Category: US Department of Justice

Source: United States Department of Justice

The United States filed a civil complaint today in the U.S. District Court for the District of Columbia alleging that the Norfolk Southern Corporation and Norfolk Southern Railway Company (collectively, Norfolk Southern) delays passenger trains on Amtrak’s Crescent Route in violation of federal law.

The Crescent Route, operated by Amtrak (also known as the National Railroad Passenger Corporation), is a 1,377-mile passenger line that stops at 33 towns and cities between New York City and New Orleans. Norfolk Southern controls 1,140 miles of rail line on the Crescent Route and handles dispatching for all trains along that segment, including freight trains it operates. Approximately 266,000 passengers traveled on the Crescent Route during 2023. That year, only 24% of southbound Crescent Route passenger trains traveling on Norfolk Southern-controlled track arrived at their destination on time.

According to the complaint filed on July 30, federal law requires Norfolk Southern to give Amtrak passenger trains preference over freight trains. The complaint alleges that Norfolk Southern regularly fails to do so, leading to widespread delays that harm and inconvenience train passengers, negatively affect Amtrak’s financial performance, and impede passenger rail transportation. The complaint includes several examples of how Norfolk Southern’s failure to give passenger trains the required preference causes many of these delays. For example, on Jan. 1, an Amtrak train 10 miles outside of New Orleans was delayed for nearly an hour when Norfolk Southern dispatchers required it to travel behind a slow-moving freight train. On another occasion, Norfolk Southern dispatchers forced an Amtrak train to wait over an hour while allowing three separate freight trains to pass. In many cases, Norfolk Southern runs freight trains along the Crescent Route that, due to track limitations, are so long they cannot move to the side for passenger trains to pass them.   

“Americans should not experience travel delays because rail carriers break the law. Our action today alleges that Norfolk Southern violates federal law by failing to give the legally required preference to Amtrak passenger trains over freight trains,” said Attorney General Merrick B. Garland. “The Justice Department will continue to protect travelers by ensuring that rail carriers fulfill their legal obligations.” 

“For half a century, federal law has required freight rail companies to give Amtrak passenger rail service preference on their tracks — yet compliance with this important law has been uneven at best,” said U.S. Transportation Secretary Pete Buttigieg. “We will continue to engage the railroad industry and work with Amtrak to ensure that freight railroads comply with their legal obligations and that Amtrak customers are not subjected to unacceptable, unnecessary, and unlawful delays.”

Trial Attorneys Max Goldman, Amber Charles, and Pauline Stamatelos of the Civil Division’s Consumer Protection Branch are handling the case.

For more information about the Consumer Protection Branch and its enforcement efforts, visit www.justice.gov/civil/consumer-protection-branch.

A complaint is merely a set of allegations that the government would need to prove by a preponderance of the evidence if the case went to trial.

Source: United States Department of Justice Criminal Division

The Justice Department announced today that it will monitor compliance with federal voting rights laws in Maricopa County, Arizona, for the July 30 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 division also deploys federal observers from the Office of Personnel Management, where authorized by federal court order. 

The 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

The United States has filed a complaint against Murphy Medical Center, Inc. doing business as Erlanger Western Carolina Hospital and Chattanooga-Hamilton County Hospital Authority doing business as Erlanger Health System and Erlanger Medical Center (collectively, Erlanger) in the U.S. District Court for the Western District of North Carolina. The government alleges that Erlanger, a health care system located in Tennessee and North Carolina, violated the Stark Law and thereby submitted false claims to the Medicare program.

The Stark Law prohibits a hospital from billing Medicare for services referred by a physician with whom the hospital has an improper financial relationship that does not meet any statutory or regulatory exception. The government’s complaint alleges that Erlanger had employment relationships with a number of physicians that did not meet any Stark Law exception because the compensation Erlanger paid to the physicians was well above fair market value. The complaint alleges that Erlanger received referrals from these physicians in violation of the Stark Law and submitted claims to Medicare knowing that the claims for those referred services were not eligible for payment.

“Improper financial relationships between hospitals and physicians threaten the integrity of clinical decision-making and can influence the type and amount of health care that is provided to patients,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department is committed to ensuring that physicians’ treatment decisions are based on the needs of their patients and not their own financial interests.”

“The government’s complaint alleges that Erlanger compromised Stark Law compliance to boost its financial standing, knowingly overpaying physicians whose practices generated profits for the hospital,” said U.S. Attorney Dena J. King for the Western District of North Carolina. “We are dedicated to enforcing the Stark Law and protecting patients and the Medicare program from financial relationships that undermine public trust and incentivize overbilling and waste of taxpayer dollars.” 

“This complaint serves as a warning to health care entities that attempt to increase profits through improper financial arrangements with referring physicians,” said Special Agent in Charge Tamala E. Miles of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG will continue to investigate such deals to prevent financial arrangements that could compromise impartial medical judgment, increase health care costs, and erode public trust in the health care system.” 

The United States filed its complaint in a lawsuit originally filed 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 the lawsuit, as it has done here in part. Those who violate the Act are subject to treble damages and applicable penalties.

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

The Justice Department’s Civil Division and the U.S. Attorney’s Office for the Western District of North Carolina handled the case, with assistance from HHS-OIG. The case is captioned United States of America, the State of North Carolina, and the State of Tennessee ex rel. Alana Sullivan and J. Britton Tabor v. Murphy Medical Center, Inc., et al. No. 1:21-CV-219-MR-WCM (W.D.N.C.).

The claims asserted in the United States’ complaint are allegations only. There has been no determination of liability.

Source: United States Department of Justice Criminal Division

A federal grand jury issued a superseding indictment yesterday charging former correctional officer Darrell Wayne Smith with 15 counts of sexual abuse, including a civil rights violation, against five female victims who were inmates under his custody and control at Federal Correctional Institution, Dublin (FCI Dublin). 

“As alleged, Officer Daryl Smith engaged in appalling criminal acts when he sexually abused those in his care and custody,” said Deputy Attorney General Lisa Monaco. “This superseding indictment is the latest product of the Department’s ongoing work to seek justice for victims of sexual assault at FCI Dublin. We remain steadfast in our commitment to root out sexual assault within the BOP and hold to account those who so egregiously violate their duty.”

The initial federal indictment against Darrell Wayne Smith, 55, now residing in Florida, was filed April 13, 2023, and charged him with engaging in illegal sexual acts with three female inmates while he was employed at FCI Dublin as a correctional officer. That initial indictment charged 12 counts that alleged 12 acts occurring between May 2019 and May 2021 in which Smith engaged in separate sexual conduct with each of the three inmate victims.

The superseding indictment issued yesterday, which supplants the initial indictment, identifies two additional victims and charges 15 counts against Smith. It charges all 12 counts of sexual abuse that were charged in the initial indictment, and adds two new counts of sexual abuse, each involving one of the two additional victims. Each additional victim is described as being an inmate at FCI Dublin who suffered abusive sexual conduct by Smith while under his custodial and disciplinary control. Smith’s charged sexual conduct is now alleged to have begun as early as August 2016.

The superseding indictment also adds a third new count that alleges a federal civil rights violation by Smith. The civil rights violation arises from aggravated sexual abuse that Smith is alleged to have engaged in against one of the female inmates. 

“Federal prison guards must treat prisoners humanely,” said U.S. Attorney Ismail Ramsey for the Northern District of California. “Victimizing inmates sexually and denying them basic civil rights must end. Yesterday’s superseding indictment demonstrates my office’s commitment to root out such misconduct and prosecute officers who allegedly perpetrate such abuse.”

“Yesterday’s superseding indictment includes three new allegations of sexual assault by Smith, a Correctional Officer at FCI Dublin,” said Justice Department Inspector General Michael E. Horowitz. “The 15 charges against Smith allege he sexually abused multiple inmates over several years, including brazen and violent acts. The Justice Department’s Office of the Inspector General (DOJ OIG) is committed to aggressively investigating allegations of abuse at FCI Dublin and across the Federal Bureau of Prisons.”

“The defendant’s alleged actions are some of the most shocking and disturbing charges we’ve seen for a former federal corrections officer,” said Executive Assistant Director Michael D. Nordwall of the FBI’s Criminal, Cyber, Response, and Services Branch. “Sexual abuse scars everyone who survives it, but can be particularly traumatizing when it’s perpetrated by someone in a position of trust or authority. The FBI is steadfast in our commitment to defending the civil rights of everyone and investigating anyone who allegedly violates this fundamental protection.”

“These allegations of sexual abuse are deeply troubling,” said Special Agent in Charge Robert K. Tripp of the FBI San Francisco Field Office. “We are committed to enforcing civil rights statutes and holding accountable those who abuse their positions.”

Each of the alleged victims is identified in the superseding indictment by initials only and is alleged to have been in official detention and under Smith’s custodial, supervisory, and disciplinary authority at the time of the charged conduct. Each count in the superseding indictment corresponds with one encounter during which Smith allegedly engaged in unlawful sexual acts or contact with one of the victims, except for the newly charged civil rights violation which arises from alleged aggravated sexual abuse also charged in another count.

Smith is now charged with six counts of sexual abuse of a ward, seven counts of abusive sexual contact, one count of aggravated sexual abuse, and one count of deprivation of rights under color of law.

Smith’s arraignment on the superseding indictment has not yet been set. However, Smith is currently set to begin jury trial on March 17, 2025, in front of U.S. District Judge Yvonne Gonzalez Rogers for the Northern District of California. If convicted, he faces a maximum penalty of life in prison for each count of aggravated sexual abuse and deprivation of rights under color of law. Additionally, Smith faces a statutory maximum penalty of 15 years in prison for each count of sexual abuse of a ward and a maximum penalty of two years in prison for each count of abusive sexual contact. In addition, as part of any sentence, the court may order a term of supervised release, a fine of up to $250,000 for each count, restitution, and additional assessments. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The FBI and DOJ OIG are investigating the case.

Assistant U.S. Attorneys Molly Priedeman and Andrew Paulson for the Northern District of California are prosecuting the case, with the assistance of Kay Konopaske.

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

Three individuals have been sentenced for participating in an international scheme involving the sale of tens of thousands of pirated business telephone system software licenses with a retail value of over $88 million.

Raymond Bradley “Brad” Pearce, 48, of Tuttle, Oklahoma, a computer system administrator, was sentenced yesterday to four years in prison and ordered to forfeit $4 million. In June, Dusti O. Pearce, 46, also of Tuttle, was sentenced to one year and a day in prison and ordered to forfeit $4 million. In July, Jason M. Hines, 44, of Caldwell, New Jersey, was sentenced to one year and six months in prison and an additional 18 months of home confinement, and ordered to forfeit $2 million. In addition, the three defendants have agreed to pay restitution—specifically, $17 million for Brad Pearce, $10 million for Dusti Pearce, and more than $5 million for Hines. The court will hold a separate restitution hearing in a few weeks to determine the details of the restitution order.

According to court documents, Brad and Dusti Pearce conspired with Hines to commit wire fraud in a scheme that involved generating and then selling unauthorized Avaya Direct International (ADI) software licenses. The ADI software licenses were used to unlock features and functionalities of a popular telephone system product called “IP Office” used by thousands of companies around the world. The ADI software licensing system has since been decommissioned.

Avaya Holdings Corporation, a multinational business communications company headquartered in California, sold IP Office to many midsize and small businesses in the United States and abroad. To unlock features and functionalities of IP Office, such as voicemail or telephones, customers had to purchase software licenses generated by Avaya from an authorized Avaya distributor or reseller. Avaya used software license keys to control access to Avaya’s copyright-protected software and to ensure that only customers who paid for the software could use it. Moreover, Avaya required that each software license on an IP Office system be associated with a proprietary memory card with a unique serial number that the end user had to keep in its possession to use the licenses.

Brad Pearce, a long-time customer service employee at Avaya, used his system administrator privileges to generate tens of thousands of ADI software license keys that he sold to Hines and other customers, who in turn sold them to resellers and end users around the world. The retail value of each Avaya software license ranged from under $100 to thousands of dollars. Brad Pearce also employed his system administrator privileges to hijack the accounts of former Avaya employees to generate additional ADI software license keys. Pearce concealed the fraud scheme for many years by using these privileges to alter information about the accounts, which helped hide his creation of unauthorized license keys. Dusti Pearce handled accounting for the illegal business.

Hines operated Direct Business Services International (DBSI), formerly known as Dedicated Business Systems International, a New Jersey-based business communications systems provider and a de-authorized Avaya reseller. He bought ADI software license keys from Brad and Dusti Pearce and then sold them to resellers and end users around the world for significantly below the wholesale price. Hines was by far the Pearces’ largest customer and significantly influenced how the scheme operated. Hines was one of the biggest users of the ADI license system in the world.

Altogether, the Pearces and Hines reaped millions of dollars from the scheme. To hide the nature and source of the money, the Pearces funneled their illegal gains through a PayPal account created under a false name to multiple bank accounts, and then transferred the money to investment and bank accounts. They also purchased large quantities of gold bullion and other valuable items.

In July 2023, Hines pleaded guilty to conspiracy to commit wire fraud. In September 2023, the Pearces also pleaded guilty to conspiracy to commit wire fraud.

Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division; U.S. Attorney Robert J. Troester for the Western District of Oklahoma; and Acting Special Agent in Charge Jason Kaplan of the FBI Oklahoma City Field Office made the announcement.

The FBI Oklahoma City Field Office investigated the case.

Senior Counsel Matthew A. Lamberti of the Criminal Division’s Computer Crime and Intellectual Property Section and Senior Litigation Counsel Julia E. Barry for the Western District of Oklahoma prosecuted the case.