Category: US Department of Justice

Source: United States Department of Justice Criminal Division

The Justice Department announced today that it has reasonable cause to believe that the Commonwealth of Kentucky (Kentucky) is violating the Americans with Disabilities Act (ADA) in the Louisville/Jefferson County Metro area by unnecessarily segregating adults with serious mental illness in psychiatric hospitals, rather than providing care in integrated community settings.

“People with serious mental illnesses in Louisville are caught in an unacceptable cycle of repeated psychiatric hospitalizations because they cannot access community-based care,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “We thank Kentucky for its full cooperation with our investigation, including readily providing access to staff, documents, and data. We also recognize that Kentucky has already begun taking important steps to expand access to a range of key services, including crisis response services; medication management supports; and housing and employment supports. Our goal is to work collaboratively with Kentucky so that it implements the right community-based mental health services and complies with the ADA. The Justice Department will continue to safeguard the rights of people with disabilities to ensure that they can fully participate in and contribute to their communities.”

“These findings demonstrate that the Commonwealth of Kentucky fails to provide adequate community-based mental health services for individuals with serious mental illness in the Louisville Metro area,” said U.S. Attorney Michael A. Bennett for the Western District of Kentucky. “Beyond the violations, however, these findings are also about recognizing the dignity and potential of every individual who has mental illness.”

The department’s investigation found Kentucky fails to provide access to community-based mental health services for many people with serious mental illness who need them, including services such as: mobile crisis response, crisis stabilization and crisis respite, case management, Assertive Community Treatment, Permanent Supportive Housing, supported employment and peer support. Instead, Kentucky relies unnecessarily on psychiatric hospitals in violation of the ADA. Each year, thousands of people are admitted to psychiatric hospitals in Louisville, and more than a thousand people experience multiple admissions to these restrictive and often traumatizing settings. With the right community-based services, many of these hospitalizations could be prevented. Kentucky can remedy this violation by expanding community-based services and implementing processes to ensure that individuals can receive those services.

The lack of community-based services has also left law enforcement as routine responders to mental health crises, contributing to avoidable law enforcement encounters and incarceration.

Deficiencies in Louisville Metro Government’s emergency response system also contribute to these outcomes. In a separate investigation, the Justice Department concluded, in March 2023, that the Louisville Metro Government and Louisville Metro Police Department violated the ADA by subjecting people with behavioral health disabilities to an unnecessary police response. The department and Louisville are currently negotiating a consent decree to resolve these and other issues.

Individuals with information relevant to this matter can contact the department by emailing Community.Kentucky@usdoj.gov.

Additional information about the Civil Rights Division of the Justice Department is available at www.justice.gov/crt/rights-persons-disabilities and www.ada.gov.

Additional information about the U.S. Attorney’s Office for the Western District of Kentucky’s Civil Rights Program is available at www.justice.gov/usao-wdky/civil-rights-program.

Source: United States Department of Justice Criminal Division

Austal USA LLC (Austal USA), a Mobile, Alabama-based shipbuilder that constructs vessels for the U.S. Navy and U.S. Coast Guard, pleaded guilty today and has agreed to pay $24 million to resolve an investigation by the Justice Department related to an accounting fraud scheme and efforts to obstruct the Defense Contract Audit Agency (DCAA) during a financial capability audit. Austal USA is a wholly owned subsidiary of Austal Limited, an Australian company that is publicly traded on the Australian Securities Exchange and was traded over-the-counter in the United States via American Depositary Receipts.

The Justice Department’s criminal resolution was coordinated with the U.S. Securities and Exchange Commission (SEC). Separately, Austal USA also entered into a False Claims Act settlement with the department’s Civil Division to resolve claims that it knowingly provided non-compliant parts to the U.S. Navy.  

“Austal USA, a shipbuilder for the U.S. military, engaged in a years-long scheme to illegally inflate its profits on ships the company was building for the U.S. Navy, reporting false financial results to investors, lenders, and its auditors,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “The investing public, the U.S. Navy, and the Defense Contract Audit Agency relied on Austal USA to tell the truth about its financial condition and its performance on U.S. Navy contracts. Today’s guilty plea underscores the Department of Justice’s commitment to holding U.S. government contractors accountable for their criminal misconduct and ensuring that they engage honestly with the U.S. government.”

“Maintaining our national security and military infrastructure cannot come at the cost of the integrity of our contracting processes,” said U.S. Attorney Sean P. Costello for the Southern District of Alabama. “Today’s actions ensure accountability and promote the rule of law in this critical arena.”

According to court documents, from at least in or around 2013 through at least in or around July 2016, Austal USA and its co-conspirators conspired to mislead Austal Limited’s shareholders, independent financial statement auditors and the investing public about Austal USA’s financial condition. Specifically, Austal USA artificially suppressed an accounting metric known as an “estimate at completion” (EAC) in relation to multiple Littoral Combat Ships that Austal USA was building for the U.S. Navy. Suppressing the EACs had the effect of falsely overstating Austal USA’s profitability on those shipbuilding efforts and Austal Limited’s earnings reported in its public financial statements. Austal USA and its co-conspirators manipulated the EAC figures in part by using so-called “program challenges,” which were false plug numbers to hide growing shipbuilding costs that should have been incorporated into the company’s financial statements. Austal USA did this to maintain and increase the share price of Austal Limited’s stock. When the higher costs were eventually disclosed to the market, Austal Limited wrote down over $100 million, and the stock price was significantly negatively impacted. 

“Defense contractors that engage in fraud erode the public’s trust in our Armed Forces,” said Director Omar Lopez of the Naval Criminal Investigative Service (NCIS). “NCIS and our investigative partners are determined to hold those accountable whose actions erode that trust. We are committed to rooting out economic crime that negatively impacts the readiness of the Department of the Navy.”

“This case is a direct result of the superb dedication of the investigative and prosecution teams,” said Director Kelly P. May of the Department of Defense (DoD) Office of Inspector General, Defense Criminal Investigative Service (DCIS). “These committed professionals’ efforts send a clear message to DoD contractors of our unwavering resolve to investigate and prosecute fraud, corruption, and efforts to circumvent compliance measures that reduce our combat effectiveness.”

The department reached this resolution with Austal USA based on a number of factors, including, among others, the nature and seriousness of the offense and the pervasiveness of the misconduct at the most senior levels of Austal USA. Austal USA received credit for affirmative acceptance of responsibility and limited credit for its cooperation with the department’s investigation, which included facilitating interviews with current and former employees, enabling the department to promptly produce records in a related court case, and making a timely disclosure of all relevant facts and documents pertaining to an unrelated matter. However, Austal USA’s cooperation was limited in a number of respects, including: Austal USA did not provide to the department any relevant facts relating to this conduct until two years after learning of the department’s investigation; Austal USA produced certain relevant documents after significant delay; Austal USA was delayed in responding to certain requests from the government, and often required follow-up requests from the government before responding; and Austal USA did not at all times demonstrate a commitment to full and timely cooperation.

Austal USA also engaged in remedial measures, but those remedial measures were untimely and incomplete, including that Austal USA did not begin disciplining employees involved in the misconduct until more than two years after Austal USA learned of the government’s investigation and did not undertake any independent steps to make restitution to the victims of its securities fraud scheme. Austal USA has begun remediating weaknesses in internal controls that allowed the company’s misconduct to occur, but Austal USA’s remediation of its controls is still ongoing and requires additional improvements and testing.

Under the terms of the plea agreement, which still must be accepted by the court, Austal USA pleaded guilty to one count of securities fraud and one count of obstruction of a federal audit. Based on application of the U.S. Sentencing Guidelines, the department determined that the appropriate criminal penalty is $73,572,680.10. However, due to Austal USA’s demonstrated inability to pay the criminal fine, Austal USA and the department agreed, consistent with the department’s inability to pay guidance, that Austal USA would pay a criminal fine of $24 million and restitution of up to $24 million for losses to Austal Limited shareholders. The department has agreed to credit all of the criminal fine and restitution against amounts Austal USA will pay to resolve an investigation by the SEC for related conduct. 

Austal USA has also agreed to retain an independent compliance monitor for a period of three years, and Austal USA and Austal Limited have agreed to continue to implement a compliance and ethics program at Austal USA designed to prevent and detect fraudulent conduct throughout its operations. Austal USA and Austal Limited have also agreed to continue to cooperate with the Justice Department in any ongoing or future criminal investigations relating to this conduct. In addition, Austal USA will serve three years of probation.

A sentencing hearing is scheduled for Nov. 25.

Three former Austal USA executives, Craig Perciavalle, Williams Adams, and Joseph Runkel, were indicted on March 30, 2023 on one count of conspiracy to commit wire fraud and wire fraud affecting a financial institution, five counts of wire fraud, and two counts of wire fraud affecting a financial institution.  They await trial. 

NCIS and DCIS are investigating the case. The Justice Department’s Office of International Affairs and authorities in Australia, as well as DCAA’s Office of Investigative Support, provided valuable assistance in the matter.

Assistant Chief Kyle Hankey and Trial Attorneys Laura Connelly and Spencer Ryan of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Christopher Bodnar for the Southern District of Alabama are prosecuting the case.

If you believe you are a victim in this case, please contact the Fraud Section’s Victim Witness Unit toll-free at (888) 549-3945 or by email at victimassistance.fraud@usdoj.gov. Victims can find case updates and additional information at www.justice.gov/criminal/criminal-vns/case/austal-usa-llc.

Under the terms of the plea agreement, the SEC would handle the distribution of funds to harmed investors. Investors harmed as a result of the misconduct of defendant should watch the SEC’s Harmed Investors page for further developments regarding the SEC’s distribution of funds to harmed investors.

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 chief executive officer of Minerco Inc. (stock ticker MINE) was arrested last week on charges of securities fraud related to a scheme to defraud investors in Minerco.

According to court documents, between about October 2019 and June 2021, Julius Jenge, 54, allegedly defrauded investors in the publicly traded securities of Minerco by, among other things, working together with his co-schemer to take control of Minerco in late 2019; causing the issuance of one billion Minerco shares to a nominee shareholder; and causing positive press releases about Minerco to be issued to the public, at least some of which contained materially false and misleading information, in an effort to artificially increase the share price of Minerco. Beginning in or around January 2020, Minerco purported publicly to be in the business of developing, marketing, and distributing psilocybin mushrooms, also known as magic mushrooms or psychedelic mushrooms.

Jenge allegedly concealed the involvement in Minerco of a co-schemer who had a criminal history and who controlled all aspects of Minerco’s operations. Among other things, Jenge allegedly failed to disclose his co-schemer’s involvement with Minerco in public filings, although he was required to do so. In addition, as part of the securities fraud scheme, and during an investor video conference, Jenge allegedly falsely stated that he had earned an MBA in marketing and a BA in accounting. 

Minerco’s stock price and trading volume increased during the period of the alleged scheme, as investors purchased Minerco stock during this period.

Jenge was arrested on Aug. 22 at Ronald Reagan Washington National Airport, where he was booked on a flight to Tanzania. 

Jenge is charged with one count of securities fraud. If convicted, Jenge faces up to 20 years in prison.

Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division, Inspector General Deborah Jeffrey of the U.S. Securities and Exchange Commission Office of Inspector General (SEC-OIG), and Inspector in Charge Eric Shen of the U.S. Postal Inspection Service (USPIS) Criminal Investigations Group made the announcement. 

The SEC-OIG and USPIS are investigating the case. 

Trial Attorney Kyle Crawford of the Criminal Division’s Fraud Section is prosecuting the case.

If you believe you are a victim in this case, please contact the Fraud Section’s Victim Witness Unit toll-free at (888) 549-3945 or by email at victimassistance.fraud@usdoj.gov. You are also encouraged to visit our webpage for this case at www.justice.gov/criminal/criminal-vns/case/united-states-v-julius-makiri-jenge.

A criminal complaint 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

A federal grand jury in Greensboro, North Carolina, returned an indictment yesterday charging a former Raleigh, North Carolina, man with 27 counts of preparing and filing false tax returns and obstructing the IRS.

According to the indictment, Jerome Osuamadi Nwabueze owned and operated Total Tax Services, located in High Point, North Carolina. Between 2018 and 2022, to secure higher refunds for his clients, Nwabueze allegedly prepared and filed with the IRS false tax returns that reported wages and withholdings, business income and expenses and education expenses that were fabricated or inflated. Nwabueze also allegedly prepared and filed false tax returns for himself that reported similar false items, and omitted income he earned from preparing tax returns. These false tax returns also generated refunds for Nwabueze to which he was not entitled.

The indictment further alleges that, when the IRS audited Nwabueze in 2020, he fabricated tax documents and provided them to the IRS.

If convicted, Nwabueze faces a maximum penalty of three years in prison for each false tax return charge and three years in prison for the obstruction charge. 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 Sandra J. Hairston for the Middle District of North Carolina made the announcement.

IRS Criminal Investigation is investigating the case.

Trial Attorney Isaiah Boyd of the Tax Division and Assistant U.S. Attorney Ashley Waid for the Middle District of North Carolina 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

A New York man was sentenced today to 20 months in prison for conspiring to defraud the United States by concealing income from the IRS.

According to court documents and statements made in court, Aniello Strocchia, of Maspeth, owned and operated an auto repair shop. From 2013 to 2017, Strocchia cashed, with the help of others, more than $1.3 million in checks made out to the shop at commercial check-cashing businesses, instead of depositing those funds into the shop’s bank account. Strocchia then hid the check-cashing activity from his return preparers, thereby causing his preparer to file false tax returns for himself and his business. The business returns underreported the shop’s gross receipts and ordinary business income; and his personal returns underreported his total income. In addition, Strocchia did not pay the full amount of the taxes he reported as due on his personal returns. Instead of reporting all his income and paying all the taxes he owed, Strocchia spent money on luxury items, including a luxury car collection, a second home and approximately $500,000 on extensive home renovations.

In total, Strocchia caused a loss to the IRS of $989,976.

In addition to his prison sentence, U.S. District Judge Hector Gonzalez for the Eastern District of New York ordered Strocchia to serve two years of supervised release and to pay approximately $989,976 in restitution to the United States.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Breon Peace for the Eastern District of New York made the announcement. 

IRS Criminal Investigation is investigating the case. 

Trial Attorney Matthew Cofer of the Tax Division prosecuted the case.