial Fraud

Suburban Bank Fraud Schemers Sentenced to Prison and Ordered to Pay $14.3 Million in Restitution

CHICAGO — A federal judge in Chicago has sentenced several defendants in a bank fraud scheme to prison terms and ordered them to pay more than $14.3 million in restitution.

CHARNPAL GHUMAN, 39, of Palatine, and AGA KHAN, 39, of Bloomingdale, were business partners who “flipped” gas stations by purchasing them and re-selling to buyers whom Ghuman and Khan knew were not qualified to obtain bank financing. The pair conspired with a loan officer inside American Enterprise Bank to submit false application documents to obtain loans from the bank guaranteed by the U.S. Small Business Administration. An accountant participated in the scheme by furnishing AEB with false tax returns to help get more than half of the loan applicants qualified for financing. From 2006 to 2009, Ghuman and Khan obtained more than $40 million in loan proceeds as a result of the scheme.

Ghuman and Khan pleaded guilty to bank fraud charges, as did the loan officer, AKASH BRAHMBHATT, 44, of Spring, Texas, and the accountant, SHITAL MEHTA, 53, of Elk Grove Village.

U.S. District Judge John J. Tharp, Jr., on Thursday ordered restitution to AEB of $14,343,899. Judge Tharp had previously sentenced all four defendants to prison terms.

The sentences and restitution order were announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; Jeffrey S. Sallet, Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation; and Gabriel L. Grchan, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago. The SBA and the Federal Deposit Insurance Corp. assisted in the investigation.

According to evidence in the case, Ghuman and Khan set up various corporate entities that purchased multiple gas stations in Illinois and other areas of the Midwest for immediate resale at a higher price. Ghuman and Khan arranged for the financing on behalf of the buyers through AEB loans, which were guaranteed by the SBA if certain requirements were met, including that the borrowers provide a percentage of equity. Ghuman and Khan worked with Brahmbhatt to falsify the loan applications, which included false statements regarding the buyers’ income, employment and experience, as well as false tax returns submitted by Mehta. Ghuman and Khan also falsified equity payments required by the buyers.

“Ghuman and Khan walked away with millions of dollars in loan proceeds, while the borrowers defaulted, leaving the bank’s loss in the millions of dollars,” Assistant U.S. Attorney Sheri H. Mecklenburg argued in the government’s sentencing memorandum. “This was not a one-time lapse in judgment. Defendants’ fraud was repeated and ongoing, over the course of years.”

Judge Tharp ordered prison terms and restitution for each of the defendants:

Ghuman: Five years and six months in prison; restitution of $11,843,899, of which $2 million is owed personally and the remainder owed jointly with Khan. Ghuman also received a concurrent sentence of three years in prison and was ordered to pay $1,952,653 to the IRS after also pleading guilty to filing a false tax return.

Khan: Three years in prison; restitution of $10,843,899, of which $1 million is owed personally and the remainder owed jointly with Ghuman.

Brahmbhatt: Three years in prison; restitution of $10,843,899, of which $1 million is owed personally and the remainder owed jointly with Ghuman.

Mehta: One year and one day in prison; restitution of $500,000, owed personally.

Health Care Fraud: Three Pharmaceutical Companies Agree to Pay to Resolve Allegations That They Paid Kickbacks Through

Health Care Fraud

Three Pharmaceutical Companies Agree to Pay a Total of Over $122 Million to Resolve Allegations That They Paid Kickbacks Through Co-Pay Assistance Foundations

The Department of Justice today announced that three pharmaceutical companies – Jazz Pharmaceuticals plc (Jazz), Lundbeck LLC (Lundbeck), and Alexion Pharmaceuticals Inc. (Alexion) – have agreed to pay a total of $122.6 million to resolve allegations that they each violated the False Claims Act by illegally paying the Medicare or Civilian Health and Medical Program (ChampVA) copays for their own products, through purportedly independent foundations that the companies used as mere conduits.

When a Medicare beneficiary obtains a prescription drug covered by Medicare, the beneficiary may be required to make a partial payment, which may take the form of a copayment, coinsurance, or a deductible (collectively “copays”). Similarly, under ChampVA, patients may be required to pay a copay for medications. Congress included copay requirements in the Medicare program, in part, to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs. The Anti-Kickback Statute prohibits a pharmaceutical company from offering or paying, directly or indirectly, any remuneration — which includes money or any other thing of value — to induce Medicare or ChampVA patients to purchase the company’s drugs. This prohibition extends to the payment of patients’ copay obligations.

“Pharmaceutical companies undercut a key safeguard against rising drug costs when they create assistance funds to serve as conduits for the companies to subsidize the copays of their own drugs,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “These enforcement actions make clear that the government will hold accountable drug companies that directly or indirectly pay illegal kickbacks.”

“We are committed to ensuring that pharmaceutical companies do not use third-party foundations to pay kickbacks masking the high prices those companies charge for their drugs,” said U.S. Attorney Andrew E. Lelling. “This misconduct is widespread, and enforcement will continue until pharmaceutical companies stop circumventing the anti-kickback laws to artificially bolster high drug prices, all at the expense of American taxpayers.”

Jazz and Lundbeck each entered five-year corporate integrity agreements (CIAs) with OIG as part of their respective settlements. The CIAs require the companies to implement measures, controls, and monitoring designed to promote independence from any patient assistance programs to which they donate. In addition, the companies agreed to implement risk assessment programs and to obtain compliance-related certifications from company executives and Board members.

“These kickback schemes harm Medicare and the public,” said Gregory E. Demske, Chief Counsel to the Inspector General. “OIG CIAs, such as those with Jazz and Lundbeck, are designed to reduce future risks to patients and taxpayer-funded programs. OIG decided not to require a CIA with Alexion because it made sweeping and fundamental organizational changes following the bad conduct. The changes included hiring a new eight-member executive leadership team and changing half of the members of its Board of Directors. In addition, 40 percent of Alexion’s employees are new and the company relocated its corporate headquarters.”

“These settlements demonstrate the FBI’s commitment to safeguard the Medicare program and ensure that patients receive treatment solely based on their medical needs,” said Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division. “Not only did these companies undermine a program that was set up to assist patients in decreasing the cost of their drugs, but they threatened the financial integrity of the Medicare program to which we all contribute and on which we all depend.”

“Kickback schemes undermine the integrity our nation’s healthcare system, including healthcare benefits administered by the U.S. Department of Veterans Affairs,” said Special Agent-in-Charge Sean Smith, VA Office of Inspector General, Northeast Field Office. “The VA Office of Inspector General, along with our law enforcement partners, will continue to aggressively pursue these investigations and exhaust all efforts to uncover these schemes.”

The government’s allegations in the three settlements being announced today are as follows:

Jazz: Jazz sells Xyrem, a narcolepsy medication with Gamma Hydroxybutyrate (GHB)—a central nervous system depressant and controlled substance—as its main active ingredient. The government alleged that, in 2011, Jazz asked a foundation to create a fund that would pay the copays of Xyrem Medicare patients and that the foundation agreed to establish a “Narcolepsy Fund,” to which Jazz became the sole donor. The government alleged that Jazz knew that, although Xyrem accounted for a small share of the overall narcolepsy market, the fund almost exclusively used Jazz’s donations to pay copays for Xyrem and required non-Xyrem patients on competing products to obtain a denial letter from another assistance plan before helping them. The government further alleged that, in conjunction with establishing this fund, Jazz made Medicare patients ineligible for Jazz’s free drug program and instead referred Xyrem Medicare patients to the foundation, enabling Jazz to generate revenue from Medicare and induce purchases of the drug, rather than continuing to provide these patients with free drugs. Meanwhile, Jazz raised the price of Xyrem by over 150 percent from 2011 through the end of the relevant time period.

Jazz also sold Prialt, an injectable severe chronic pain medication. The government alleged that Jazz asked the same foundation to create a fund ostensibly to assist patients with the co-pays of any severe chronic pain drugs, but which, in practice, almost exclusively paid Prialt Medicare copays. Shortly after creating the fund, the foundation allegedly told Jazz that when severe chronic pain patients seeking assistance with other drugs contacted the foundation, it would refer them elsewhere. The government alleged that Jazz was also aware that the fund did not appear on the foundation’s website, thereby minimizing the number of non-Prialt patients seeking assistance from the fund. Jazz has agreed to pay $57 million to resolve the government’s allegations.

Lundbeck: Lundbeck sells Xenazine, the only drug that was approved to treat chorea associated with Huntington’s disease until a generic version became available until 2015. The government alleged that Lundbeck was the sole donor and made millions in payments to a fund at a foundation that ostensibly provided financial support only for patients with Huntington’s Disease. However, Lundbeck allegedly referred Xenazine patients with many other conditions to this foundation, which then paid the Xenazine copays for these unapproved uses from its Huntington’s Disease fund. The government further alleged that, in June 2014, after the foundation determined that its Huntington’s Disease fund would no longer pay the copays of patients taking Xenazine for non-Huntington’s disease uses, Lundbeck agreed to repurpose some of its prior donations to the Huntington’s Disease fund to a “general fund” at the foundation for the purpose of paying these patients’ Xenazine copays, and made subsequent “unrestricted” payments to the foundation with the understanding that the foundation would use these payments to pay Xenazine copays for these same patients. Lundbeck allegedly asked the foundation whether there was a “risk” that this practice would be viewed as not compliant with the foundation’s HHS-OIG Advisory Opinion, and the foundation allegedly replied that “[t]hey don’t know what we use the general fund for.”

The government also alleged that, at the time it was engaged in the foregoing conduct, Lundbeck had a policy of not permitting Medicare or ChampVA patients to participate in its free drug program for Xenazine, which was open to other financially needy patients, even if those Medicare or ChampVA patients could not afford their copays for Xenazine. Instead, in order to generate revenue from Medicare and ChampVA and to induce purchases of Xenazine, Lundbeck allegedly referred financially needy non-Huntington’s Disease Xenazine patients to the foundation, which resulted in claims to Medicare and ChampVA to cover the cost of the drug. Lundbeck has agreed to pay $52.6 million to resolve the government’s allegations.

Alexion: Alexion sells Soliris, which, from Jan. 1, 2010, through June 30, 2016, was indicated for certain uses to treat patients with paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS). The cost of Soliris, based upon its list price and indicated dosing recommendation, can be approximately $500,000 per year. The government alleged that Alexion made donations to a “Complement-Mediated Disease” (CMD) fund at a foundation to pay the Medicare copay obligations of patients taking Soliris and to induce those patients’ purchases of Soliris. Alexion allegedly knew that the price it set for Soliris could pose a barrier to patients’ purchases of it. In particular, the government alleged that Alexion approached the foundation in January 2010 to request that it create a fund to provide financial assistance to Soliris patients, including by paying patients’ Soliris Medicare copays and other medical expenses for Soliris patients. Over the next several months, Alexion and the foundation allegedly discussed the coverage parameters for the fund, including Alexion’s desire that the foundation “not support a patient with any of these [CMD] diagnoses for other reasons tha[n] Soliris therapy.” After the fund opened, Alexion—the sole donor to the fund—allegedly understood that the foundation’s provision of financial assistance to a patient was contingent on the patient taking Soliris. Alexion allegedly noted internally that it needed to be diligent in letting the foundation know if a patient had stopped taking Soliris so that Alexion’s donations would not be used on patients who were not starting or maintaining Soliris therapy.

Meanwhile, the government alleged that Alexion had a general practice of not permitting Medicare patients to participate in its free drug program, which was open to other financially needy patients, even if those Medicare patients could not afford their copays for Soliris. Instead, in order to generate revenue from Medicare and induce purchases of Soliris, Alexion allegedly referred Medicare patients prescribed Soliris to the foundation, through the foundation’s “referral portal” software. Allegedly, the “referral portal” reported information back to Alexion confirming those Soliris patients who were approved for copay or other financial assistance from the foundation, and detailed the foundation’s payments to them, which resulted in claims to Medicare to cover the cost of Soliris. Alexion has agreed to pay $13 million to resolve the government’s allegations.

The government’s resolution of these matters illustrates the government’s emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

These investigations were conducted by the Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of Massachusetts, in conjunction with the Department of Health and Human Services, Office of Inspector General; the Federal Bureau of Investigation; and the Department of Veterans Affairs, Office of Inspector General.

The claims resolved by the settlement are allegations only; there has been no determination of liability.

Financial Fraud: Demetrios Stavrakis Indicted For An Arson Conspiracy In Order To Obtain Insurance Proceeds

Insurance Fraud

Baltimore Business Owner Indicted on Federal Charges for a Conspiracy to Set Fire to His Business In Order to Obtain Insurance Proceeds

Baltimore, Maryland – A federal grand jury has indicted Demetrios Stavrakis, a/k/a Jimmy, age 53, of Lutherville-Timonium, Maryland, for an arson conspiracy to allegedly damage his business by setting it on fire in order to obtain insurance proceeds. The indictment was returned on March 28, 2019 and unsealed today. Stavrakis was arrested and had his initial appearance today in U.S. District Court in Baltimore. Chief U.S. Magistrate Judge Beth P. Gesner ordered Stavrakis to be released under the supervision of U.S. Pretrial Services pending trial.

The indictment was announced by United States Attorney for the District of Maryland Robert K. Hur; Special Agent in Charge Rob Cekada of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Baltimore Field Division; Maryland State Fire Marshal Brian Geraci; and Commissioner Michael Harrison of the Baltimore Police Department.

The four-count indictment alleges that beginning in July 2015, Stavrakis engaged in a conspiracy to set fire to commercial property he owned in the 200 block of Haven Street in Baltimore, in order to collect insurance proceeds on the property. According to the indictment, on July 28, 2015, just before 6 p.m., Stavrakis used adhesive tape to defeat one of the security features on the front door of the building so that the person or persons setting the fire could enter the building.

According to the indictment, very early the next morning, someone disarmed the alarms inside the building by entering the four-digit codes for the alarms. Between 12:25 a.m. and 1:30 a.m., the office area of the warehouse was set on fire by using Methyl Ethyl Ketone, a flammable liquid used as a cleaning agent. The fire destroyed the office area and damaged a portion of the ceiling directly above the area. Later on July 29, 2015, Stavrakis contacted a public adjuster firm that his company had previously retained to notify them of the fire and to request their assistance in filing claims with the insurance company.

From July 29, 2015 through August 5, 2016, the adjusters, acting on behalf of Stavrakis and his companies, submitted false insurance claims totaling over $21 million. The insurance company paid a total of approximately $15,081,435. Of that amount, the indictment alleges that approximately $8,762,037 was used to purchase new machinery, purchase parts inventory, restore the building, and for other business expenses. In addition, insurance proceeds were allegedly transferred or used for other expenses, including, $600,000 which was transferred to an account in the name of Stavrakis’s wife, after which additional monthly payments of approximately $6,000 followed; approximately $98,499.20 used to purchase a 2016 Mercedes-Benz GL 550, titled and registered to Stavrakis; and approximately $25,500 used to purchase a 2016 Harley-Davidson Street Glide motorcycle.

If convicted, Stavrakis faces a mandatory minimum sentence of five years and a maximum of 20 years in prison for the arson conspiracy and for malicious destruction of property by fire; a mandatory 10 years in prison, consecutive to any other sentence imposed, for use of fire to commit a federal felony; and a maximum sentence of 20 years in prison for wire fraud.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

United States Attorney Robert K. Hur commended the ATF, the Office of the Maryland State Fire Marshal, and the Baltimore Police Department for their work in the investigation. Mr. Hur thanked Assistant U.S. Attorney Judson T. Mihok, who is prosecuting the case.

Financial Fraud: Marc I. Korn Convicted Of Bank Theft And Willful Failure To Pay Tax

Financial Fraud

Former Owner Of Local Nursing Homes Sentenced On Bank Theft And Tax Charges

BUFFALO, N.Y. – U.S. Attorney James P. Kennedy, Jr. announced today that Marc I. Korn, 62, of East Amherst, NY, who was convicted of bank theft and willful failure to pay tax, was sentenced to serve 18 months in prison by Senior U.S. District Judge William S. Skretny. The defendant will also pay over $2,500,000 in restitution to three different private entities along with approximately $850,000 to the Internal Revenue Service.

Assistant U.S. Attorney Elizabeth R. Moellering, who handled the case, stated that Korn was the former owner of the Batavia Nursing Home in Batavia, NY, and the Fairchild Manor Nursing Home in Lewiston, NY. The defendant committed bank theft in connection with his actions concerning a credit card and loan from Fifth Third Bank. He also failed to pay over employment taxes related to his nursing homes over three quarters in 2009.

In 2008, Korn sought a loan to refinance the Batavia Nursing Home from Fifth Third Bank. In June 2008, Fifth Third Bank provided $3,900,000 to refinance the nursing home and provided the defendant with a credit card. As part of the application for the loan, Korn submitted a personal financial statement and guaranty on which the bank relied when underwriting the loan. The statement contained numerous falsehoods, including the overvaluation of his primary residence. The defendant stated that the property was valued at $1,465,000 when, at the same time, he was contesting its value with the Town of Amherst for purposes of property taxes, alleging it was worth between $500,000 and $550,000. Additionally, Korn provided the bank with statements of bank accounts that he claimed to own. However those statements also contained falsehoods – including one statement in which the defendant claimed ownership of an account containing $50,000 in February 2008, when the account actually contained $1.00 and belonged to someone else. The loan and payments on the credit card went into default, and Fifth Third Bank lost more than $2,400,000.

Prior to March 2009, for both Batavia Nursing Home and Fairchild Manor Nursing Home, Korn used a service to collect and pay over employment taxes owed. However, beginning in March 2009, the defendant ceased using the service and subsequently intentionally failed to pay to the IRS employment taxes owed for the second, third and fourth quarters of 2009. Instead of paying the taxes owed to the IRS, Korn spent the funds on personal expenses including restaurants, hockey tickets, jewelry, and to pay his children’s college tuition.

Today’s sentencing is the result of an investigation by the Federal Bureau of Investigation, under the direction of Special Agent-in-Charge Gary Loeffert, and the Internal Revenue Service, Criminal Investigations Division, under the direction of Jonathan D. Larsen, Acting Special Agent-in-Charge, New York Field Office.