Month: November 2022

Source: United States Department of Justice News

BRUNSWICK, GA:  A former U.S. Navy petty officer stationed at Submarine Base Kings Bay was sentenced to federal prison after admitting he distributed images of child sexual exploitation.
Anthony Gabriel Ortiz, 23, of Kings Bay, Ga., was sentenced to 74 months in prison after pleading guilty to Distribution of Child Pornography, said David H. Estes, U.S. Attorney for the Southern District of Georgia. U.S. District Court Judge Lisa Godbey Wood also ordered Ortiz to pay restitution of $19,000, to register as a sex offender, and to serve 15 years of supervised release after completion of his prison sentence.
There is no parole in the federal system.
“Distributing child pornography shares the pain of victimization endlessly for innocent children who have been exploited,” said U.S. Attorney Estes. “Anthony Ortiz is being held accountable for perpetuating the harm to these vulnerable victims.” 
As described in court documents and testimony, Ortiz was in the U.S. Navy assigned to the Naval Nuclear Power Training Command, Naval Weapons Station in Charleston, S.C., when investigators with the Royal Canadian Mounted Police (RCMP) in early 2019 found online images of child pornography shared via a messaging application. RCMP alerted the Homeland Security Investigations (HSI) Cyber Crimes Center, and HSI contacted the Naval Criminal Investigative Service (NCIS). 
Ortiz, a petty officer third class, transferred in April 2019 to Submarine Base Kings Bay in Kingsland, Ga., where he later was interviewed by HSI and NCIS investigators. He was taken into custody after admitting to possessing and distributing child pornography over the internet, and investigators found hundreds of images and videos of child sexual exploitation on electronic devices in his possession.
“Mr. Ortiz deserves to be held fully accountable for his reprehensible actions to possess and distribute child pornography,” said Special Agent in Charge Thomas Cannizzo of the NCIS Southeast Field Office. “NCIS exists to protect our Department of the Navy warfighters and their families from harm. We sincerely thank our partners at Homeland Security Investigations and the Department of Justice for their continued efforts to combat child sexual exploitation in communities where our DON families live and work.”
“Those who create, view and distribute images of child exploitation create an enduring cycle of trauma and victimization, which is why these crimes are so detrimental,” said Special Agent in Charge Katrina W. Berger, who oversees Homeland Security Investigations (HSI) operations in Georgia and Alabama. “Catching and prosecuting the predators that traffic in these disturbing images takes a team effort and we are very thankful for the great relationships we have with our law enforcement partners.”
This investigation took place under the umbrella of the U.S. Department of Justice’s Project Safe Childhood, and was investigated by Homeland Security Investigations and the Naval Criminal Investigative Service. The case was prosecuted for the United States by Assistant U.S. Attorneys Jennifer Kirkland and Project Safe Childhood Coordinator Tara M. Lyons. 
Anyone with information on suspected child sexual exploitation can contact the National Center for Missing and Exploited Children at 800-843-5678, or https://report.cybertip.org/.
 

Source: United States Department of Justice News

EVANSVILLE –Roy L. Durham Jr., 37, of Evansville, Indiana, was sentenced to 92 months in federal prison after pleading guilty to illegal possession of a firearm by a previously convicted felon.

According to court documents, on June 6, 2020, an Indiana State Police Trooper initiated a traffic stop of Durham’s vehicle at an Evansville gas station and convenience store. As the trooper approached the vehicle, Durham reached for a handgun tucked inside the driver’s side door handle. The trooper drew his service weapon and commanded Durham to show his hands. Durham did not comply. Instead, he exited the vehicle and fled on foot, leaving the handgun behind.

The trooper inventoried Durham’s vehicle before having it towed and recovered five fully loaded firearms, three 9mm magazines, assorted ammunition, a gun holster, a laser sight for a firearm, 49 grams of synthetic marijuana, a digital scale, small plastic baggies, thirteen cellular telephones, three laptop computers, and $1,530 in U.S. currency from Durham’s vehicle.

Durham has prior felony convictions in state court for unlawful possession of a firearm by a serious violent felon in 2019 and for dealing methamphetamine in 2016. Durham is prohibited from possessing firearms by federal law due to these felony convictions.   

Zachary A. Myers, U.S. Attorney for the Southern District of Indiana, and Daryl S. McCormick, Special Agent in Charge of the Bureau of Alcohol, Tobacco, Firearms, and Explosives, Columbus Field Division, made the announcement.

ATF investigated the case in conjunction with the Indiana State Police. The sentence was imposed by U.S. District Judge Richard L. Young. As part of the sentence, Judge Young ordered that Durham be supervised by the U.S. Probation Office for three years following his release from federal prison.

U.S. Attorney Myers thanked Assistant U.S. Attorney Matthew B. Miller who prosecuted this case.

This case is part of Project Safe Neighborhoods (PSN), a program bringing together all levels of law enforcement and the communities they serve to reduce violent crime and gun violence, and to make our neighborhoods safer for everyone. On May 26, 2021, the Department launched a violent crime reduction strategy strengthening PSN based on these core principles: fostering trust and legitimacy in our communities, supporting community-based organizations that help prevent violence from occurring in the first place, setting focused and strategic enforcement priorities, and measuring the results.

Source: United States Department of Justice News

Damian Williams, the United States Attorney for the Southern District of New York, announced earlier today that a federal jury found NEIL COLE, the former Chief Executive Officer of Iconix Brand Group, Inc. (“Iconix”), guilty of participating in a scheme to fraudulently inflate Iconix’s revenue and earnings per share, making false filings with the U.S. Securities and Exchange Commission (“SEC”), and misleading the conduct of audits.  The defendant was found guilty following a four-week retrial before U.S. District Judge Edgardo Ramos.  Sentencing has not yet been scheduled.

U.S. Attorney Damian Williams said: “As a unanimous jury has now found, Neil Cole deceived his company’s investors and auditors in order to make his company appear to be performing better than it was.  Cole tried to hide his conduct behind tricks and lies, but the truth is now clear: Cole cooked the books.  This verdict sends a message that this Office is committed to holding corporate executives accountable when they resort to fraud, no matter how long it takes.  Wall Street should know that we will not be deterred from seeking justice in tough cases.”

According to the allegations contained in the Indictment, the evidence offered at trial, and matters included in public filings:

Iconix, whose shares traded on the NASDAQ, was in the business of acquiring various brands, including clothing and fashion brands, and then licensing those brands to retailers, wholesalers, and suppliers who, in turn, produced and sold clothing and other products bearing the brand names. 

Iconix utilized joint ventures (“JVs”) to profit from its brands in foreign markets.  With respect to these JVs, Iconix transferred ownership of a trademark or brand to the JV while maintaining a 50 percent ownership interest in the JV itself.  The other party involved in the JV purchased a 50 percent interest in the JV from Iconix.  As part of the JV agreements, each JV partner was generally entitled to 50 percent of the JV’s licensing revenue.  When it entered into a JV, Iconix recognized as revenue the buy-in purchase price paid by the JV partner, less Iconix’s cost basis in the trademarks.

Among the most critical financial metrics disclosed in Iconix’s public filings with the SEC were Iconix’s quarterly and annual revenue and non-GAAP diluted earnings per share (“EPS”).  Iconix executives, including COLE, publicly identified revenue and EPS as the principal metrics demonstrating Iconix’s growth.  They also touted Iconix’s consistent record of revenue and earnings growth and of meeting or exceeding Wall Street analyst consensus with respect to these metrics. 

The Accounting Fraud Scheme

COLE engaged in a scheme to falsely inflate Iconix’s reported revenue and EPS by orchestrating a series of “round trip” transactions in which COLE and a senior Iconix executive induced a JV partner, a Hong Kong-based international apparel licensing company (“Company-1”), to pay artificially inflated buy-in purchase prices for JV interests, with the understanding that Iconix would then reimburse Company-1 for the overpayments.  COLE executed the scheme for the purpose of enabling Iconix to report fraudulently inflated revenue and EPS figures based on the inflated buy-in purchase prices it obtained from Company-1. 

COLE arranged for Iconix to enter into at least two JVs with Company-1 that included inflated buy-in purchase prices from Company-1: (1) an amendment to a preexisting Southeast Asia joint venture, which closed on or about June 30, 2014 (“SEA-2”), and (2) a second amendment to the Southeast Asia joint venture, which closed on or about September 17, 2014 (“SEA-3”) (collectively, the “SEA JVs”).  SEA-2 and SEA-3 involved a fraudulent “round trip” transaction, lacking in economic substance, in which Company-1 paid an artificially inflated buy-in purchase price for its interest in the JV, in exchange for COLE’s agreement that Iconix would give back the inflated portion of the purchase price to Company-1.  COLE and a senior Iconix executive hid from Iconix’s lawyers and outside auditors that COLE had reached an understanding with Company-1 to artificially increase the consideration Company-1 paid Iconix in exchange for COLE’s agreement to round-trip the overpayment back to Company-1.

Through the scheme, COLE caused Iconix to report fraudulently inflated revenue and EPS figures to the investing public.  COLE did so, in part, to ensure that the reported figures met analyst consensus and to fraudulently convey the impression to the investing public that Iconix was growing quarter after quarter, as COLE had touted to the investing public. 

*                *                * 

COLE, 65, of New York, New York, was convicted of one count of securities fraud, six counts of making false filings with the SEC, and one count of improperly influencing the conduct of audits.  Each count carries a maximum prison term of 20 years.   

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence will be determined by the judge. 

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation and the SEC Office of the Inspector General.  Mr. Williams also thanked the SEC Division of Enforcement, which previously brought a separate civil action.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Jared Lenow, Justin V. Rodriguez, and Andrew Thomas are in charge of the prosecution. 

Source: United States Department of Justice News

A San Francisco-area doctor pleaded guilty on Nov. 22 in connection with the use of unapproved products she sold as genuine Botox and Juvederm.

Dr. Lindsay Clark, 45, pleaded guilty to one misdemeanor count of violating the Federal Food, Drug, and Cosmetic Act (FDCA) by receiving and delivering misbranded drugs and misbranded and adulterated devices. Her medical practice, Lindsay Clark, M.D., Medical Corporation, also pleaded guilty to one felony count of receiving and delivering misbranded drugs and misbranded and adulterated devices.

Clark specialized in procedures using injectable drugs and devices for cosmetic purposes. In pleading guilty, Clark admitted that, from 2016 through 2020, she obtained and used with patients prescription drugs and devices that were not the subject of Food and Drug Administration (FDA) licenses or approvals, and that she took steps to conceal this conduct from patients, the FDA, and the authorized corporate distributor of the products. Clark further admitted that she and her practice obtained these products from sources outside of the United States. Specifically, the defendants purchased unapproved and unlicensed injectable botulinum toxin drugs and hyaluronic acid filler devices from online “pharmacies” outside the United States. Clark admitted that she then sold these products to patients, falsely representing the products to be the more expensive, FDA-approved products Botox and Juvederm. Clark’s practice received more than $1,069,880 in connection with the sale and use of misbranded and adulterated products.

“Consumers must have confidence that the prescription drugs and devices they use are authentic and safe,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Department of Justice’s Civil Division. “The Department of Justice will continue to work with its law enforcement partners to investigate and prosecute doctors who mislead patients for their own profit.”

“Health care professionals who dispense and administer misbranded and adulterated prescription drugs and devices of unknown origin put the health of their patients at significant risk,” said Acting Special Agent in Charge Robert M. Iwanicki of the FDA Office of Criminal Investigations Los Angeles Field Office. “We will continue to pursue and bring to justice those who choose to subvert the safeguards of the legitimate drug and device regulatory regime and supply chain and jeopardize the public health.”

Clark and Lindsay Clark, M.D., Medical Corporation pleaded guilty before District Judge Susan Illston in San Francisco. Sentencing is scheduled for April 7, 2023.  

The case is being investigated by the FDA’s Office of Criminal Investigations.

Assistant U.S. Attorneys Joseph Tartakovsky and Kaitlin Paulson for the Northern District of California and Trial Attorney Rachael Doud of the Civil Division’s Consumer Protection Branch are prosecuting this case.

For more information about the Consumer Protection Branch and its enforcement efforts, visit its website at https://www.justice.gov/civil/consumer-protection-branch.  

Source: United States Department of Justice News

INDIANAPOLIS– Christopher Gene Beke, 44, of Crawfordsville, Indiana, was sentenced to 10 years in federal prison after pleading guilty to possession of child sexual abuse material with a prior conviction.

According to court documents, in December 2021, law enforcement officers received a report that child sexual abuse material, consisting of hundreds of photos depicting children engaged in sexually explicit conduct, were being stored in a Google account. Through investigation, officers learned that Beke was the Google account holder and a registered sex offender.

On January 25, 2022, a search warrant was executed at Beke’s residence in Crawfordsville. Officers seized several electronic devices including two USB thumb drives and a cellular telephone. The devices were examined and found to contain numerous images of children, including at least one pre-pubescent child engaged in sexually explicit conduct. The images were representative of the child sexual abuse material found in Beke’s Google account.

In 2011, Beke was convicted of child molesting in Indiana after sexually abusing a 10‑year‑old girl on multiple occasions. Beke was sentenced to 10 years in prison with 4 years suspended. In 2017, Beke was convicted of possession of child sexual abuse material in Indiana and sentenced to 16 months in prison. At his federal sentencing today, the sentencing judge found that Beke had engaged in a pattern of activity involving the sexual abuse or exploitation of a minor.

Zachary A. Myers, U.S. Attorney for the Southern District of Indiana, and Herbert J. Stapleton, Special Agent in Charge of the FBI’s Indianapolis Field Office, made the announcement.

The FBI investigated the case with the Montgomery County Sheriff’s Office. The sentence was imposed by U.S. District Judge Jane Magnus-Stinson. As part of the sentence, Judge Magnus-Stinson ordered that Beke be supervised by the U.S. Probation Office for 12 years following his release from federal prison and ordered Beke to pay $13,000 in restitution to the child victims. Beke must also register as sex offender wherever he lives, works, or goes to school, as required by law.

U.S. Attorney Myers thanked Assistant U.S. Attorney Kristina M. Korobov and Trial Attorney Adam W. Braskich, of the Department of Justice’s Child Exploitation and Obscenity Section, who prosecuted this case.

This investigation was conducted by the Indiana Internet Crimes Against Children (ICAC) Task Force, a partnership of federal, state, and local law enforcement agencies led by the Indiana State Police. The Task Force is dedicated to investigating and prosecuting crimes involving the technology-facilitated sexual exploitation of children and the trafficking of child sexual abuse material. Each year, Indiana ICAC investigators evaluate thousands of tips, investigate hundreds of cases, and rescue dozens of children from ongoing sexual abuse. In fiscal year 2019, the most recent year for which data is available, the Southern District of Indiana was second out of the 94 federal districts in the country for the number of child sexual exploitation cases prosecuted.