Best Defender Bytes:

The Justice Department announced today that it reached a settlement with Life Generations Healthcare LLC, doing business as Generations Healthcare (GHC), a company that runs assisted living facilities throughout California.  The settlement follows an administrative court decision finding that GHC engaged in a pattern and practice of discrimination against individuals born abroad, including naturalized U.S. citizens, in violation of the Immigration and Nationality Act.

On Sept. 30, 2011, the Justice Department filed a lawsuit against GHC alleging that the company discriminated against authorized workers born abroad.  Specifically, GHC required these immigrants to produce more documents to establish authority to work than it required of citizens born in the United States.  After a trial, the Office of the Chief Administrative Hearing Officer—the administrative court that hears such claims—ruled in the department’s favor.

Today’s settlement resolves the remedial issues in the case, which the court did not address in its earlier ruling.  Under the terms of the settlement agreement, GHC will pay a total of $119,313 in back pay to two victims of discrimination, and $88,687 in civil penalties to the United States.  GHC will also be subject to monitoring of its hiring practices for a period of two years.

“Both the court’s ruling and this settlement underscore the importance of complying with the anti-discrimination provision of the Immigration and Nationality Act and the consequences for failing to do so,” said Acting Assistant Attorney General Vanita Gupta for the Civil Rights Division.  “Employers should review their hiring policies and employment eligibility verification practices to ensure that they comply with federal anti-discrimination law.

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A California attorney was sentenced to serve 17 years in prison today in the Southern District of Florida for operating a five-year, multi-million dollar market manipulation and fraud scheme, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.

Mitchell J. Stein, 53, of Hidden Hills, California, was convicted by a jury on May 20, 2013, of conspiracy to commit mail and wire fraud, three counts of wire fraud, three counts of securities fraud, three counts of money laundering, and one count of conspiracy to obstruct justice.  In addition to the prison sentence, U.S. District Judge Kenneth A. Marra of the Southern District of Florida ordered Stein to forfeit $5.3 million.  Restitution will be determined at a later date.

“Lawyers for companies are supposed to guide their clients through the important reporting and regulatory requirements that ensure the integrity of our financial markets,” said Assistant Attorney General Caldwell.  “Stein abdicated his responsibility, and instead abused his position of trust to defraud a public company, its shareholders, and the investing public of millions of dollars.”

“The ‘pump and dump’ scheme orchestrated by Stein and his co-conspirators was extremely elaborate,” said U.S. Attorney Ferrer.  “In an effort to conceal his fraudulent financial scheme, Stein falsely testified before the SEC and used his position of trust to arrange for others to do the same.  The sentencing announced today underscores the department’s commitment to hold liable those individuals who profit from manipulating the financial markets and violating securities and other laws that are intended to protect investors and markets.”

According to evidence presented at trial, Stein’s wife held a controlling majority interest in Signalife Inc., a publicly-traded company currently known as Heart Tronics that purportedly sold electronic heart monitoring devices.  While acting as Signalife’s outside legal counsel, Stein engaged in a scheme to artificially inflate the price of Signalife stock by creating the false impression of sales activity at the company.  Specifically, the evidence at trial showed that Stein and his co-conspirators created fake purchase orders and related documents from fictitious customers, then caused Signalife to issue press releases and file documents with the Securities and Exchange Commission (SEC) trumpeting these fictitious sales.  Evidence at trial also proved that in a further effort to create the false appearance of sales activity, Stein arranged to have Signalife products shipped to and temporarily stored with an individual who had not purchased any products. (more…)

SANTA ANA – A Huntington Beach church worship leader was sentenced today to 36 years to life in state prison for sexually assaulting a boy relative and producing child pornography. Jeffrey Adam Tracy, 38, was found guilty by a jury Oct. 16, 2014, of two felony counts of oral copulation of a child 10 years old or younger, four felony counts of lewd acts upon a child under 14, and one felony count of using a minor for sex acts.

In April 2013, U. S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and other members of the Orange County Child Exploitation Task Force (OCCETF) began investigating the defendant for uploading child pornography videos on the Internet using various file sharing programs. On Sept. 25, 2013, members of the OCCETF executed search warrants in connection with the case. Tracy was subsequently taken into custody Sept. 27, 2013.

“Tragically, it’s not uncommon for individuals targeted in cases involving the production and distribution of child pornography to also be engaged in the hands-on sexual abuse of children,” said Claude Arnold, special agent in charge for HSI Los Angeles. “What makes this case even more heartbreaking was that this predator’s young victim had a disability. Fortunately, the lengthy sentence imposed today virtually assures that no more children will fall prey to this defendant.”

During the investigation, HSI special agents discovered that between 2008 and 2012, Tracy sexually assaulted a minor male relative, John Doe, by orally copulating the victim, committing lewd acts upon him, and videotaping some of the sex acts. Tracy e-mailed the illegal child pornography videos of the sex acts with John Doe to various unknown individuals. John Doe was under 10 years old when the sexual assaults took place.

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Four Philippine nationals were indicted today on conspiracy, hostage-taking, and weapons charges stemming from the kidnapping in the Philippines of a mother and her then 14-year-old son in July of 2011.  The indictment alleges that the group held the mother for approximately 82 days and the son for approximately 151 days, and forced the family to pay ransom for their return. The victims, both U.S. nationals, were in the Philippines on a family trip.

The indictment, returned by a grand jury in the U.S. District Court for the District of Columbia, was announced by John P. Carlin, Assistant Attorney General for National Security; Ronald C. Machen Jr., U.S. Attorney for the District of Columbia; Stephanie Yonekura, Acting U.S. Attorney for the Central District of California, and Bill L. Lewis, Assistant Director in Charge of the FBI’s Los Angeles Field Office.

The four men are identified as John Does, but are also known as Furuji Indama, Radzmil Jannatul, Muadz, and Abu Basim.  Each is charged with one count of conspiracy to commit hostage-taking, two counts of hostage-taking, one count of conspiracy to use, carry, brandish and discharge a firearm during a crime of violence and one count of using, carrying, brandishing and discharging a firearm during a crime of violence and aiding and abetting and causing an act to be done.  None of the defendants is in custody.

If extradited to the United States and convicted of these charges, each defendant would face a maximum term of life in prison.

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A grand jury in Santa Ana, California, indicted three individuals for allegedly operating fraudulent debt relief services companies that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service announced.

Jeremy Nelson, 29, Elias Ponce, 27, and John Vartanian, 55, all of Orange County, California, were charged with conspiracy, mail fraud, and wire fraud in connection with their roles at companies known as Nelson Gamble & Associates and Jackson Hunter Morris & Knight LLP.  According to the indictment, the defendants portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors. Clients made monthly payments expecting the money to go toward settlements.  But the defendants instead took at least 15 percent of the total debt as company fees, with the first six months of payments going almost entirely towards undisclosed up-front fees.

If convicted, the defendants face a maximum penalty of 20 years in prison and a $250,000 fine for each count of conspiracy, mail fraud, and wire fraud, or an alternate fine of twice the loss or twice the gain, whichever is greater, along with mandatory restitution.

“Americans facing credit card debts are sometimes desperate to improve their financial situations,” said Acting Assistant Attorney General Joyce R. Branda for the Civil Division.  “The Civil Division will vigorously pursue those who take advantage of vulnerable consumers trying to dig themselves out of debt.”

“Lying to victims to get their money is not only wrong, it is criminal,” said Acting Inspector in Charge Troy Raper of the U.S. Postal Inspection Service.  “Postal Inspectors aggressively investigate any operations that use the U.S. mail to perpetrate frauds on the American public.” (more…)

NEWPORT BEACH, Calif. – Two Orange County residents were arraigned in an $11 million Ponzi scheme victimizing over 27 people with sale of unsecured securities based on fraudulent insurance policies. Joseph Francis Bartholomew, 75, Lake Forest, is charged with one felony count of the use of a device or scheme to defraud and 28 felony counts of using an untrue statement in the purchase or sale of a security with sentencing enhancements for aggravated white collar crime over $500,000 and loss greater than $3.2 million. If convicted, Bartholomew faces a maximum sentence of 42 years in state prison. Bartholomew is being held on $11.3 million bail and must prove that the money comes from a legal and legitimate source before posting bond.

Co-defendant Wendy King-Jackson, 54, Laguna Niguel, is charged with one felony count of the use of a device or scheme to defraud and two felony counts of the use of an untrue statement or omission in connection with the purchase or sale of a security with sentencing enhancements for aggravated white collar crime over $500,000 and loss greater than $3.2 million. If convicted, King-Jackson faces a maximum sentence of 16 years in state prison. Both defendants will be arraigned on Thursday, Dec. 4, 2014, at 8:30 a.m. in Department H-2, Harbor Justice Center, Newport Beach.

The defendants are accused of engaging in a “Ponzi scheme,” which is a fraudulent operation that offers investors high, short-term returns on investments. Instead of using the money to generate actual income and legitimate profits, the money from the investors is kept for the benefit of the defendant or used to repay earlier investors.

Bartholomew is accused of owning and operating MBP Insurance Services, Inc. (MBP), which offered and sold unsecured securities based on fraudulent insurance policies. Between July 2005 and May 2014, Bartholomew is accused of defrauding over 27 investors, the majority of whom were senior citizens, and falsely promising them that he would be able to provide a return of 15 to 40 percent in interest from their investment.

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WASHINGTON – The U.S. District Court for the Central District of California entered a consent decree of permanent injunction on Dec. 1 against Neptune Manufacturing Inc. of Los Angeles and its corporate officers, Alexander Goldring, Peter Oyrekh and Semyon Krutovsky, to prevent the distribution of adulterated seafood products, the Department of Justice announced today.

The department filed a complaint in the U.S. District Court for the Central District of California on Nov. 21 at the request of the U.S. Food and Drug Administration (FDA), alleging the company’s seafood products are produced under conditions that are inadequate to ensure the safety of its products.  The complaint alleges that Neptune prepares, processes, packs, holds and distributes ready-to-eat smoked and salt-cured seafood including pickled herring, smoked steelhead trout, smoked halibut, smoked whitefish, smoked salmon and smoked mackerel.  The complaint also alleges that defendants Goldring, Oyrekh and Krutovsky are Neptune’s corporate officers with the authority and responsibility for preventing and correcting violations of federal law at the company.

In conjunction with the filing of the complaint, the defendants agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from committing violations of the federal Food, Drug, and Cosmetic Act.  The consent decree requires Neptune to cease all manufacturing operations and requires that, in order for defendants to resume distributing seafood products, the FDA first must determine that Neptune’s manufacturing practices have come into compliance with the law.

“Neptune was repeatedly informed that the sanitation practices at its facility were deficient,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “The failure to actively plan for and control the presence of bacteria and neurotoxins commonly found in seafood processing facilities can pose a serious risk to the public health.”

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LOS ANGELES – A San Gabriel man who attempted to smuggle nearly four dozen turtles from Southern California to Hong Kong has been sentenced to federal prison.

Kwong Wa Cheung, 36, was sentenced Tuesday to two months in federal prison. Following the completion of the prison term, Cheung will be on supervised release for two years, during which time he will serve two months in a residential re-entry center (a “halfway house”) and perform 500 hours of community service at an animal shelter.

Cheung was sentenced by United States District Judge John F. Walter, who also ordered the defendant to pay a $12,000 fine.

When Cheung attempted to smuggle the 46 turtles and tortoises to Hong Kong, he brought three boxes containing the animals to a United States Postal Service facility in San Gabriel. Cheung used a fake name and address on the packages, and declared that the content of the packages were “Toys (Acces Model).” The fake name that Cheung used aroused suspicion, and the Postal Service refused to ship the packages.

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LOS ANGELES – A Lake Elsinore man who was employed as a correctional officer at the Federal Correctional Institution, Terminal Island has pleaded guilty to a federal bribery charge for taking $1,000 in cash to smuggle a cell phone into the prison facility.

Luis Borjon, 52, pleaded guilty on Tuesday to the felony charge and admitted that he took the payment while employed as a correctional officer by the United States Bureau of Prisons.

Borjon pleaded guilty before United States District Judge R. Gary Klausner, who is scheduled to sentence the defendant on February 23, 2015. At sentencing, Borjon will face a statutory maximum sentence of 15 years in federal prison.

According to court documents, Borjon approached an inmate under his supervision at the Terminal Island prison in November 2012 and solicited a “loan.” The inmate put Borjon in contact with the inmate’s brother, who was not in custody, and Borjon called the inmate’s brother to provide him with the number for Borjon’s “burner cell phone” (a disposable phone).

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A federal grand jury in San Francisco returned a nine-count indictment against five real estate investors for their role in bid rigging and fraud at foreclosure auctions in Northern California, the Department of Justice announced.

The indictment, filed today in U.S. District Court for the Northern District of California in Oakland, California, charges Northern California real estate investors John Michael Galloway, Nicholas Diaz, Glenn Guillory, Thomas Joyce and Charles Rock with participating in a conspiracy to rig bids and a scheme to defraud mortgage holders and others.  The indictment alleges that the defendants agreed not to compete at public foreclosure auctions in Contra Costa County, California, and diverted money to themselves and others that should have gone to mortgage holders and other beneficiaries.

To date, 50 individuals have pleaded guilty or agreed to plead guilty to criminal charges as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public foreclosure auctions in Northern California.  In addition, 21 real estate investors have been charged in five multi-count indictments for their roles in bid rigging and fraud schemes at foreclosure auctions in Alameda, Contra Costa and San Francisco counties.

“The Antitrust Division will continue to cooperate with its law enforcement partners to bring to justice those who undermine the competitive market for foreclosed properties,” said Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program.  “Public auctions are meant for the public, not for an elite group conspiring together for their own profit.”

The indictments allege, among other things, that as early as June 2008 until about January 2011, the defendants conspired to rig bids to obtain numerous properties sold at foreclosure auctions in Contra Costa County, negotiated payoffs for agreeing not to compete, held second, private auctions known as “rounds,” concealed those rounds and payoffs, and, in the process, defrauded mortgage holders and other beneficiaries. (more…)