March 13th, 2013

FBI Investigating Dallas DA Craig Watkins — and U.S. Attorney Is Involved, Too, as Watkins Charged with Contempt of Court Last Week

It’s official:  the Federal Bureau of Investigation (FBI) is investigating the activities of the Dallas County District Attorney Craig Watkins.  The Office of the United States Attorney for the Eastern District of Texas is reported to have its own files opened into Dallas DA Watkins’ activities, as well.

And this isn’t something that has just begun: reports are that the FBI Investigation has been going on for almost two years now as the FBI operation is 20 months old.

FBI Looking Into Dallas DA Watkins — Investigation Is “Active” and “Serious” – But How Big is It?

The Texas Lawbook apparently got the scoop on the FBI looking into Watkins and it’s being reported in the local news media that The Texas Lawbook has first-hand information from lawyers who know about the investigation details that the FBI (and the U.S. Attorney’s Office) are “very active” and “extremely serious” about finding out everything they can about District Attorney Craig Watkins’ decision to go after Al Hill III for mortgage fraud.

(For details on the Hill fraud charges, see our earlier post.)

Apparently, the federal agents are wondering what Watkins’ motivation was in filing criminal charges against Mr. Hill — was it because Lisa Blue asked him to do it?  was it because it would serve him well on re-election?  was it both?  something else?

News of the FBI looking into the reasons why charges were filed against Al Hill III and his wife (charges against her were dropped early on) first came to light when Lisa Blue’s attorney advised the Dallas trial court that the FBI’s inquiry was one of the reasons that Lisa Blue would be taking the Fifth Amendment in her testimony before the court that day.

However, many are questioning what is going on with the FBI looking into Dallas DA Watkins, since an investigation going twenty months back in time clearly goes further than this recent controversy over the Hill mortgage fraud charges.

If the FBI has been looking into Watkins since Summer 2011, then are they looking into more than this single fraud charge — and what spurred their interest in the Dallas District Attorney twenty months ago? The FBI isn’t saying.

Right now, no one really knows the scope of the FBI’s investigation into the Dallas County District Attorney except the FBI, apparently.  DA Watkins’ representatives are not sharing anything, but one of the attorneys working in the office is reporting that DA Watkins has not been given any official notification of a federal investigation.

Contempt Hearing: Dallas District Attorney Held in Contempt of Court by Texas District Judge

In the criminal mortgage fraud case brought by Dallas County DA Watkins against Al Hill III, the defense attorneys for Al Hill III subpoenaed the district attorney to take the stand and to provide evidence they told the judge would support Hill’s defense.  Lisa Blue was also subpoenaed for the same hearing, for the same reason.

Their argument:  the charges stemmed from prosecutorial misconduct on the part of Watkins, whose office they claimed had never before filed charges for mortgage fraud against anyone in a situation where there was no evidence of any financial loss.

At the initial February 2013 hearing, Watkins never entered the courtroom (he was sick).  Blue took the Fifth.  (Details here.)

When the hearing resumed last week, Watkins appeared and took the stand.  However, the Dallas County District Attorney didn’t provide substantive answers to the questions posed to him; instead, he refused to answer the defense lawyer’s questions on grounds of work product and attorney-client privileges.

So, Judge Levario found Watkins in contempt.

Reports are that FBI agents were in the courtroom that day, and that FBI investigators initiated conversations with Hill’s defense team.

Next up:  Texas Regional Administrative Law Judge John Ovard was asked to name a special judge to preside over the contempt proceedings, and yesterday Judge Ovard appointed a trial court judge from Wichita Falls, Bob Brotherton, Presiding Judge for the 30th Judicial District of Texas, to hear the DA Watkins’ contempt of court case.

Judge Brotherton is expected to travel to Dallas and preside over the proceedings here in Dallas County.

Meanwhile, the Mortgage Fraud Charges Against Hill III Have Been Dropped

As this whirlwind continues to build here in Dallas County, with a growing fascination into what the FBI is doing checking into the local county district attorney who just got cited with contempt, an important but less covered event also happened in the recent days.

What happened?  Seems District Judge Lena Levario summarily ended the criminal case against Al Hill III.   Judge Levario dismissed the mortgage fraud indictment against Hill III this week after Craig Watkins declined to take the stand in her court and give sworn testimony on his decision to seek an indictment against Hill from the Dallas grand jury.

There’s lots of drums beating about the charges against Al Hill III being re-filed, but whether that happens or not is something that they may be taking odds on in Vegas — for the skinny on all this chatter, check out the analysis over at the Texas Observer on the likelihood of the Dallas District Attorney’s Office re-filing those fraud charges against Mr. Hill.

So, as the brouhaha builds for Dallas District Attorney Craig Watkins, Texas’ Al Hill III has apparently won his battle, and maybe the war: he settled and got a multi-million dollar Big Oil inheritance; he got his legal fees from Lisa Blue and her two fellow lawyers settled down significantly in their fee fight; and he’s no longer facing criminal charges.

It’s not clear what’s happening with Craig Watkins these days, but odds are high that Al Hill III and his defense team are enjoying a very nice Spring Break 2013.

Posted by Michael Lowe at 12:31 pm

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March 6th, 2013

Texas Weapons Charges: ATF Stings Result in All Kinds of Firearms Convictions – Straw Buys, Gun Dealers, Conspiracies to Move Weapons Across State Lines and National Borders

Weapons charges face a lot of defendants here in Texas; sometimes they are tied to other charges (drug arrests, for example) but many federal cases are filed based solely on alleged violations of federal gun laws.  Recent reports from the Texas’ offices of the Federal Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the Justice Department include the following:

1.  ATF Sting Results in Two Mexican Nationals Sentenced to Federal Prison for Moving 652 Assault Rifle Magazines Across Texas-Mexico Border, Driving  Truck Over Laredo Bridge

On February 25, 2013, two men from Mexico (Julio Cesar Flores-Martinez, 47, and Francisco Padilla–Perez, 41) were sentenced to federal prison on federal weapon charge violations based upon their participation in moving (smuggling) 652 assault rifle magazines into Mexico. (See the public domain image to the left for an example of an assault rifle magazine.)

While the two men live with their families in Nuevo Laredo and were sentenced in an American court, they may still face Mexico allegations once they have completed the sentence that Judge Keith Ellison ordered last week: Flores–Martinez sentenced to serve 46 months federal incarceration with Padilla–Perez, 50 months.

Weapons charges were filed against these two defendants back in April 2012 as the result of a joint undercover sting run by the Department of Homeland Security and the ATF. The federal agents pretended to be gun dealers interested in selling assault rifle magazines. Padilla-Perez ordered 650 high–capacity AK–47 magazines explaining he would move them into Mexico with Flores-Martinez as the Mexican truck driver who would be responsible for taking the merchandise over the Texas border into Mexico.

2.  Straw Man Buys Three Guns for Someone Else – ATF Charges Result in Three Concurrent 51 Month Prison Terms

Last week, another ATF investigation resulted in the sentencing of significant time in a federal prison based on weapons charges. Down in Laredo, Silverio Venegas Jr., 37, was sentenced to serve three concurrent 51 month sentences in a federal prison after ATF agents showed that Venegas had bought three weapons — an AK–47 rifle, an AR–15 rifle and an AR-15 pistol — from a Laredo gun store using an old physical address, not his current home address, which alone is a violation of federal law (making false statements on federal firearms form 4473). Venegas told ATF agents that he was acting as a straw man for a man from Mexico who had paid Mr. Venegas to go to the gun store and buy the three weapons in three separate trips.

Mexican authorities later confirmed that these same guns were found at Mexican crime scenes where Mexican soldiers were involved in shoot outs with gunmen using these firearms. One soldier died; many on both sides were injured.

3.  Mastermind of Straw Buys of Guns in Texas Found Guilty of Weapons Charges After Guns Pop Up From New Jersey to Virgin Islands in ATF Investigation

On February 19, 2013, a federal jury in Houston came back with a guilty verdict against Tyrone Reid, 22, finding the defendant guilty of a conspiracy that had lots of co–defendants in the conspiracy who worked together to buy firearms from federal firearms dealers with false information, as straw men.  Mr. Reid was found guilty of talking other people into participating in straw buys where they would go to the firearms dealer and claim to be the actual buyer of the firearms.  Reid gave them the money to buy the weapons; after they left the dealer’s shop, Reid took the guns.  Evidence showed that Reid spent over $60,000 in straw buys of over 30 guns here in Texas.

Federal authorities testified that these weapons were later found at crime scenes in New Jersey and the U.S. Virgin Islands.  Sentencing has been set for a May 14, 2013, hearing before U.S. District Judge David Hittner.

4.  Dallas ATF Investigation Results in 68 Year Old Gun Dealer Facing Federal Prison Time for Selling Guns Without Asking for Enough Information

Earlier last month, here in Dallas, another federal jury came back with a guilty verdict in a weapons case.  Jackie Don Burke, 68, was found guilty of engaging in the business of firearms without a license after an ATF investigation showed Mr. Burke ran a print screening business over in Garland and had bought and sold used firearms at his shop.  Burke did display a sign at the shop that stated he was also in the business of selling guns.

The ATF agents testified that Burke then sold over 135 firearms from his print shop in around a year’s time (14 months).  One ATF agent bought a pistol from Burke at his print shop and took the stand to tell the jury that Burke did not ask questions to confirm that the agent could legally buy a gun. After showing a Texas Driver’s License to Burke, the agent was able to purchase the firearm.

At the age of 68, Mr. Burke will be sentenced on May 24, 2013, in a hearing before U.S. District Judge Barbara M.G. Lynn and he faces being fined up to $250,000 and incarceration of up to 5 years.  He may also have to forfeit over 40 weapons still in his possession.

Federal agencies are investing significant time and money investigating weapons here in Texas.  If you or a loved one is involved in the purchase or sale of guns or gun products (bullets, magazines, etc.) then be aware of this federal focus and federal regulations that apply to guns and firearms.  All these examples are of people facing prison time after an undercover federal agent entered their lives.

Posted by Michael Lowe at 1:39 pm

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February 27th, 2013

Money Laundering and the Black Market Peso Exchange: Big Target for Federal Agency Investigations

For many profit-making enterprises that operate outside the law, business revenues and profits mean lots of cash that needs to be moved from stacks on a table or in a safe (or set of safes) into places where it can be used to buy things without raising eyebrows or the suspicions of law enforcement.  This is what “money laundering” is all about, and it’s been going on for many years.

The Black Market Peso Exchange – Popular Way to Launder Money

There are as many ways to launder money as there are ways to make a sandwich, and some of the best are known by nicknames: for instance, the Black Market Peso Exchange.  Remember the movie “Blow” starring Johnny Depp, based upon the true story of cocaine trafficker Charles Jung?  The Black Market Peso exchange was one of Jung’s primary ways of laundering all the cash that came from business drug sales for the Medellin cartel.

Black Market Currencies – Selling Money on the Black Market

Currency can be a product on the black market for a number of reasons, for example in countries where laws are passed to prevent people from holding any currency other than that country’s own dollar or peso or franc, those who work to get foreign currencies in spite of the law will do so via the black market.  (Two recent examples: black markets for currencies in Egypt and Argentina.) So, having money trading on the black market as a product alone isn’t a new twist.

The money laundering twist of the Black Market Peso Exchange works like this:  in order to take large amounts of dollars in drug sales revenue and convert them into safe avenues for buying things, the dollars are sold to brokers who export American goods overseas.  These brokers deposit the dollars they’ve purchased into financial accounts and then these brokers sell the dollars to foreign businesses who need U.S. Dollars to buy American goods for export, and these businesses buy those dollars using pesos.  Now, the broker has exchanged pesos for dollars, and the drug revenue money has been “laundered.”

December 2012: Biggest Bank in Europe Pays Billions in Money Laundering / Black Market Peso Exchange Settlement with Justice Department

According to the U.S. Department of Treasury, the Black Market Peso Exchange has proved to be very successful and in earlier years, BMPE was considered “…perhaps the single largest avenue for the laundering of the wholesale proceeds of narcotics trafficking in the United States.”

Which makes BMPE a big target for federal investigations, like the big investigation into HSBC, the biggest bank in Europe.  In December 2012, the United States Attorney’s Office in Brooklyn, New York,, announced that HSBC had reached a settlement with the federal government over allegations that it had participated in a BMPE where the Sinaloa Cartel of Mexico and the Norte del Valle Cartel of Columbia laundered over $881,000,000 during a four year time period (2006 – 2010).

This was a big deal.  HSBC agreed to pay $1.9+ billion in a deferred prosecution agreement to settle probes of money laundering and to pay $665,000,000 in civil penalties.  HSBC also make the record books for agreeing to the biggest forfeiture by a bank in U.S. history ($1.25 billion).

February 2013: U.S. Attorney Announces Texas Black Market Peso Exchange Plea Deal

As further confirmation that federal investigators are working hard to find and arrest people for laundering money in peso exchanges, this week the United States Attorney of the Southern District of Texas, Kenneth Magidson, announced that that a plea deal had been reached with Enrique Morales, one of the four defendants indicted by a Houston Grand Jury with a BMPE money laundering operation that moved over $20,000,000 from Texas to Mexico.

Morales pled guilty to federal charges of (1) conspiracy to commit money laundering and (2) conspiracy to operate an unlicensed money transmitting business.  According to the federal prosecutors, Mr. Morales was considered to be the mastermind of this Black Market Peso Exchange operation.

How did Morales’ BMPE Work?

Their BMPE involved putting U.S. dollars, revenue from drug sales into bank accounts held in the name of shell companies.  The four co-defendants were named on corporate documents as owning and operating these shell companies.  The shell accounts were then used to move the money from the company accounts into other bank accounts both in the United States and in Mexico.  The accounts that received the deposits from these shell companies then moved money into the shell companies’ bank accounts in the form of pesos.  Those accounts were held by the clients of the co-defendant brokers.

Sentencing of Morales and his co-defendants (who have already entered into plea deals) is scheduled for May 2013. Morales can be sentenced to up to 20 years incarceration in a federal prison along with a $500,000 fine or twice the value of the property involved in the offense, whichever is greater, on the money laundering charge as well as up to five years in federal prison and a fine of $250,000 for conspiracy to operate an unlicensed money transmitting business.

What Will The Sentence Be?  It’s Too Soon to Tell.

Of course, whether or not these defendants will face the maximum sentence will not depend upon the United States Attorney but instead upon the federal judge presiding over the sentencing hearing.  Criminal defense attorneys recognize federal sentencing to be a major courtroom battle, especially in press-covered cases like this one.  However, what Mr. Morales receives in years behind bars and monetary fines cannot be assumed.

For example, the federal judge agreed with my arguments in a structured money laundering case back in 2006, and while the Pre-Sentence Report called for a 46-57 month sentence, my client only received 15 months in a sentence rendered by Dallas Federal Judge David Godbey.

Posted by Michael Lowe at 1:15 pm

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Labels: Crime News, Federal Government Watch, Money Laundering Charges


February 20th, 2013

Dallas District Attorney Craig Watkins Facing Prosecutorial Misconduct Charges and Maybe an FBI Investigation: Here’s the Scoop (The Hearing is March 7th)

Without any opinions or asides, here’s the scoop on the growing controversy surrounding Dallas County District Attorney Craig Watkins; the Federal Bureau of Investigation (FBI); Al Hill III, heir to the H.L. Hunt Oil Dynasty; and local attorney Lisa Blue.

Posted by Michael Lowe at 12:03 pm

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Labels: DA Watch, Federal Government Watch, Orwellian Threats to Rights


February 13th, 2013

Dallas is a Marijuana Marketplace: Another Federal Marijuana Trafficking Bust as US Attorney John Bales Announces $1.7 Cash Seized, 17 People Arrested

This week, the U.S. Attorney for the Eastern District of Texas John M. Bales announced to the media that federal authorities have taken possession of almost two million dollars in cash ($1.7 million) as well as arresting seventeen (17) people in a big sting operation operated by the Texas Department of Public Safety (leading agency) and the Wylie Police Department, the Collin County Sheriff’s Office, the Dallas County Sheriff’s Office, and the Dallas County District Attorney’s Office.  The Bureau of Alcohol, Tobacco, Firearms, and Explosives also helped out.

This announcement is on the heels of U.S. Attorney John Bales announcement that his office had overseen the indictment of 11 people in Cherokee County for meth trafficking. That was a big bust over in the Tyler, Texas area where another federal/state/local tag team of law enforcement agencies worked together to bust a bunch of people on drug charges after taking their investigation to the local grand jury which then issued the indictments.

Targeting drug traffickers isn’t news: drug trafficking has been the focus of law enforcement (state and federal) for awhile now.  In fact, Mexico has been involved in these trafficking investigations, too, having announced awhile back that they would be going after drug trafficking operations instead of focusing on drug cartels.  What’s Mexico got to do with it?  Well, Mexico product is a big part of the marijuana market here in Texas and around the country.  Mexico marijuana operations aren’t just in Mexico: Mexican marijuana growers have found it to be very profitable to grow their product here in the United States (e.g., big national parks, like those in California) and then move that product to distribution centers around the country without bothering with international border check points.

It’s not known where the Marijuana in the Rodgers bust was grown.  It is clear that this was a long-standing marijuana distribution and sales operation that was doing well (it was a profitable and apparently stable business until the bust).

Rufus Delane Rodgers and the Horse Trailer Filled With Secrets.

In the marijuana bust, the sting operation had been going on for almost 3  years and the Feds had given it a nickname, the “Rufus Rodgers Marijuana Group.”   Who was Rufus?  Apparently, one of the accused is a man named Rufus Delane Rodgers who is now being considered as the mastermind of this marijuana marketing operation.

Seems that Rufus Rodgers allegedly had built up a trade route between Phoenix and Tucson to Dallas and Fort Worth.  Rufus’ creative thinking, according to the indictment, was to move or transport a huge amount of product (1000s of pounds, it’s reported) over Arizona and Texas roads by using a horse trailer that had a special design: secret compartments in which to place the marijuana that could hold up over 1000 lbs per trip.  (By the way, Rufus’ marijuana was supposed to be top quality: in the words of the authorities, it was “high grade.”)  They’d also have horses in the trailer, with feed and such.

Rufus Rodgers and his gang (or employees, depending upon your perspective here) moved lots of marijuana from Arizona to Texas to sell and then allegedly used the same horse trailer to bring back the revenue from Texas to Arizona.  Of course, this being a drug operation, the revenue would be in cash.  This being a business, the indictment does recognize that some of the revenue went back into the business to buy more product for future sales.

Caught by the Wylie Snitch

Mr. Rodgers’ operation apparently cruised along the roads of Arizona and Texas without a problem until someone in Wylie, Texas, snitched to the local police.   Ultimately, this led to this month’s big bust where Mr. Rodgers’ horse trailer was searched and around $700,000 cash was found in the trailer’s secret cubby holes along with some ledgers.  Guns were taken, too.  Search warrants served on a Dallas County storage unit lead to the authorities taking away more guns and $900,000.00 in cash which had been safeguarded in five different safes.

Charges of Conspiracy to Possess With Intent to Distribute Marijuana, Possessing a Firearm in Furtherance of Drug Trafficking

Now, the Rodgers folk (“conspirators”)  have been indicted on charges of conspiracy to possess with intent to distribute marijuana. Mr. Rodgers and Joe Dell Sterling face additional charges because of the guns: weapons charges of possessing a firearm in furtherance of a drug trafficking crime.

All but one man has pled guilty.

What Happened to All That Cash?

As for all the money that was discovered in those searches, U.S. Attorney Bales announced that this is how it’s being split up:

  • Texas Department of Public Safety              $1,119,360.20            (65%)
  • Asset Forfeiture Fund                                        $ 344,416.00              (20%)
  • Wylie Police Department                                   $ 86,104.63                 (5%)
  • Dallas County Sheriff’s Office                            $ 86,104.63                 (5%)
  • Collin County Sheriff’s Office                            $ 68,883.70                 (4%)
  • Dallas County District Attorney’s Office      $ 17,220.93                (1%)

Posted by Michael Lowe at 1:15 pm

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Labels: Crime News, Federal Government Watch, Marijuana Charges, Trafficking Charges


February 6th, 2013

FBI Bust $200+ Million Credit Card Fraud Ring: Charging Identity Theft and Fake Accounts, Phony Companies Used by International Organization of Companies and Individuals

Credit Card Fraud is a common crime in federal courts here in Dallas and Texas (and across the country), and most of these federal fraud charges come with sizable amounts in controversy.   Texas fraud defense attorneys are used to defending people facing fraud charges with large amounts of money ribboning through complex scenarios.

However, yesterday’s news from the Federal Bureau of Investigation threw a shadow on some of the biggest fraud cases that the Lone Star State has seen, as the FBI arrested over a dozen people in 4 different states on a massive, global credit card fraud operation in what the federal agency calls a “sprawling criminal enterprise.”

It’s been considered one of the largest, if not the largest, credit card fraud case ever prosecuted by the Department of Justice, according to U.S. Attorney Paul Fishman.

Yesterday’s Bust of $200 Million Credit Card Fraud Scheme Heralded as One of the Largest Fraud Charges Ever Made by Justice Department

As of this morning, 18 people have been arrested in this sting operation, where the FBI charges that literally thousands of fake identities were created in a plan that successfully grabbed $200 million through credit buys using credit cards established in these fake identities.  It’s the stuff of a Matt Damon movie.

First, the defendants are alleged to have made up all these fake identities (identity fraud).  Then they got credit cards based on these fake identities (credit card fraud).  Then they went further:  they took to the credit reporting agencies and messed with things so their Fake People could get higher credit scores, which would allow the Fake People to get more credit and buy more and bigger things.  Part of this strategy included creating Fake Companies to support the Fake People getting higher credit scores and bigger credit lines.

Which apparently happened quite a lot as the Fake People bought Big Things and borrowed Big Loans (bank fraud)and never paid back the account balances.  To the total, according to the FBI number crunchers, of $200,000,000.00.  Somewhere in all this, the mail was used of course – so tag some mail fraud and wire fraud charges in here, too as the conspirators allegedly wired millions of dollars to over 28 states (including Texas) and 8 countries around the world (the complaint lists Canada, China, India, Japan, Pakistan, Romania, the United Arab Emirates, and the United States)(see footnote 1 on page 2 of the Complaint).

The Federal Bureau of Investigation’s Official Explanation of What Was Going On Here:  The Very Big, Bad Fraud

They’re being charged and prosecuted out of the United States District Court in Newark, New Jersey.  Here’s the FBI’s official description of what has happened here:

The defendants and their conspirators stole hundreds of millions of dollars through a scheme repeated thousands of times to create more than 7,000 false identities and fraudulently obtain tens of thousands of credit cards (the “fraud cards”). The scheme involved a three-step process in which the defendants would:

  • “Make up” a false identity by creating fraudulent identification documents and a fraudulent credit profile with the major credit bureaus.
  • “Pump up” the credit of the false identity by providing false information about that identity’s creditworthiness to the credit bureaus. Believing the furnished information to be accurate, the credit bureaus would incorporate this material into the false identity’s credit report, making it appear that the false identity had excellent credit.
  • “Run up” large loans using the false identity. The higher the fraudulent credit score, the larger the loans that the defendants could obtain. These loans were never repaid, and the defendants reaped the profits.

The Sham Companies

The enormous size and scope of the Criminal Fraud Enterprise required the defendants and others to construct an elaborate network of false identities. Across the country, the defendants and their co-conspirators maintained more than 1,800 “drop addresses,” including houses, apartments, and post office boxes, which they used as the mailing addresses of the false identities.

They created dozens of sham companies that did little or no legitimate business, obtained credit card terminals for the companies, and then ran up charges on the fraud cards. To accept payments in the form of credit cards, a business must establish a merchant account with an entity known as a merchant processor. The merchant processor provides the business with equipment to process credit cards, receives payments from credit card companies for credit cards run at the business, and deposits those payments, minus a fee, into the business’ bank account. When the merchant processors shut down accounts operated by the conspirators for fraud, they would apply for new terminals and create new companies.

The sham companies also served as “furnishers,” providing the credit bureaus with false information about the credit history of numerous false identities of people who purportedly worked at or owned the sham companies.

Tradelines

The defendants used sophisticated methods—including a network of black-market businesses called “tradelines” providers—to commit fraud.

Tradelines come in two varieties: primary tradelines and authorized user tradelines. Primary tradelines are lines of credit in a credit history. If a credit card user has primary tradelines in good standing, it can have a significant impact on the user’s credit score, enabling the user to borrow more from credit card issuers. The defendants, however, trafficked in fraudulent primary tradelines.

A second kind of tradeline is the “authorized user” tradeline, where a credit card holder adds another, so-called “authorized user,” to a credit card account. This raises the credit score of the authorized user, who inherits some of the primary user’s credit history.

Some defendants created and sold fake lines of credit for false identities made up by other defendants. These fraudulent primary tradelines were then used to increase the credit limits on fraud cards, so that the defendants could reap even larger profits. Defendants used the authorized user tradelines to create new identities.

Complicit Businesses

The defendats also relied upon complicit businesses, including several jewelry stores in the Jersey City, New Jersey area to extract money from the fraud cards. The complicit businesses would allow the defendants to conduct sham transactions on the fraud cards and would then receive the proceeds from the credit card companies and split them with the other conspirators. These complicit businesses maintained multiple credit card merchant processing accounts at the same time. By operating dozens of accounts, these businesses furthered the conspiracy by allowing more fraudulent transactions to be processed before the merchant processors shut down the account. The proceeds from these merchant terminals were deposited into various business checking accounts, and the money was paid out to the owners of the complicit businesses, along with other defendants and conspirators.

Lavish Spending

The conspiracy generated enormous profits for the defendants—even though they spent millions of dollars sustaining the elaborate network of drop addresses and running credit reports on the thousands of false identities. Records of the New York and New Jersey Departments of Labor reveal that many of the defendants have no reported legitimate employment in the last five years. Nonetheless, the defendants used the proceeds of the criminal enterprise to buy luxury automobiles, electronics, spa treatments, expensive clothing, and millions of dollars in gold. They also stockpiled large sums of cash. Law enforcement discovered approximately $70,000 in cash in the oven of one defendant.

The defendants also moved millions of dollars through accounts under their control and wired millions of dollars overseas. An analysis of 169 bank accounts of the defendants, sham companies, and complicit businesses has identified $60 million dollars in proceeds that flowed through the accounts, much of it withdrawn in cash. The conspirators wired millions of dollars to Pakistan, India, the United Arab Emirates, Canada, Romania, China, and Japan. Due to the massive scope of the conspiracy, which involved over 25,000 fraudulent credit cards, loss calculations are ongoing. Final figures may grow beyond the present confirmed losses of more than $200 million.

The charge and allegations contained in the complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Posted by Michael Lowe at 12:30 pm

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January 30th, 2013

Medicare Fraud Sting Operations by Federal Government Includes Senior Volunteers Spying on Doctors and Health Care Providers: Expect to See More National Stings and Sweeping Arrests of Medical Pros in the Future

Be on the look out for seniors in trench-coats if you’re working in the health care industry:  the federal government has proudly launched its latest weapon against health care fraud:  the “Senior Medicare Patrol.”

Here’s the description of this new “tool to fight fraud, strengthen federal and private health programs, and protect consumer and taxpayer dollars” as reported on HealthCare.gov:

As a part of the new resources dedicated to fighting fraud, the Obama Administration has significantly expanded funding for Senior Medicare Patrols – groups of senior citizen volunteers who educate and empower their peers to identify, prevent and report health care fraud. In 2012, the Secretary awarded 54 states and territories with funding to support the Senior Medicare Patrol programs Last year, these programs taught more than 2 million beneficiaries how to look for Medicare fraud. Local Senior Medicare Patrol offices provide assistance when such issues are identified, so that mistakes are corrected and suspected fraud referred to the appropriate authorities. Since 1997, more than 1.5 million seniors and their caregivers have contacted the Senior Medicare Patrol to ask questions or report potential fraud.

Medicare Fraud Bust in Miami: Example of Federal Government Focus on Medicare Fraud / Health Care Fraud Investigations

Here’s an example of the health care fraud prosecutions that are taking place in the United States right now.  This week, the Federal Bureau of Investigation announced that a therapist, 35 years old, was sentenced this week to 4 years imprisonment in a federal prison and ordered to pay restitution in excess of $72 million by U.S. District Judge Patricia A. Seitz in the Southern District of Florida. .

The woman, Nickole Eckert, lost her fight at a six-week trial in November when a jury found her guilty of Medicare fraud (1 count of conspiracy to commit health care fraud) for her part in a Medicare Fraud Scheme that totalled $205 million according to the investigators with the Department of Health and Human Services.

Eckert pays her restitution to the federal goverment.  Once she gets out of the federal prison, she’s also ordered to be under 3 years of supervised release.  From the FBI release on the sentencing this week:

“Evidence at trial demonstrated that the defendant and her co-conspirators caused the submission of false and fraudulent claims to Medicare through ATC, a Florida corporation headquartered in Miami that operated purported partial hospitalization programs (PHPs) in seven different locations throughout South Florida and Orlando,” according to the Department of Justice.

The Medicare Fraud Scheme here involved conspiracy charges that the defendants filed false (fraudulent) claims for payment from Medicare both for themselves and through a company called the American Sleep Institute and their patients were being treated for severe mental illness.  Evidence was provided at her trial to demonstrate that the Miami therapist “… fabricated therapist notes and other documents for patient files and submissions, and taught others to fabricate them, to make it appear both that ATC patients were qualified for PHP treatment and that they were receiving the intensive, individualized treatment PHP is supposed to be.”

Medicare Fraud and Health Care Fraud Prosecutions Are Big Focus of Federal Government and its Medicare Fraud Strike Force

The federal government is serious about investigating health care providers (doctors, nurses, clinics, hospitals, labs, therapists, home health care companies, etc.) and big Sting Operations have already resulted in national sweeps where large numbers of arrests are made in one big swoop followed by media coverage.  For example:

1.  In October 2012, 91 people were arrested by the Justice Department for Medicare Fraud in Houston, Dallas, Brooklyn, Baton Rouge, Chicago, Los Angeles and Miami.  This included the president of a Texas hospital in Houston (Riverside General).  Scheme: $452,000,000.00.

2.  In May 2012, 107 people were indicted by the Justice Department for Medicare Fraud in seven cities, including Houston, Miami, Baton Rouge, Los Angeles, Detroit, Chicago, and Tampa.  Scheme:  $205,000,000.00.

More Medicare Fraud Arrests Are Going to Happen

Health care fraud defense lawyers in Dallas and across the country are expecting many more federal arrests and federal indictments of medical professionals in the coming years.  We’re not the only ones:  this week, the CEO of Health Care Compliance Association was quoted in the media warning about these federal fraud investigations into the health care industry.  Roy Snell told HealthLeadersMedia this week that this is coming from pressure on the federal government to boost their arrests because (1) cost of health care reform (Obamacare) and (2) the growing national concern about the deficit.

In other words, these Health Care Fraud Stings bring in big money from restitution orders. If they can collect the money from the May 2012 and October 2012 Schemes alone, then the federal government will take in a restitution total of $657,000,000.00.

So, if you practice medicine these days, then you may be wise to check with someone who practices law to make sure you’re doing everything you can to avoid getting caught in one of these nets.

  • Remember:  an indictment isn’t a conviction.
  • And also remember:  a senior citizen spy from the Senior Medicare Patrol may be watching you.

Posted by Michael Lowe at 12:27 pm

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Labels: Federal Government Watch, Fraud Charges, Orwellian Threats to Rights


January 23rd, 2013

Mexican Shooter Arrested for Planning to Kill Hidalgo Sheriff Lupe Trevino Claims Involvement in Fast And Furious Scandal as Killer of Border Patrol Agent Brian Terry in December 2010

It looked like the dust was settling on all the news coverage of Hidalgo County Sheriff Lupe Trevino having to watch his son, Mission police officer Jonathan Treviño, 28, being arrested along with several other members of local law enforcement by the Federal Bureau of Investigation (FBI) for escorting drug cartel transports along Texas roadways as paid protection (read our earlier post for details).

Coming on the heels of media coverage of his re-election in November, perhaps Hidalgo Sheriff Trevino looked forward to be less of a media star in the coming months.

No such luck.  Because now, within days of the buzz surrounding the federal agents busting those four law enforcement officers for taking thousands of dollars in exchange for helping vehicles filled with drugs move safely through Texas, Hidalgo County Sheriff Lupe Trevino is once again making the national news.  And this time, he’s sharing the spotlight with United States Attorney General Eric Holder and the DOJ’s Operation Fast and Furious Scandal.

Gustavo Cruz-Lozano Confesses to Killing Border Agent Terry on Mexican News Program

In an exclusive interview on the Univision News’  show “Primer Impacto,” a man named Gustavo Cruz-Lozano gave the reporter quite an exclusive when he announced on air that he, Mr. Cruz-Lozano, had killed U.S. Border Patrol Agent Brian Terry on December 14, 2010, as Terry was on duty, patrolling the Arizona border with Mexico.

Most will recognize the Brian Terry killing for its continued connection with the “Fast and Furious” scandal. What’s that?  In essence, Operation Fast and Furious was a federal sting operation that was intended to track firearms going into Mexico from the United States by letting weapons be sold to straw purchasers with the knowledge that the guns would end up with other people which the sting hoped would be drug cartel members.  Through the identification and tracking of these Fast and Furious weapons, they hoped to track the cartel membership and operations and ultimately to arrest cartel leaders.

However, Operation Fast and Furious failed miserably and became the subject of Congressional investigation.  Attorney General Eric Holder as a target of these investigations was held in contempt by the House of Representatives. And Arizona Border Patrol Agent Brian Terry became part of the Fast and Furious story after he was killed by one of the guns initially sold in the sting operation.

Sheriff Trevino Connects to Fast and Furious Through Gustavo Cruz-Lozano

How does Sheriff Lupe Trevino become connected to the Brian Terry shooting and the Fast and Furious scandal?  Well, the man that is taking credit now for killing Border Patrol Agent Terry is the same man who turned himself in this month for threatening to kill Hidalgo County Sheriff Lupe Treviño.

That’s right: this one man, a citizen of Mexico, is telling authorities that he shot down the federal border patrol agent and was planning on assassinating Sheriff Trevino, too.

Down in Hidalgo County, they’ve been looking for Gustavo Cruz-Lozano as one of the men involved in making death threats against Sheriff Trevino since back in October 2012. Apparently, Cruz-Lozano had been identified as the man who had called the Sheriff’s office to threaten his life back in July 2012.

The Federal Bureau of Investigation, meanwhile, isn’t taking Gustavo Cruz-Lozano at his word: there are media reports that the FBI is skeptical that this man was involved in the death of Border Patrol Agent Terry.

In fact, media reports are that Gustavo Cruz-Lozano has recanted his earlier admission about being involved in Fast and Furious, according to the FBI spokesperson.  The FBI is reporting that Cruz Lozano has taken back his story about shooting Officer Terry, claiming that Cruz-Lozano told the story in order to get attention for himself.

Looks like Cruz Lozano was pretty successful there, right?  Interestingly, when Cruz Lozano turned himself in to Texas officials earlier this month, after the TV interview, for planning to kill Sheriff Trevino, he was suffering from at least one stab wound to the neck.

Image above:  House of Representatives Infographic of the Victims of Operation Fast and Furious.

Click here for more information.

Posted by Michael Lowe at 12:30 pm

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Labels: Crime News, Federal Government Watch, Orwellian Threats to Rights


January 16th, 2013

Increasing Gun Control by the Federal Government Announced Today: Will Attorney General Eric Holder Decide Who Owns and Holds Guns in Texas?

This morning, President Obama announced that he will sign 23 Executive Orders today, all of which are targeting guns in the United States: specifically, gun control by the federal government of weapons owned by private citizens. Here is the list just announced at the White House press conference of these 23 Executive Orders:

1. “Issue a presidential memorandum to require federal agencies to make relevant data available to the federal background check system.”

2. “Address unnecessary legal barriers, particularly relating to the Health Insurance Portability and Accountability Act, that may prevent states from making information available to the background check system.”

3. “Improve incentives for states to share information with the background check system.”

4. “Direct the attorney general to review categories of individuals prohibited from having a gun to make sure dangerous people are not slipping through the cracks.”

5. “Propose rulemaking to give law enforcement the ability to run a full background check on an individual before returning a seized gun.”

6. “Publish a letter from ATF to federally licensed gun dealers providing guidance on how to run background checks for private sellers.

7. “Launch a national safe and responsible gun ownership campaign.”

8. “Review safety standards for gun locks and gun safes (Consumer Product Safety Commission).”

9. “Issue a presidential Memorandum to require federal law enforcement to trace guns recovered in criminal investigations.”

10. “Release a DOJ report analyzing information on lost and stolen guns and make it widely available to law enforcement.”

11. “Nominate an ATF director.”

12. “Provide law enforcement, first responders, and school officials with proper training for active shooter situations.”

13. “Maximize enforcement efforts to prevent gun violence and prosecute gun crime.”

14. “Issue a presidential memorandum directing the Centers for Disease Control to research the causes and prevention of gun violence.”

15. “Direct the attorney general to issue a report on the availability and most effective use of new gun safety technologies and challenge the private sector to develop innovative technologies.”

16. “Clarify that the Affordable Care Act does not prohibit doctors asking their patients about guns in their homes.”

17. “Release a letter to health care providers clarifying that no federal law prohibits them from reporting threats of violence to law enforcement authorities.”

18. “Provide incentives for schools to hire school resource officers.”

19. “Develop model emergency response plans for schools, houses of worship and institutions of higher education.”

20. “Release a letter to state health officials clarifying the scope of mental health services that Medicaid plans must cover.”

21. “Finalize regulations clarifying essential health benefits and parity requirements within ACA exchanges.”

22. “Commit to finalizing mental health parity regulations.”

23. “Launch a national dialogue led by Secretaries Sebelius and Duncan on mental health.”

Executive Orders Can Create Federal Law Without the Need for Congressional Okay

Presidents are allowed to issue orders, orders akin to orders issued by a judge, that become law.  Executive Orders, by definition, impact the Executive Branch and control the operations and scope of those agencies and employees of the Executive Branch of the Federal Government.  Which, of course, includes Eric Holder, as the Attorney General of the United States.

Media reports are already circulating past video of Holder’s position on gun control and the federal constitutional protections of citizens and their right to bear arms.  You can read Holder’s perspective on constitutional rights here as well as watch a video of Eric Holder discussing gun rights and gun control online for free.

Suffice to say, Eric Holder appears to be more than ready and willing to change the meaning and impact of the constitutional right to bear arms for all of us.   Meantime, there are already discussions in various statehouses about responding to possible actions by Holder based upon these Executive Orders:  Texas and Oregon are discussing ways to stop these federal actions announced today.

Is the Constitutional Right to Bear Arms Unlimited?  No.

The Bill of Rights includes the Second Amendment of the United States Constitution, which states as follows:

A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.

Nevertheless, our right to own guns – pistols, rifles, assault weapons, shotguns, revolvers, semi-automatics, whatever – as well as other weapons (knives, Chinese stars, etc.) are not unlimited.   Laws exist that control guns and other weapons, and have for many years now.  Congress has passed laws regarding guns in the past.   State legislatures have passed gun legislation.

Courts have ruled in ways that have limited guns, too.  For example, consider the Fifth Circuit decision from 2009, United States v. Bledsoe, 334 Fed. Appx. 771 (5th Cir.2009) where our federal appeals court agreed with a Texas judge to find that a federal law (18 U.S.C. § 922(a)(6)) does not allow for “straw purchases” of a firearm:  it’s not legal to buy a gun for someone who isn’t allowed to own a firearm under the law, for whatever reason (say, someone underage or with a felony record).

Still, the Second Amendment right to bear arms is considered to be powerful and broad in scope.  Whether or not today’s Executive Orders – which appear to include an attempt to get doctors to question patients on whether or not they own guns - will not only be controversial and challenged in the public arena but undoubtedly also end up being reviewed in the courts, as today’s Executive Orders are suspiciously adverse to the language found in the Bill of Rights.

Posted by Michael Lowe at 12:42 pm

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Labels: Federal Government Watch, Orwellian Threats to Rights


January 9th, 2013

FBI – Texas Rangers Sting Results in Arrests of Four Texas Law Enforcement Officers Including the Son of Local Police Chief and the Son of the Local County Sheriff Who Moonlighted in Cocaine Trafficking

This week, the announcement came down from the Hidalgo County Sheriff’s Office: its scandal-ridden “Panama Unit” will be shut down permanently at the orders of Hidalgo County Sheriff Lupe Treviño.

Hidalgo County is an Important County in Texas – With a History of Police Corruption

You know the place:  Hidalgo County sets right on the Texas-Mexico border, home to the city of Edinburg, and it’s far from a tiny backwater community:  Hidalgo is the 8th most populated county in the State of Texas and it’s also considered to be one of the fastest-growing counties in the country.

It’s the same place where we posted about the Hidalgo County constable being convicted of felony theft for taking a seized, stolen truck for his personal use and where another FBI sting resulted in Edinburg police officer Robert Alvarez being indicted and charged for some very serious crimes which included having sexual relations with a female robbery suspect in the jail and submitting inflated time sheets to get higher overtime pay.

Hidalgo’s Panama Unit is Shut Down After Making National Headlines for Corruption

This shutdown of the special police drug unit isn’t a big surprise considering the national headlines the Panama Unit has been making over the past few weeks after Sheriff Trevino’s son as well as the son of the Chief of Police for Hidalgo, Texas, were both arrested by federal agents along with other members of the infamous “Panama Unit.”

In one more federally-coordinated sting operation, the Department of  Immigration and Customs Enforcement (ICE) worked with the Federal Bureau of Investigation as well as the Drug Enforcement Administration (DEA), the Department of Justice’s Office of the Inspector General, and the Texas Rangers to bring down a group of law enforcement officers down in South Texas who were making money on the side by playing both sides of the law.

What were the Texas cops who were arrested in the FBI Sting doing?

The investigation revealed that the son of the Police Chief and the son of the Deputy Sheriff (as well as another two men employed as Deputies by the Hidalgo Sheriff’s Department), were not only on the official government payroll to serve and protect as Hidalgo police officers, they were also being paid by drug dealers to protect their shipments of cocaine coming through Texas.

The sting resulted in the arrest of these four officers and the rest of the Panama Unit quit their jobs. The man assigned to oversee the Panama Unit, Hidalgo Police Department Sgt. Roy Mendez, remains on the force – he’s now on the streets, back on patrol.

The actual FBI arrests of Alexis Espinoza, 29, son of Hidalgo Police Chief Rudy Espinoza, and Jonathan Treviño, 28, the son of Hidalgo County Sheriff Lupe Treviño, happened shortly before Christmas.

Federal Complaints Describe Cops on Drug Cartel Payroll to Protect Cocaine Trade Along Texas Roadways and Thru Checkpoints

From the complaints (Espinoza; Trevino) and other documentation filed in the federal court records, it is known that the sting began after ICE got a tip that there were some South Texas police officers on the take, making money on drugs.  Soon, federal authorities were acting on the tip by faking a drug deal where a car carrying cocaine was driven from McAllen to Weslaco and a deal was made for Hidalgo Police Officer Alexis Espinoza to escort and protect that cocaine-filled car on its route.  He was paid $1500 down and several thousand dollars more when the car successfully made its trip.   The federal agents did this again: once more, Officer Espinoza together with another officer protected a vehicle as it transported cocaine from one location to another on Texas roads in exchange for several thousand dollars payment (around $3500 – $4000).

Soon, the feds learned that the Panama Unit was corrupted — and that the Hidaldo Sheriff’s Department unit assigned to fight drug crimes was instead working with drug dealers to move narcotics along Texas roads.  Officers Trevino, Espinoza, and Rodriguez of the Panama Unit were paid by a federal informant to protect the move of 7 kilos of cocaine from McAllen to Edinburg for payment of $6000.00.  Federal authorities upped the ante after this round:  according to the federal complaint, Panama Unit member Duran and an unknown cohort agreed to protect a vehicle that was moving 20 kilos of cocaine from McAllen through the Falfurrias checkpoint.  Shortly after this fake drug deal, the arrests were made.

Now, we can all monitor how these two sons of the men in charge of insuring Texas law is respected in Hidalgo County proceed through the federal courts and the federal system of justice.   Good thing that this all came down after Hidalgo Sheriff Lupe Trevino was reelected for a third term in November, right?

Posted by Michael Lowe at 1:05 pm

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Labels: Cop Watch, Corrupt Cops


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