Hundreds of billions of dollars are lost each year due to fraudulent activity. Staying on top of recent fraud cases can help you recognize the tactics fraudsters are using so you can stay alert to possible fraudulent activity. The FBI and Department of Justice websites offer valuable information on recent fraud cases as well as tips to keep yourself and your business safe.
Continue reading to find out about recent crime investigations and fraud cases from the United States Department of Justice.
Financial Fraud
Read Article: Convicted Felon Pleads Guilty to Fraud Scheme Involving Local Newspaper
Alexandria, VA — A previously convicted felon pleaded guilty to charges related to defrauding investors of a local newspaper and unlawful possession of firearms by a previously convicted felon.
According to court documents, Brian Thomas Reynolds, 52, of Leesburg, defrauded both investors and lenders to a company that he controlled that operates a local newspaper in Loudoun County. Reynolds made several materially false and fraudulent representations to actual and potential investors and lenders regarding the existence and value of advertising contracts held by the company and created fake advertising contracts when no such agreements existed. Reynolds also made materially false and fraudulent representations regarding the company’s historical advertising revenues and the amount of money that Reynolds and others had invested in the company, falsely claimed that another individual had agreed to “match” the investments of certain investors, falsely claimed to at least one investor that the company lacked any debt, and materially overstated the amount of money held by the company in its bank accounts.
Court documents also state that Reynolds created altered loan documentation to defraud an individual who had lent money to the company by changing the language of the loan agreement to conditions that were materially more favorable to Reynolds and his company than had actually been agreed to by the lender. Reynolds also made materially false representations regarding the number of issues previously distributed by the newspaper, and falsely claimed that a prominent businessperson served on the company’s advisory board, when in fact that individual held no position on the board and played no role in the operation of the business.
Reynolds, who has four prior felony convictions and is prohibited from possessing firearms, also pleaded guilty to unlawfully possessing seven firearms and associated ammunition. Read More
Computer Fraud and Abuse
Middle District of Louisiana – A federal grand jury recently returned a four-count indictment charging Ehab Meselhe, age 53, a U.S. citizen living in Lafayette and New Orleans, Louisiana, and Kelin Hu, age 42, a Chinese citizen, lawfully living in the United States, of Baton Rouge, Louisiana, with conspiracy to steal trade secrets, attempting to steal trade secrets, and conspiracy to commit computer fraud and abuse. Hu was also charged with committing computer fraud and abuse. Meselhe and Hu appeared for their arraignment in court and pleaded not guilty to the pending charges.
The indictment alleges that Meselhe and Hu, former employees of the Water Institute of the Gulf (“Water Institute”), engaged in a plan to steal computer trade secrets from the Water Institute. The Water Institute is an applied scientific research organization in Baton Rouge, Louisiana, which studies and consults on land subsidence, storms, rising sea levels, and other coastal threats. Of special importance to this work was a highly valuable and closely protected computer program that allowed the Water Institute to project how the natural environment of the Mississippi Delta will change over time.
According to the allegations contained in the indictment, Meselhe and Hu planned and attempted to take the trade secrets from the Water Institute computer network, download them to personal electronic devices, and then misappropriate those trade secrets for their own economic benefit.
The indictment further alleges that Meselhe instructed Hu about which computer files to copy, making sure they included the trade secret, when to copy them in relation to Hu’s anticipated resignation from the Water Institute, and how to communicate with Meselhe via personal Google Message and email so as to avoid detection by the Water Institute. According to the indictment, Hu was attempting to download the computer files of the Water Institute, as Meselhe had instructed, to personal computer devices Hu had brought into his office, when he was caught in the act. Read More
Health Care Fraud
Read Article: Chicago-Area Physical Therapy Center and 4 Nursing Facilities to Pay $9.7 Million to Resolve False Claims Act Allegations
Chicago, IL — The U.S. Attorney’s Office in Chicago announced that a Chicago-area physical therapy center and four nursing facilities have agreed to pay $9.7 million to resolve civil allegations that they violated the False Claims Act by providing unnecessary services to increase Medicare payments.
The settlements and consent judgments resolve allegations that skilled therapy service provider Quality Therapy & Consultation Inc. and its owner, Frances Parise, worked with the four skilled nursing facilities — The Carlton At The Lake Inc., Ridgeview Rehab and Nursing Center, Lake Shore Healthcare and Rehabilitation Centre LLC, and Balmoral Home Inc. — to increase Medicare reimbursements by “upcoding” their patients’ “Resource Utilization Group” scores. A “RUG” score indicates a patient’s care requirements based on the level of physical-, occupational-, and speech-rehabilitation therapy the patient receives, and the complexity of the skilled nursing care the patient requires. The higher the RUG score, the higher the amount paid by Medicare to the nursing facility. The allegations also contend that the providers rendered skilled therapy to patients who did not need it or could not benefit from it, as part of an effort to bill the highest possible amount to Medicare.
The settlements and consent judgments resolve a civil lawsuit filed in U.S. District Court in Chicago by a former employee of Quality Therapy and Consultation under the qui tam, or whistleblower, provisions of the False Claims Act. The Act permits private citizens to bring lawsuits on behalf of the United States for false claims, and to share in any recovery. The United States intervened in the lawsuit prior to the settlements and consent judgments. Read More
Public Corruption
Read Article: Former Healthcare Executive Pleads Guilty to Bribing Arkansas State Senator
Springfield, MO — A former executive of Preferred Family Healthcare, Inc., pleaded guilty in federal court to his role in a conspiracy to bribe an Arkansas state senator to influence public policy for the benefit of the charity and its executives.
Robin Raveendran, 63, of Little Rock, Arkansas, pleaded guilty before U.S. Magistrate Judge David P. Rush to a federal information that charges him with one count of conspiracy to commit bribery concerning programs receiving federal funds.
Raveendran worked for Preferred Family Healthcare (formerly known as Alternative Opportunities, Inc.) from 2014 to 2017 as a director of operations, executive vice president, and analyst. Prior to his employment with the charity, Raveendran was employed by the state of Arkansas as director of program integrity for the Arkansas Department of Human Services, Division of Medical Services, and then as business operations manager with the Office of the Medicaid Inspector General.
By pleading guilty today, Raveendran admitted that he participated in a conspiracy to bribe then-Arkansas State Senator Jeremy Young Hutchinson, who is charged in a separate case, in order to influence and reward Hutchinson in exchange for Hutchinson taking legislative and official action favorable to Preferred Family Healthcare and its executives.
According to the plea agreement, Preferred Family paid funds to Alliance for Health Care (also known as Alliance for Health Care Improvement), a private association formed in early 2014 by Raveendran, Hutchinson, and Milton “Rusty” Cranford, an Arkansas lobbyist and Preferred Family executive. Alliance was formed to advocate for issues relevant to health care providers at the Arkansas state legislature and in state departments.
Raveendran then directed Alliance funds to Hutchinson, the plea agreement says, in exchange for Hutchinson holding up agency budgets; initiating legislative audits; sponsoring, filing, and voting for legislation, including shell bills; and pressuring and advising other public officials to perform official action on behalf of Preferred Family. Read More
Health Care Fraud
District of Maryland – ACell Inc. (ACell), a Maryland-based medical device manufacturer, pleaded guilty to charges relating to its MicroMatrix powder wound dressing product (MicroMatrix), the Department of Justice announced. ACell entered a guilty plea before U.S. District Court Judge Ellen L. Hollander in the District of Maryland to one misdemeanor count of failure and refusal to report a medical device removal in violation of the Federal Food, Drug, and Cosmetic Act (FDCA). In addition, ACell has agreed to settle allegations that it caused false claims to be submitted to federal health care programs for MicroMatrix, and to pay $15 million to resolve its criminal and civil liability arising from these matters.
The “settlement underscores the Department of Justice’s commitment to holding device manufacturers accountable for ensuring that their products are safe, which includes making timely notifications to the FDA when a product recall is required,” said Assistant Attorney General Jody Hunt of the Civil Division.
“When companies use contaminated materials to manufacture devices and fail to notify the FDA of recalls of their products due to concerns of patient safety, they undermine the integrity of the FDA recall process and may cause patients to receive devices that are not safe,” said U.S. Attorney for the District of Maryland Robert K. Hur. “This joint criminal and civil resolution holds ACell accountable for this violation while returning dollars back to the Medicare program for false claims.”
“The FDA will not tolerate the actions of companies that put patients at risk by failing to report the market withdrawal of their medical devices to the FDA,” said Acting FDA Commissioner Ned Sharpless, M.D. “By not notifying the FDA nor being forthcoming about their reasons for the product removal, ACell executives placed profit above patient safety. They risked that doctors would use the devices in procedures that could jeopardize patient health, and violated both the trust of patients and the medical community in their medical device. We will continue to investigate and bring to justice companies that do not follow FDA’s postmarket compliance requirements, which are important to ensure the protection of the public health.”
Along with the civil settlement, ACell entered into a Corporate Integrity Agreement (CIA) with the HHS-OIG. The five-year CIA requires, among other things, the implementation of a risk assessment and internal review process designed to identify and address evolving compliance risks on an ongoing basis. In addition, the CIA enhances individual accountability by requiring sign-off certifications from the ACell Board of Directors and specified executives. The CIA requires training, auditing, and monitoring designed to address the range of activities (promotional and otherwise) at issue in the case.
“Neglecting to provide vital medical device information to the FDA, medical professionals, and even the company’s own sales force, posed a significant threat to the lives of patients across the country,” said Maureen Dixon, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services region including Maryland. “Compounding that crime, the government contended the company paid thinly-veiled bribes to health providers and stuck taxpayers with inflated bills.” Read More
Extortion Scheme
Read Article: Three Peruvians Plead Guilty to Overseeing Spanish-Speaking Call Centers that Extorted U.S. Consumers
Southern District of Florida—Three residents of Lima, Peru, pleaded guilty recently to extortion for overseeing a ring of call centers that threatened and extorted Spanish-speaking victims in the United States, the Department of Justice and U.S. Postal Inspection Service announced.
Jesus Gerardo Gutierrez Rojas, 37, Maria de Guadalupe Alexandra Podesta Bengoa, 38, and Virgilio Ignacio Polo Davila, 43, were extradited from Peru in April and pleaded guilty before U.S. District Court Judge Roy K. Altman in Fort Lauderdale. As part of his guilty plea, Gutierrez admitted that he oversaw a number of affiliated call centers in Peru that falsely told Spanish-speaking victims across the United States that they had incurred debts and would suffer various consequences for failure to pay off the debts that they did not, in fact, owe. As part of their guilty pleas, Podesta and Polo admitted that they managed and supervised two of these affiliated call centers that used extortion to obtain money from U.S. victims.
“The Department of Justice is committed to identifying and prosecuting criminals who target and extort U.S. consumers,” said Assistant Attorney General Jody Hunt. “Yesterday’s guilty pleas demonstrate that those who threaten U.S. consumers by phone cannot escape justice by placing their calls from abroad. Working with our international partners, we will bring them to justice no matter where they reside. I thank the Republic of Peru for extraditing these defendants to face justice in our courts and the U.S. Postal Inspection Service for its work investigating this case.”
As part of their guilty pleas, Podesta and Polo admitted that their Peruvian call centers contacted U.S. consumers, many of whom were elderly and vulnerable, using Internet-based calls. Claiming to be attorneys and government representatives, Podesta, Polo and their callers falsely told victims that they failed to pay for or receive a delivery of products and threatened them into paying fraudulent settlements for nonexistent debts. The callers falsely threatened victims with lawsuits, negative marks on their credit reports, imprisonment, or immigration consequences if they did not immediately pay for the purportedly delivered products and “settlement fees.” Many victims made payments based on these baseless extortionate threats.
Gutierrez was the general manager of a larger company where he worked in partnership with Podesta, Polo, and others to facilitate their extortion scheme. The defendants’ associates in Miami collected the payments and sometimes shipped packages to victims in the U.S. Read More
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Read related articles:
Fraud News April 2019: Public Corruption, Cyber Crime, and More
Fraud News May 2019: Cyber Crime, Financial Fraud, and More
Fraud News March 2019: Mail Fraud, Wire Fraud, Financial Fraud, and More