The White Collar Defense Report® provides updates on cases, policy developments and trends in the white collar area, including federal criminal matters as well as civil cases such as qui tam cases and SEC enforcement actions.
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Health Care & COVID-19 Fraud
The Department of Justice has filed criminal charges against 138 defendants, including 42 doctors, nurses, and other licensed medical professionals, in 31 federal districts across the United States for their alleged participation in various health care fraud schemes that resulted in approximately $1.4 billion in alleged losses. Dozens of the defendants live in the North Texas area. The charges target approximately $1.1 billion in fraud committed using telemedicine, $29 million in COVID-19 health care fraud, $133 million connected to substance abuse treatment facilities, and $160 million connected to other health care fraud and illegal opioid distribution schemes across the country.
Fahad Shah, 45, of Murphy, has been sentenced to 31 months in federal prison for perpetrating a scheme to fraudulently obtain more than $3.3 million in Paycheck Protection Program (PPP) loans. According to court documents, Shah sought approximately $3.3 million in PPP funds by claiming that his family’s business, WBF Weddings by Farah Inc. (WBF), employed more than 100 individuals and paid millions of dollars in compensation to those employees. In actuality, WBF had no employees aside from Shah and his wife. Shah received more than $1.5 million in PPP loans, which he used to pay off his home mortgage and purchase two Teslas and a Mercedes, among other items.
Could your business already be in DOJ’s crosshairs?
Health care fraud investigations and prosecutions are on the rise, and scrutiny of physicians and other medical professionals can lead to career-ending charges. A mere investigation can cause untold damage to one’s reputation, to say nothing of the possible criminal penalties. Health care professionals and executives in Texas and across the country are encouraged to seek experienced counsel if they receive any indication they are being investigated.
At The Law Offices of Dan C. Guthrie, Jr., we have decades of experience both prosecuting and defending individuals in white collar crime cases, including many major health care prosecutions that ended in no indictment for our client.
Formosa Plastics Corporation has agreed to pay $2.85 million in civil penalties and improve its risk management program to resolve alleged violations of the Chemical Accident Prevention Provisions of the Clean Air Act (CAA) at their petrochemical manufacturing plant in Point Comfort. According to court records, the Environmental Protections Agency’s (EPA) investigation of Formosa was spurred by a series of fires, explosions and accidental releases at the Point Comfort plant spanning from May 2013 through October 2016. These accidents caused injuries to workers, including second- and third- degree burns and chlorine inhalation requiring hospitalization as well as property damage and the release of extremely hazardous substances to the environment. Formosa will be required to update its response and personal protection plans to prevent employee injury, conduct a third-party audit of its risk management practices, perform corrective actions based on audit results and develop key performance indicators to evaluate future compliance. In addition, the company agreed to conduct a service compatibility evaluation to identify any incompatible equipment and implement a mechanical integrity reporting program.
Federal Payroll Tax Fraud
John Bennett White IV, 61, of Tyler has been sentenced to prison for federal employment tax violations. According to court documents, White was an attorney and firm manager for a Tyler law firm where he withheld his employees’ employment taxes but did not fully pay those funds to the federal government. Instead of paying employment taxes, court records allege that White paid other creditors and his own personal expenses.
Jared Rice, Sr., 33, the inventor of cryptocurrency AriseCoin, was sentenced to five years in federal prison for duping investors out of more than $4 million. Rice, the CEO of AriseBank, had pleaded guilty to one count of securities fraud in March 2019. In addition to his prison sentence, he was ordered to pay $4.2 million in restitution. According to his plea papers, Mr. Rice, 33, admitted he lied to would-be investors, claiming that AriseBank – billed as the world’s “first decentralized banking platform” based on the proprietary digital currency AriseCoin – could offer consumers FDIC-insured accounts and traditional banking services, including Visa-brand credit cards, in addition to cryptocurrency services. In actuality, AriseBank had not been authorized to conduct banking in Texas, was not FDIC insured, and did not have any sort of partnership with Visa.
Arturo Salazar III, 41, of San Angelo, was sentenced to more than three years in federal prison after pleading guilty to embezzling more than half a million dollars from a wind farm. A former site manager for a Vestas-American Wind Technologies wind farm, was also ordered to pay $359,810 in restitution to the company. According to court documents, Mr. Salazar admitted that he teamed up with a conspirator to create a sham business, BT Machine, with the sole purpose of creating fraudulent invoices. From 2016 to 2019, the pair created hundreds of bogus invoices for nonexistent equipment BT Machine purportedly leased to Vestas.
Jonathan Dean Davis, 43, the owner of a for-profit trade school convicted of bilking the U.S. Department of Veterans Affairs, will forfeit $72 million to the federal government. According to court records, the forfeiture includes more than $4.7 million in cash; numerous luxury vehicles, including a Lamborghini, a Ferrari, a Bentley, two Mercedes-Benzes, and a BMW; and real estate in Dallas and Utah worth more than $2.5 million. Davis was found guilty of seven counts of wire fraud and four counts of money laundering following a six-day trial in April. Acting U.S. Attorney for the Northern District of Texas said that Davis had attempted to argue that because the proceeds of his fraud were in his business account, rather than in a personal bank account, he should not have to give it all back.
Waseem Maknojiya, 37, a citizen of India who was illegally residing in Houston, has entered a guilty plea to conspiracy to commit mail fraud in connection with a telemarketing scheme involving Indian call centers that allegedly extorted money from victims in the United States. Maknojiya acted as a runner in these schemes, using aliases and fake identification documents to pick up more than 70 parcels containing cash the scheme’s victims had mailed. One common script used in the scheme involved coercing victims into believing federal agents were investigating them. The “agent” on the phone would convince the victim the only way to clear his or her name from investigation was to send cash in a parcel shipped through FedEx to a name and address they provided. Runners in the United States like Maknojiya would then pick up the parcels.
A federal grand jury in Sherman has returned a seven-count superseding indictment charging 101 individuals in a cell phone trafficking conspiracy that resulted in the illicit sales of over 70,000 stolen cellular devices valued at nearly $100 million. According to the superseding indictment, members of a multi-layered criminal organization stole personal electronics, including cell phones, tablets, laptops, and smart watches, within the North Texas area and then exported those items overseas for resale. The defendants’ organization included runners, suppliers, device traffickers, and exporters. The indictment alleges that in late October 2020, a series of armed takeover-style robberies began to take place at AT&T, T-Mobile, and Verizon retail cell phone stores in the Dallas area.