Month: July 2024

Source: United States Department of Justice Criminal Division

Today, the Justice Department’s Civil Rights Division convened principals of federal agency civil rights offices and senior government officials to foster AI and civil rights coordination.

This was the third such convening hosted by the Civil Rights Division following President Biden’s Executive Order on the Safe, Secure and Trustworthy Development and Use of Artificial Intelligence (EO 14110), which tasks the Civil Rights Division with coordinating federal agencies to use our authorities to prevent and address unlawful discrimination and other harms that may result from the use of AI in programs and benefits, while preserving the potential social, medical and other advances AI may spur.

In her opening remarks, Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division highlighted her recent announcement that nine cabinet-level federal agencies have joined the pledge to enforce civil rights laws in AI as new technologies become more common in daily life.

Agencies discussed their efforts to safeguard civil rights through robust enforcement, policy initiatives, rulemaking and ongoing education and outreach, including completing all 180-day actions in EO 14110 on schedule. These accomplishments include:

• Guidance to assist federal contractors in compliance with equal employment laws to promote safe AI adoption and to apply the Fair Labor Standards Act and other federal labor standards as employers use AI (Department of Labor);
• Resources for job seekers, workers, tech vendors and creators on how AI use could violate employment discrimination laws (Equal Employment Opportunity Commission);
• Guidance affirming that existing prohibitions against discrimination apply to AI’s use for tenant screening and advertisement of housing opportunities, and explained how deployers of AI tools can comply with these obligations (Department of Housing and Urban Development);
• Guidance and principles that set guardrails for the responsible and equitable use of AI in administering public benefits programs (Department of Agriculture and Department of Health and Human Services); and
• A final rule applying the nondiscrimination principles under Section 1557 of the Affordable Care Act to the use of patient care decision support tools in clinical care, and it requires those covered by the rule to take steps to identify and mitigate discrimination when they use AI and other forms of decision support tools for care (Department of Health and Human Services).

The interagency convening’s attendees included Chair Charlotte Burrows of the Equal Employment Opportunity Commission, Director Melanie Fontes Rainer of the Department of Health and Human Services’ Office of Civil Rights, Officer for Civil Rights and Civil Liberties Shoba Sivaprasad Wadhia of the Department of Homeland Security and Principal Deputy Assistant Secretary Diane Shelley of the Department of Housing and Urban Development. Other senior agency officials also participated.

All participants pledged to continue collaboration to protect the American public against any harm that might result from the increased use and reliance on AI, algorithms and other advanced technologies. The agencies also agreed to partner on external stakeholder engagement around their collective efforts to advance equity and civil rights in AI.

For more information, see the Civil Rights Division’s webpage, which centralizes content related to the division’s work on AI and civil rights. This resource provides information about how advanced technologies can result in unlawful discrimination and what the division can do to assist victims of discrimination. The webpage will soon also include the work on AI and civil rights from enforcement agencies throughout the federal government.

Source: United States Department of Justice Criminal Division

A federal jury in New Jersey convicted the former CEO of SCWorx Corp. (SCWorx), a publicly traded health care company, today for his role in a scheme to mislead investors about SCWorx’s procurement of COVID-19 rapid test kits in the early days of the COVID-19 pandemic.

According to court documents and evidence presented at trial, Marc Schessel, 64, of New Paltz, New York, caused SCWorx to issue multiple public statements claiming that SCWorx was buying and reselling at least 48 million COVID-19 test kits, despite knowing that such statements were false and misleading. Specifically, Schessel made, or caused to be issued, four false and misleading statements during a five-day period in April 2020: an April 13 press release; an April 15 investor conference call; an April 16 8-K filing with the U.S. Securities and Exchange Commission; and an April 17 press release. All four announcements claimed that SCWorx would be receiving millions of COVID-19 rapid test kits within two weeks, but Schessel and SCWorx never acquired a single COVID-19 test kit as part of the announced transaction.

In the wake of these public announcements, SCWorx’s share price surged, rising by over 400%, from approximately $2.25 to an intraday high of $14.88. After SCWorx announced that it was terminating these COVID-19 rapid test kit agreements without having acquired any tests, SCWorx’s share price quickly dropped below its pre-April 13, 2020, announcement price.

The jury convicted Schessel of two counts of securities fraud. He is scheduled to be sentenced on Dec. 17 and faces a maximum penalty of 20 years in prison on count one and a maximum penalty of 25 years on count two. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division; U.S. Attorney Philip R. Sellinger for the District of New Jersey; and Assistant Director Michael D. Nordwall of the FBI’s Criminal Investigative Division made the announcement.

The FBI Newark Field Office investigated the case. The Justice Department appreciates the assistance of FINRA’s Criminal Prosecution Assistance Group.

Principal Assistant Deputy Chief Lucy Jennings and Trial Attorneys Kate McCarthy and Spencer Ryan of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys George Brandley and Angelica Sinopole for the District of New Jersey are prosecuting the case.

The Fraud Section uses the Victim Notification System to provide victims with case information and updates related to this case. Victims with questions may contact the Fraud Section’s Victim Assistance Unit by calling the Victim Assistance phone line at 1-888-549-3945 or by emailing victimassistance.fraud@usdoj.gov. To learn more about victims’ rights, please visit www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas.

Source: United States Department of Justice Criminal Division

An Alaska man was sentenced yesterday to 30 months in prison for embezzling more than $1 million from the City of Houston, Alaska, and from a Wasilla-based equipment company, and then evading taxes on the embezzled profits.

According to court documents and statements made in court, from 2015 through 2018, Jess Adams was the Treasurer for the City of Houston, where he was entrusted with bookkeeping responsibilities and had administrative access to the city’s accounting records and software. Adams used this access to direct electronic transfers from the city’s bank account to a personal account in his name, which he maintained to hide the embezzled funds. Adams created fictitious entries in the city’s accounting records to disguise these payments as legitimate business expenses.

In October 2018, the City of Houston placed Adams on administrative leave, and he resigned his position in November 2018. A year later, Adams was employed as a bookkeeper by an equipment company, where he exercised control over the company’s accounting records and software. Using this access, Adams directed electronic transfers from the company’s bank account to other personal accounts that Adams opened in his name to hide the embezzled money. To conceal his activity, Adams used fictitious entries in the company’s accounting software to make it appear as though these funds were transferred for the payment of legitimate business expenses.

Adams then laundered the money he embezzled from the equipment company by making several wire transfers from his personal bank account to other accounts, each at a value greater than $10,000.

To further conceal his embezzlement and evade his taxes, Adams – a former seasonal tax return preparer for a national tax advisory company – filed false individual income tax returns for tax years 2016 through 2021. These returns did not disclose the additional income he embezzled.

In addition to his prison sentence, Adams was ordered to serve three years of supervised release and pay over $1.5 million in restitution to the United States, as well as additional restitution to the City of Houston and to the equipment company.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney S. Lane Tucker for the District of Alaska made the announcement.

IRS Criminal Investigation investigated the case, with substantial assistance from the Alaska State Troopers.

Trial Attorney Boris Bourget of the Tax Division and Assistant U.S. Attorney Tom Bradley for the District of Alaska prosecuted the case.

Source: United States Department of Justice Criminal Division

The Justice Department today announced that Rite Aid Corporation (Rite Aid) and 10 subsidiaries and affiliates have agreed to settle the government’s allegations under the False Claims Act (FCA) and Controlled Substances Act (CSA) asserted in United States ex rel. White et al. v. Rite Aid Corp., et al., No. 1:21-cv-1239 (N.D. Ohio). Under the settlement, the government will be paid $7.5 million and have an allowed, unsubordinated, general unsecured claim of $401.8 million in Rite Aid’s bankruptcy case that is pending in the District of New Jersey. During the relevant time period, Rite Aid operated one of the country’s largest retail pharmacy chains with over 2,200 retail pharmacies in 17 states.

“Filling unnecessary prescriptions for powerful and addictive opioids, as the government alleged here, not only takes a toll on our communities, but also violates the law,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “As today’s settlement illustrates, the Justice Department is committed to holding pharmacies accountable for their role in the nation’s opioid crisis.”

“Pharmacies and pharmacists have an affirmative legal duty to ensure that the prescriptions they fill are legitimate,” said U.S. Attorney Rebecca C. Lutzko for the Northern District of Ohio. “When they disregard this responsibility and instead ignore red flags indicating that prescriptions for addictive painkillers are invalid, they violate the public’s trust and harm the community they are supposed to serve — all to make a buck. Our settlement with Rite Aid reinforces the Northern District of Ohio’s continued commitment to combatting the opioid crisis. My office and our law enforcement partners will continue to battle this epidemic by ensuring that corporate actors comply with their legal obligations, which help to restrict unwarranted public access to highly addictive medications, and thereby fight to keep vulnerable members of our communities from becoming addicted to opioids.”

The government’s complaint alleges that, from May 2014 through June 2019, Rite Aid knowingly dispensed at least hundreds of thousands of unlawful prescriptions for controlled substances that (1) lacked a legitimate medical purpose and were not issued in the usual course of professional practice and/or (2) were not valid prescriptions, were not for a medically accepted indication or were medically unnecessary. These unlawful prescriptions included, for example, prescriptions for the dangerous, highly diverted combination of drugs known as “the trinity,” prescriptions for excessive quantities of opioids, such as highly addictive oxycodone and fentanyl, and prescriptions issued by prescribers who Rite Aid pharmacists had repeatedly identified internally as suspicious and as writing unlawful, unnecessary prescriptions. The government further alleges that Rite Aid filled these prescriptions despite clear “red flags,” which highly indicated the prescriptions were unlawful and which pharmacists are trained to recognize. Rite Aid also allegedly ignored substantial evidence that its stores were dispensing unlawful prescriptions, including specific concerns raised by its pharmacists, and intentionally deleted internal notes about suspicious prescribers written by Rite Aid pharmacists, such as “writing excessive dose[s] for oxycodone,” and “DO NOT FILL CONTROLS.” By knowingly dispensing unlawful prescriptions for controlled substances, the government alleges that Rite Aid violated the CSA and, where Rite Aid sought reimbursement from federal healthcare programs, also violated the FCA. 

Along with Rite Aid Corporation, the government’s complaint names as defendants the following Rite Aid subsidiaries: Rite Aid Hdqtrs Corp.; Rite Aid of Connecticut Inc.; Rite Aid of Delaware Inc.; Rite Aid of Maryland; Rite Aid of Michigan; Rite Aid of New Hampshire; Rite Aid of New Jersey; Rite Aid of Ohio; Rite Aid of Pennsylvania and Rite Aid of Virginia.

“Pharmacies and pharmacists have a critical responsibility to ensure controlled substances are dispensed lawfully and safely to the public. This includes highly addictive opioids as we continue to see the impact of the opioid crisis,” said Deputy Inspector General Christian J. Schrank of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG is entering into a Corporate Integrity Agreement with Rite Aid, which includes a prescription drug claims review to have an Independent Review Organization determine whether prescription drugs are properly prescribed, dispensed, and billed.  HHS-OIG will continue to work with our law enforcement partners to hold providers accountable that put the public at risk.”

“America continues to live through the worst opioid epidemic we have ever seen. Rite Aid contributed to this crisis by ignoring obvious red flags and dispensing hundreds of thousands of unnecessary opioids,” said Administrator Anne Milgram of the Drug Enforcement Administration (DEA). “DEA will continue to do everything in our power to protect the health and safety of Americans and to end the opioid epidemic.”

The civil settlement includes the resolution of claims that certain Rite Aid pharmacies in Washington State violated the CSA by filling prescriptions written by prescribers who lacked proper controlled substance prescribing authority. The settlement also resolves claims brought in 2019 under the qui tam, or whistleblower, provisions of the FCA by Andrew White, Mark Rosenberg and Ann Wegelin, who all previously worked for Rite Aid at various pharmacies. The FCA authorizes private parties to sue on behalf of the United States for false claims and share in any recovery, and permits the United States to take over the lawsuit, as it did here in part. The relators will receive 17% of the government’s FCA recovery in this matter.

In addition to the civil settlement, Rite Aid has entered into agreements with DEA and HHS-OIG to address its obligations going forward. Rite Aid and DEA entered a memorandum of agreement (MOA) designed to increase communication between the company, its retailers and DEA. Employees will receive additional training to help them identify illegitimate prescriptions and minimize the risk of drug diversion. The MOA also requires Rite Aid to create and keep materials relevant to DEA investigations for a minimum of five years. Rite Aid further commits to implementing and managing an anonymous hotline for employees, patients and the public to report suspected illegal dispensing of highly diverted controlled substances as well as suspected violations of the CSA. Rite Aid has also entered into a corporate integrity agreement (CIA) with HHS-OIG. The CIA includes a prescription claims drug review to have an Independent Review Organization to determine whether prescription drugs are properly prescribed, dispensed and billed.

The settlement was approved on June 28 by the bankruptcy court as part of Rite Aid’s plan of reorganization, which is expected to become effective later this summer. The amount the government will recover on its unsecured claim under the settlement will depend on the ultimate amount of assets available to the bankruptcy estate for distribution to unsecured creditors.

The Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of Ohio handled this matter. The DEA Cleveland Division, FBI Cleveland Field Office and HHS-OIG provided substantial assistance in the investigation.

Senior Trial Counsel Christopher Wilson of the Civil Division’s Fraud Section and Assistant U.S. Attorneys Patricia Fitzgerald, Elizabeth Berry and Kathryn Andrachik for the Northern District of Ohio handled the White matter. Trial Attorneys Mary Schmergel, Gregory Werkheiser and Ryan Lamb of the Civil Division’s Corporate/Financial Litigation Section handled the Rite Aid bankruptcy case.

Today’s settlement illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the FCA. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to the HHS at 800-HHS-TIPS (800-447-8477).

The claims asserted against the defendants are allegations only. There has been no determination of liability.