Members of the U.S. Marshals Fugitive Task Force from both New Hampshire and Massachusetts arrested fugitive Jeffrey Leonard, age 29. Leonard was being sought in connection with two armed robberies in MA.
Earlier this month, the U.S. Marshals Fugitive Task Force in Massachusetts had been requested to assist in the location and arrest of Jeffrey Leonard. Leonard was wanted by both the Yarmouth and Dennis, Massachusetts Police Departments on outstanding arrest warrants for armed robbery while masked with a firearm. Information developed by the Marshals Task Force in Massachusetts, led investigators to NH, where Leonard was originally from and had a previous conviction for another armed robbery.
Investigators narrowed their search to a residence in the 900 block of Union Street in Manchester, NH. After a period of surveillance, it was determined that Leonard was likely inside the residence. Officers initially checked the apartment that Leonard was believed to be in without finding him. A further search of the residence led investigators to the basement where Leonard was found hiding, and he was arrested without any further incident.
The Hillsborough County Sheriff’s Office has charged Leonard as a fugitive from justice on the two outstanding Massachusetts arrest warrants.
These arrests were made by members of the task force, including; Rockingham, Hillsborough, & Belknap County Deputy Sheriffs, deputy U.S. Marshals from MA and NH.
Since the inception of the New Hampshire Joint Fugitive Task Force in 2002, these partnerships have resulted in over 5,523 arrests. These arrests have ranged in seriousness from murder, assault, unregistered sex offenders, probation and parole violations and numerous other serious offenses.
Nationally the United States Marshals Service fugitive programs are carried out with local law enforcement in 94 district offices, 85 local fugitive task forces, 7 regional task forces, as well as a growing network of offices in foreign countries.
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Monday, January 27, 2014
Dr. Charles DeHaan of Housecall Physicians Group, Arrested on Charge of Health Care Fraud
A local physician whose license was suspended this month was arrested on a federal complaint alleging health care fraud. Charles S. DeHaan, 59, of Belvidere, Illinois, was charged with engaging in a scheme to defraud Medicare. The complaint alleges that as a part of the scheme, DeHaan operated Housecall Physicians Group of Rockford, S.C., located in Rockford. The charge alleges that DeHaan submitted false claims to Medicare in December 2013.
In support of the charge, the complaint alleges that between 2010 and 2013, DeHaan billed Medicare for medical services that he did not provide to at least five patients. Instead, DeHaan engaged in sexual misconduct with four of these patients, all women, and offered or provided prescriptions for controlled medications, according to the complaint affidavit.
DeHaan appeared before United States Magistrate Judge Iain D. Johnston, who ordered that he be held in custody until a detention hearing is conducted.
The charge of health care fraud carries a maximum potential penalty of up to 10 years in prison, a fine of up to $250,000, and full restitution.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent in Charge of the Chicago Office of Federal Bureau of Investigation; and Lamont Pugh, III, Special Agent in Charge of the Chicago Regional Office of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG)
The federal case was investigated by the FBI and HHS-OIG, with the assistance of the Illinois State Police Medicaid Fraud Control Unit. The government was represented in federal court by Assistant U.S. Attorney Jolm G. McKenzie.
The public is reminded that a complaint is only a charge and is not evidence of guilt. The defendant is presumed innocent and is entitled to indictment by a federal grand jury and, if indicted, to a fair trial at which the government has the burden of proving his guilt beyond a reasonable doubt.
In support of the charge, the complaint alleges that between 2010 and 2013, DeHaan billed Medicare for medical services that he did not provide to at least five patients. Instead, DeHaan engaged in sexual misconduct with four of these patients, all women, and offered or provided prescriptions for controlled medications, according to the complaint affidavit.
DeHaan appeared before United States Magistrate Judge Iain D. Johnston, who ordered that he be held in custody until a detention hearing is conducted.
The charge of health care fraud carries a maximum potential penalty of up to 10 years in prison, a fine of up to $250,000, and full restitution.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent in Charge of the Chicago Office of Federal Bureau of Investigation; and Lamont Pugh, III, Special Agent in Charge of the Chicago Regional Office of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG)
The federal case was investigated by the FBI and HHS-OIG, with the assistance of the Illinois State Police Medicaid Fraud Control Unit. The government was represented in federal court by Assistant U.S. Attorney Jolm G. McKenzie.
The public is reminded that a complaint is only a charge and is not evidence of guilt. The defendant is presumed innocent and is entitled to indictment by a federal grand jury and, if indicted, to a fair trial at which the government has the burden of proving his guilt beyond a reasonable doubt.
Waldyr Prado and Igor Cornelsen Charged with Insider Trading on @BurgerKing Stock
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (FBI), announced today the unsealing of a criminal complaint in Manhattan federal court charging Waldyr Prado, a former financial adviser at a large U.S. brokerage firm, and Igor Cornelsen, a director of a British Virgin Islands Investment Company that he owns and operates, with using inside information to trade on Burger King securities in advance of Burger King’s September 2010 acquisition by 3G Capital Partners (3G), a New York and Brazil based private equity firm. Prado and Cornelsen are nationals and residents of Brazil, and they have not yet been arrested on these charges.
Manhattan U.S. Attorney Preet Bharara said, “As alleged, when Waldyr Prado and Igor Cornelsen traded around a ‘sandwich deal,’ the defendants knew they were committing insider trading. They were illegally profiting from material non-public information to which they were not entitled.”
Assistant Director in Charge George Venizelos said, “Trading on inside information negatively impacts individual investors, puts companies at risk and threatens the public’s faith in our financial markets. As alleged, Mr. Prado and Mr. Cornelsen put their faith in a ‘sandwich deal’ and bit off more than they could chew. The FBI will continue to investigate this type of illegal conduct and prosecute those who violate our laws.”
According to the complaint unsealed today in Manhattan federal court:
In about February 2010, 3G initiated discussions with Burger King about a potential acquisition. As part of these discussions, Burger King and 3G executed a confidentiality agreement in April 2010, pursuant to which all aspects of their negotiations and due diligence were non-public.
In about early March 2010, a principal of 3G (3G Principal-1) contacted an investor of the firm (Client-1) and advised that 3G was in negotiations to acquire Burger King. Client-1, who was also a brokerage client of Prado’s, signed a confidentiality agreement with 3G relating to the potential Burger King acquisition. This agreement permitted Client-1 to share information concerning the potential acquisition with Client-1’s financial adviser, i.e. Prado, in order to facilitate Client-1’s decision to invest in the specific 3G fund that would acquire Burger King (the 3G Fund).
From about March 2010 through the September 2, 2010 announcement that 3G would purchase Burger King for $4 billion in stock and the assumption of debt (the September 2 announcement), Client-1 received periodic updates about the general progress of the deal from 3G’s principals. During this period, Client-1 evaluated whether to liquidate personal holdings for a $50 million commitment to the 3G Fund or to obtain separate financing. Client-1 discussed this issue with Prado and, in so doing, confided that the financing was for a commitment to a 3G fund seeking to acquire Burger King. Based on their professional relationship, Client-1 believed that Prado would maintain the confidentiality of this information. Over the next several months, Client-1 and Client-1’s assistant spoke with Prado about the progress of the Burger King transaction.
Notwithstanding the duties of trust and confidence owed to his brokerage firm employer and Client-1, Prado misappropriated information learned from Client-1 for his own benefit and to purchase Burger King stock and options. For example, on May 17, 2010, after Prado met with Client-1 in Brazil and learned of the potential 3G-Burger King acquisition, Prado sent an e-mail to an acquaintance in the financial industry (Witness-1) stating that Prado was “in Brazil with information that cannot be sent by e-mail. You can’t miss it.” After sending this e-mail, Prado and Witness-1 spoke by telephone, and Prado told Witness-1 that 3G was going to acquire Burger King. From May 17, 2010 through September 1, 2010, Prado purchased Burger King stock and call options. On September 2, 2010, following the announcement of 3G’s acquisition, Prado sold his Burger King holdings for a total profit of over approximately $175,000.
On May 17, 2010, and minutes after Prado sent the e-mail to Witness-1 referenced above, Prado sent a similar e-mail to Cornelsen. The e-mail stated that Prado had “some info that I cannot say over the phone....You have to hear this.” Within minutes, and after the market closed, Cornelsen called Prado. The next day, Cornelsen began trading out-of-the-money Burger King call options. From May 18, 2010 through late August 2010, Cornelsen purchased short-expiration call options and had frequent contact with Prado. For example, on August 18, 2010, Cornelsen sent Prado an e-mail asking if “the sandwich deal going to happen,” to which Prado replied, “it’s going to happen.” On the same day, Cornelsen sent Prado another e-mail asking again whether the “sandwich deal” was going to happen, and Prado responded that it was a “sure thing.” After the September 2 announcement, Cornelsen sold his options for a total profit of approximately $1.68 million and a net profit (including expired July 2010 options) of approximately $1.4 million.
In July 2012, in connection with an insider trading investigation, the Securities and Exchange Commission (SEC) deposed Prado. In his deposition, Prado denied any advance knowledge of the Burger King acquisition. Approximately one month after his deposition, Prado fled to Brazil, from where he told his U.S.-based supervisor that he would not be returning to the United States because he believed that he was going to be charged with perjury and because Brazil did not have “an extradition policy.”
Prado, 43, of Porto Seguro, Brazil, and Cornelsen, 65, of São Paolo, Brazil, have been charged in the complaint with conspiracy to commit securities fraud and fraud in connection with a tender offer (count one), securities fraud (count two), and fraud in connection with a tender offer (count three). The securities fraud and fraud in connection with a tender offer charges each carry a maximum term of 20 years in prison, and the conspiracy charge carries a maximum term of five years in prison.
Mr. Bharara praised the investigative work of the FBI and also thanked the Securities and Exchange Commission, which has brought civil actions against the defendants.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. The task force was established 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 is 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 nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys David I. Miller and Jason Cowley are in charge of the prosecution.
Manhattan U.S. Attorney Preet Bharara said, “As alleged, when Waldyr Prado and Igor Cornelsen traded around a ‘sandwich deal,’ the defendants knew they were committing insider trading. They were illegally profiting from material non-public information to which they were not entitled.”
Assistant Director in Charge George Venizelos said, “Trading on inside information negatively impacts individual investors, puts companies at risk and threatens the public’s faith in our financial markets. As alleged, Mr. Prado and Mr. Cornelsen put their faith in a ‘sandwich deal’ and bit off more than they could chew. The FBI will continue to investigate this type of illegal conduct and prosecute those who violate our laws.”
According to the complaint unsealed today in Manhattan federal court:
In about February 2010, 3G initiated discussions with Burger King about a potential acquisition. As part of these discussions, Burger King and 3G executed a confidentiality agreement in April 2010, pursuant to which all aspects of their negotiations and due diligence were non-public.
In about early March 2010, a principal of 3G (3G Principal-1) contacted an investor of the firm (Client-1) and advised that 3G was in negotiations to acquire Burger King. Client-1, who was also a brokerage client of Prado’s, signed a confidentiality agreement with 3G relating to the potential Burger King acquisition. This agreement permitted Client-1 to share information concerning the potential acquisition with Client-1’s financial adviser, i.e. Prado, in order to facilitate Client-1’s decision to invest in the specific 3G fund that would acquire Burger King (the 3G Fund).
From about March 2010 through the September 2, 2010 announcement that 3G would purchase Burger King for $4 billion in stock and the assumption of debt (the September 2 announcement), Client-1 received periodic updates about the general progress of the deal from 3G’s principals. During this period, Client-1 evaluated whether to liquidate personal holdings for a $50 million commitment to the 3G Fund or to obtain separate financing. Client-1 discussed this issue with Prado and, in so doing, confided that the financing was for a commitment to a 3G fund seeking to acquire Burger King. Based on their professional relationship, Client-1 believed that Prado would maintain the confidentiality of this information. Over the next several months, Client-1 and Client-1’s assistant spoke with Prado about the progress of the Burger King transaction.
Notwithstanding the duties of trust and confidence owed to his brokerage firm employer and Client-1, Prado misappropriated information learned from Client-1 for his own benefit and to purchase Burger King stock and options. For example, on May 17, 2010, after Prado met with Client-1 in Brazil and learned of the potential 3G-Burger King acquisition, Prado sent an e-mail to an acquaintance in the financial industry (Witness-1) stating that Prado was “in Brazil with information that cannot be sent by e-mail. You can’t miss it.” After sending this e-mail, Prado and Witness-1 spoke by telephone, and Prado told Witness-1 that 3G was going to acquire Burger King. From May 17, 2010 through September 1, 2010, Prado purchased Burger King stock and call options. On September 2, 2010, following the announcement of 3G’s acquisition, Prado sold his Burger King holdings for a total profit of over approximately $175,000.
On May 17, 2010, and minutes after Prado sent the e-mail to Witness-1 referenced above, Prado sent a similar e-mail to Cornelsen. The e-mail stated that Prado had “some info that I cannot say over the phone....You have to hear this.” Within minutes, and after the market closed, Cornelsen called Prado. The next day, Cornelsen began trading out-of-the-money Burger King call options. From May 18, 2010 through late August 2010, Cornelsen purchased short-expiration call options and had frequent contact with Prado. For example, on August 18, 2010, Cornelsen sent Prado an e-mail asking if “the sandwich deal going to happen,” to which Prado replied, “it’s going to happen.” On the same day, Cornelsen sent Prado another e-mail asking again whether the “sandwich deal” was going to happen, and Prado responded that it was a “sure thing.” After the September 2 announcement, Cornelsen sold his options for a total profit of approximately $1.68 million and a net profit (including expired July 2010 options) of approximately $1.4 million.
In July 2012, in connection with an insider trading investigation, the Securities and Exchange Commission (SEC) deposed Prado. In his deposition, Prado denied any advance knowledge of the Burger King acquisition. Approximately one month after his deposition, Prado fled to Brazil, from where he told his U.S.-based supervisor that he would not be returning to the United States because he believed that he was going to be charged with perjury and because Brazil did not have “an extradition policy.”
Prado, 43, of Porto Seguro, Brazil, and Cornelsen, 65, of São Paolo, Brazil, have been charged in the complaint with conspiracy to commit securities fraud and fraud in connection with a tender offer (count one), securities fraud (count two), and fraud in connection with a tender offer (count three). The securities fraud and fraud in connection with a tender offer charges each carry a maximum term of 20 years in prison, and the conspiracy charge carries a maximum term of five years in prison.
Mr. Bharara praised the investigative work of the FBI and also thanked the Securities and Exchange Commission, which has brought civil actions against the defendants.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. The task force was established 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 is 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 nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys David I. Miller and Jason Cowley are in charge of the prosecution.
DEA Charges Bitcoin Exchange Companies for Laundering #SilkRoad Drug Money
The DEA and other federal law enforcement partners today Bitcoin exchangers, including a CEO, were charged with money laundering related to drug proceeds from users of the Silk Road website. James J. Hunt, the DEA Acting Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), Preet Bharara, the United States Attorney for the Southern District of New York, and Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced the unsealing of criminal charges in Manhattan federal court.
Charges are against ROBERT M. FAIELLA, a/k/a “BTCKing,” an underground Bitcoin exchanger, and CHARLIE SHREM, the Chief Executive Officer and Compliance Officer of a Bitcoin exchange company, for engaging in a scheme to sell over $1 million in Bitcoins to users of “Silk Road,” the underground website that enabled its users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement. Each defendant is charged with conspiring to commit money laundering, and operating an unlicensed money transmitting business. SHREM is also charged with willfully failing to file any suspicious activity report regarding FAIELLA’s illegal transactions through the Company, in violation of the Bank Secrecy Act. SCHREM was arrested yesterday at John F. Kennedy International Airport in New York, and is expected to be presented in Manhattan federal court later today before U.S. Magistrate Judge Henry Pitman. FAIELLA was arrested today at his residence in Cape Coral, Florida, and is expected to be presented in federal court in the Middle District of Florida.
DEA Acting Special-Agent-in-Charge James J. Hunt said: “The charges announced today depict law enforcement's commitment to identifying those who promote the sale of illegal drugs throughout the world. Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way. Drug law enforcement’s job is to investigate and identify those who abet the illicit drug trade at all levels of production and distribution including those lining their own pockets by feigning ignorance of any wrong doing and turning a blind eye.”
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Robert Faiella and Charlie Shrem schemed to sell over $1 million in Bitcoins to criminals bent on trafficking narcotics on the dark web drug site, Silk Road. Truly innovative business models don’t need to resort to old-fashioned law-breaking, and when Bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act. We will aggressively pursue those who would coopt new forms of currency for illicit purposes.”
IRS Special-Agent-in-Charge Toni Weirauch said: “The government has been successful in swiftly identifying those responsible for the design and operation of the ‘Silk Road’ website, as well as those who helped ‘Silk Road’ customers conduct their illegal transactions by facilitating the conversion of their dollars into Bitcoins. This is yet another example of the New York Organized Crime Drug Enforcement Strike Force’s proficiency in applying financial investigative resources to the fight against illegal drugs.”
According to the allegations contained in the Criminal Complaint unsealed today in Manhattan federal court:
From about December 2011 to October 2013, FAIELLA ran an underground Bitcoin exchange on the Silk Road website, a website that served as a sprawling and anonymous black market bazaar where illegal drugs of virtually every variety were bought and sold regularly by the site’s users. Operating under the username “BTCKing,” FAIELLA sold Bitcoins – the only form of payment accepted on Silk Road – to users seeking to buy illegal drugs on the site. Upon receiving orders for Bitcoins from Silk Road users, he filled the orders through a company based in New York, New York (the “Company”). The Company was designed to enable customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and it charged a fee for its service. FAIELLA obtained Bitcoins with the Company’s assistance, and then sold the Bitcoins to Silk Road users at a markup.
SHREM is the Chief Executive Officer of the Company, and from about August 2011 until about July 2013, when the Company ceased operating, he was also its Compliance Officer, in charge of ensuring the Company’s compliance with federal and other anti-money laundering (“AML”) laws. SHREM is also the Vice Chairman of a foundation dedicated to promoting the Bitcoin virtual currency system.
SHREM, who personally bought drugs on Silk Road, was fully aware that Silk Road was a drug-trafficking website, and through his communications with FAIELLA, SHREM also knew that FAIELLA was operating a Bitcoin exchange service for Silk Road users. Nevertheless, SHREM knowingly facilitated FAIELLA’s business with the Company in order to maintain FAIELLA’s business as a lucrative source of Company revenue. SHREM knowingly allowed FAIELLA to use the Company’s services to buy Bitcoins for his Silk Road customers; personally processed FAIELLA’s orders; gave FAIELLA discounts on his high-volume transactions; failed to file a single suspicious activity report with the United States Treasury Department about FAIELLA’s illicit activity, as he was otherwise required to do in his role as the Company’s Compliance Officer; and deliberately helped FAIELLA circumvent the Company’s AML restrictions, even though it was SHREM’s job to enforce them and even though the Company had registered with the Treasury Department as a money services business.
Working together, SHREM and FAIELLA exchanged over $1 million in cash for Bitcoins for the benefit of Silk Road users, so that the users could, in turn, make illegal purchases on Silk Road.
In late 2012, when the Company stopped accepting cash payments, FAIELLA ceased doing business with the Company and temporarily shut down his illegal Bitcoin exchange service on Silk Road. FAIELLA resumed operating on Silk Road in April 2013 without the Company’s assistance, and continued to exchange tens of thousands of dollars a week in Bitcoins until the Silk Road website was shut down by law enforcement in October 2013.
FAIELLA, 52, of Cape Coral, Florida, and SHREM, 24, of New York, New York, are each charged with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and one count of operating an unlicensed money transmitting business, which carries a maximum sentence of five years in prison. SHREM is also charged with one count of willful failure to file a suspicious activity report, which carries a maximum sentence of five years in prison.
Mr. Bharara praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which is comprised of agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement - Homeland Security Investigations, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshal Service, New York National Guard, Office of Foreign Assets Control and the New York Department of Taxation and Finance. Mr. Bharara also thanked the FBI’s New York Field Office. Mr. Bharara also noted that the investigation remains ongoing.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Serrin Turner is in charge of the prosecution, and Assistant United States Attorney Andrew Adams of the Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Charges are against ROBERT M. FAIELLA, a/k/a “BTCKing,” an underground Bitcoin exchanger, and CHARLIE SHREM, the Chief Executive Officer and Compliance Officer of a Bitcoin exchange company, for engaging in a scheme to sell over $1 million in Bitcoins to users of “Silk Road,” the underground website that enabled its users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement. Each defendant is charged with conspiring to commit money laundering, and operating an unlicensed money transmitting business. SHREM is also charged with willfully failing to file any suspicious activity report regarding FAIELLA’s illegal transactions through the Company, in violation of the Bank Secrecy Act. SCHREM was arrested yesterday at John F. Kennedy International Airport in New York, and is expected to be presented in Manhattan federal court later today before U.S. Magistrate Judge Henry Pitman. FAIELLA was arrested today at his residence in Cape Coral, Florida, and is expected to be presented in federal court in the Middle District of Florida.
DEA Acting Special-Agent-in-Charge James J. Hunt said: “The charges announced today depict law enforcement's commitment to identifying those who promote the sale of illegal drugs throughout the world. Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way. Drug law enforcement’s job is to investigate and identify those who abet the illicit drug trade at all levels of production and distribution including those lining their own pockets by feigning ignorance of any wrong doing and turning a blind eye.”
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Robert Faiella and Charlie Shrem schemed to sell over $1 million in Bitcoins to criminals bent on trafficking narcotics on the dark web drug site, Silk Road. Truly innovative business models don’t need to resort to old-fashioned law-breaking, and when Bitcoins, like any traditional currency, are laundered and used to fuel criminal activity, law enforcement has no choice but to act. We will aggressively pursue those who would coopt new forms of currency for illicit purposes.”
IRS Special-Agent-in-Charge Toni Weirauch said: “The government has been successful in swiftly identifying those responsible for the design and operation of the ‘Silk Road’ website, as well as those who helped ‘Silk Road’ customers conduct their illegal transactions by facilitating the conversion of their dollars into Bitcoins. This is yet another example of the New York Organized Crime Drug Enforcement Strike Force’s proficiency in applying financial investigative resources to the fight against illegal drugs.”
According to the allegations contained in the Criminal Complaint unsealed today in Manhattan federal court:
From about December 2011 to October 2013, FAIELLA ran an underground Bitcoin exchange on the Silk Road website, a website that served as a sprawling and anonymous black market bazaar where illegal drugs of virtually every variety were bought and sold regularly by the site’s users. Operating under the username “BTCKing,” FAIELLA sold Bitcoins – the only form of payment accepted on Silk Road – to users seeking to buy illegal drugs on the site. Upon receiving orders for Bitcoins from Silk Road users, he filled the orders through a company based in New York, New York (the “Company”). The Company was designed to enable customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and it charged a fee for its service. FAIELLA obtained Bitcoins with the Company’s assistance, and then sold the Bitcoins to Silk Road users at a markup.
SHREM is the Chief Executive Officer of the Company, and from about August 2011 until about July 2013, when the Company ceased operating, he was also its Compliance Officer, in charge of ensuring the Company’s compliance with federal and other anti-money laundering (“AML”) laws. SHREM is also the Vice Chairman of a foundation dedicated to promoting the Bitcoin virtual currency system.
SHREM, who personally bought drugs on Silk Road, was fully aware that Silk Road was a drug-trafficking website, and through his communications with FAIELLA, SHREM also knew that FAIELLA was operating a Bitcoin exchange service for Silk Road users. Nevertheless, SHREM knowingly facilitated FAIELLA’s business with the Company in order to maintain FAIELLA’s business as a lucrative source of Company revenue. SHREM knowingly allowed FAIELLA to use the Company’s services to buy Bitcoins for his Silk Road customers; personally processed FAIELLA’s orders; gave FAIELLA discounts on his high-volume transactions; failed to file a single suspicious activity report with the United States Treasury Department about FAIELLA’s illicit activity, as he was otherwise required to do in his role as the Company’s Compliance Officer; and deliberately helped FAIELLA circumvent the Company’s AML restrictions, even though it was SHREM’s job to enforce them and even though the Company had registered with the Treasury Department as a money services business.
Working together, SHREM and FAIELLA exchanged over $1 million in cash for Bitcoins for the benefit of Silk Road users, so that the users could, in turn, make illegal purchases on Silk Road.
In late 2012, when the Company stopped accepting cash payments, FAIELLA ceased doing business with the Company and temporarily shut down his illegal Bitcoin exchange service on Silk Road. FAIELLA resumed operating on Silk Road in April 2013 without the Company’s assistance, and continued to exchange tens of thousands of dollars a week in Bitcoins until the Silk Road website was shut down by law enforcement in October 2013.
FAIELLA, 52, of Cape Coral, Florida, and SHREM, 24, of New York, New York, are each charged with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and one count of operating an unlicensed money transmitting business, which carries a maximum sentence of five years in prison. SHREM is also charged with one count of willful failure to file a suspicious activity report, which carries a maximum sentence of five years in prison.
Mr. Bharara praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which is comprised of agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement - Homeland Security Investigations, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshal Service, New York National Guard, Office of Foreign Assets Control and the New York Department of Taxation and Finance. Mr. Bharara also thanked the FBI’s New York Field Office. Mr. Bharara also noted that the investigation remains ongoing.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Serrin Turner is in charge of the prosecution, and Assistant United States Attorney Andrew Adams of the Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Seth Gillman Charged with Federal Health Care Fraud for Allegedly Falsely Elevating Level of Patients’ Care
An owner of an Illinois hospice company was charged with federal health care fraud for allegedly engaging in an extensive scheme to obtain higher Medicare and Medicaid payments by fraudulently elevating the level of hospice care for patients, many of whom resided at nursing homes he also controlled across the state. In many instances, the level of hospice care allegedly exceeded what was medically necessary or actually provided, including for some patients who did not have terminal illnesses or who were enrolled far longer―sometimes for several years―than the required life expectancy of six months or less.
The defendant, Seth Gillman, 46, of Lincolnwood, was charged with one count each of health care fraud and obstructing a federal audit in a criminal complaint that was filed late Friday in U.S. District Court. He is scheduled to appear at 3 p.m. today before Magistrate Judge Geraldine Soat Brown in federal court.
Gillman, an attorney, is the corporate agent, administrator, and one-fourth owner of Passages Hospice LLC, based in west suburban Lisle, and is also the agent and secretary of Asta Healthcare Company Inc., which operates Asta Care Center nursing homes in Bloomington, Colfax, Elgin, Ford County, Pontiac, Rockford, and Toluca, Illinois. Passages did not have its own inpatient facility but instead deployed nurses to visit hospice patients in nursing homes and private residences. As Passages grew, it divided its operations into geographic regions covering Chicago and the western suburbs, Rockford, Bloomington, and Belleville, with different nurses, nursing directors, and medical directors for each region.
The charges allege that between August 2008 and January 2012, Gillman trained and caused to be trained Passages nurses to look for signs that allegedly would qualify a hospice patient for general inpatient care (GIP), resulting in higher payments per day, compared to routine care. Gillman allegedly knew that many of Passages’ patients were improperly being placed on GIP, in part as a result of a 2009 review of patient files, a 2009 report by an outside consultant, and a 2010 internal audit. Gillman also knew that some patients were placed on GIP without a medical director’s approval.
In fiscal year 2012, Medicare’s daily reimbursement for GIP was $671.84, while the daily payment for routine care was $151.23. According to claims data, from January 2006 to late 2011, Passages submitted claims for approximately 4,769 patients to Medicare and/or Medicaid and was paid approximately $95 million from Medicare and approximately $30 million from Medicaid. Between July 2008 and late 2011, Passages was paid approximately $23 million by Medicare for claimed GIP services, in addition to Medicaid payments for claimed GIP services submitted on behalf of more than 200 patients.
According to a 69-page affidavit in support of the charges, federal agents have interviewed patients, family members, and more than 30 former and current employees of Passages, including several who reported allegedly fraudulent billing and marketing practices to Medicare and/or law enforcement before they were contacted by agents. Investigators have also reviewed e-mails, documents, and patient files that were obtained in response to a 2011 civil investigative demand, a January 2012 search warrant, and subpoenas issued in 2013, as well as claims data from Medicare and Medicaid.
Medicare claims data revealed that approximately 22 percent of Passages’ patients between 2006 and late 2011 had more than six months of hospice care, with 28 patients receiving more than 1,000 days of hospice care in that period. By contrast, according to the National Hospice and Palliative Care Organization, only 11.8 percent of all hospice patients in 2009 were on hospice care for longer than six months.
For example, the complaint affidavit cites Patient JW, who was admitted to an Asta nursing home in 2003 following a major stroke, and Passages billed for more than 2,000 days of hospice services. In another example, Passages submitted bills for 1,443 days of hospice care for Patient LJ, who was admitted to an Asta nursing home in 2001. Patient LJ’s son told investigators that his mother appeared in no danger of dying until the last month of her life.
The charges also cite Medicare claims data showing that Passages’ billing for GIP services grew significantly. In 2010, Passages billed approximately 1,161 GIP patient days to Medicare monthly, and the figure rose to 1,430 GIP patient days a month through the first nine months of 2011. The average GIP payments that Passages received per month was $4,437 in the period from mid-2006 to mid-2008, and the monthly payments increased to $946,743 in 2011.
A hospice physician retained by the government reviewed files for 13 Passages patients, 10 of whose admissions exceed six months and extended to as many as 1,598 days over two admission periods. The government’s expert found that nine of the 13 patients were not eligible for Medicare hospice benefits for part or all of their admission and that all the 503 days of GIP submitted for those patients were improper and excessive.
A woman, identified as Individual E in the affidavit, who helped Gillman and his father start Passages and served as its clinical director for several years until she was fired told agents that Gillman said if a patient was under Passages’ care, they were sick enough to warrant GIP care. When Individual E confronted Gillman over the GIP eligibility of Patient DB, Gillman allegedly told her to mind her own business because he needed the money, the affidavit states.
The charges further allege that in the fall of 2008, Gillman began paying bonuses, sometimes well in excess of their salary, to Passages’ directors overseeing nurses and certified nursing assistants based on the amount of GIP under their supervision. Gillman also authorized large bonuses to himself and a co-administrator, Individual A, based on the number of patients per day at certain nursing homes in the Belleville region, including $833,375 to himself between March 2009 and April 2011. The bonuses increased as the number of patients on GIP increased and as the number of facilities counted for the bonuses increased, according to the affidavit.
Passages also allegedly had arrangements with approximately eight nursing homes in 2010 in which it paid the nursing homes $250 for every patient who was on GIP per day.
The obstructing a federal audit count alleges that in August and September 2009, Gillman, Individual A, and others oversaw and conducted an effort to alter patient files that had been requested by TrustSolutions, which contracted with the Centers for Medicare and Medicaid Services to audit providers for fraud and abuse. Several former Passages employees have admitted to agents their involvement in the altering of patient files in the summer of 2009 as well as in another session in 2010, the affidavit states.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Lamont Pugh, III, Special Agent in Charge of the Chicago Regional Office of the HHS-OIG; and Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation. The Illinois Attorney General’s Office is also participating in the investigation.
The government is being represented by Assistant U.S. Attorney Stephen C. Lee.
Health care fraud carries a maximum penalty of 10 years in prison and a $250,000 fine, and obstructing a federal audit carries a maximum of five years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that a complaint is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The defendant, Seth Gillman, 46, of Lincolnwood, was charged with one count each of health care fraud and obstructing a federal audit in a criminal complaint that was filed late Friday in U.S. District Court. He is scheduled to appear at 3 p.m. today before Magistrate Judge Geraldine Soat Brown in federal court.
Gillman, an attorney, is the corporate agent, administrator, and one-fourth owner of Passages Hospice LLC, based in west suburban Lisle, and is also the agent and secretary of Asta Healthcare Company Inc., which operates Asta Care Center nursing homes in Bloomington, Colfax, Elgin, Ford County, Pontiac, Rockford, and Toluca, Illinois. Passages did not have its own inpatient facility but instead deployed nurses to visit hospice patients in nursing homes and private residences. As Passages grew, it divided its operations into geographic regions covering Chicago and the western suburbs, Rockford, Bloomington, and Belleville, with different nurses, nursing directors, and medical directors for each region.
The charges allege that between August 2008 and January 2012, Gillman trained and caused to be trained Passages nurses to look for signs that allegedly would qualify a hospice patient for general inpatient care (GIP), resulting in higher payments per day, compared to routine care. Gillman allegedly knew that many of Passages’ patients were improperly being placed on GIP, in part as a result of a 2009 review of patient files, a 2009 report by an outside consultant, and a 2010 internal audit. Gillman also knew that some patients were placed on GIP without a medical director’s approval.
In fiscal year 2012, Medicare’s daily reimbursement for GIP was $671.84, while the daily payment for routine care was $151.23. According to claims data, from January 2006 to late 2011, Passages submitted claims for approximately 4,769 patients to Medicare and/or Medicaid and was paid approximately $95 million from Medicare and approximately $30 million from Medicaid. Between July 2008 and late 2011, Passages was paid approximately $23 million by Medicare for claimed GIP services, in addition to Medicaid payments for claimed GIP services submitted on behalf of more than 200 patients.
According to a 69-page affidavit in support of the charges, federal agents have interviewed patients, family members, and more than 30 former and current employees of Passages, including several who reported allegedly fraudulent billing and marketing practices to Medicare and/or law enforcement before they were contacted by agents. Investigators have also reviewed e-mails, documents, and patient files that were obtained in response to a 2011 civil investigative demand, a January 2012 search warrant, and subpoenas issued in 2013, as well as claims data from Medicare and Medicaid.
Medicare claims data revealed that approximately 22 percent of Passages’ patients between 2006 and late 2011 had more than six months of hospice care, with 28 patients receiving more than 1,000 days of hospice care in that period. By contrast, according to the National Hospice and Palliative Care Organization, only 11.8 percent of all hospice patients in 2009 were on hospice care for longer than six months.
For example, the complaint affidavit cites Patient JW, who was admitted to an Asta nursing home in 2003 following a major stroke, and Passages billed for more than 2,000 days of hospice services. In another example, Passages submitted bills for 1,443 days of hospice care for Patient LJ, who was admitted to an Asta nursing home in 2001. Patient LJ’s son told investigators that his mother appeared in no danger of dying until the last month of her life.
The charges also cite Medicare claims data showing that Passages’ billing for GIP services grew significantly. In 2010, Passages billed approximately 1,161 GIP patient days to Medicare monthly, and the figure rose to 1,430 GIP patient days a month through the first nine months of 2011. The average GIP payments that Passages received per month was $4,437 in the period from mid-2006 to mid-2008, and the monthly payments increased to $946,743 in 2011.
A hospice physician retained by the government reviewed files for 13 Passages patients, 10 of whose admissions exceed six months and extended to as many as 1,598 days over two admission periods. The government’s expert found that nine of the 13 patients were not eligible for Medicare hospice benefits for part or all of their admission and that all the 503 days of GIP submitted for those patients were improper and excessive.
A woman, identified as Individual E in the affidavit, who helped Gillman and his father start Passages and served as its clinical director for several years until she was fired told agents that Gillman said if a patient was under Passages’ care, they were sick enough to warrant GIP care. When Individual E confronted Gillman over the GIP eligibility of Patient DB, Gillman allegedly told her to mind her own business because he needed the money, the affidavit states.
The charges further allege that in the fall of 2008, Gillman began paying bonuses, sometimes well in excess of their salary, to Passages’ directors overseeing nurses and certified nursing assistants based on the amount of GIP under their supervision. Gillman also authorized large bonuses to himself and a co-administrator, Individual A, based on the number of patients per day at certain nursing homes in the Belleville region, including $833,375 to himself between March 2009 and April 2011. The bonuses increased as the number of patients on GIP increased and as the number of facilities counted for the bonuses increased, according to the affidavit.
Passages also allegedly had arrangements with approximately eight nursing homes in 2010 in which it paid the nursing homes $250 for every patient who was on GIP per day.
The obstructing a federal audit count alleges that in August and September 2009, Gillman, Individual A, and others oversaw and conducted an effort to alter patient files that had been requested by TrustSolutions, which contracted with the Centers for Medicare and Medicaid Services to audit providers for fraud and abuse. Several former Passages employees have admitted to agents their involvement in the altering of patient files in the summer of 2009 as well as in another session in 2010, the affidavit states.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Lamont Pugh, III, Special Agent in Charge of the Chicago Regional Office of the HHS-OIG; and Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation. The Illinois Attorney General’s Office is also participating in the investigation.
The government is being represented by Assistant U.S. Attorney Stephen C. Lee.
Health care fraud carries a maximum penalty of 10 years in prison and a $250,000 fine, and obstructing a federal audit carries a maximum of five years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that a complaint is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
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