601 Defendants Charged, More Than $2 Billion in Fraud Losses Recorded

FBI Deputy Director David Bowdich took part in a press conference today with U.S. Attorney General Jeff Sessions, Health and Human Services (HHS) Secretary Alex Azar III, and other federal officials to announce a nationwide health care fraud and opioid takedown that has resulted in charges against 601 defendants around the country, along with a total of more than $2 billion in fraud losses.

This takedown, the largest health care enforcement action taken to date by the joint Department of Justice and HHS Medicare Fraud Strike Force, involved numerous federal and state agencies working together on the front lines in the fight against health care fraud. “But our work is not finished—we are just getting started,” said Sessions. “We will continue to find, arrest, prosecute, convict, and incarcerate fraudsters and drug dealers, wherever they are.”

The charges announced today aggressively targeted schemes billing Medicare, Medicaid, TRICARE (a health insurance program for members and veterans of the armed forces and family members), and private insurance companies. Some of these schemes involved medically unnecessary prescription drugs and compounded medications that were often never even purchased and/or distributed to beneficiaries. In other cases, patient recruiters, beneficiaries, and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills for services that were medically unnecessary or never performed.

According to Bowdich, “Any good criminal investigator or analyst will tell you that to find the criminals, you have to follow the money. And the people we’ve charged this week viewed our health care system as their personal ATM.”

Another focus of the operation was medical professionals allegedly involved in the unlawful distribution of opioids and other prescription narcotics.

Because virtually every health care fraud scheme requires a corrupt medical professional to be involved in order for Medicare or Medicaid to pay the fraudulent claims, aggressively pursuing these corrupt professionals not only has a deterrent effect on other medical professionals who might be tempted but also ensures that their licenses can no longer be used to bilk the system. Among those charged in this operation were 165 doctors, nurses, and other licensed medical professionals.

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Burglary Microbiome Project Looks for Incriminating Bacteria in Mock Crimes

The human body emits a staggering 36 million microbes into the outside environment—every single hour. Forensic scientists have looked to this signature as a kind of microscopic trail that may track down suspects, or even reconstruct movements in a crime.

The Burglary Microbiome Project, an ongoing study using mock crime scenes and scientific sampling of homes, residents and intruders, is underway to lay the groundwork for implementing the concept in real life, according to a group of scientists from three colleges.

The initial results were presented by the investigators at the American Society of Microbiology’s annual Microbe meeting in Atlanta earlier this month.

“This study is one of the first to use the microbiome as a forensic tool using unique markers rather than variances in microbial community structure,” said Jarrad Hampton-Marcell, a doctoral candidate at the University of Illinois at Chicago, who presented at the conference.

The researchers, including those from Nova Southeastern University and the University of Chicago, first established baselines of the microbiome in the “crime scenes.”

They started by taking bacterial samples from the noses and hands of the residents, as well as various surfaces within their homes.

Overall, a total of 9,965 unique operational taxonomic units, or OTUs, were identified among 30 people who participated in the experiment.

The baseline established, they then conducted the mock burglaries, in which a suspect entered into the microbiome, dragging their own signature through the domestic environment, according to the researchers.

The invaders’ microbial signature was detected and mapped to the homes at greater than 60 percent accuracy, according to the scientists.

“When observing the change in OTUs over time, appearance/disappearance rates showed no significant difference in the absence or presence of other individuals,” add the researchers, in an American Society of Microbiology statement on the work.

But more work remains to refine the markers, and distinguish further markers to improve the accuracy, they said.

“With further improvement in detection of stable markers, the human microbiome may serve as an additional tool for human profiling and crime scene investigations,” added Hampton-Marcell.

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Ponzi Scheme Resulted in $10 Million in Losses for Investors

In July 2008, special agents from the FBI Sacramento Field Office executed a search warrant at the residence of a suspect and interviewed other individuals in connection with a mortgage fraud investigation.

In addition to finding evidence for their own case, investigators uncovered ties to what appeared to be a separate mortgage fraud scheme, and FBI Sacramento opened another case, working in partnership with the Internal Revenue Service (IRS) Criminal Investigation.

The main subject of the second case was Lee Loomis, president of Loomis Wealth Solutions, a company based in Roseville, California, but operating in about half a dozen states. And it wasn’t long before FBI and IRS investigators realized they were dealing with a much broader criminal scheme, and that mortgage fraud was just the tip of the iceberg.

After a long-term and complex investigation by law enforcement, Loomis was charged, pleaded guilty, and sentenced earlier this year for running a multi-faceted investment fraud/Ponzi scheme that caused millions of dollars in losses to more than 183 investors.

By reviewing voluminous amounts of evidence—including personal and company records, real estate records, bank records, financial statements, etc.—and questioning victims, employees of Loomis-owned entities, and others, investigators learned that from 2006 through 2008, Loomis offered what he called a “wealth-building program.”

During seminars about his company held at hotels and casinos, he boasted of unusually high rates of return for anyone who invested with him, and he advertised individualized financial family planning to help prospective clients earn money for college tuitions and retirement. Those attending the seminars were then asked to submit financial information including tax returns, pay stubs, copies of bills, and information concerning their home equity. Loomis would analyze this information and—targeting families with substantial home equity and good credit—invite them to a private two-day workshop.

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Justices Adopt New Privacy Rules for Cellphone Tracking

The Supreme Court says police generally need a search warrant if they want to track criminal suspects’ movements by collecting information about where they’ve used their cellphones.

The justices’ 5-4 decision Friday is a victory for privacy in the digital age. Police collection of cellphone tower information has become an important tool in criminal investigations.

The outcome marks a big change in how police can obtain phone records. Authorities can go to the phone company and obtain information about the numbers dialed from a home telephone without presenting a warrant.

Chief Justice John Roberts wrote the majority opinion, joined by the court’s four liberals.

Roberts said the court’s decision is limited to cellphone tracking information and does not affect other business records, including those held by banks.

He also wrote that police still can respond to an emergency and obtain records without a warrant.

Justices Anthony Kennedy, Samuel Alito, Clarence Thomas and Neil Gorsuch dissented. Kennedy wrote that the court’s “new and uncharted course will inhibit law enforcement” and “keep defendants and judges guessing for years to come.”

The court ruled in the case of Timothy Carpenter, who was sentenced to 116 years in prison for his role in a string of robberies of Radio Shack and T-Mobile stores in Michigan and Ohio. Cell tower records that investigators got without a warrant bolstered the case against Carpenter.

Investigators obtained the cell tower records with a court order that requires a lower standard than the “probable cause” needed to obtain a warrant. “Probable cause” requires strong evidence that a person has committed a crime.

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Apple Closing iPhone Security Gap Used by Law Enforcement

Apple is closing a security gap that allowed outsiders to pry personal information from locked iPhones without a password, a change that will thwart law enforcement agencies that have been exploiting the vulnerability to collect evidence in criminal investigations.

The loophole will be shut down in a forthcoming update to Apple’s iOS software, which powers iPhones.

Once fixed, iPhones will no longer be vulnerable to intrusion via the Lightning port used both to transfer data and to charge iPhones. The port will still function after the update, but will shut off data an hour after a phone is locked if the correct password isn’t entered.

The current flaw has provided a point of entry for authorities across the U.S. since the FBI paid an unidentified third party in 2016 to unlock an iPhone used by a killer in the San Bernardino, California, mass shooting a few months earlier. The FBI sought outside help after Apple rebuffed the agency’s efforts to make the company create a security backdoor into iPhone technology.

Apple’s refusal to cooperate with the FBI at the time became a political hot potato pitting the rights of its customers against the broader interests of public safety. While waging his successful 2016 campaign, President Donald Trump ripped Apple for denying FBI access to the San Bernardino killer’s locked iPhone.

In a Wednesday statement, Apple framed its decision to tighten iPhone security even further as part of its crusade to protect the highly personal information that its customers store on their phones.

CEO Tim Cook has hailed privacy as a “fundamental” right of people and skewered both Facebook and one of Apple’s biggest rivals, Google, for vacuuming up vast amounts of personal information about users of their free services to sell advertising based on their interests. During Apple’s 2016 battle with the FBI, he called the FBI’s effort to make the company alter its software a “dangerous precedent” in an open letter.

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Dedicated Law Enforcement Effort Leads to Capture of Indiana Fugitive

Seymour, Indiana, in the 1990s was a Midwestern town with rural roots and a comfortable, small-town feel. Parents felt safe letting their children walk to Girl Scout meetings with friends and ride their bikes unchaperoned.

All that changed on January 20, 1999, when a 10-year-old girl waiting for her father after gymnastics practice was abducted and molested. The man who approached her outside a local girl’s club said he had locked the keys in his car and needed someone with slender arms to reach them.

The attack shocked the community, all the more when the suspect fled before he could be apprehended. At the time, no one realized it would take nearly two decades to bring justice to the victim and her family, and a sense of closure to the community—or that an Indiana State Trooper who was born and raised in Seymour, and is now an FBI agent, would play a central role in resolving the case.

On that cold January day, Charley Hollin forced the girl into his car at knifepoint, drove away, and sexually assaulted her. Afterward, he made the girl leave the car naked, and her clothes were thrown out after her. Hollin also mistakenly threw out his own jacket, which contained his day planner.

Todd Prewitt was an Indiana State Police trooper at the time, and although he wasn’t assigned to the investigation, he took a keen interest. The crime had occurred in his district, and Seymour was his hometown. “I didn’t know the victim,” he said, “but I had family friends who sent their kids to that girl’s club.”

The assault itself was tragic, but then justice was not served. Hollin’s identity was known to authorities—and reported by the media—because they had his day planner. But the victim could not positively identify her assailant with full certainty, so authorities were forced to wait for the results of DNA testing before they could arrest Hollin and charge him with the crime. Hollin took that opportunity to flee.

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Conviction of husband-wife team in Amazon case signals

The sentencing of three people who committed over $1 million in return fraud at Amazon points to a cottage industry of bogus returns.

Earlier this month, United States Attorney Josh Minkler announced that three individuals were sentenced up to 71 months for defrauding Amazon out of $1.2 million in consumer electronics items.

Erin Finan, 38, and Leah Finan, 38, a husband and wife from Indiana, pleaded guilty to federal mail fraud and money laundering charges, the Department of Justice, U.S. Attorney’s Office Southern District of Indiana, said earlier this month.

The two were sentenced to 71 months and 68 months respectively. Danijel Glumac, 29, of Indianapolis, pleaded guilty to money laundering and to fencing the items the Finans stole and was sentenced to 24 months in prison.

The three went on a return binge between 2014 and 2016, stealing and selling over 2,700 items, including GoPro digital cameras, Microsoft Xboxes, Microsoft Surface tablets, and MacBooks.

The scheme works by exploiting Amazon’s customer service policy. Basically, they claim that the items they ordered were damaged or not working and then request and receive replacements from Amazon at no charge, the U.S. Attorney’s office said in a statement.

The Finans would place thousands of Amazon orders, create multiple false identities, and get the stolen goods from retail shipping stores all over Indiana, the U.S. Attorney’s office said. Then sell them to their fence, Glumac. In two years, they made roughly $750,000.

“Fraud had become a way of life. Their Amazon scheme was their ‘job,’” the U.S. attorney said in a statement.

This is reflected in the numbers reported by the National Retail Federation (NRF) in a targeted survey for 2017. Of total annual returns and exchanges, the average fraudulent return was expected to be 10.8 percent, up from 8.8 percent in 2015, according to the NRF.

“Return fraud continues to pose a serious threat to the retail industry,” the NRF said in its 2017 Organized Retail Crime Survey.  The most common (about two-thirds) is “the return of stolen merchandise and employee return fraud,” the NRF said.

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International Business E-Mail Compromise Takedown

Today, federal authorities—including the Department of Justice and the FBI—announced a major coordinated law enforcement effort to disrupt international business e-mail compromise (BEC) schemes that are designed to intercept and hijack wire transfers from businesses and individuals.

Operation WireWire—which also included the Department of Homeland Security, the Department of the Treasury, and the U.S. Postal Inspection Service—involved a six-month sweep that culminated in over two weeks of intensified law enforcement activity resulting in 74 arrests in the U.S. and overseas, including 42 in the U.S., 29 in Nigeria, and three in Canada, Mauritius, and Poland. The operation also resulted in the seizure of nearly $2.4 million and the disruption and recovery of approximately $14 million in fraudulent wire transfers.

A number of cases charged in this operation involved international criminal organizations that defrauded small- to large-sized businesses, while others involved individual victims who transferred high-dollar amounts or sensitive records in the course of business. The devastating impacts these cases have on victims and victim companies affect not only the individual business but also the global economy. Since the Internet Crime Complaint Center (IC3) began formally keeping track of BEC and its variant, e-mail account compromise (EAC), there has been a loss of over $3.7 billion reported to the IC3.

BEC, also known as cyber-enabled financial fraud, is a sophisticated scam that often targets employees with access to company finances and trick them—using a variety of methods like social engineering and computer intrusions—into making wire transfers to bank accounts thought to belong to trusted partners but instead belong to accounts controlled by the criminals themselves. And these same criminal organizations that perpetrate BEC schemes also exploit individual victims—often real estate purchasers, the elderly, and others—by convincing them to make wire transfers to bank accounts controlled by the criminals.

Foreign citizens perpetrate many of these schemes, which originated in Nigeria but have spread throughout the world.

During Operation WireWire, U.S. law enforcement agents executed more than 51 domestic actions, including search warrants, asset seizure warrants, and money mule warning letters. And local and state law enforcement partners on FBI task forces across the country, with the assistance of multiple district attorney’s offices, charged 15 alleged money mules for their roles in defrauding victims.

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Court Says Border Agents Need Suspicion to Search Cellphones

U.S. border authorities cannot search the cellphones of travelers without having some reason to believe a particular traveler has committed a crime, a federal appeals court ruled Wednesday.

The 4th U.S. Circuit Court of Appeals in Richmond ruled in the case of a Turkish national who was arrested at Dulles International Airport after agents found firearm parts in his luggage.

A lower court judge refused to suppress evidence obtained from a warrantless search of Hamza Kolsuz’s phone.

The 4th Circuit upheld that ruling and found that a forensic search of electronic devices requires “individualized suspicion” of wrongdoing. The court said agents had that suspicion because Kolsuz had made two previous attempts to smuggle weapons parts out of the U.S.

The Fourth Amendment requires law enforcement to obtain warrants based on probable cause. But courts have made an exception for searches at airports and U.S. ports of entry, finding that the government can conduct warrantless border searches to protect national security, prevent transnational crime and enforce immigration and customs laws.

The American Civil Liberties had urged the 4th Circuit to find that the government should be required to obtain a warrant or at least a determination of probable cause that evidence of a crime is contained on electronic devices before agents can search them at airports.

The 4th Circuit said it did not have to reach the question of whether probable cause or a warrant is required. Reasonable suspicion is a lower legal standard.

Claire Gastanaga, the executive director of the ACLU of Virginia, said the group is pleased that the appeals court “recognized correctly that border agents can’t conduct invasive searches on a traveler’s cell phone or other electronic devices just because the person is crossing the border.”

Last year, the ACLU filed a federal lawsuit claiming warrantless border searches are unconstitutional because of the vast amount of private personal and business information stored on electronic devices.


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Palo Alto Turns to Cameras to Keep Watchful Eye on Railroad

Palo Alto is turning to technology in hopes of preventing people from attempting to stand in front of or jump in front of trains traveling through the Peninsula city.

The city has installed thermal imaging-equipped video cameras designed to keep an eye out for people standing or hanging around the tracks at four railroad crossings within city limits.

While the video cameras have already been put in place, the city is still conducting rounds of testing before making the cameras fully operational later this month.

Palo Alto has hired a company to watch the camera feeds from an off-site location and call law enforcement if they spot anything unusual. Those monitoring the camera feeds can also speak via a public address system to alert someone on the tracks that help is on the way.

The Peninsula city has been paying security guards to scan the railroad crossings since about 2009 after a number of teenagers committed suicide on the tracks.

Unlike the human eye, the cameras are able to scan for movement roughly 1,000 feet away from where they are located along the tracks. The cameras can also capture movement when its dark, raining or foggy.

“We’re hoping that not only will this provide better monitoring, the ability to see much better down the tracks than the human eye, but also in the long run to provide faster notification to law enforcement and be more cost effective,” Claudia Keith with the city of Palo Alto said.

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