Month: October 2024

Source: United States Department of Justice Criminal Division

An Illinois man pleaded guilty today for his role in a COVID-19 testing fraud scheme.

According to court documents, Zishan Alvi, 45, of Inverness, owned and operated a laboratory in Chicago that performed testing for COVID-19. From February 2021 through February 2022, Alvi caused claims to be submitted to the Department of Health and Human Services’ Health Resources and Services Administration (HRSA) for COVID-19 tests that were not performed as billed. As part of the scheme, the laboratory released negative COVID-19 test results to patients, even though the laboratory either had not actually tested the specimens or the results were inconclusive. Alvi knew that the laboratory was releasing negative results for tests that were not performed or were inconclusive, but still caused the laboratory to submit claims to HRSA for those tests. HRSA paid the laboratory over $14 million as a result of the fraudulent claims Alvi caused to be submitted to HRSA.

Alvi pleaded guilty to one count of wire fraud. He is scheduled to be sentenced on Feb. 7, 2025, and faces a maximum penalty of 20 years in prison. 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; Acting U.S. Attorney Morris Pasqual for the Northern District of Illinois; Assistant Director Chad Yarbrough of the FBI’s Criminal Investigative Division; and Special Agent in Charge Mario Pinto of the Department of Health and Human Services Office of Inspector General (HHS-OIG) made the announcement.

The FBI and HHS-OIG are investigating the case.

Trial Attorney Claire T. Sobczak of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Jared Hasten and Misty Wright for the Northern District of Illinois are prosecuting the case.

The Fraud Section leads the Criminal Division’s efforts to combat health care fraud through the Health Care Fraud Strike Force Program. Since March 2007, this program, currently comprised of nine strike forces operating in 27 federal districts, has charged more than 5,400 defendants who collectively have billed federal health care programs and private insurers more than $27 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to hold providers accountable for their involvement in health care fraud schemes. More information can be found at www.justice.gov/criminal-fraud/health-care-fraud-unit.

Source: United States Department of Justice Criminal Division

A Montana man was sentenced today to six months in prison for committing two felony wildlife crimes — a conspiracy to violate the Lacey Act and substantively violating the Lacey Act — as part of an almost decade-long effort to create giant sheep hybrids in the United States with an aim to sell the species to captive hunting facilities.

Arthur “Jack” Schubarth, 81, of Vaughn, is the owner and operator of Sun River Enterprises LLC, also known as Schubarth Ranch, which is a 215-acre alternative livestock ranch in Vaughn. The Schubarth Ranch is engaged in the purchase, sale and breeding of “alternative livestock” such as mountain sheep, mountain goats and various ungulates. The primary market for Schubarth’s livestock is captive hunting operations, also known as shooting preserves or game ranches.

According to court documents, Schubarth conspired with at least five other individuals between 2013 and 2021 to create a larger hybrid species of sheep that would garner higher prices from shooting preserves. Schubarth brought parts of the largest sheep in the world, Marco Polo argali sheep (Ovis ammon polii), from Kyrgyzstan into the United States without declaring the importation. Average males can weigh more than 300 pounds, with horns that span more than five feet. Marco Polo argali are native to the high elevations of the Pamir region of Central Asia. They are protected internationally by the Convention on International Trade in Endangered Species (CITES) and domestically by the Endangered Species Act, and are prohibited in the State of Montana to protect native sheep from disease and hybridization.

Schubarth sent genetic material from the argali parts to a lab to create cloned embryos. Schubarth then implanted the embryos in ewes on his ranch, resulting in a single, pure genetic male Marco Polo argali that he named “Montana Mountain King” or MMK.

Court documents explain that Schubarth worked with the other unnamed coconspirators to use MMK’s semen to artificially impregnate various other species of ewes — all of which were prohibited in Montana — and create hybrid animals. Their goal was to create a larger and more valuable species of sheep to sell to captive hunting facilities, primarily in Texas.

To move the prohibited sheep into and out of Montana, Schubarth and others forged veterinary inspection certificates, falsely claiming that the sheep were legally permitted species. On occasion, Schubarth sold MMK semen directly to sheep breeders in other states. According to court documents, disease introduction was a risk associated with Schubarth’s conduct and at least two sheep from the scheme died from Johne’s disease. Johne’s disease is a contagious, chronic wasting disease easily spread between animals directly or through environmental contamination.

Court documents also describe how Schubarth illegally obtained genetic material from wild-hunted Rocky Mountain bighorn sheep in Montana. Schubarth purchased parts of these wild-hunted sheep in violation of Montana law, which prohibits the sale of game animal parts within the state and prohibits the use of Montana game animals on alternative livestock ranches. Schubarth transported and sold the bighorn parts in interstate commerce.

“Schubarth not only violated federal and state law and international treaties, but he and others illegally conspired to conceal their actions from authorities,” said Assistant Attorney General Todd Kim of the Justice Department’s Environment and Natural Resources Division. “Violations of the Lacey Act, CITES and other laws can be devastating for our domestic populations of wild animals, which is why we are unwavering in our commitment to enforce them.”

“Schubarth’s criminal conduct is not how Montanans treat our wildlife population,” said U.S. Attorney Jesse Laslovich for the District of Montana. “Indeed, his actions threatened Montana’s native wildlife species for no other reason than he and his co-conspirators wanted to make more money. Schubarth’s greed drove their conspiracy to bring to Montana parts of the largest sheep in the world from Kyrgyzstan. Such actions to create hybrid animals are as unnatural as they are illegal, and I applaud the extensive collaboration and diligence of all of our law enforcement partners to bring Schubarth to justice.”

“This case exemplifies the serious threat that wildlife trafficking poses to our native species and ecosystems,” said Assistant Director Edward Grace of the U.S. Fish and Wildlife Service’s Office of Law Enforcement. “Mr. Schubarth’s actions not only violated multiple laws designed to protect wildlife, but also risked introducing diseases and compromising the genetic integrity of our wild sheep populations. The U.S. Fish and Wildlife Service remains committed to working with our partners to investigate and prosecute those who exploit protected species for personal gain. This sends a clear message that we will not tolerate the illegal importation, sale and transport of wildlife, especially when it endangers our natural heritage.”

“This case is complex and is a great example of how we work together with the U.S. Fish and Wildlife Service to protect resources no matter where the investigation takes us,” said Chief of Law Enforcement Ron Howell of Montana Fish, Wildlife and Parks.

In addition to his prison sentence, Schubarth was ordered to pay a $20,000 fine to the Lacey Act Reward Fund, a $4,000 payment to the National Fish and Wildlife Foundation and a $200 special assessment.

The Lacey Act prohibits interstate trade in wildlife that has been taken, possessed, transported or sold in violation of federal or state law. The Lacey Act also prohibits the interstate sale of wildlife that has been falsely labeled. The Act is one of the most powerful tools the United States has to combat wildlife trafficking and prevent ecological invasion by injurious wildlife.

The U.S. Fish and Wildlife Service and Montana Department of Fish, Wildlife and Parks are investigating the case.

Trial Attorney Sarah M. Brown and Senior Trial Attorney Patrick M. Duggan of the Environment and Natural Resources Division’s Environmental Crimes Section and Assistant U.S. Attorney Jeffrey Starnes for the District of Montana are prosecuting the case.

Source: United States Department of Justice Criminal Division

WASHINGTON – TD Securities (USA) LLC (TD Securities), a securities firm based in New York, has entered into a resolution with the Justice Department to resolve criminal charges concerning a scheme to defraud that involved hundreds of episodes of unlawful trading in the secondary (cash) market for U.S. Treasuries.

TD Securities entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the District of New Jersey charging the company with one count of wire fraud. Under the terms of the DPA, TD Securities will pay over $15.5 million in a criminal monetary penalty, forfeiture, and victim compensation. Under the DPA, TD Securities will pay the equivalent of the statutory maximum criminal fine in connection with the offense (approximately $9.4 million) and will ensure that victims of the offense are made whole through a claims administration process (approximately $4.7 million in victim compensation). 

The former head of the TD Securities desk that was responsible for trading U.S. Treasuries, Jeyakumar Nadarajah, was indicted on Nov. 7, 2023, in the District of New Jersey connection with this scheme and is awaiting trial.

“TD Securities placed hundreds of orders to buy and sell U.S. Treasuries that it never intended to execute, in order to deceive market participants and manipulate prices by creating the false appearance of supply and demand,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “Such efforts to profit through unlawful trading undermine public confidence in U.S. Treasuries markets and defraud other market participants. The Criminal Division is committed to ensuring the integrity of our financial markets and holding accountable those who engage in deceptive trading practices.”

“The American public places trust in our financial institutions and relies on companies to be truthful and execute their obligations to traders in an ethical manner,” said Inspector in Charge Eric Shen of the U.S. Postal Inspection Service (USPIS)’s Criminal Investigations Group. “The USPIS’ DOJ Mail Fraud team found there was a blatant violation of that trust, as this individual placed billions of dollars in spoof orders, distorting supply and demand and causing significant losses. These charges send a clear message that such deceptive practices will not be tolerated, and we are dedicated to protecting the integrity of our markets and the interests of honest investors.”

According to court documents and admissions, Nadarajah, a former director and head of the TD Securities U.S. Treasuries trading desk, engaged in a scheme to defraud in connection with the purchase and sale of U.S. Treasuries in the secondary market. In hundreds of instances, Nadarajah placed orders to buy and sell U.S. Treasuries with the intent to cancel those orders before execution. Nadarajah did so in an attempt to profit by injecting false and misleading information concerning the existence of genuine supply and demand for U.S. Treasuries, thereby deceiving other market participants and fraudulently inducing those participants to trade at prices, quantities, and times that they otherwise would not have traded.

As part of the DPA, TD Securities, and its U.S. parent company, TD Group US Holdings LLC (TDGUS), have agreed to, among other things, continue to cooperate with the Criminal Division’s Fraud Section in any ongoing or future investigations by the Fraud Section begun before or during the term of the DPA. As part of its cooperation, TD Securities and TDGUS are required to report evidence or allegations of conduct that may constitution a violation of the U.S. anti-fraud, securities, and commodities laws as defined in the DPA. In addition, TD Securities and TDGUS have also agreed to enhance TD Securities’ compliance program where necessary and appropriate, and to report to the government regarding remediation and implementation of their enhanced compliance program.

The department reached this resolution with TD Securities based on numerous factors, including the nature and seriousness of the offense conduct, which involved placing hundreds of fraudulent spoof orders amounting to tens of billions of dollars of false supply and demand in the secondary market for U.S. Treasuries, and TD Securities’ failure to voluntarily self-disclose the offense conduct to the department.

TD Securities received credit for its cooperation with the department’s investigation and for remedial measures taken, including terminating Nadarajah, and reviewing and continuing to enhance the compliance function.

Today, the Financial Industry Regulatory Authority announced a separate settlement with TD Securities in connection with a related, parallel proceeding. Under the terms of that resolution, TD Securities agreed to pay a fine of approximately $6 million. Also today, the U.S. Securities and Exchange Commission (SEC) announced a separate settlement with TD Securities in connection with a related, parallel proceeding. Under the terms of that resolution, TD Securities agreed to pay approximately $7 million, which includes a civil monetary penalty of approximately $6.5 million, as well as approximately $400,000 in disgorgement and $135,000 in prejudgment interest. A portion of the forfeiture agreed to in the department’s DPA will be credited against payments made to the SEC under a separate agreement with the SEC.

USPIS is investigating the case.

Trial Attorney John J. Liolos of the Criminal Division’s Fraud Section is prosecuting the case. Former Deputy Assistant Chief Scott Armstrong of the Criminal Division’s Fraud Section provided substantial assistance. 

Source: United States Department of Justice Criminal Division

On Sept. 27, the Commonwealth of Australia extradited Jin Guanghua, 53, to the United States. Jin, a Chinese national, and his co-conspirators North Korean banker, Sim Hyon-Sop, 50, and Chinese nationals Qin Guoming, 60, and Han Linlin, 41, both of Liaoning Province, were all charged by indictment in 2022 in connection with a multi-year scheme to facilitate the sale of tobacco to North Korea through the U.S. financial system in violation of the sanctions imposed on North Korea. Jin made his initial appearance in the District of Columbia today.

Between 2009 and 2019, the defendants engaged in a scheme to purchase leaf tobacco for North Korean-owned entities and used front companies and false documentation to cause U.S. financial institutions to process at least 310 transactions worth approximately $74 million that the financial institutions otherwise would have frozen, blocked, investigated, or declined, had they known that the transactions involved trade with North Korea. The transactions resulted in an estimated nearly $700 million in revenue for North Korean entities, and ultimately, for the government of North Korea. The defendants are charged by indictment with conspiracy to commit bank fraud, conspiracy to violate and violations of International Emergency Economic Powers Act (IEEPA) and the North Korean sanctions regulations, and conspiracy to launder monetary instruments and laundering monetary instruments.

Jin was residing in Australia and was attempting to depart the country for China at the time of his arrest by Australian authorities on March 23, 2023. The arrest followed a request by the United States for Jin’s provisional arrest with a view toward extradition.

This case is part of a larger Justice Department response to the ongoing efforts of North Korea to evade sanctions and use the U.S. financial system to engage in illicit trafficking of tobacco products. As alleged in the indictment, trafficking in tobacco products generates revenue for advancing North Korea’s Weapons of Mass Destruction (WMD) programs. North Korea has been developing nuclear weapons since at least 2006 and financed these activities through illicit trade, including trafficking of tobacco and counterfeit cigarettes, which North Korea has engaged in since at least 1992. North Korea’s counterfeit cigarette production capacity is estimated to exceed two billion packs a year. Counterfeit cigarettes are a major source of income to the North Korean regime and may be the single most lucrative item in the North Korean portfolio, as smuggled tobacco is estimated to garner revenue as much as $20 on every $1 spent in cost. North Korean tobacco sales are alleged to flow back to the North Korean government, including to slush funds designed to sustain the loyalty of a core of party elite and to underwrite weapons development programs.

If convicted, the defendant faces a maximum penalty of 30 years in prison for bank fraud, 20 years in prison for violating IEEPA, and 20 years in prison for committing money laundering. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division, U.S. Attorney Matthew M. Graves for the District of Columbia, and Executive Assistant Director Robert Wells of the FBI’s National Security Branch made the announcement.

The FBI Phoenix Field Office and HSI Colorado Springs and investigating the case. Valuable assistance was provided by the Australian Attorney-General’s Department, the Australian Federal Police, and the Justice Department’s Office of International Affairs.

Assistant U.S. Attorneys Karen P. Seifert, David Recker, and Steven Wasserman for the District of Columbia and Trial Attorney Emma Ellenrieder of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case with assistance from Paralegal Specialists Brian Rickers and Jorge Casillas.

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

The Justice Department and Environmental Protection Agency (EPA) today announced a more than $16 million settlement with Ovintiv USA Inc. resolving Clean Air Act violations at the company’s oil and gas production facilities on the Uintah and Ouray Reservation in Utah and Utah state lands. The settlement requires Ovintiv to pay the United States and the state of Utah a civil penalty of $5.5 million. It also requires Ovintiv to implement extensive compliance measures to achieve major reductions in pollutants emitted from 139 of its facilities across the state.

The settlement resolves a civil suit, filed jointly by the United States and the state of Utah, alleging that Ovintiv failed to comply with federal and state requirements to capture and control air emissions and comply with inspection, monitoring and recordkeeping requirements from 22 of its oil and gas production facilities in the Uintah Basin. These violations resulted in illegal emissions of volatile organic compounds (VOC), which contribute to asthma and increase susceptibility to respiratory illnesses. Additionally, greenhouse gases, including methane, were released in large quantities, contributing to climate change.

Along with the civil penalty, the settlement requires Ovintiv to take corrective action and mitigation projects estimated to cost over $10 million at 139 of its facilities that will eliminate over 2,000 tons of VOC emissions annually. It will also eliminate methane emissions equivalent to a reduction of over 50,000 tons of carbon dioxide emissions annually, a reduction similar to taking nearly 13,000 gas powered cars off the road each year.

“This case is a win for the environment and for consumers,” said Assistant Attorney General Todd Kim of the Justice Department’s Environment and Natural Resources Division. “The work required under the consent decree will significantly reduce the amount of gas Ovintiv facilities vent into the atmosphere and return some of that gas to the sales pipeline where it can be sent to productive use.”

“As climate change accelerates and wreaks havoc in communities across the nation, EPA is doing everything possible to limit the methane emissions that are among the most powerful drivers of climate change,” said Assistant Administrator David M. Uhlmann of EPA’s Office of Enforcement and Compliance Assurance. “Today’s settlement with Ovintiv will significantly reduce emissions across 139 facilities on Tribal and state lands and provides another example of how EPA is delivering on its climate enforcement strategy and holding companies accountable for climate pollution.”

The settlement requires Ovintiv to invest in extensive compliance measures for the proper design of Ovintiv’s oil and gas facilities to capture all VOC emissions and send the emissions to an appropriate control device. Compliance measures also include periodic infrared camera inspections, enhanced maintenance requirements and installation of storage tank pressure monitors at many facilities. The settlement is part of EPA’s National Enforcement and Compliance Initiative, Mitigating Climate Change. This initiative focuses, in part, on reducing methane emissions from oil and gas and landfill sources. Like all of EPA’s national enforcement initiatives, this initiative prioritizes communities already overburdened by pollution and other potential environmental justice concerns.

More information on the settlement agreement is available on EPA’s webpage at www.epa.gov/enforcement/ovintiv-usa-inc-2024-clean-air-act-stationary-source-case-summary.

The complaint and proposed consent decree were filed in the U.S. District Court for the District of Utah. The consent decree is subject to a 30-day comment period. A copy of the complaint and the proposed consent decree are available at www.justice.gov/enrd/consent-decrees.

The EPA investigated the case.

Attorneys with the Environment and Natural Resources Division’s Environmental Enforcement Section are handling the case.