Category: US Department of Justice

Source: United States Department of Justice 2

Two pharmacy owners were sentenced for using New York-area pharmacies to submit millions of dollars in false and fraudulent claims to Medicare and then laundering the proceeds, including during the COVID-19 pandemic.

Peter Khaim, 44, of Forest Hills, New York, was sentenced today to eight years and one month in prison, and his brother and co-defendant, Arkadiy Khaimov, 41, also of Forest Hills, was sentenced on April 3 to six years in prison.

According to court documents, Khaim and Khaimov engaged in a complex money laundering conspiracy to launder the proceeds of a fraudulent health care scheme involving 16 New York-area pharmacies that they and their co-conspirators owned and controlled. Khaim, Khaimov, and their co-conspirators exploited the COVID-19 emergency for their own financial gain by using COVID-19-related “emergency override” billing codes to submit fraudulent claims for expensive cancer medications Targretin Gel 1% and Panretin Gel 0.1% that were not prescribed by physicians or dispensed to patients, and that were purportedly dispensed during periods when certain pharmacies were closed.

To conceal over $18 million of their criminal proceeds, Khaim, Khaimov, and their co-conspirators funneled money through several shell companies, including sham pharmacy wholesale companies designed to look like legitimate wholesalers. Khaim and Khaimov typically sent the funds from the pharmacy bank accounts they controlled to the sham wholesale companies. The funds were then typically sent to companies in China for distribution to individuals in Uzbekistan. The defendants then received a corresponding amount of cash from a co-conspirator, minus a commission. At other times, the fraudulent proceeds were sent from the sham wholesale companies to Khaim, Khaimov, their relatives, or their designees, in the form of certified cashier’s checks and cash. Khaim and Khaimov used the proceeds of the scheme to purchase real estate and other luxury items. 

Khaim pleaded guilty on Nov. 3, 2022 to one count of conspiracy to commit money laundering.  Khaimov pleaded guilty on Nov. 16, 2022 to one count of conspiracy to commit money laundering. At sentencing, Khaim was ordered to pay more than $18 million in restitution and to forfeit more than $2.7 million. Khaimov was ordered to pay more than $18 million in restitution and to forfeit more than $9.6 million. 

Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division; U.S. Attorney Breon Peace for the Eastern District of New York; Assistant Director in Charge James Smith of the FBI New York Field Office; Special Agent in Charge Thomas M. Fattorusso of the IRS Criminal Investigation; Special Agent in Charge Naomi Gruchacz of the Department of Health and Human Services Office of Inspector General (HHS-OIG); and Special Agent in Charge Patricia Tarasca of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG) made the announcement.

HHS-OIG, the FBI, IRS Criminal Investigation, and FDIC-OIG investigated the case. 

Trial Attorney Arun Bodapati of the Criminal Division’s Fraud Section’s Northeast Strike Force prosecuted the case, with assistance from Principal Assistant Chief Jacob Foster and Assistant Chief Patrick Mott of the Criminal Division’s Fraud Section.

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

The Justice Department announced today that it will monitor compliance with federal voting rights laws in Queens, New York, for the June 25 primary election.

The Justice Department enforces the federal voting rights laws that protect the rights of all citizens to access the ballot. The department regularly deploys its staff to monitor for compliance with federal civil rights laws in elections in communities all across the country. In addition, the department deploys federal observers from the Office of Personnel Management, where authorized by federal court order. 

The Justice Department’s Civil Rights Division’s Voting Section, working with U.S. Attorneys’ Offices, enforces the civil provisions of federal statutes that protect the right to vote, including the Voting Rights Act, National Voter Registration Act, Help America Vote Act, Civil Rights Act and Uniformed and Overseas Citizens Absentee Voting Act.

More information about voting and elections is available on the Justice Department’s website at www.justice.gov/voting. Learn more about the Voting Rights Act and other federal voting laws at www.justice.gov/crt/voting-section. Complaints about possible violations of federal voting rights laws can be submitted through the Civil Rights Division’s website at civilrights.justice.gov or by telephone at 1-800-253-3931.

Source: United States Department of Justice Criminal Division

Deputy Attorney General (Deputy AG) Lisa Monaco traveled to Brussels last week to lead the U.S. delegation at the U.S.-EU Justice and Home Affairs Ministerial and reaffirm the Justice Department’s commitment to a critical alliance that combats shared risks to global security.

The Ministerial brings together leadership from the Justice and Home Affairs Ministries of the European Union and the U.S. Departments of Justice and Homeland Security to strengthen transatlantic collaboration. The Ministers focused on addressing persistent threats to our nations, including organized crime, terrorism, cybercrime, and foreign malign influence — especially by nation-states seeking to sow discord and further their autocratic agendas amid this year’s global elections, when over four billion people are expected to vote. They also discussed international law enforcement collaboration to disrupt trafficking of cocaine and synthetic drugs, particularly fentanyl, as well as AI — including AI’s potential to enhance law enforcement operations and the risk that it could supercharge criminal activity.

During the Ministerial, the officials reaffirmed their resolute support for Ukraine and unwavering resolve to hold Russia accountable for war crimes, atrocities, and the crime of aggression. They reiterated the need for sustained coordination between the U.S. and EU to deprive the Russian war machine of funding and supplies — with the Deputy AG underscoring the successful efforts of the Department’s Disruptive Technology Strike Force and Task Force KleptoCapture to enforce export controls and the sweeping sanctions imposed on Russia for its unprovoked aggression against Ukraine. The officials also emphasized their commitment to supporting anti-corruption efforts in Ukraine. 

While in Brussels, the Deputy AG convened an international meeting of the Justice Department’s Justice AI Initiative with Member of the European Parliament (MEP) Eva Maydell and leaders from the European Parliament, which recently passed the EU AI Act—the first comprehensive legislative framework to govern the integration of AI into society. Launched by Deputy AG Monaco earlier this year, Justice AI brings together stakeholders across civil society, industry, academia, and government to share expertise and a wide range of perspectives on both the promise of AI and the perils of its misuse.

The Deputy AG and MEPs discussed how AI is changing the way crimes are committed in the United States and in Europe — from intensifying cyberattacks, to making fraud scams more believable, to creating child sexual abuse material. They also focused on the threat of malign state actors using AI to undermine global elections this year, and the MEPs shared observations and lessons learned from recent European elections. The Deputy AG underscored that the Justice Department will remain vigilant to foreign adversaries abusing AI to accelerate online hate and disinformation, imitate trusted sources of information, and proliferate deepfakes.

During her trip, the Deputy AG also held bilateral meetings with European Commissioner for Home Affairs Ylva Johansson and Belgian Minister of Justice Paul Van Tigchelt to highlight areas for continued collaboration between the Justice Department and our European partners. She met with United States Ambassador to the European Union Mark Gitenstein and United States Ambassador to Belgium Michael Adler, and also visited the U.S. Mission to the European Union and the U.S. Embassy in Belgium for a briefing with U.S. officials on their work with our European allies and to thank them for their service.

Source: United States Department of Justice Criminal Division

A federal jury in Los Angeles convicted the former CEO, executive chairman, and chairman of the board of directors of Ontrak Inc., a publicly traded health care company, for engaging in an insider trading scheme using Rule 10b5‑1 trading plans. 

“When Terren Peizer learned significant negative news about Ontrak, he set up Rule 10b5-1 trading plans to sell shares before the news became public and to conceal that he was trading on inside information,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “With today’s verdict, the jury convicted Peizer of insider trading. This is the Justice Department’s first insider trading prosecution based exclusively on the use of a trading plan, but it will not be our last. We will not let corporate executives who trade on inside information hide behind trading plans they established in bad faith.”

“Corporate executives and other insiders hold major power in our economy, but with that power comes responsibility,” said U.S. Attorney Martin Estrada for the Central District of California. “It is important that executives, such as this defendant, be held accountable when they line their own pockets at the expense of shareholders. That is why I created our office’s Corporate Crime and Securities Fraud Strike Force. Today’s verdict sends a clear message that everyone, including corporate executives, must abide by the law.”  

According to court documents and evidence presented at trial, Terren S. Peizer, 64, a resident of Santa Monica, California, and Puerto Rico, avoided more than $12.5 million in losses by entering into two Rule 10b5-1 trading plans while in possession of material non-public information concerning the serious risk that Ontrak’s then-largest customer would terminate its contract. In May 2021, Peizer entered into his first Rule 10b5-1 trading plan shortly after learning that the relationship between Ontrak and the customer was deteriorating and that the customer had expressed serious reservations about continuing its contract with Ontrak. Peizer later learned that the customer informed Ontrak of its intent to terminate the contract. Then, in August 2021, Peizer entered into his second Rule 10b5-1 trading plan approximately five minutes after Ontrak’s chief negotiator for the contract informed Peizer that the contract likely would be terminated.

“As a CEO, Mr. Peizer abdicated his responsibilities by using his position to conceal trading on material non-public information in order to avoid the losses shareholders suffered,” said Acting Assistant Director in Charge Krysti Hawkins of the FBI Los Angeles Field Office. “The FBI is committed to investigating illegal trading practices and holding offenders accountable in order to ensure fairness and trust in the marketplace.”

In establishing his Rule 10b5-1 plans, Peizer refused to engage in any “cooling-off” period—the time between when he entered into the trading plan and when he sold Ontrak stock—despite warnings from multiple brokers, Ontrak’s Insider Trading Compliance Officer, and several attorneys. Instead, Peizer began selling shares of Ontrak on the next trading day after establishing each plan. On Aug. 19, 2021, just six days after Peizer adopted his second Rule 10b5-1 plan, Ontrak announced to the public that the customer had terminated its contract and Ontrak’s stock price declined by more than 44%. 

The jury convicted Peizer of one count of securities fraud and two counts of insider trading. He is scheduled to be sentenced on Oct. 21 and faces a maximum penalty of 25 years in prison on the securities fraud count and 20 years in prison on each of the insider trading counts. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The case is part of a data-driven initiative led by the Criminal Division’s Fraud Section to identify executive abuses of 10b5-1 trading plans. A Rule 10b5-1 trading plan, which allows a corporate insider of a publicly traded company to set up a plan for selling company stock, can offer an executive a defense to insider trading charges. However, the defense is unavailable if the executive is in possession of material, non-public information at the time he or she enters into the 10b5-1 trading plan. Additionally, a plan does not protect an executive if the trading plan was not entered into in good faith or was entered into as part of an effort or scheme to evade the prohibitions of Rule 10b5-1.

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

Trial Attorneys Matthew Reilly and Della Sentilles of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Ali Moghaddas for the Central District of California are prosecuting the case.

Source: United States Department of Justice Criminal Division

A federal jury convicted a Maine doctor today for unlawfully distributing controlled substances, including oxycodone, hydromorphone, and fentanyl.

According to court documents and evidence presented at trial, Dr. Merideth Norris, 53, of Kennebunk, distributed controlled substances to patients at her practice without a legitimate medical purpose and outside the usual course of professional practice. Norris prescribed controlled substances despite the fact that some of these patients suffered from opioid use disorder, tested positive for addictive substances that were not prescribed to them, or appeared to be diverting the drugs into the community. Norris was warned about her prescribing on numerous occasions, including by way of pharmacists who refused to fill prescriptions she wrote and letters from an insurance company covering one of her patients. Walmart pharmacies also issued a “central block,” or a nationwide ban, on filling prescriptions written by Norris. When asked by Maine’s Board of Osteopathic Licensure (the “Board”) to justify her prescribing, Norris submitted an incomplete patient file to the Board, and otherwise deceived the Board about her prescribing practices.

The jury convicted Norris of 15 counts of unlawfully distributing controlled substances. She faces a maximum penalty of 20 years in prison on each count. 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 Darcie N. McElwee for the District of Maine; Assistant Director Michael Nordwall of the FBI’s Criminal Investigative Division; Special Agent in Charge Jodi Cohen of the FBI Boston Division; Assistant Administrator Thomas Prevoznik of the DEA’s Diversion Control Division; and Special Agent in Charge Roberto Coviello of the Department of Health and Human Services Office of Inspector General (HHS-OIG) Boston Region made the announcement.

The FBI, DEA, and HHS-OIG investigated the case.

Trial Attorneys Thomas Campbell and Danielle Sakowski of the Criminal Division’s Fraud Section are prosecuting the case, with assistance from Assistant U.S. Attorney Nicholas Scott for the District of Maine.

The Fraud Section partners with federal and state law enforcement agencies and U.S. Attorneys’ Offices throughout the country to prosecute medical professionals and others involved in the illegal prescription and distribution of opioids. 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 the 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.

Anyone needing access to opioid treatment services can contact HHS-OIG’s Substance Abuse and Mental Health Services Administration 24/7 National Helpline for referrals to treatment services at 1-800-662-4359.