Category: US Department of Justice

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.

Source: United States Department of Justice Criminal Division

On the 34th anniversary of the Americans with Disabilities Act (ADA), Attorney General Merrick B. Garland signed a final rule under Title II of the ADA to improve access to medical diagnostic equipment (MDE) for people with disabilities. MDE includes equipment like medical examination tables, weight scales, dental chairs, x-ray machines and mammography machines. Accessible MDE is essential for people with disabilities to have equal access to medical care.

The final rule will soon be available for review on the Federal Register’s website at www.federalregister.gov. A fact sheet that provides information about the final rule will soon be available on ada.gov. 

“Thirty-four years after passage of the ADA, people with disabilities should not have to forgo needed medical care due to inaccessible medical diagnostic equipment,” said Assistant Attorney General Kristen Clarke of the Civil Rights Division. “This rule marks a significant milestone in our ongoing efforts to ensure that people with disabilities can get the medical treatment they need. Whether you are talking about access to mammograms or access to general OB/GYN services, it is critical that hospitals and doctors’ offices provide equipment that is accessible to patients with disabilities.” 

The rule clarifies how public entities that use MDE, such as hospitals and health care clinics operated by state or local governments, can meet their obligations to ensure accessibility under the ADA. The department has heard from many individuals with disabilities who have been denied basic, critically important health care services because medical providers lacked accessible MDE. For example, patients with disabilities reported receiving only a cursory physical examination in their wheelchair because they could not be transferred to the examination table for a full examination. Other patients reported forgoing basic preventative health care, such as dental examinations and mammograms, because providers did not have accessible MDE.

The rule adopts a technical standard for accessible MDE. The rule also establishes requirements that will help make accessible examination tables and weight scales more available. This will make it easier for people with disabilities — especially people who use wheelchairs — to receive medical care.

For more information on the Civil Rights Division, please visit the department’s website at www.justice.gov/crt. For inquiries regarding the ADA, please contact the department’s toll-free ADA Information Line at 800-514-0301 (voice) or 833-610-1264 (TTY) or visit the ADA website at www.ada.gov. 

Source: United States Department of Justice Criminal Division

Technology is growing ever more indispensable to many aspects of modern life. Consequently, ensuring that technology does not create new barriers for people with disabilities, and that disabled people can fully access and benefit from technology, is becoming increasingly important to securing the promise of equal opportunity under the Americans with Disabilities Act (ADA). This includes the technologies deployed by employers, state and local government services such as public schools, voting systems and public transit systems, and places of public accommodation such as doctors’ offices and private colleges. As the ADA reaches its 34th anniversary this month, the Justice Department’s Civil Rights Division and the Equal Employment Opportunity Commission (EEOC) are working closely with one another to prioritize issues of technological equity, inclusion and accessibility through a multi-pronged approach.

Our agencies have engaged in rulemaking as well as enforcement in this area. Earlier this year, the department finalized regulations on Accessibility of Web Information and Services of State and Local Government Entities, establishing a technical standard for accessibility of web content and mobile apps provided or made available by entities covered by Title II of the ADA. And the Justice Department recently reached agreements under Title II of the ADA to ensure that four counties in Texas have accessible election websites and that an Oklahoma state agency’s mobile applications are accessible to people with disabilities. Employers (covered by Title I of the ADA) and places of public accommodation (covered by Title III of the ADA) also have to make information they present online accessible to people with disabilities, including people who use assistive technology. For example, the department recently reached a settlement with a health clinic in Springfield, Illinois, under which the clinic agreed to make its website, patient portal and mobile applications accessible to people with disabilities, as required by Title III of the ADA. And employers who do not allow disabled people to use assistive technology (whether provided by the employer or someone else) that they need to apply for a job, perform a job or enjoy equal terms, conditions or privileges of employment, even if the employer must consider making other modifications to workplace systems to accommodate that assistive technology, may face legal action, as evidenced by two recent lawsuits filed by the EEOC in Maryland and North Carolina.

When applied to technology, the ADA’s equal-opportunity mandate goes beyond making sure that information provided through electronic means is as readily accessible to people with disabilities as it is to those without disabilities. It also means making sure that software and other information technology deployed by employers to aid in the hiring process or to monitor and rate employee performance does not screen out qualified applicants or employees with disabilities or otherwise discriminate against them in violation of Title I of the ADA. The EEOC and Justice Department have both recently published technical assistance documents explaining how some of these popular software tools, such as interview chatbots, keystroke trackers and algorithms that analyze voice patterns, personality traits or work history, can disadvantage disabled people, and how employers can take proactive steps to guard against such algorithmic discrimination. The EEOC has also published an ASL video on this topic, as well as a list of tips for employees and applicants.

Technology continues to evolve at the speed of human ingenuity, which means that the broad antidiscrimination mandates of the ADA must continually be applied to new situations. Fortunately, technology offers many innovative tools that can make life more accessible and eliminate barriers to equal opportunity. Some of these technological tools are described in the EEOC’s recent technical assistance documents regarding the rights of people with hearing and visual disabilities in the workplace, and further information about assistive technology and other accommodations in the workplace is available through the Job Accommodation Network. But where technology risks creating or perpetuating barriers rather than removing them, the EEOC and the Justice Department stand ready to use the legal tools at our disposal to defend and advance the rights of people with disabilities in the digital age.

Source: United States Department of Justice Criminal Division

A federal grand jury in the Central District of California returned an indictment yesterday charging a prominent activist short seller with multiple counts of securities fraud for a long-running market manipulation scheme reaping profits of at least $16 million.

According to the indictment, Andrew Left, 54, formerly of Beverly Hills, California, and now a resident of Boca Raton, Florida, was a securities analyst, trader, and frequent guest commentator on cable news channels such as CNBC, Fox Business, and Bloomberg Television. Left conducted business under the name “Citron Research” (Citron), an online moniker he created as a vehicle for publishing investment recommendations. Citron’s online presence included a website and a social media account on X, formerly known as Twitter.

As alleged in the indictment, Left commented on publicly traded companies, asserting that the market incorrectly valued a company’s stock and advocating that the current price was too high or too low. Left’s recommendations often included an explicit or implicit representation about Citron’s trading position—which created the false pretense that Left’s economic incentives aligned with his public recommendation—and a “target price,” which Left represented as his valuation of the company’s stock. Sometimes, the commentary represented Left’s own work. Other times, Left disseminated the commentary of third parties as his own. The commentary routinely included sensationalized headlines and exaggerated language to maximize the reaction it would get from the stock market. As alleged, Left knowingly exploited his ability to move stock prices by targeting stocks popular with retail investors and posting recommendations on social media to manipulate the market and make fast, easy money.

As further alleged in the indictment, in the leadup to publication of Citron’s commentary, Left established long or short positions in the public company on which he was commenting in his trading accounts and prepared to quickly close those positions post-publication and take profits on the short-term price movement caused by his commentary. Left allegedly used his advance knowledge and control over the timing of a market-moving event to build his positions using inexpensive, short-dated options contracts that expired from the same day that he published his commentary to within five days. Left also allegedly submitted limit orders, often prior to publication of his commentary, to close his positions as soon as the company’s shares reached a certain price and at prices vastly different from the target prices that Left recommended to the public. While Left made false representations to the public to bolster his credibility, behind the scenes, Left allegedly took contrary trading positions to reap quick profits off the stocks he either promoted or pilloried through Citron.

To further the scheme, Left allegedly advanced the false pretense that his investment recommendations were credible because he was independent and free from any financial conflicts of interest. However, Left allegedly concealed Citron’s financial relationships with a hedge fund by fabricating invoices, wiring payments through a third party, and making false and misleading statements to the public about Citron’s relationship with hedge funds. In addition, Left allegedly lied to law enforcement, stating that Citron “never” exchanged compensation with a hedge fund or coordinated trading with a hedge fund in advance of the issuance of its commentary.

Through his publishing of research reports, Left gained influence and a public platform on social media and through regular appearances on podcasts and cable news programs. Left allegedly furthered his scheme by misrepresenting his trading positions during media appearances. For example, after denouncing one company as a “fraud” on CNBC’s “Fast Money,” Left allegedly falsely claimed to have covered only a “small size” of his position in the company’s stock when, earlier that same day, he allegedly closed out more than sixty percent of his position.

Left is charged with one count of engaging in a securities fraud scheme, 17 counts of securities fraud, and one count of making false statements to federal investigators. If convicted, he faces a maximum penalty of 25 years in prison on the securities fraud scheme count, 20 years in prison on each securities fraud count, and five years in prison on the false statements count.

Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division; U.S. Attorney Martin Estrada for the Central District of California; Executive Assistant Director Michael A. Nordwall of the FBI’s Criminal, Cyber, Response, and Services Branch; Assistant Director in Charge Akil Davis of the FBI Los Angeles Field Office; and Inspector in Charge Eric Shen of the U.S. Postal Inspection Service (USPIS) Criminal Investigations Group made the announcement.

The FBI Los Angeles Field Office and USPIS are investigating the case.

Trial Attorneys Lauren Archer and Matthew Reilly of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Brett Sagel and Alexander Schwab for the Central District of California are prosecuting the case.

The Fraud Section uses the Victim Notification System (VNS) to provide victims with case information and updates related to this case. Victims with questions may contact the Fraud Section’s Victim Assistance Unit by calling the Victim Assistance phone line at 1-888-549-3945 or by emailing victimassistance.fraud@usdoj.gov. To learn more about victims’ rights, please visit www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas.

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 issued the following statement from Attorney General Merrick B. Garland on the arrests of alleged leaders of the Sinaloa Cartel, Ismael Zambada Garcia (El Mayo) and Joaquin Guzman Lopez:

“The Justice Department has taken into custody two additional alleged leaders of the Sinaloa Cartel, one of the most violent and powerful drug trafficking organizations in the world. Ismael Zambada Garcia, or “El Mayo,” cofounder of the Cartel, and Joaquin Guzman Lopez, a son of its other cofounder, were arrested today in El Paso, Texas. 

Both men are facing multiple charges in the United States for leading the Cartel’s criminal operations, including its deadly fentanyl manufacturing and trafficking networks. 

El Mayo and Guzman Lopez join a growing list of Sinaloa Cartel leaders and associates who the Justice Department is holding accountable in the United States. That includes the Cartel’s other cofounder, Joaquin Guzman Loera, or “El Chapo”; another of El Chapo’s sons and an alleged Cartel leader, Ovidio Guzman Lopez; and the Cartel’s alleged lead sicario, Néstor Isidro Pérez Salas, or “El Nini.”

Fentanyl is the deadliest drug threat our country has ever faced, and the Justice Department will not rest until every single cartel leader, member, and associate responsible for poisoning our communities is held accountable.”