Month: August 2024

Source: United States Department of Justice Criminal Division

A former energy trader pleaded guilty yesterday for his role in a scheme to bribe Mexican government officials to secure contracts for his then-employer, Vitol Inc. (Vitol), the U.S. affiliate of the largest independent energy trading firm in the world.

According to court documents, Javier Aguilar, 50, of Houston, and his co-conspirators paid approximately $600,000 in bribes to two senior officials at PEMEX Procurement International, Inc. (PPI), a wholly owned affiliate of the Mexican state-owned oil company, Petróleos Mexicanos (PEMEX), in exchange for assistance in winning business for Vitol. 

“Javier Aguilar has now admitted that he bribed foreign officials to win business when he worked as an oil and gas trader at Vitol Inc., using shell companies, fake contracts, sham invoices, and alias email accounts,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “Aguilar’s guilty plea yesterday follows his conviction at trial on related charges earlier this year. His illegal conduct netted Vitol hundreds of millions of dollars in contracts, and now he will pay the price.”

“With yesterday’s guilty plea, the defendant admits his role in the widespread corruption of the international commodities market and to casting aside laws and rules that apply to all to unfairly line the pockets of the few,” said U.S. Attorney Breon Peace for the Eastern District of New York. “The actions of the defendant and his co-conspirators, and of those who act similarly, destroy people’s faith in their governments, disadvantage those who play by the rules, undermine confidence in American businesses worldwide, and will not be tolerated by this Office or our law enforcement partners.”

“The Southern District of Texas is ground zero in the fight against foreign bribery and corruption in Latin America,” said U.S. Attorney Alamdar S. Hamdani for the Southern District of Texas. “My office’s prosecutors — experts on the Foreign Corrupt Practices Act — will continue to bring to justice those who damage the integrity of Texas’s vital energy sector with illegal advantages fueled by greed. This guilty plea begins the process of repairing the damage caused by Aguilar as well as putting on notice those who might seek to emulate him and his cohorts.”

“The Foreign Corrupt Practices Act has been the law of the land, and enforceable worldwide, for decades. Yet unscrupulous businessmen still try to bribe their way to profit,” said Special Agent in Charge Jeffrey B. Veltri of the FBI Miami Field Office. “My message to them is that the charges and penalties you will face are not worth the gain. I want to commend the Criminal Division’s Fraud Section, Money Laundering and Asset Recovery Section, and Office of International Affairs; the U.S. Attorney’s Office for the Eastern District of New York; and the U.S. Attorney’s Office for the Southern District of Texas for their diligence pursuing this case, but especially the agents and analysts who leave no stone unturned in pursuit of FCPA violators.”

Between 2017 and 2020, Aguilar, who was a trader in Vitol’s Houston office, and his co-conspirators paid approximately $600,000 in bribes to two senior officials at PPI to obtain numerous contracts for Vitol to supply hundreds of millions of dollars of ethane to PEMEX. To conceal the scheme, Aguilar and his co-conspirators used a series of fake contracts, sham invoices and shell entities incorporated in Curaçao and Mexico. The defendant and his co-conspirators also used alias email accounts to communicate about the scheme and code words, including “shoes,” “medicine,” “invitations,” and “coffee,” to describe the bribes.

Aguilar pleaded guilty to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and to a violation of the Travel Act. The FCPA conspiracy charge, which was brought by a grand jury in the Southern District of Texas, related to conduct that was initially charged in the Eastern District of New York. As part of his guilty plea, Aguilar consented to transfer the Texas case to New York, to consolidate the cases, and to forfeit $7,129,938. The plea follows Aguilar’s related conviction at trial in February 2024 for conspiracy to violate the FCPA, violating the FCPA, and conspiracy to commit money laundering in connection with schemes to bribe Ecuadorian and Mexican officials. He faces a maximum sentence of 20 years’ imprisonment on the money laundering offense and five years’ imprisonment on each of the other offenses. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

In December 2020, Vitol admitted to bribing officials in Ecuador, Mexico, and Brazil in violation of the anti-bribery provisions of the FCPA. Vitol entered into a deferred prosecution agreement with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Eastern District of New York. As a part of the resolution, Vitol agreed to pay a combined $135 million in penalties as part of a coordinated resolution with the Department of Justice, the Commodity Futures Trading Commission, and authorities in Brazil.

Seven of the defendant’s co-conspirators have pleaded guilty for their role in the scheme and are awaiting sentencing. These individuals have agreed to forfeit more than $63 million in connection with this and related schemes.

FBI Miami’s International Corruption Squad investigated the case.

Trial Attorney Clayton P. Solomon and Assistant Chiefs Derek J. Ettinger and Jonathan P. Robell of the Criminal Division’s Fraud Section, Trial Attorney D. Hunter Smith and Deputy Chief Adam J. Schwartz of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), and Assistant U.S. Attorneys Jonathan P. Lax, Matthew R. Galeotti, and Nick M. Axelrod for the Eastern District of New York, and Assistant U.S. Attorney Sherin Daniel and Deputy Chief Suzanne Elmilady for the Southern District of Texas are prosecuting the case. The MLARS Special Financial Investigations Unit and Justice Department’s Office of International Affairs also provided substantial assistance.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting FCPA and Foreign Extortion Prevention Act matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

The Kleptocracy Asset Recovery Initiative is led by a team of dedicated prosecutors in MLARS, in partnership with federal law enforcement agencies, and often with U.S. Attorneys’ Offices, to forfeit the proceeds of foreign official corruption. Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov or https://tips.fbi.gov/.

Source: United States Department of Justice Criminal Division

Clean Harbors Inc. and two of its subsidiaries, Clean Harbors Baton Rouge LLC and Baton Rouge Disposal LLC, have reached an over $5 million agreement with the Justice Department and Environmental Protection Agency (EPA) to clean up decades-old contamination at the Devil’s Swamp Lake Superfund Site just north of Baton Rouge, Louisiana. 

A complaint filed today along with a proposed consent decree seeks an order requiring the Clean Harbors companies to perform a cleanup of pollution at Devil’s Swamp Lake, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), also known as Superfund. The cleanup is estimated to cost over $3 million. Additionally, the consent decree requires reimbursement of over $2 million in costs incurred by the United States in responding to the contamination at Devil’s Swamp Lake. The companies will also pay the United States for all costs it spends in the future for that purpose.

“The Devil’s Swamp Lake Superfund Site is located in an area that is unfortunately already overburdened by a variety of environmental problems,” said Assistant Attorney General Todd Kim of the Justice Department’s Environment and Natural Resources Division. “This settlement will protect the public from the dangerous chemicals that have been contaminating Devil’s Swamp Lake for decades and bring the community one step closer to reclaiming this and other important natural resources.”

“The people of Louisiana deserve safe, clean natural resources,” said U.S. Attorney Ronald C. Gathe Jr. for the Middle District of Louisiana. “This proposed consent decree will ensure that the Devil’s Swamp Lake Superfund Site is appropriately remediated and that the American taxpayers are reimbursed for costs incurred in responding to contamination at that site. I appreciate the hard work of our partners at EPA and at the Justice Department’s Environment and Natural Resources Division toward achieving this settlement.”

“The East Baton Rouge community expects and deserves the full protection of EPA’s cleanup laws and standards. This settlement is a huge step in resolving a decades-long issue for families that experience a higher burden of environmental problems than other areas of the parish,” said Regional Administrator Dr. Earthea Nance of EPA Region 6. “Holding companies accountable and financially responsible for the harms they commit is one of our strongest tools for getting overburdened communities the relief they deserve. I would like to thank our federal partners for their support in ensuring the site is cleaned up and given back to the communities.”

Devil’s Swamp Lake is contaminated with polychlorinated biphenyls (PCBs), which are extremely harmful chemicals that build up in the environment over time and have been linked to cancer. Due in part to the levels of PCBs, Louisiana state agencies have repeatedly issued advisories warning the public not to swim in or eat fish caught in Devil’s Swamp Lake.

The Devil’s Swamp Lake Superfund Site is located in East Baton Rouge Parish, an area with a population that disproportionately suffers from pollution in the water and the air. Ensuring cleanup of hazardous waste at sites such as Devil’s Swamp Lake is an important aspect of a broader fight to achieve environmental justice.

The Environment and Natural Resources Division’s Environmental Enforcement Section is handling the case, in conjunction with EPA.

The complaint and the proposed consent decree were filed with the U.S. District Court for Middle District of Louisiana. The settlement is subject to a public comment period and final court approval. The consent decree is available for viewing on the Justice Department’s website at www.justice.gov/enrd/consent-decrees.

Source: United States Department of Justice Criminal Division

The United States joined a whistleblower suit and filed a complaint-in-intervention against the Georgia Institute of Technology (Georgia Tech) and Georgia Tech Research Corp. (GTRC) asserting claims that those defendants knowingly failed to meet cybersecurity requirements in connection with the Department of Defense (DoD) contracts. GTRC is an affiliate of Georgia Tech that contracts with government agencies for work to be performed at Georgia Tech. The whistleblower suit was initiated by current and former members of Georgia Tech’s Cybersecurity team.

“Government contractors that fail to fully implement required cybersecurity controls jeopardize the confidentiality of sensitive government information,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department’s Civil Cyber-Fraud Initiative was designed to identify such contractors and to hold them accountable.”

Specifically, the lawsuit alleges that until at least February 2020, the Astrolavos Lab at Georgia Tech failed to develop and implement a system security plan, which is required by DoD cybersecurity regulations, that set out the cybersecurity controls that Georgia Tech was required to put in place in the lab. Even when the Astrolavos Lab finally implemented a system security plan in February 2020, the lawsuit alleges that Georgia Tech failed to properly scope that plan to include all covered laptops, desktops, and servers.

Additionally, the lawsuit alleges until December 2021, the Astrolavos lab failed to install, update or run anti-virus or anti-malware tools on desktops, laptops, servers and networks at the lab. Instead, Georgia Tech approved the lab’s refusal to install antivirus software — in violation of both federal cybersecurity requirements and Georgia Tech’s own policies — to satisfy the demands of the professor who headed the lab.

The lawsuit further alleges that in December 2020 Georgia Tech and GTRC submitted a false cybersecurity assessment score to DoD for the Georgia Tech campus. DoD requires contractors to submit summary level scores reflecting the status of their compliance with applicable cybersecurity requirements on covered contracting systems that are used to store or access covered defense information. The submission of this score was a “condition of contract award” for Georgia Tech’s DoD contracts. The lawsuit alleges that the summary level score of 98 for the Georgia Tech campus that Georgia Tech and GTRC reported to DoD in December 2020 was false because (1) Georgia Tech did not actually have a campus-wide IT system and (2) the score was for a “fictitious” or “virtual” environment and did not apply to any covered contracting system at Georgia Tech that could or would ever process, store or transmit covered defense information.

“Cybersecurity compliance by government contractors is critical in safeguarding U.S. information and systems against threats posed by malicious actors,” said U.S. Attorney Ryan K. Buchanan for the Northern District of Georgia. “For this reason, we expect contractors to abide by cybersecurity requirements in their contracts and grants, regardless of the size or type of the organization or the number of contracts involved. Our office will hold accountable those contractors who ignore cybersecurity rules.”

“Deficiencies in cybersecurity controls pose a significant threat not only to our national security, but also to the safety of the men and women of our armed services who risk their lives daily,” said Special Agent in Charge Darrin K. Jones of the DoD’s Office of Inspector General, Defense Criminal Investigative Service (DCIS), Southeast Field Office. “As force multipliers, we place a substantial amount of trust in our contractors and expect them to meet the strict standards our service members deserve.”

The whistleblower lawsuit was filed by Christopher Craig and Kyle Koza, who were previously senior members of Georgia Tech’s cybersecurity compliance team, under the qui tam or whistleblower provisions of the False Claims Act, which allow private parties to file suit on behalf of the United States for false claims and to receive a share of any recovery. The act permits the United States to intervene and take over responsibility for litigating these cases, as it has done here. A defendant who violates the act is subject to liability for three times the government’s losses, plus applicable penalties.   

On Oct. 6, 2021, Deputy Attorney General Lisa Monaco announced the department’s Civil Cyber-Fraud Initiative to hold accountable entities or individuals that put U.S information or systems at risk by knowingly providing deficient cybersecurity products or services, knowingly misrepresenting their cybersecurity practices or protocols or knowingly violating obligations to monitor and report cybersecurity incidents and breaches. Information on how to report cyber fraud can be found here.

Senior Trial Counsel Jake M. Shields of the Justice Department’s Civil Division and Assistant U.S. Attorneys Adam D. Nugent and Melanie D. Hendry for the Northern District of Georgia are handling the matter.

The case is captioned United States ex rel. Craig v. Georgia Tech Research Corp, et al., No. 1:22-cv-02698 (N.D. Ga.). Investigative support is being provided by the DoD Office of Inspector General, Defense Criminal Investigative Service, Air Force Office of Special Investigations and Air Force Material Command.

The claims alleged by the United States are allegations only. There has been no determination of liability.

Source: United States Department of Justice Criminal Division

A federal grand jury in Kansas returned an indictment yesterday charging seven defendants, including five current and former high-level officers of the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmith, Forgers and Helpers (Boilermakers Union) for their alleged roles in a 15-year, $20 million embezzlement scheme.

The defendants are charged with conspiracy to commit offenses under the Racketeer Influenced and Corrupt Organizations (RICO) Act, as well as other charges including embezzlement, health care fraud, wire fraud, and theft in connection with health care and retirement plans.

“As alleged in the indictment, these defendants, including two former presidents of the Boilermakers Union, enriched themselves by spending millions of dollars in union funds for their own benefit, including for salary and benefits for no-show jobs, tuition, rent, luxury international travel, meals, vacation payouts, and unauthorized loans,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “This indictment marks an important step in restoring financial security to the Boilermakers Union and control of the union’s future to its membership. The department is committed to protecting union members from officials who abuse their positions of authority for their own personal ends.”

The defendants are former union president Newton Jones, 71, of Chapel Hill, North Carolina; former secretary-treasurer William Creeden, 76, of Kearney, Missouri; former president Truman “Warren” Fairley, 59, of Chapel Hill; current secretary-treasurer Kathy Stapp, 53, of Shawnee, Kansas; former vice president Lawrence McManamon, 76, of Rocky River, Ohio; Kateryna Jones, 32, of Chapel Hill; and Cullen Jones 35, of Chapel Hill.

“Union members pay their dues believing union leaders will use the money in support of the organization’s mission to advocate for and protect employment rights,” said U.S. Attorney Kate E. Brubacher for the District of Kansas. “The Department of Justice is deeply concerned whenever there are accusations of fraud and misappropriation of union funds.”

“The employees believed the Union executives would promote and protect their best interests. Instead, they allegedly utilized their positions for personal and financial gain,” said Special Agent in Charge Stephen A. Cyrus of the FBI Kansas City Field Office. “By allegedly unlawfully misappropriating Union funds, the defendants betrayed their members’ trust and confidence. Anyone who unlawfully profits at the expense of others will be held accountable.”

“We would like to thank our fellow law enforcement partners, the Criminal Division, and the United States Attorney’s Office for working collaboratively to bring change within the Boilermakers International Union,” said District Director Christiane Abendroth of the Department of Labor’s Office of Labor-Management Standards (OLMS). “Today’s indictment of seven defendants, including five current and former high-level officers, is a direct result of OLMS’s audit findings and a multi-agency criminal investigation. We look forward to obtaining justice for the rank-and-file union members by removing officers who allegedly treated the union as their personal piggy bank.”

Over the course of 15 years, the defendants, led by Newton Jones and William Creeden, allegedly engaged in widespread embezzlement of the funds of the Boilermakers Union including:

• Over $5 million in unnecessary luxury international travel;
• Over $2 million in salary and benefits to Kateryna Jones and Cullen Jones for no-show jobs, at which they were not required to work, including payment of two years of salary to Kateryna Jones for a period when she resided in Ukraine and was dating Newton Jones;
• Hundreds of thousands of dollars in tuition, rent, and relocation expenses for members of the family of Newton Jones;
• Millions of dollars in cash payments relating to fraudulently claimed vacation time;
• Hundreds of fraudulent restaurant charges by Newton Jones and Kateryna Jones in their hometown;
• Funds wrongly expended to engage in email surveillance of Union employees to defend Newton Jones and McManamon from internal union charges; and
• $7 million in loans from the Boilermakers Union MORE Fund executed by Newton Jones and Creeden to the Bank of Labor, which were not authorized under the terms of the Boilermakers Union constitution or its conflict-of-interest policy.

The indictment also charges Newton Jones and Creeden with wire fraud relating to their alleged demand and acceptance of no-show employment with the Bank of Labor for which they were paid more than $3.4 million each in salary, benefit contributions, and other paid benefits. The indictment additionally seeks forfeiture of $20 million.

If convicted, the defendants face a maximum penalty of 20 years in prison on the RICO conspiracy count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The FBI Kansas City Field Office and the Department of Labor are investigating the case.

Trial Attorney Vincent Falvo of the Criminal Division’s Violent Crime and Racketeering Section and Assistant U.S. Attorneys Faiza Alhambra and Jabari Wamble for the District of Kansas are prosecuting the case.

An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Source: United States Department of Justice Criminal Division

Christopher Johnson, of Orlando, Florida, and Jasen Harvey, of Tampa, Florida, pleaded guilty yesterday to conspiring to defraud the United States by promoting a tax fraud scheme called the “Note Program.” 

Arthur Grimes, of Ocoee and Orlando, Florida, previously pleaded guilty on April 2 to obstructing the IRS in connection with the scheme.

According to court documents and statements made in court, from 2015 to 2018, Johnson and Harvey conspired to promote a scheme in which Harvey and others prepared tax returns for clients that claimed large nonexistent income tax withholdings had been paid to the IRS, and sought large refunds based on those purported withholdings.  The conspirators charged clients fees and required them to pay over a portion of the fraudulently obtained refunds.

Overall, the defendants claimed over $3 million in fraudulent refunds on their clients returns, of which the IRS paid about $1.5 million.

Grimes participated in the scheme by causing four false income tax returns prepared by Harvey to be filed. When the IRS attempted to recover a refund issued to Grimes based on one of those returns, Grimes made false statements and submitted false documents to an IRS revenue officer and transferred funds to a nominee bank account.

Johnson was paid more than $200,000 in 2016 and more than $100,000 in 2017 as his share of the proceeds from the scheme. Johnson filed false tax returns for those years that did not report that income, resulting in a tax loss of $78,259.

A sentencing hearing will be set at a later date for Johnson and Harvey. They each face a maximum penalty of five years in prison for the conspiracy charge.

Grimes is scheduled to be sentenced on Nov. 12. He faces a maximum penalty of three years in prison for the tax obstruction charge.

All three defendants also face a period of supervised release, restitution and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Roger B. Handberg for the Middle District of Florida made the announcement.

IRS Criminal Investigation investigated the case.

Trial Attorneys Melissa Siskind, Jeffrey McLellan and Caroline Pearson of the Justice Department’s Tax Division and Assistant U.S. Attorney Diane Hu for the Middle District of Florida are prosecuting the case.