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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PPP & Coronavirus Fraud
Fahad Shah, 44, of Murphy, Texas, pleaded guilty to filing fraudulent loan applications seeking more than $3 million in Paycheck Protection Program. According to court documents, Shah admitted that he fraudulently claimed that his company, WBF Weddings by Farah Inc. employed 126 people with an average monthly payroll of over $700,000 — when it only had two. Within days of receiving the PPP funds, Shah used over $1 million in fraudulently obtained proceeds to pay off his home mortgage, purchase securities through his personal investment account, and buy two Teslas, two Freightliner trucks, and a Mercedes Benz van.
Steven R. Brandenburg, 46, of Grafton, Wisconsin, was sentenced to three years in prison for tampering with COVID-19 vaccine doses at the hospital where he worked. According to court documents, Brandenburg purposefully removed a box of COVID-19 vaccine vials manufactured by Moderna — which must be stored at specific cold temperatures to remain viable — from a hospital refrigeration unit during two successive overnight shifts in late December 2020. According to his plea agreement, Brandenburg stated that he was skeptical of vaccines in general, and the Moderna vaccine specifically, and had communicated his beliefs about vaccines to his co-workers. Brandenburg acknowledged that after leaving the vaccines out for several hours each night, he returned the vaccines to the refrigerator to be used in the hospital’s vaccine clinic the following day. Before the full extent of Brandenburg’s conduct was discovered, 57 people received doses of the vaccine from these vials.
Could your business already be in DOJ’s crosshairs?
There is an unprecedented coordination between government agencies regarding the investigation of PPP fraud crimes. In many cases, businesses with no intent to defraud U.S. taxpayers get caught in a net of overzealous prosecutions. Business owners and executives must seek experienced counsel if they receive any indication they are being investigated.
Health Care Fraud
Javaid Perwaiz, 71, of Chesapeake, Virginia, was sentenced to 59 years in prison after a jury convicted him on 52 counts of health care fraud and other charges arising from his performance of irreversible hysterectomies, improper sterilizations, and other medically unnecessary surgeries and procedures on his patients over a decade. According to court records and evidence presented at trial and at sentencing, Perwaiz, an obstetrician-gynecologist, would falsely tell his patients that they needed the surgeries because they had cancer, or to avoid cancer, in order to induce them to agree to the surgeries. The evidence also demonstrated that Perwaiz falsified records for his obstetric patients so that he could induce their labor early, prior to the recommended gestational age that minimizes risk to the mother and baby, to ensure he would be reimbursed for the deliveries. The witnesses at trial included more than 25 former patients, some of whom testified to the complications they continue to endure as a result of the unnecessary surgeries Perwaiz performed. Witnesses also included nurses who worked at the hospitals where Perwaiz performed his surgeries, who testified that they repeatedly complained about his practices to their supervisors. The unnecessary procedures caused approximately $20.8 million dollars in losses to private and government health care insurers for irreversible hysterectomies and other surgeries and procedures that were not medically necessary for his patients.
Dr. Mark E. Gibbs, Dr. Laila Hirjee, and Tammie Little RN, have been convicted by a federal jury for their role in a hospice agency Medicare scam. According to evidence presented at trial, the defendants helped Novus CEO Bradley Harris defraud Medicare by submitting materially false claims for hospice services, providing kickbacks for referrals, violating HIPAA to recruit beneficiaries, and destroying documents to conceal the fraud from Medicare. Mr. Harris testified that instead of relying on the expertise of licensed medical professions, he and Novus nurses, including Ms. Little, determined which patients would be admitted to or discharged from hospice care, as well as which drugs and dosages they would receive. They relied upon Novus doctors, including Dr. Gibbs and Dr. Hirjee, to certify that they had examined these patients face-to-face, when no such examinations had occurred. In total, Medicare and Medicaid paid the Novus entities approximately $40 million dollars for hospice services before the companies were shut down. Dr. Hirjee now faces up to 60 years in federal prison, Dr. Gibbs faces up to 35 years, and Ms. Little faces up to 40 years.
Trivikram Reddy, 39, a Waxahachie nurse practitioner, was sentenced to 20 years in federal prison and ordered to repay more than $52 million in restitution for his role in a health care fraud conspiracy. Reddy pleaded guilty to conspiracy to commit wire fraud in October 2020. According to court documents, Mr. Reddy created false patient bills using the provider numbers of six doctors as the treating physicians on the claims. All the claims were false and at no time did the six doctors provide billable services to any of Mr. Reddy’s medical clinics.
A federal grand jury sitting in McAllen returned a 15-count indictment charging John Ageudo Rodriguez, 51, Mohammad Imtiaz Chowdhury, 40, his father Dr. Tajul Shams Chowdhury, 71, and Alex Flores Jr., 51, all of McAllen; Hector DeLaCruz, Jr., 50, Edinburg; Araceli Gaona, 35, Mission; and Erika Hernandez Salinas, 38, Donna, in a multi-million dollar health care fraud and kickback scheme. Rodriguez was the owner of Pharr Family Pharmacy (PFP). From May 2014 to September 2016, PFP allegedly billed various federal health care programs more than $110 million, including claims that were false, fraudulent and the result of illegal kickbacks. According to the indictment, Mohammad Chowdhury, Flores and DeLaCruz were purported marketers for PFP who were the conduits for several million dollars in kickbacks relating to the referral of prescriptions for high-reimbursing compound drugs to the pharmacy. In numerous instances, the marketers allegedly received kickbacks from Rodriguez, which they shared with referring physicians. Dr. Chowdhury is a physician at Edinburg’s Center for Pain Management while Gaona and Salinas were employees at the clinic. The indictment alleges Mohammad Chowdhury paid kickbacks to his father for referring prescriptions to PFP, including prescriptions for high-reimbursing compound drugs that were not medically necessary.
Tax Fraud and False Claims Act
Swiss Life Holding AG (Swiss Life Holding), Swiss Life (Liechtenstein) AG (Swiss Life Liechtenstein), Swiss Life (Singapore) Pte. Ltd. (Swiss Life Singapore), and Swiss Life (Luxembourg) S.A. (Swiss Life Luxembourg), collectively, the “Swiss Life Entities,” accepted responsibility for their criminal conduct in a conspiracy with U.S. taxpayers and others to conceal from the IRS more than $1.452 billion in offshore insurance policies, including more than 1,600 insurance wrapper policies, and related policy investment accounts in banks around the world and the income generated in these accounts. As part of the resolution, the Swiss Life Entities agreed to pay approximately $77.3 million to the U.S. Treasury. According to court records, the Swiss Life Entities sold approximately 1,608 Private Placement Life Insurance (PPLI) policies in a manner to assist U.S. taxpayers in evading U.S. taxes and reporting requirements and concealing the ownership of offshore assets.
Anton Bogdanov, a citizen of Russia, was sentenced to 60 months’ imprisonment in connection with a scheme in which he and others hacked into private tax preparation firms, stole personal information, used that information to file federal tax returns and fraudulently attempted to obtain more than $1.5 million in tax refunds from the Department of the Treasury. According to court documents, Bogdanov and his co-conspirators misappropriated personally identifiable information (“PII”), such as Social Security numbers and the dates of birth of their victims, by gaining unauthorized access to the computer systems of private tax preparation firms in the United States. Bogdanov and his co-conspirators then changed the tax return information so that the refunds were paid to prepaid debit cards that they controlled.
Two North Texas dentists, Drs. Gunjan Dhir, 43, and Gaurav Puri, 43, their dental management companies, and certain affiliated pediatric dental practices have paid the United States $3.1 million to resolve allegations that they defrauded the Texas Medicaid program and violated the False Claims Act by knowingly billing for pediatric dental services that were not rendered or that falsely identified the person who provided the service. Dhir’s and Puri’s clinics serve primarily low-income children enrolled in the Texas Medicaid program. According to court documents, Drs. Dhir and Puri submitted false claims for payment to the Texas Medicaid Program for fillings in children that were not actually performed.
Conspiracy & Financial Fraud
Octavian Ocasio, 49, New York, and Emmanuel Padilla Reyes aka Christian Hernandez Bonilla, 31, city unknown, have been indicted for using fictitious car dealerships to issue nearly 600,000 automobile paper tags and selling them on the internet without selling any cars. The two men remain at large. Houston resident Leidy Areli Hernandez Lopez, 39, is also charged in the scheme. She is in custody. According to the charges, these three knowingly participated in the scheme to issue and sell more than 580,000 fraudulent tags to buyers across the United States. They allegedly provided false information such as fraudulent identities, drivers’ licenses, lease agreements and business signs in the online application portal to obtain GDN licenses for fictitious car dealerships. The indictment further alleges they advertised the sale of Texas buyer tags on social media platforms like Facebook and Instagram.
Joshua James Chappa, 45, of Bozeman, Montana, pleaded guilty in a scheme to steal cattle and embryos while defrauding a bank and a business partner. He was sentenced to 30 months in prison and ordered to pay $450,993 restitution. According to court documents, Chappa was a ranch manager and worked for Hayes Ranch, LLC, in Wilsall, from 2008 until 2017. Chappa also formed Cold Smoke Cattle, LLC, in 2015. While working for Hayes Ranch, Chappa had access to the cattle, embryos, and other items. When the owners were out of the country, Chappa began dealing in cattle, including stealing cattle from the Hayes Ranch and selling them as if they were his own.
Four individuals, including two Red River Army Depot (RRAD) officials, have been charged in a bribery and conspiracy scheme. Jimmy Scarbrough, 69, Jeffrey Harrison, 43, Justin Bishop, 50, and Devin McEwin, 41, were charged in the scheme. According to court documents, Scarbrough was the Equipment Mechanic Supervisor at the RRAD in Texarkana, Texas. He is alleged to have directed more than $7 million in purchases from RRAD to Harrison and Bishop through the government purchase card (GPC) program. In order to manipulate the GPC program, which is designed to ensure a competitive bidding process, Scarbrough told the vendors what to bid, including the item, the quantity, and the price. By collecting fake bids from multiple vendors, Scarbrough was able to direct RRAD purchases to his select vendors, in this case Harrison and Bishop, while maintaining the appearance of a competitive bidding process. Scarbrough accepted bribes in various forms, including receiving at least $116,000 in U.S. Postal Service money orders from Harrison. McEwin accepted more than $21,000 in bribes from Harrison, including hunting trips, donations directed to the Annona Volunteer Fire Department, and the refurbishment of his 1964 Ford truck.
Joseph Maurice Deberry, a/k/a Joseph Maurice Dewberry, 57, of Charlotte, N.C., was sentenced to 57 months in prison for orchestrating an investment scheme that defrauded victims of hundreds of thousands of dollars. According to court documents, Deberry induced victims, many of whom he met through online dating platforms, to invest in entities with which he was affiliated, such as Pinnacle Investment Properties LLC and Place Capital Group LLC among others. Deberry typically represented to investors that their money would be used to build student housing at certain colleges in the Carolinas. Instead, he spent a significant portion of the victims’ funds to pay for personal expenses like rent, entertainment and travel. In imposing the sentence, the Court highlighted, among other things, the need to protect the public from further crimes of Deberry, who had defrauded a new victim even after he signed his plea agreement. The Court also took into account that Deberry had filed with the Court a fraudulent character letter on his behalf that purported to be from a former NFL player, when in reality the letter was a complete fabrication.
William Roy Stone, Jr., 62, a retired FBI agent, was indicted in connection with a scheme to convince a Granbury woman she was on “secret probation” and con her out of roughly $800,000. According to the indictment, in November 2015, Mr. Stone allegedly convinced his victim, identified in court documents as C.T., that she was under “secret probation” for drug crimes in “Judge Anderson’s court in Austin, Texas.” He allegedly told the victim that the fictitious federal judge had appointed Mr. Stone and another individual to “mentor” and “supervise” her, and claimed that her conditions of probation mandated that she report her activities, as well as a list of her assets, to Mr. Stone. Moreover, he said, C.T. was obligated to pay any expenses Mr. Stone incurred while supervising her, and was forbidden from disclosing her probation status to anyone. If she did not comply with the terms of this probation, Mr. Stone said, she would risk imprisonment and the loss of her children. In order to convince C.T. the probation was real, Mr. Stone allegedly claimed that he had the ability to monitor her cell phone communications, said he discussed C.T.’s probation with a psychiatrist, enlisted another person to leave messages on his own phone purporting to be from the U.S. Drug Enforcement Administration “Intelligence Center,” and even placed “spoof” calls between himself, C.T., and the fictitious Judge Anderson. Eventually, he convinced her to hand over large sums of money to purchase a home and cars. At one point, he allegedly proposed to marry her, claiming he would then seek discharge of her probation. Over the course of several years, C.T. gave Mr. Stone more than $800,000.
Securities, Commodities & Investment Fraud
Reva Joyce Stachniw, 69, of Galesburg, Illinois, and Ron Throgmartin, 57, of Buford, Georgia, were charged with running a Ponzi scheme that raised approximately $650 million from investors across the country. According to the indictment, the conspirators fraudulently represented to victim-investors that their investments were backed by short-term investments in cattle. They also used false and fraudulent pretenses to solicit money from victim-investors for the conspirators’ Colorado-based marijuana business, Universal Herbs LLC. Other victim-investors gave the conspirators money based on false promises that investment money would be used for legitimate business activity related to cattle or marijuana, without having the investment money linked to specific investment opportunities. In all three variations of the conspirators’ investment fraud scheme, victim-investors were promised returns of approximately 10% to 20% over periods as short as several weeks. At no point did the conspirators tell victim-investors that they were primarily using their money to repay other investors in a Ponzi-style investment scheme, or to enrich themselves. Stachniw and Throgmartin allegedly received millions of dollars from the scheme, despite putting little to none of their own money into it.
David A. Krueger, 52, has been sentenced to federal prison in connection with a scheme to defraud current and former clients of his law practice. He was also ordered to pay $350,000 in victim restitution. According to court documents, Krueger solicited clients to invest in and fund his outside business ventures, claiming that they would receive guaranteed annual returns at rates of approximately 10 percent of their investments. Those funds were used to fund his businesses as well as for his own personal benefit.
Public Corruption and National Security & Immigration
Ian R. Diaz, 43, of Brea, California, has been charged with cyberstalking and perjury.
According to court documents, Diaz, a Deputy U.S. Marshal, conspired with his former wife to frame another woman, known as Jane Doe in court documents, in a harassment campaign. Diaz and his former wife sent to themselves harassing and threatening electronic communications that contained apparent threats to harm Diaz’s former wife; solicited and lured men found through Craigslist “personal” advertisements to engage in so-called “rape fantasies” in an attempt to stage a purported sexual assault on Diaz’s former wife; and staged one or more hoax sexual assaults and attempted sexual assaults on Diaz’s former wife. Diaz and his then-wife reported this conduct to local law enforcement, falsely claiming that Jane Doe posed a genuine and serious threat to Diaz and his then-wife, and thereby caused local law enforcement to arrest, charge, and ultimately detain Jane Doe in jail for nearly three months for conduct for which they framed her and in fact perpetrated themselves.
Bruce Thomas, 53, of Germantown, Maryland, pleaded guilty to paying gratuities to a public official in exchange for official acts. Thomas is the owner and operator ofPinnacle Orthopedic Services, Inc., in Germantown. Pinnacle sold more than $20 million in prosthetics and orthotics to Walter Reed National Military Medical Center. According to court documents, Thomas provided David Laufer, the Chief of the Prosthetics and Orthotics Department at Walter Reed, with cash, airlines flights, meals, entertainment, and other benefits in exchange for those purchases.
Song Guo Zheng, 58, of Hilliard, Ohio, was sentenced to 37 months in prison for making false statements to federal authorities as part of an immunology research fraud scheme. He was also ordered to pay more than $3.4 million in restitution to the National Institute of Health (NIH) and approximately $413,000 to The Ohio State University. Zheng pleaded guilty last November and admitted he lied on applications to use approximately $4.1 million in grants from NIH to develop China’s expertise in the areas of rheumatology and immunology. Zheng was a professor of internal medicine who led a team conducting autoimmune research at The Ohio State University and Pennsylvania State University. According to his plea, Zheng caused materially false and misleading statements on NIH grant applications, seeking to hide his participation in Chinese Talent Plans and his affiliation and collaboration with a Chinese university controlled by the Chinese government. Since 2013, Zheng had been participating in a Chinese Talent Plan, a program established by the Chinese government to recruit individuals with knowledge or access to foreign technology intellectual property. Since that time, Zheng used research conducted in the United States to benefit the People’s Republic of China. Zheng failed to disclose conflicts of interest or his foreign commitments to his American employers or to the NIH.
Cloudgen LLC has pleaded guilty to conspiracy to commit H-1B visa fraud. Cloudgen, a consulting and strategic solutions company in Houston, pleaded guilty to recruiting multiple Information Technology workers from India and falsely procuring H-1B visas for them to enter and work in the United States. An H-1B visa permits the temporary employment of non-immigrants to fill specialized jobs in the United States. Specifically, in this “bench and switch” scheme, the company would file documents with the Departments of Labor (DOL) and Homeland Security (DHS) containing fraudulent statements about the availability of work at third-party national employers. Cloudgen would then submit forged contracts stating each third-party company had a job for the individual Indian national. Next, based on those false documents, Cloudgen would submit paperwork to get an H-1B worker’s visa for the Indian nationals. When granted, they would use that visa to allow the Indian nationals to enter the United States. However, because the jobs were fake, they were housed in different locations across the country while Cloudgen obtained other employment for them. Such action gave Cloudgen a competitive advantage by having a steady “bench” or supply of visa-ready workers to send to different employers based on market needs when the true process actually takes some time. Once workers had obtained new employment, the “switch” would occur when the new third-party company filed immigration paperwork for the foreign workers. Cloudgen would also extend their visas, based on the original false ones, to allow them to stay and continue working in the United States. Cloudgen took a percentage of the worker’s salary as their fees, earning approximately $493,516.28 in profits during the course of the conspiracy.