The following is an excerpt from the Department of Justice website:
Tuesday, September 20, 2011
“WASHINGTON – The former chief financial officer of CSK Auto Corp. was sentenced late yesterday to 24 months in prison for his role in a scheme to manipulate CSK’s earnings and double-bill CSK’s customers, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division; Special Agent in Charge James L. Turgal of the FBI’s Phoenix Field Office; Special Agent in Charge Dawn Mertz of the Internal Revenue Service-Criminal Investigation (IRS-CI) Phoenix office; and Inspector in Charge Pete Zegarac of the U.S. Postal Inspection Service (USPIS) for the Phoenix Division.
Don W. Watson, 55, of Gilbert, Ariz., was sentenced by U.S. District Judge Susan R. Bolton in the District of Arizona in Phoenix. In addition to his prison term, Watson was sentenced to three years of supervised release. Restitution will be determined by the court at a later date.
Watson pleaded guilty on May 13, 2011, to one count of conspiracy to commit securities and mail fraud. Watson admitted in his plea that, from 2001 to 2006, he and others conspired to misstate CSK’s income by concealing that the company had tens of millions of dollars in rebates from vendors that CSK had claimed as income that were never collected. As a result of the fraud scheme, CSK reported millions of dollars more in pre-tax income than it in fact earned. In addition, Watson admitted in his plea that he and others intentionally caused CSK to double-bill vendors millions of dollars that CSK was not owed.
According to court documents, CSK operated under the brand names Checker Auto Parts, Schucks Auto Supply and Kragen Auto Parts. During the time of the conspiracy, CSK was the largest specialty retailer of auto parts and accessories in the western United States and one of the largest such retailers in the entire United States.
According to court documents, CSK purchased hundreds of millions of dollars worth of auto parts every year. Its vendors gave CSK allowances, or rebates, for products CSK purchased in exchange for CSK using the allowances for marketing of the vendors’ products for sale in its stores. By reducing the cost to CSK of the products it purchased from vendors, the allowances increased CSK’s income. Watson admitted that, instead of writing off allowances that CSK had claimed but could not collect, he and others concealed the uncollectible amounts by causing vendor allowances from later years to be moved to cover the shortfalls in prior years and by causing vendors to be billed for allowances CSK was not owed.
As a result of the scheme, CSK misstated its receivables and pre-tax income in its annual reports (Forms 10-K) in fiscal years 2002, 2003 and 2004 by approximately $10 million, $23 million and $19 million, respectively.
In related actions, Edward W. O’Brien III, the former controller of CSK, and Gary M. Opper, the former director of credits and receivables at CSK, pleaded guilty to obstruction of justice in April 2009. Sentencings for O’Brien and Opper are scheduled for Nov. 7, 2011, before Judge Bolton. CSK recently entered into a non-prosecution agreement with the Department of Justice, in which it agreed to pay a penalty of $20.9 million and abide by conditions of the agreement for a period of two years. The U.S. Securities and Exchange Commission (SEC) conducted its own investigation, which resulted in a filed action against CSK and pending actions against Watson, O’Brien and Opper. The SEC also referred the conduct to the department.”
Saturday, September 24, 2011
Friday, September 23, 2011
EPA'S LISTS SITES ADDED TO NATIONAL PRIORITIES LIST OF SUPERFUND SITES
Industrialization has left many places where the health of the local human population is in jeopardy due to the residual pollution left from the abandoned sites previous activities. Hopefully, companies and individuals have learned some lessons about the aftermath of not thinking through the consequences of allowing industrial chemicals and byproducts to leach into the environment. The following excerpt is from an e-mail sent out by the Environmental Protection Agency:
September 15, 2011
WASHINGTON - The U.S. Environmental Protection Agency (EPA) is adding 15 hazardous waste sites that pose risks to people’s health and the environment to the National Priorities List (NPL) of Superfund sites. EPA is also proposing 11 sites to be added to the list. Superfund is the federal program that investigates and cleans up the most complex, uncontrolled or abandoned hazardous waste sites in the country with the goal of protecting people’s health and the environment through long-term and short-term cleanup activities.
To date, 1,652 sites have been listed on the NPL. Of these sites, 350 sites have been cleaned up, resulting in 1,302 sites currently on the NPL (including the 15 sites added today). There are 62 proposed sites (including the 11 announced today) awaiting final agency action.
With all NPL sites, EPA works to identify companies or people responsible for the contamination at a site, and require them to conduct or pay for the cleanup. For the newly listed sites without viable potentially responsible parties, EPA will investigate the full extent of the contamination before starting significant cleanup at the site. Therefore, it may be several years before significant EPA clean up funding is required for these sites.
The following 15 sites have been added to the National Priorities List:
· Blue Ledge Mine (abandoned mine) in Rogue River – Siskiyou National Forest, Calif.;
· New Idria Mercury Mine (abandoned mercury mine) in Idria, Calif.;
· Armstrong World Industries (ceiling tile manufacturer) in Macon, Ga.;
· Sandoval Zinc Company (former zinc smelter) in Sandoval, Ill.;
· Gary Development Landfill (former landfill) in Gary, Ind.;
· Kerr-McGee Chemical Corp – Columbus (former pressure –treated railroad products manufacturer) in Columbus, Miss.;
· Red Panther Chemical Company (former pesticides formulation plant) in Clarksdale, Miss.;
· Horton Iron and Metal (former fertilizer manufacturer and metal salvage) in Wilmington, N.C.;
· Garfield Ground Water Contamination (contaminated ground water plume) in Garfield, N.J.;
· Chevron Questa Mine (molybdenum mine) in Questa, N.M.;
· New Cassel/Hicksville Ground Water Contamination (contaminated ground water plume) in Hicksville, Hempstead, and North Hempstead, N.Y.;
· North Ridge Estates (former WWII medical facility) in Klamath Falls, Ore.;
· US Finishing/Cone Mills (former textile operation) in Greenville, S.C.;
· Alamo Contaminated Ground Water (contaminated ground water plume) in Alamo, Tenn.; and
· Falcon Refinery (inactive refinery) in Ingleside, Texas.
The following 11 sites have been proposed to the National Priorities List:
· Jervis B. Webb Co. (former manufacturer) in South Gate, Calif.;
· Seam Master Industries (adhesive manufacturer) in South Gate, Calif.;
· Continental Cleaners (former dry cleaners) in Miami, Fla.;
· Leeds Metal (former scrap metal facility) in Leeds, Maine;
· Compass Plaza Well TCE (contaminated ground water plume) in Rogersville, Mo.;
· Eighteenmile Creek (contaminated creek) in Niagra County, N.Y.;
· Southeastern Wood Preserving (former wood treating operation) in Canton, Miss.;
· Metro Container Corporation (former drum recycler) in Trainer, Pa.;
· Corozal Well (contaminated ground water plume) in Corozal, Puerto Rico;
· US Oil Recovery (used oil recovery facility) in Pasadena, Texas; and
· Bremerton Gasworks (former gasworks facility) in Bremerton, Wash.”
September 15, 2011
WASHINGTON - The U.S. Environmental Protection Agency (EPA) is adding 15 hazardous waste sites that pose risks to people’s health and the environment to the National Priorities List (NPL) of Superfund sites. EPA is also proposing 11 sites to be added to the list. Superfund is the federal program that investigates and cleans up the most complex, uncontrolled or abandoned hazardous waste sites in the country with the goal of protecting people’s health and the environment through long-term and short-term cleanup activities.
To date, 1,652 sites have been listed on the NPL. Of these sites, 350 sites have been cleaned up, resulting in 1,302 sites currently on the NPL (including the 15 sites added today). There are 62 proposed sites (including the 11 announced today) awaiting final agency action.
With all NPL sites, EPA works to identify companies or people responsible for the contamination at a site, and require them to conduct or pay for the cleanup. For the newly listed sites without viable potentially responsible parties, EPA will investigate the full extent of the contamination before starting significant cleanup at the site. Therefore, it may be several years before significant EPA clean up funding is required for these sites.
The following 15 sites have been added to the National Priorities List:
· Blue Ledge Mine (abandoned mine) in Rogue River – Siskiyou National Forest, Calif.;
· New Idria Mercury Mine (abandoned mercury mine) in Idria, Calif.;
· Armstrong World Industries (ceiling tile manufacturer) in Macon, Ga.;
· Sandoval Zinc Company (former zinc smelter) in Sandoval, Ill.;
· Gary Development Landfill (former landfill) in Gary, Ind.;
· Kerr-McGee Chemical Corp – Columbus (former pressure –treated railroad products manufacturer) in Columbus, Miss.;
· Red Panther Chemical Company (former pesticides formulation plant) in Clarksdale, Miss.;
· Horton Iron and Metal (former fertilizer manufacturer and metal salvage) in Wilmington, N.C.;
· Garfield Ground Water Contamination (contaminated ground water plume) in Garfield, N.J.;
· Chevron Questa Mine (molybdenum mine) in Questa, N.M.;
· New Cassel/Hicksville Ground Water Contamination (contaminated ground water plume) in Hicksville, Hempstead, and North Hempstead, N.Y.;
· North Ridge Estates (former WWII medical facility) in Klamath Falls, Ore.;
· US Finishing/Cone Mills (former textile operation) in Greenville, S.C.;
· Alamo Contaminated Ground Water (contaminated ground water plume) in Alamo, Tenn.; and
· Falcon Refinery (inactive refinery) in Ingleside, Texas.
The following 11 sites have been proposed to the National Priorities List:
· Jervis B. Webb Co. (former manufacturer) in South Gate, Calif.;
· Seam Master Industries (adhesive manufacturer) in South Gate, Calif.;
· Continental Cleaners (former dry cleaners) in Miami, Fla.;
· Leeds Metal (former scrap metal facility) in Leeds, Maine;
· Compass Plaza Well TCE (contaminated ground water plume) in Rogersville, Mo.;
· Eighteenmile Creek (contaminated creek) in Niagra County, N.Y.;
· Southeastern Wood Preserving (former wood treating operation) in Canton, Miss.;
· Metro Container Corporation (former drum recycler) in Trainer, Pa.;
· Corozal Well (contaminated ground water plume) in Corozal, Puerto Rico;
· US Oil Recovery (used oil recovery facility) in Pasadena, Texas; and
· Bremerton Gasworks (former gasworks facility) in Bremerton, Wash.”
Thursday, September 22, 2011
SAUDI BASED COMPANY AGREES TO PAY $13 MILLION TO SETTLE KICKBACK AND GRATUITIES ALLEGATIONS
The following excerpt is from the Department of Justice website:
Friday, September 16, 2011
“WASHINGTON – Saudi Arabia-based Tamimi Global Company Ltd (TAFGA) has agreed to pay the United States $13 million to resolve criminal and civil allegations that the company paid kickbacks to a Kellogg Brown & Root Inc. (KBR) employee and illegal gratuities to a former U.S. Army sergeant, in connection with contracts in support of the Army’s operations in Iraq and Kuwait. The civil matter was handled by the Justice Department’s Civil Division, and the criminal matter was handled by the U.S. Attorney’s Office for the Central District of Illinois.
The U.S. alleges that employees of TAFGA paid kickbacks to KBR to obtain subcontracts awarded under LOGCAP (Logistics Civil Augmentation Program) III – KBR’s prime contract with the U.S. Army to provide logistical support to the military in conflicts abroad, including Iraq and Afghanistan. LOGCAP III is the third generation of contracts under the program. KBR performs its obligations under the contract largely through subcontractors such as TAFGA.
The U.S. also alleges that employees of TAFGA paid illegal gratuities to Army Sergeant Ray Chase. Chase was responsible for Army food services at camps Doha and Arifjan (Zone 1) in Kuwait in 2002 and 2003. As alleged in the information, Chase received regular payments from TAFGA employees on account of official acts that he took while he served in Kuwait in 2002 and 2003. TAFGA has now admitted that its employees entered into a conspiracy to pay illegal gratuities to Chase.
TAFGA appeared today before Senior Judge Michael M. Mihm in the U.S. District Court for the Central District of Illinois in Peoria, Ill., on consideration of a deferred prosecution agreement (DPA) between TAFGA and the U.S. Attorney’s Office. Under the terms of that agreement, TAFGA will pay the United States $5.6 million as part of a deferred prosecution and institute a strict compliance program to ensure that the company and its employees will abide by the legal and ethical standards required for government contracts. If TAFGA meets its obligations under the agreement without violation for 18 months, the United States will dismiss the criminal charges.
As part of the criminal agreement, TAFGA admitted conspiring to pay kickbacks to former KBR subcontract manager Steven Lowell Seamans in return for favorable treatment in the award and performance of a subcontract to provide dining services at Camp Arifjan in Kuwait. The conspiracy lasted from October 2002 to March 2006. In related proceedings in March 2006, Seamans pleaded guilty to accepting $60,500 in kickbacks from TAFGA’s former director of operations in Kuwait, Mohammad Shabbir Khan, for the award of the Camp Arifjan subcontract. In June 2006, Khan pleaded guilty to paying Seamans $133,000 in kickbacks for the award of this and another subcontract. Both were sentenced to prison and ordered to pay restitution. In the DPA unsealed today, TAFGA also admitted that as part of the conspiracy charged its then employees made false statements to federal investigators about a phantom business deal to cover up wire transfers to Seamans transmitting the kickbacks. As alleged, this transaction also involved another former TAFGA operations director, Zubair Khan. Khan has been indicted in the Central District of Illinois, and that case is still pending.
With respect to the conspiracy involving Chase, TAFGA admitted that it is responsible for the misconduct of its employees who agreed to provide Chase illegal gratuities and in furtherance of that conspiracy provided Chase money and use of an apartment in Kuwait. All of these illegal gratuities were paid to Chase on account of official acts he performed, or was going to perform, at Camps Doha and Arifjan in Kuwait in relation to the war effort. In 2010, Chase pled guilty and was sentenced to prison for accepting approximately $1.4 million in illegal gratuities from various contractors, including TAFGA. Chase was prosecuted in the Central District of Illinois.
In a separate civil settlement agreement, TAFGA agreed to pay the United States an additional $7.4 million to resolve civil allegations that TAFGA paid kickbacks in return for favorable treatment in the award and performance of the Camp Arifjan subcontract, a subcontract for dining facilities at the Baghdad Palace in Iraq, and five smaller subcontracts for dining services and other logistical support in Iraq, including temporary personal services and installation of tent pads and a shower/laundry unit. The United States alleged that TAFGA’s conduct violated the False Claims Act and the Anti-Kickback Act.
“Kickbacks and collusion in military contracting corrode the process of supplying our men and women in uniform with the quality supplies they need and deserve,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “When we believe companies are engaging in wartime profiteering, we will not hesitate to act.”
TAFGA is the 13th defendant criminally charged by the LOGCAP Working Group, based in the Central District of Illinois and led by the U.S. Attorney’s Office. This district is also home to the Rock Island Arsenal in Rock Island, Ill., where LOGCAP III is administered by the Army Sustainment Command, giving the district jurisdiction over these cases.
“Our district was one of the first in the country to take on the challenge of prosecuting war zone cases involving fraud, bribes, and kickbacks that took place during the military conflict in Southwest Asia,” said U.S. Attorney Jim Lewis, Central District of Illinois. “Our commitment to prosecute these cases is rivaled only by our commitment to the men and women who serve in our armed forces. The agreements announced today will return $13 million to the American taxpayer and serve as an example of our long-term commitment to root out public corruption in every form, especially corruption perpetrated in war zones.”
The compliance program agreed to under the deferred prosecution agreement requires TAFGA to establish a new Kuwait management team as well as an ethics and compliance team with oversight over U.S. government contracts and subcontracts, to strengthen its code of business conduct, to modernize its standard operating procedures for financial and accounting functions, to institute a compliance hotline, and to retain a contract and compliance consultant to evaluate and monitor its compliance program.
These settlements are a direct result of the efforts of the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. It includes representatives from a broad range of federal agencies, including regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The criminal case was prosecuted by Assistant U.S. Attorney Matthew J. Cannon and former Assistant U.S. Attorney Jeffrey B. Lang, the current and former lead prosecutors for the LOGCAP Working Group. Former Department of Justice Senior Trial Attorney Joseph Capone in the Fraud Section of the Criminal Division also worked on the case. The civil case was prosecuted by Assistant Director Judith Rabinowitz, Senior Trial Counsel John A. Kolar and Trial Attorney Kelley C. Hauser in the Justice Department’s Commercial Litigation Branch of the Civil Division.
Investigative agencies that participated in the investigations include the Internal Revenue Service Criminal Investigation Division, Chicago Field Office; the Defense Criminal Investigative Service, Central Field Office, Rock Island Post of Duty; U.S. Army Criminal Investigation Command, Major Procurement Fraud Unit, located at Rock Island Arsenal and the FBI, Springfield Division.”
The following excerpt is from the Department of Justice website:
Friday, September 16, 2011
“WASHINGTON – Saudi Arabia-based Tamimi Global Company Ltd (TAFGA) has agreed to pay the United States $13 million to resolve criminal and civil allegations that the company paid kickbacks to a Kellogg Brown & Root Inc. (KBR) employee and illegal gratuities to a former U.S. Army sergeant, in connection with contracts in support of the Army’s operations in Iraq and Kuwait. The civil matter was handled by the Justice Department’s Civil Division, and the criminal matter was handled by the U.S. Attorney’s Office for the Central District of Illinois.
The U.S. alleges that employees of TAFGA paid kickbacks to KBR to obtain subcontracts awarded under LOGCAP (Logistics Civil Augmentation Program) III – KBR’s prime contract with the U.S. Army to provide logistical support to the military in conflicts abroad, including Iraq and Afghanistan. LOGCAP III is the third generation of contracts under the program. KBR performs its obligations under the contract largely through subcontractors such as TAFGA.
The U.S. also alleges that employees of TAFGA paid illegal gratuities to Army Sergeant Ray Chase. Chase was responsible for Army food services at camps Doha and Arifjan (Zone 1) in Kuwait in 2002 and 2003. As alleged in the information, Chase received regular payments from TAFGA employees on account of official acts that he took while he served in Kuwait in 2002 and 2003. TAFGA has now admitted that its employees entered into a conspiracy to pay illegal gratuities to Chase.
TAFGA appeared today before Senior Judge Michael M. Mihm in the U.S. District Court for the Central District of Illinois in Peoria, Ill., on consideration of a deferred prosecution agreement (DPA) between TAFGA and the U.S. Attorney’s Office. Under the terms of that agreement, TAFGA will pay the United States $5.6 million as part of a deferred prosecution and institute a strict compliance program to ensure that the company and its employees will abide by the legal and ethical standards required for government contracts. If TAFGA meets its obligations under the agreement without violation for 18 months, the United States will dismiss the criminal charges.
As part of the criminal agreement, TAFGA admitted conspiring to pay kickbacks to former KBR subcontract manager Steven Lowell Seamans in return for favorable treatment in the award and performance of a subcontract to provide dining services at Camp Arifjan in Kuwait. The conspiracy lasted from October 2002 to March 2006. In related proceedings in March 2006, Seamans pleaded guilty to accepting $60,500 in kickbacks from TAFGA’s former director of operations in Kuwait, Mohammad Shabbir Khan, for the award of the Camp Arifjan subcontract. In June 2006, Khan pleaded guilty to paying Seamans $133,000 in kickbacks for the award of this and another subcontract. Both were sentenced to prison and ordered to pay restitution. In the DPA unsealed today, TAFGA also admitted that as part of the conspiracy charged its then employees made false statements to federal investigators about a phantom business deal to cover up wire transfers to Seamans transmitting the kickbacks. As alleged, this transaction also involved another former TAFGA operations director, Zubair Khan. Khan has been indicted in the Central District of Illinois, and that case is still pending.
With respect to the conspiracy involving Chase, TAFGA admitted that it is responsible for the misconduct of its employees who agreed to provide Chase illegal gratuities and in furtherance of that conspiracy provided Chase money and use of an apartment in Kuwait. All of these illegal gratuities were paid to Chase on account of official acts he performed, or was going to perform, at Camps Doha and Arifjan in Kuwait in relation to the war effort. In 2010, Chase pled guilty and was sentenced to prison for accepting approximately $1.4 million in illegal gratuities from various contractors, including TAFGA. Chase was prosecuted in the Central District of Illinois.
In a separate civil settlement agreement, TAFGA agreed to pay the United States an additional $7.4 million to resolve civil allegations that TAFGA paid kickbacks in return for favorable treatment in the award and performance of the Camp Arifjan subcontract, a subcontract for dining facilities at the Baghdad Palace in Iraq, and five smaller subcontracts for dining services and other logistical support in Iraq, including temporary personal services and installation of tent pads and a shower/laundry unit. The United States alleged that TAFGA’s conduct violated the False Claims Act and the Anti-Kickback Act.
“Kickbacks and collusion in military contracting corrode the process of supplying our men and women in uniform with the quality supplies they need and deserve,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “When we believe companies are engaging in wartime profiteering, we will not hesitate to act.”
TAFGA is the 13th defendant criminally charged by the LOGCAP Working Group, based in the Central District of Illinois and led by the U.S. Attorney’s Office. This district is also home to the Rock Island Arsenal in Rock Island, Ill., where LOGCAP III is administered by the Army Sustainment Command, giving the district jurisdiction over these cases.
“Our district was one of the first in the country to take on the challenge of prosecuting war zone cases involving fraud, bribes, and kickbacks that took place during the military conflict in Southwest Asia,” said U.S. Attorney Jim Lewis, Central District of Illinois. “Our commitment to prosecute these cases is rivaled only by our commitment to the men and women who serve in our armed forces. The agreements announced today will return $13 million to the American taxpayer and serve as an example of our long-term commitment to root out public corruption in every form, especially corruption perpetrated in war zones.”
The compliance program agreed to under the deferred prosecution agreement requires TAFGA to establish a new Kuwait management team as well as an ethics and compliance team with oversight over U.S. government contracts and subcontracts, to strengthen its code of business conduct, to modernize its standard operating procedures for financial and accounting functions, to institute a compliance hotline, and to retain a contract and compliance consultant to evaluate and monitor its compliance program.
These settlements are a direct result of the efforts of the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. It includes representatives from a broad range of federal agencies, including regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The criminal case was prosecuted by Assistant U.S. Attorney Matthew J. Cannon and former Assistant U.S. Attorney Jeffrey B. Lang, the current and former lead prosecutors for the LOGCAP Working Group. Former Department of Justice Senior Trial Attorney Joseph Capone in the Fraud Section of the Criminal Division also worked on the case. The civil case was prosecuted by Assistant Director Judith Rabinowitz, Senior Trial Counsel John A. Kolar and Trial Attorney Kelley C. Hauser in the Justice Department’s Commercial Litigation Branch of the Civil Division.
Investigative agencies that participated in the investigations include the Internal Revenue Service Criminal Investigation Division, Chicago Field Office; the Defense Criminal Investigative Service, Central Field Office, Rock Island Post of Duty; U.S. Army Criminal Investigation Command, Major Procurement Fraud Unit, located at Rock Island Arsenal and the FBI, Springfield Division.”
Wednesday, September 21, 2011
COMPANIES PAY FINE FOR SUBMITTING FALSE CLAIMS FOR NASA WORK
The following excerpt is from the Department of Justice website:
Wednesday, September 21, 2011
“WASHINGTON - Lydia Demski, the owner of Deerpath Corp., has agreed to pay the United States $800,000 to resolve allegations that she and her companies, including Deerpath Corp., Scope Services Inc. and American Nuclear Resources Inc. knowingly caused false claims to be submitted relating to a contract to provide re-furbishment of equipment at the National Aeronautics and Space Administration’s (NASA) Plumbrook facility in Sandusky, Ohio, the Justice Department announced today.
The re-furbishment contract at Plumbrook was set aside by NASA to be performed by a Service-Disabled Veteran-Owned Small Business (SDVOSB). Under that set-aside program, one or more service-disabled veterans must own and control the small business. The United States alleged that Demski, who is not a service-disabled veteran, organized and controlled a business called Deerpath International in order to capture SDVOSB set-aside contracts and funnel the work to her St. Joseph., Mich.-based company, Deerpath Corp.
“The department will pursue government contractors who game the system to take opportunities away from our Nation’s disabled veterans,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “Settlements like this one help ensure that our men and women in uniform who have sacrificed so much have the support they need to start small businesses.”
The government’s investigation of Deerpath International was initiated by a lawsuit, U.S. ex rel. Fones v. Deerpath International, et al., No. 07-CV-3802 (N.D. OH), filed under the False Claims Act’s qui tam, or whistleblower, provisions, which permit private parties to sue for false claims on behalf of the United States and to share in any recovery. The whistleblower in this case, Greg Fones, will receive $140,000 of the settlement.
“I can think of few things more egregious than taking advantage of a program designed to help those who were wounded or injured defending our nation,” said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio.”
Wednesday, September 21, 2011
“WASHINGTON - Lydia Demski, the owner of Deerpath Corp., has agreed to pay the United States $800,000 to resolve allegations that she and her companies, including Deerpath Corp., Scope Services Inc. and American Nuclear Resources Inc. knowingly caused false claims to be submitted relating to a contract to provide re-furbishment of equipment at the National Aeronautics and Space Administration’s (NASA) Plumbrook facility in Sandusky, Ohio, the Justice Department announced today.
The re-furbishment contract at Plumbrook was set aside by NASA to be performed by a Service-Disabled Veteran-Owned Small Business (SDVOSB). Under that set-aside program, one or more service-disabled veterans must own and control the small business. The United States alleged that Demski, who is not a service-disabled veteran, organized and controlled a business called Deerpath International in order to capture SDVOSB set-aside contracts and funnel the work to her St. Joseph., Mich.-based company, Deerpath Corp.
“The department will pursue government contractors who game the system to take opportunities away from our Nation’s disabled veterans,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “Settlements like this one help ensure that our men and women in uniform who have sacrificed so much have the support they need to start small businesses.”
The government’s investigation of Deerpath International was initiated by a lawsuit, U.S. ex rel. Fones v. Deerpath International, et al., No. 07-CV-3802 (N.D. OH), filed under the False Claims Act’s qui tam, or whistleblower, provisions, which permit private parties to sue for false claims on behalf of the United States and to share in any recovery. The whistleblower in this case, Greg Fones, will receive $140,000 of the settlement.
“I can think of few things more egregious than taking advantage of a program designed to help those who were wounded or injured defending our nation,” said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio.”
Monday, September 19, 2011
ANOTHER AFTERMARKET AUTO LIGHTS BUSINESS PLEADS GUILTY TO PRICE-FIXING
The following excerpt is from the Department of Justice website:
MONDAY, SEPTEMBER 12, 2011
“WASHINGTON — A second California aftermarket auto lights distributor has agreed to plead guilty for participating in a global conspiracy to fix the prices of aftermarket auto lights, the Department of Justice announced. Aftermarket auto lights are incorporated into an automobile after its original sale, often as repairs following a collision or as accessories and upgrades.
According to a one-count felony charge filed today in U.S. District Court in San Francisco, Maxzone Vehicle Lighting Corp. conspired with others to suppress and eliminate competition by fixing the prices of aftermarket auto lights. The department said that Maxzone, a wholly-owned subsidiary of the Taiwan-based aftermarket auto lights manufacturer Depo Auto Parts Industrial Co. Ltd., participated in the conspiracy from about April 2000 to about Sept. 3, 2008. Under the plea agreement, which is subject to court approval, Maxzone has agreed to pay a $43 million criminal fine and to assist the department in its ongoing investigation into the aftermarket auto lights industry.
According to the charge, Maxzone and co-conspirators participated in a conspiracy in which the participants met and agreed to charge prices of aftermarket auto lights at certain predetermined levels. According to the court documents, the participants in the conspiracy issued price announcements and price lists in accordance with the agreements reached, and collected and exchanged information on prices and sales of aftermarket auto lights for the purpose of monitoring and enforcing adherence to the agreed-upon prices. The department said that the conspirators met in Taiwan, the United States and elsewhere for their discussions.
Maxzone is the second U.S. distributor of aftermarket auto lights to be charged in connection with the department's ongoing investigation into the aftermarket auto lights industry. On Aug. 30, 2011, the department announced that Sabry Lee (U.S.A.) Inc. was charged and had agreed to plead guilty. Three individuals have also been charged. Polo Shu-Sheng Hsu, the former president and chief executive officer of Maxzone, entered his guilty plea on March 29, 2011, and was sentenced to serve 180 days in prison and to pay a $25,000 criminal fine. Chien Chung Chen, aka Andrew Chen, the former executive vice president of Sabry Lee, pleaded guilty to his participation in the conspiracy on June 7, 2011. He is currently scheduled to be sentenced on Dec. 13, 2011. Homy Hong-Ming Hsu was arrested at Los Angeles International Airport on July 12, 2011, and indicted on July 19, 2011. Homy Hong-Ming Hsu is the vice chairman and second highest-ranking officer of a Taiwan manufacturer of aftermarket auto lights.
Maxzone is charged with violating the Sherman Act, which carries a maximum penalty of a $100 million criminal fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims, if either of those amounts is greater than the statutory maximum fine.”
MONDAY, SEPTEMBER 12, 2011
“WASHINGTON — A second California aftermarket auto lights distributor has agreed to plead guilty for participating in a global conspiracy to fix the prices of aftermarket auto lights, the Department of Justice announced. Aftermarket auto lights are incorporated into an automobile after its original sale, often as repairs following a collision or as accessories and upgrades.
According to a one-count felony charge filed today in U.S. District Court in San Francisco, Maxzone Vehicle Lighting Corp. conspired with others to suppress and eliminate competition by fixing the prices of aftermarket auto lights. The department said that Maxzone, a wholly-owned subsidiary of the Taiwan-based aftermarket auto lights manufacturer Depo Auto Parts Industrial Co. Ltd., participated in the conspiracy from about April 2000 to about Sept. 3, 2008. Under the plea agreement, which is subject to court approval, Maxzone has agreed to pay a $43 million criminal fine and to assist the department in its ongoing investigation into the aftermarket auto lights industry.
According to the charge, Maxzone and co-conspirators participated in a conspiracy in which the participants met and agreed to charge prices of aftermarket auto lights at certain predetermined levels. According to the court documents, the participants in the conspiracy issued price announcements and price lists in accordance with the agreements reached, and collected and exchanged information on prices and sales of aftermarket auto lights for the purpose of monitoring and enforcing adherence to the agreed-upon prices. The department said that the conspirators met in Taiwan, the United States and elsewhere for their discussions.
Maxzone is the second U.S. distributor of aftermarket auto lights to be charged in connection with the department's ongoing investigation into the aftermarket auto lights industry. On Aug. 30, 2011, the department announced that Sabry Lee (U.S.A.) Inc. was charged and had agreed to plead guilty. Three individuals have also been charged. Polo Shu-Sheng Hsu, the former president and chief executive officer of Maxzone, entered his guilty plea on March 29, 2011, and was sentenced to serve 180 days in prison and to pay a $25,000 criminal fine. Chien Chung Chen, aka Andrew Chen, the former executive vice president of Sabry Lee, pleaded guilty to his participation in the conspiracy on June 7, 2011. He is currently scheduled to be sentenced on Dec. 13, 2011. Homy Hong-Ming Hsu was arrested at Los Angeles International Airport on July 12, 2011, and indicted on July 19, 2011. Homy Hong-Ming Hsu is the vice chairman and second highest-ranking officer of a Taiwan manufacturer of aftermarket auto lights.
Maxzone is charged with violating the Sherman Act, which carries a maximum penalty of a $100 million criminal fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims, if either of those amounts is greater than the statutory maximum fine.”
Sunday, September 18, 2011
AUTO PARTS COMPANY AGREES TO PAY $20.9 MILLION TO RESOLVE ALLEGED MANIPULATION OF CORPORATE EARNINGS
The following excerpt is from the Department of Justice website:
Friday, September 9, 2011
WASHINGTON – CSK Auto Corporation, a specialty retailer of automotive parts and accessories and formerly a publicly-traded company, has agreed to pay a $20.9 million penalty to resolve securities law violations stemming from a corporate earnings manipulation and double-billing scheme, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division.
As part of an agreement with the Department of Justice, CSK has accepted responsibility for the illegal conduct of its former employees. According to the non-prosecution agreement, from 2001 through 2006, certain former CSK employees, including senior executives, conspired to willfully manipulate CSK’s earnings. To date, the criminal investigation has resulted in charges against three former CSK executives, all of whom have pleaded guilty. Don W. Watson, CSK’s former chief financial officer, pleaded guilty to conspiracy to commit securities and mail fraud in connection with the scheme. Edward W. O’Brien III, the former controller of CSK, and Gary M. Opper, the former director of credits and receivables at CSK, each pleaded guilty to obstruction of justice for making material false statements during an internal investigation of CSK’s accounting practices.
As part of an agreement with the Department of Justice, CSK has accepted responsibility for the illegal conduct of its former employees. According to the non-prosecution agreement, from 2001 through 2006, certain former CSK employees, including senior executives, conspired to willfully manipulate CSK’s earnings.
According to the agreement, CSK purchased hundreds of millions of dollars in automotive parts and accessories every year from vendors. CSK received vendor allowances, or discounts, on its purchases in return for marketing vendors’ products for sale in CSK’s stores. These allowances reduced CSK’s expenses and thereby increased its pre-tax income. CSK recognized vendor allowances based on anticipated purchases from vendors. According to the agreement, certain employees manipulated CSK’s largest and most lucrative vendor allowance program by concealing amounts it had recognized based on anticipated purchases that ultimately did not take place, thus making the allowances uncollectible. The employees concealed these uncollectible amounts by applying collections for allowances from subsequent years to cover shortfalls in collections from prior years and by moving uncollectible balances to subsequent years. In so doing, the employees gave the false appearance that CSK had collected or was going to collect vendor allowances that it had already recognized as earnings. As a result of these manipulations, the employees caused CSK to conceal approximately $52 million in uncollectable receivables for fiscal years 2002 through 2004. By failing to write off uncollectible balances in these fiscal years, CSK overstated its pre-tax income in its public filings.
According to the agreement, in July 2005, CSK employees attempted to conceal their scheme by billing CSK’s vendors for approximately $30 million in vendor allowances, approximately $15 million of which they knew the vendors did not owe CSK. Additionally, throughout the duration of the scheme, they provided false information to CSK’s independent auditor to further conceal the accounting improprieties.
O’Reilly Automotive Inc., which acquired CSK after the accounting improprieties were uncovered and disclosed to the government, is also a party to the non-prosecution agreement because of its acquisition of CSK. The agreement and monetary penalty recognizes CSK’s timely, voluntary and complete disclosure of the illegal conduct; CSK’s and O’Reilly’s thorough cooperation with the government’s investigation; O’Reilly’s extensive remedial efforts pertaining to CSK’s internal training, compliance and reporting; and O’Reilly’s acquisition of CSK after the illegal conduct was discovered and disclosed to the government. As a result of these mitigating factors, the department agreed not to prosecute CSK or O’Reilly for the manipulation of CSK’s earnings, provided that CSK and O’Reilly satisfy their ongoing obligations under the agreement for a period of two years.
The sentencings for the CSK executives are scheduled to take place in Phoenix in September and November before U.S. District Judge Susan Bolton.
The U.S. Securities and Exchange Commission (SEC) conducted its own investigation, which resulted in a filed action against CSK and pending actions against Watson, O’Brien and Opper. The SEC also referred the conduct to the department.
The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Andrew H. Warren of the Criminal Division’s Fraud Section. The case is being investigated by the FBI, the IRS-Criminal Investigation and the U.S. Postal Inspection Service. The department thanks those agencies as well as the SEC for their substantial assistance in this matter.”
Friday, September 9, 2011
WASHINGTON – CSK Auto Corporation, a specialty retailer of automotive parts and accessories and formerly a publicly-traded company, has agreed to pay a $20.9 million penalty to resolve securities law violations stemming from a corporate earnings manipulation and double-billing scheme, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division.
As part of an agreement with the Department of Justice, CSK has accepted responsibility for the illegal conduct of its former employees. According to the non-prosecution agreement, from 2001 through 2006, certain former CSK employees, including senior executives, conspired to willfully manipulate CSK’s earnings. To date, the criminal investigation has resulted in charges against three former CSK executives, all of whom have pleaded guilty. Don W. Watson, CSK’s former chief financial officer, pleaded guilty to conspiracy to commit securities and mail fraud in connection with the scheme. Edward W. O’Brien III, the former controller of CSK, and Gary M. Opper, the former director of credits and receivables at CSK, each pleaded guilty to obstruction of justice for making material false statements during an internal investigation of CSK’s accounting practices.
As part of an agreement with the Department of Justice, CSK has accepted responsibility for the illegal conduct of its former employees. According to the non-prosecution agreement, from 2001 through 2006, certain former CSK employees, including senior executives, conspired to willfully manipulate CSK’s earnings.
According to the agreement, CSK purchased hundreds of millions of dollars in automotive parts and accessories every year from vendors. CSK received vendor allowances, or discounts, on its purchases in return for marketing vendors’ products for sale in CSK’s stores. These allowances reduced CSK’s expenses and thereby increased its pre-tax income. CSK recognized vendor allowances based on anticipated purchases from vendors. According to the agreement, certain employees manipulated CSK’s largest and most lucrative vendor allowance program by concealing amounts it had recognized based on anticipated purchases that ultimately did not take place, thus making the allowances uncollectible. The employees concealed these uncollectible amounts by applying collections for allowances from subsequent years to cover shortfalls in collections from prior years and by moving uncollectible balances to subsequent years. In so doing, the employees gave the false appearance that CSK had collected or was going to collect vendor allowances that it had already recognized as earnings. As a result of these manipulations, the employees caused CSK to conceal approximately $52 million in uncollectable receivables for fiscal years 2002 through 2004. By failing to write off uncollectible balances in these fiscal years, CSK overstated its pre-tax income in its public filings.
According to the agreement, in July 2005, CSK employees attempted to conceal their scheme by billing CSK’s vendors for approximately $30 million in vendor allowances, approximately $15 million of which they knew the vendors did not owe CSK. Additionally, throughout the duration of the scheme, they provided false information to CSK’s independent auditor to further conceal the accounting improprieties.
O’Reilly Automotive Inc., which acquired CSK after the accounting improprieties were uncovered and disclosed to the government, is also a party to the non-prosecution agreement because of its acquisition of CSK. The agreement and monetary penalty recognizes CSK’s timely, voluntary and complete disclosure of the illegal conduct; CSK’s and O’Reilly’s thorough cooperation with the government’s investigation; O’Reilly’s extensive remedial efforts pertaining to CSK’s internal training, compliance and reporting; and O’Reilly’s acquisition of CSK after the illegal conduct was discovered and disclosed to the government. As a result of these mitigating factors, the department agreed not to prosecute CSK or O’Reilly for the manipulation of CSK’s earnings, provided that CSK and O’Reilly satisfy their ongoing obligations under the agreement for a period of two years.
The sentencings for the CSK executives are scheduled to take place in Phoenix in September and November before U.S. District Judge Susan Bolton.
The U.S. Securities and Exchange Commission (SEC) conducted its own investigation, which resulted in a filed action against CSK and pending actions against Watson, O’Brien and Opper. The SEC also referred the conduct to the department.
The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Andrew H. Warren of the Criminal Division’s Fraud Section. The case is being investigated by the FBI, the IRS-Criminal Investigation and the U.S. Postal Inspection Service. The department thanks those agencies as well as the SEC for their substantial assistance in this matter.”
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