Meet the Con Man Who Pulled Off a Federal Sting That Cost Google $500 Million

ON FEBRUARY 25, 2009, a then 34-year-old career con man named David Anthony Whitaker left the Wyatt Detention Facility in Central Falls, Rhode Island, and slid into the backseat of an unmarked government car. He was dressed in traditional prison garb—khaki pants, brown shirt, handcuffs, leg irons. A federal agent sat beside him. A second car followed to make sure nobody trailed them or attempted an ambush. Not that anyone expected trouble. This was merely standard procedure when transporting a government cooperator.

That’s what Whitaker was now: a cooperator. It felt surreal. One year ago he was in Mexico, living the most fulfilling life he’d ever known in his chaotic, troubled years on the planet. He had been bringing in obscene amounts of money by selling black-market steroids and human growth hormone online. He had a multimillion-dollar apartment in a country club in Guadalajara. He had a cabin in the mountain town of Mazamitla. He had lots of cars—an orange 4Runner, a BMW, a Jeep. He’d even funded the construction of a local hospital. Sure, he had to live under an alias and was on the run from US Secret Service agents who were trying to nail him for a long-standing multicount fraud complaint. But he had a lawyer on retainer, and at least the local cops were easy to pay off.

That life ended on March 19, 2008, when a Mexican immigration agent nabbed Whitaker and brought him back to LAX, where the Secret Service promptly arrested him. He was facing a potential sentence of 65 years in prison. Sixty-five years. That meant spending the rest of his life behind bars. The thought was unbearable.

Whitaker began thinking of ways to knock years off his sentence. He considered providing the names of the drug users, pushers, and doctors who had patronized his online steroid business. They were mostly easy marks, and Whitaker was quick to take advantage of them. For a while he bottled sterile water in 1-milliliter vials, marketed it as a steroid called Dutchminnie, and sold it for $1,000 a pop. Not only did clients fall for the scam, they sent back photos showing how they’d bulked up after using the “drug.”

But he quickly realized that he could offer the government much more than the names of a few juicers. At one point during a meeting with Whitaker and his lawyer, the Feds asked him how he had grown his online enterprise. Whitaker’s answer was immediate: He had used Google AdWords. In fact, he claimed, Google employees had actively helped him advertise his business, even though he had made no attempt to hide its illegal nature. It was reasonable to assume, Whitaker said, that Google was helping other rogue Internet pharmacies too.

If true, this would be a bombshell. This was Google, after all. Since its founding, the search giant had prided itself on being a different kind of corporation, the “don’t be evil” company. And for almost as long, its open-to-all-comers ad policy had come under scrutiny. Online pharmacies were a particular sticking point; in 2003, three separate congressional committees initiated inquiries into the matter. On July 22, 2004, a month before Google went public, Sheryl Sandberg—at the time Google vice president of global online sales and operations—testified before the Senate Permanent Subcommittee on Investigations. Legislators had proposed two bills that would regulate online pharmaceutical sales, but Sandberg argued that the measures would be unduly burdensome. She said that Google employed a third-party verification service to vet online pharmacies. She also described Google’s own automated monitoring system and the creation of a team of Google employees dedicated to enforcing all of the company’s pharmaceutical ad policies. “Google has taken strong voluntarily [sic] measures—going beyond existing legal requirements—to ensure that our advertising services protect our users by providing access to safe and reliable information,” she testified. Neither bill made it out of committee. (Sandberg, now Facebook’s chief operating officer, declined to comment or be interviewed for this story.)

The agents seemed skeptical of Whitaker’s claims and spent the next 10 months following up on them. But they apparently found the story plausible, because now Whitaker was being driven to a Providence, Rhode Island, postal inspector’s office to launch the US government’s undercover investigation into one of the world’s most admired, profitable, and powerful companies.

As soon as they entered the postal inspector’s office, the Feds explained the ground rules. Whitaker had to be completely honest with them; one lie and any possible deal was off. From now on, he would be known as Jason Corriente, the fictional CEO of a fake Rhode Island–based marketing firm called Maxwell and Associates. The FDA had already secured an 800 number, a bank account, and an answering service. His job: to buy advertising for SportsDrugs.net, a website that sold HGH and steroids from Mexico, no doctor’s prescription required.

With his talent for prevarication, Whitaker was well suited to the task. Throughout his checkered past, he had assumed false identities, sold nonexistent products, and written bad checks. But he’d never faced such high stakes. If he couldn’t somehow lead Google into breaking the law again, he’d probably die in prison.

An agent handed Whitaker a list of phone numbers of Google employees and a phone hooked up to a recorder, then told him to dial.

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Walmart Employee Theft Scheme

Police are looking for a Walmart cashier and her husband, who investigators say were the ringleaders in a store theft ring.

Jatmarie Merced and her husband David Burgos are accused of stealing $60,000 worth of merchandise, with the help of at least three other employees.

Police say the wife, who worked at the Bethlehem Township Walmart, would check out a large order of merchandise, but would only ring up a very inexpensive item and let the rest go unpaid.

“Even people that work in the store think there’s a legitimate transaction going on and in reality there is not,” said Tony Stevens, Bethlehem Twp. Police, who showed surveillance video of one of these “fake” transactions to NBC10′s Doug Shimell.

Investigators are trying to track down Merced and Burgos, along with Kristopher Herrera, 19, but say there are several other participants in the theft ring who they are working to identify.

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Two charged in theft of $40K from hacked Subway keypads

Two California men have been indicted for allegedly hacking point-of-sale terminals at Subway shops to steal at least $40,000.

Prosecutors accused Shahin Abdollahi, aka “Sean Holdt,” and Jeffrey Thomas Wilkinson of hacking at least 13 point-of-sale (POS) terminals to install software that fraudulently loaded at least $40,000 onto Subway gift cards, according to an indictment unsealed in Boston on Friday (see below). The pair then allegedly used the cards to make purchases at Subway shops and sold them on eBay and Craigslist.

Abdollahi owned a Subway franchise in Southern California from 2005 to 2008 and later ran a business called POS Doctor that sold POS terminals to Subways across the country, according to the Justice Department. Around 2011, Abdollahi allegedly sold terminals to Subway franchises in California, Massachusetts, and Wyoming that were loaded with LogMeIn, a remote desktop tool.

Both defendants were charged with one count of conspiracy to commit computer intrusion and wire fraud, as well as with a separate count of wire fraud.

This isn’t the first time Subway POS terminals have fallen victim to intrusion. Last year, two Romanian men pled guilty to hacking point-of-sale terminals at hundreds of Subway sandwich stores in the U.S. to steal credit card data from more than 146,000 accounts.

Interestingly, the indictments were announced by Carmen Ortiz, the U.S. attorney for Massachusetts, who oversaw the criminal case of Aaron Swartz before the Internet activist’s suicide in January.

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Child Identity Theft

A child’s Social Security number can be used by identity thieves to apply for government benefits, open bank and credit card accounts, apply for a loan or utility service, or rent a place to live. Check for a credit report to see if your child’s information is being misused. Take immediate action if it is.

Many school forms require personal and, sometimes, sensitive information. Find out how your child’s information is collected, used, stored, and thrown away. Your child’s personal information is protected by law. Asking schools and other organizations to safeguard your child’s information can help minimize your child’s risk of identity theft.

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NACA Leads the Way in Innovative Approaches to Consumer Education and Consumer Advocacy Resources

The National Association of Consumer Advocates (NACA) is a non-profit association of attorneys and consumer advocates committed to representing customers’ interests. Our members are private and public sector attorneys, legal services attorneys, law professors and law students whose primary focus is the protection and representation of consumers. NACA’s members focus much of their efforts on advocating for individuals who have been victimized by fraudulent, abusive, or predatory business practices. However, NACA is also diligently focusing on innovative educational opportunities designed to prevent consumers from falling victim to these consumer scams. We are pleased to join in celebrating National Consumer Protection Week (NCPW) with the Federal Trade Commission the week of March 3rd-9th.

“The goal of any good consumer advocate is our own obsolescence,” states Ira Rheingold, NACA’s Executive Director. Though National Consumer Protection Week comes only once a year, NACA’s educational unit strives year round to provide both attorneys and consumers with the learning resources, opportunities, and forums they need to be effective advocates for themselves and others in the marketplace. To that end, NACA has launched a new initiative aimed at providing consumer advocates with frequent, free-of-charge online webinar courses addressing the latest in substantive legal developments, legislative and regulatory updates, and more. Our goal with these webinars is to provide consumer advocates and educators a forum to absorb and share new and relevant information, and then be able to tailor and implement what they have learned to serve the specific needs of the consumer communities.

NACA also develops free educational materials and brochures on various consumer protection topics, including Fair Debt Collection, Foreclosure, Military Consumer Justice, and Auto Fraud, which can be found on NACA’s website here. The brochures provide basic information for consumers to learn more about abusive lending and ways to try to avoid it. Some of our publications are available in Spanish. As part of NACA’s Military Consumer Justice Project, we have also developed free educational materials specifically tailored for military servicemembers and their families.

As part of NCPW, NACA helped to kick off this exciting week by participating in the NCPW Congressional Fair on Thursday, February 28th. Additionally, NACA is co-sponsoring the Fair Debt Collection Practices Conference with the National Consumer Law Center in Baltimore during NCPW (March 7th-9th).

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Retailers struggle to curb shoplifting, fraud

Feb. 24–Fraud, theft and other preventable losses drain billions of dollars from retailers nationwide as shops confront increasingly sophisticated criminals bent on looting shelves.

A December study by the Centre for Retail Research on behalf of New Jersey-based Checkpoint Systems, a global leader in fighting retail crime, estimated that America’s shops lost $8.9 billion during the holiday season to shoplifters, vendor fraud, deceitful employees and other problems. That added $98 to each family’s shopping bill as stores tried to recoup losses.The research echoed the National Retail Security Survey published in June by the National Retail Federation and the University of Florida. It pegged losses for America’s 3.6 million retailers at $35 billion in 2011.

There is some good news: The losses in 2011 were down $3.5 billion from those in 2008, when the recession began. Experts credit an increase in shops’ spending on guards and anti-crime gadgets that were cut from corporate budgets during the recession.

“It’s a combination of things. We’re seeing more money spent on loss prevention. That’s been notching up every year,” said Richard Mellor, vice president for Loss Prevention at the Washington-based National Retail Federation.

Key security innovations include anti-theft alarms hidden in products; software that mines sales data, inventory logs and video footage to flag shoplifters and dishonest employees; and increased information sharing between retailers and law enforcement to identify criminal suspects before they strike again.

“Retailers are paying more attention to what shrinkage means to the bottom line,” said Dan Reynolds, vice president of North American Sales and Customer Service for Checkpoint Systems.

The rise of organized crime rings is harder to halt.

The National Retail Security Survey revealed that 96 percent of retailers were victimized by packs of professional pilferers in 2011, perhaps looting as much as $12 billion.

Moving from state to state, the shoplifters often distract employees before snatching consumer goods they can fenced easily, especially online. Their top targets: Alcohol, clothing, toys, perfume, DVDs, hardware, watches and chocolates, according to Checkpoint, which designed ways to identify the criminals’ tools when they enter a store.

“We have to keep one step ahead of them,” Reynolds said.Ross Township Police Department officers try to do just that.

Dramatic heists, such as an autumn spree that targeted the Best Buy electronics store on McKnight Road or the theft of handbags from the Louis Vuitton store in Ross Park Mall in November, attract media attention, but police spend most of their time working with stores to prevent crime and quickly investigate shoplifting bands, then disseminate information about them.”It’s an issue for any township or municipality that has the number of retail stores that we do. Our problem is no different than any other community with many strip malls, malls and others retail outlets,” said Ross police Sgt. Benjamin Dripps.

Best Buy’s theft ring remains at large but Dripps said police still are looking for them.”We do many large-scale investigations. But we always also work closely with the anchor stores at the malls and the shops in strip malls. They’re familiar with our policies and know what we can do with them when we arrive.”

Carl Prine is a staff writer for Trib Total Media. He can be reached at 412-320-7826 or cprine@tribweb.com.

Feb. 24–Fraud, theft and other preventable losses drain billions of dollars from retailers nationwide as shops confront increasingly sophisticated criminals bent on looting shelves.

A December study by the Centre for Retail Research on behalf of New Jersey-based Checkpoint Systems, a global leader in fighting retail crime, estimated that America’s shops lost $8.9 billion during the holiday season to shoplifters, vendor fraud, deceitful employees and other problems. That added $98 to each family’s shopping bill as stores tried to recoup losses.The research echoed the National Retail Security Survey published in June by the National Retail Federation and the University of Florida. It pegged losses for America’s 3.6 million retailers at $35 billion in 2011.

There is some good news: The losses in 2011 were down $3.5 billion from those in 2008, when the recession began. Experts credit an increase in shops’ spending on guards and anti-crime gadgets that were cut from corporate budgets during the recession.

“It’s a combination of things. We’re seeing more money spent on loss prevention. That’s been notching up every year,” said Richard Mellor, vice president for Loss Prevention at the Washington-based National Retail Federation.

Key security innovations include anti-theft alarms hidden in products; software that mines sales data, inventory logs and video footage to flag shoplifters and dishonest employees; and increased information sharing between retailers and law enforcement to identify criminal suspects before they strike again.

“Retailers are paying more attention to what shrinkage means to the bottom line,” said Dan Reynolds, vice president of North American Sales and Customer Service for Checkpoint Systems.

The rise of organized crime rings is harder to halt.

The National Retail Security Survey revealed that 96 percent of retailers were victimized by packs of professional pilferers in 2011, perhaps looting as much as $12 billion.

Moving from state to state, the shoplifters often distract employees before snatching consumer goods they can fenced easily, especially online. Their top targets: Alcohol, clothing, toys, perfume, DVDs, hardware, watches and chocolates, according to Checkpoint, which designed ways to identify the criminals’ tools when they enter a store.

“We have to keep one step ahead of them,” Reynolds said.Ross Township Police Department officers try to do just that.

Dramatic heists, such as an autumn spree that targeted the Best Buy electronics store on McKnight Road or the theft of handbags from the Louis Vuitton store in Ross Park Mall in November, attract media attention, but police spend most of their time working with stores to prevent crime and quickly investigate shoplifting bands, then disseminate information about them.”It’s an issue for any township or municipality that has the number of retail stores that we do. Our problem is no different than any other community with many strip malls, malls and others retail outlets,” said Ross police Sgt. Benjamin Dripps.

Best Buy’s theft ring remains at large but Dripps said police still are looking for them.”We do many large-scale investigations. But we always also work closely with the anchor stores at the malls and the shops in strip malls. They’re familiar with our policies and know what we can do with them when we arrive.”

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Lawyers: Jackson Jr., wife intend to plead guilty to charges

Jesse Jackson Jr. and his wife Sandi intend to plead guilty to federal charges alleging the former congressman misused $750,000 in campaign funds while she understated their income on tax returns for six years, their lawyers say.

Jackson Jr., 47, a Democrat from Chicago, was charged in a criminal information Friday with one count of conspiracy to commit wire fraud, mail fraud and false statements. He faces up to five years in prison, a fine of up to $250,000 and other penalties.

Sandi Jackson was charged with one count of filing false tax returns. She faces up to three years in prison, a fine of up to $250,000 and other penalties.

Jackson Jr. is accused of diverting $750,000 in campaign funds for personal use.

Federal authorities allege that Jackson Jr. used campaign funds to purchase a $43,350 men’s gold-plated Rolex watch, $5,150 worth of fur capes and parkas, and $9,588 in children’s furniture. The purchases were made between 2007 and 2009, according to the criminal information, which authorities noted is not evidence of guilt.

Other expenditures listed by prosecutors include $10,105 on Bruce Lee memorabilia, $11,130 on Martin Luther King memorabilia and $22,700 on Michael Jackson items, including $4,600 for a “Michael Jackson fedora.”

The government also alleged that Jackson Jr. made false statements to the House of Representatives because he did not report approximately $28,500 in loans and gifts he received.

“He has accepted responsibility for his actions and I can confirm that he intends to plead guilty to the charge in the information,” Jackson Jr.’s attorney Brian Heberlig said.

Sandi Jackson is accused of filing incorrect joint tax returns with her husband for calendar years 2006 through 2011, reporting income “substantially less than the amount of income she and her husband received in each of the calendar years,” with a substantial additional tax due.

Her attorneys released a statement saying she has “reached an agreement with the U.S. attorney’s office to plead guilty to one count of tax fraud.”

Jackson Jr. stepped down from the House of Representatives on Nov. 21, citing both his poor health and an ongoing federal probe of his activities. In a statement then, he said he was doing his best to cooperate with federal investigators and to accept responsibility for his “mistakes.”

In a statement, Jackson Jr. said:

“Over the course of my life I have come to realize that none of us are immune from our share of shortcomings and human frailties. Still I offer no excuses for my conduct and I fully accept my responsibility for the improper decisions and mistakes I have made. To that end I want to offer my sincerest apologies to my family, my friends and all of my supporters for my errors in judgment and while my journey is not yet complete, it is my hope that I am remembered for the things that I did right.”

Sandi Jackson’s attorneys released a statement saying she “has accepted responsibility for her conduct, is deeply sorry for her actions, and looks forward to putting this matter behind her and her family. She is thankful for the support of her family and friends during this very difficult time.”

Jackson’s father, the Rev. Jesse Jackson Sr., said he wanted to attend President Barack Obama’s speech Friday at Hyde Park Academy in Chicago but traveled to Washington, D.C., instead, to be with family members while they waited for the federal charges to come down.

“This has been a difficult and painful ordeal for our family,” the civil rights leader said.

The Rev. Jesse Jackson said he would “leave it up to the courts system” to determine his son’s fate.

“We express our love for him as a family,” he said.

Jackson Jr.’s political fortunes sank beginning late in 2008, when he sought unsuccessfully to have Gov. Rod Blagojevich appoint him to the Senate seat that came open with the election of then-Sen. Barack Obama to the White House.

Jackson Jr. or an emissary reportedly offered to raise up to $6 million in campaign cash for Blagojevich, who now is in federal prison for crimes including trying to sell the Senate seat. Jackson Jr. was never charged in the case, which became the subject of an ethics probe in the House.

Last June, Jackson Jr. began a mysterious leave of absence for what originally was called “exhaustion” but later emerged as bipolar disorder. He spent months in treatment and won re-election Nov. 6 despite never returning to service in the House or staging a single campaign appearance.

A campaign to replace him is being conducted now in the 2nd Congressional District, which includes parts of the South Side and south suburbs.

Jackson Jr. was first elected to Congress in 1995. Sandi Jackson was a Chicago alderman until she resigned her post last month. They have two children.

Sandi Jackson’s firm, J. Donatella & Associates, has been paid at least $452,500 from her husband’s campaign committee since 2002, Federal Election Commission reports show.

The former congressman’s campaign committee reported $105,703 in cash on hand on last Nov. 26, FEC reports show. Leading up to the last election, it reported $1 million in contributions and $1.06 million in operating expenditures, reports show.

Once considered a potential candidate for mayor of Chicago, Jesse Jackson Jr.’s reputation has taken a hit in recent years because of the Blagojevich scandal and also because of news reports in 2010 that a suburban Chicago businessman told federal investigators he twice paid to fly a woman — a hostess from a Washington, D.C. bar — to Chicago at Jackson’s request.

In the wake of the reports, Jackson Jr. issued a statement calling the woman a “social acquaintance” and describing the matter as a “private and personal matter between me and my wife that was handled some time ago.”

Jackson Jr. subsequently told the Tribune editorial board he had apologized to “my absolute best friend, my wife.”

Still, he also acknowledged he asked longtime supporter Raghuveer Nayak to pay to fly the woman from Washington to Chicago. House ethics rules prohibit members from soliciting gifts of personal benefit. Jackson said Nayak’s purchase was “a friendly gesture” by “a close and dear friend of mine, one who knows members of my family, has worked with members of my family, has been a friend of our family’s for a number of years.”

The woman’s travel was “not a personal benefit to me, I don’t believe, under the House rules. A benefit to the person for whom he bought the ticket. He didn’t buy tickets for me. Did I direct him? I did.”

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Examples of Identity Theft Schemes – Fiscal Year 2013

The following examples of identity theft schemes are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

Husband and Wife Sentenced for Fraud and Identity Theft

On January 30, 2013, in Roanoke, Va., Michelle A. Ferguson, of Roanoke, Va., was sentenced to 29 months in prison for conspiracy to commit fraud and stealing the identities of others. Her husband, William J. Ferguson Jr., was sentenced to 14 months in prison for his participation in the conspiracy to commit fraud. According to court documents, the Fergusons operated a tax return preparation business out of their Roanoke home and committed fraud in two specific manners. When meeting with clients face-to-face to prepare their taxes, the Fergusons would have their clients sign the return without reviewing its contents. The returns were set-up to have any refunds deposited directly into an account controlled by the Fergusons. To maximum refunds, the Ferguson, without the knowledge of their clients, included phony Schedule C’s, Profit and Loss from Business, to the returns. Once the tax refund was received by the Fergusons, they would write a check to each client for a fraction of the total refund received. In addition, the defendants filed false tax returns using stolen social security numbers. The individuals who had their identity stolen did not receive any portion of the proceeds obtained through the false claim for refund.

Tax Preparer Sentenced for Identity Theft and Tax Fraud

On January 29, 2013, in Boston, Mass., Rosa Ivette Colon, of Milford, Mass., was sentenced to 61 months in prison and three years of supervised release for filing hundreds of false income tax returns for her clients and identity theft. She was also ordered to pay $400,000 in restitution to the IRS. In August 2012, Colon pleaded guilty to a 32-count indictment charging her with aggravated identity theft, filing false claims with the IRS, and forging endorsements on United States Treasury checks. Colon operated a business called X-Press Taxes in Somerville, Mass. During the tax years 2004 through 2010, she prepared hundreds of false income tax returns for her clients. On numerous occasions, when preparing income tax returns for clients, Colon prepared two different versions of the return. Colon gave one version of the return to the client, but filed another version seeking a larger refund with the IRS, and kept the additional fraudulent amount for herself. In addition, Colon submitted false personal income tax returns to the IRS on her own behalf. Colon also unlawfully used the identities of three individuals in connection with her fraudulent tax refund scheme.

Dominican National Sentenced for Identity Trafficking Scheme

On January 29, 2013, in San Juan, Puerto Rico, Rafael Joaquin Beltre-Beltre, formerly of Caguas, Puerto Rico, was sentenced to 63 months in prison for his leading role in trafficking the identities of Puerto Rican U.S. citizens and corresponding identity documents. In addition Beltre-Beltre will forfeit $424,793 in illegal proceeds and be deported to the Dominican Republic after the completion of his sentence. On September 4, 2012, Beltre-Beltre pleaded guilty to one count of conspiracy to commit identification fraud, one count of conspiracy to commit alien smuggling for financial gain and one count of international money laundering. Beltre-Beltre admitted that he and his co-conspirators sold personal identifying information pertaining to real Puerto Rican U.S. citizens, including minors, and that he knew some of the identities would be used to commit tax fraud and some would be used to fraudulently apply for U.S. passports.

Florida Man Sentenced for Income Tax Fraud

On January 24, 2013, in Tallahassee, Fla., Marvens Jean-Paul, of Opa Locka, Florida, was sentenced to 48 months in prison and ordered to pay $280,285 in restitution. Jean-Paul pleaded guilty in 2012 to two counts of conspiracy to file false claims, seven counts of wire fraud, and four counts of aggravated identity theft based upon his involvement in schemes to file false claims for more than $1 million in federal tax refunds in 2010 and 2011. According to court documents, Jean-Paul admitted to stealing personal identifying information from an office on the campus of a Florida university. Illegally using the information, Jean-Paul and his co-conspirators filed false tax returns. At Jean-Paul’s direction, his co-defendants, Kimle Fils-Aime and Guerline St. Charles, cashed tax refund checks generated by one of the schemes at a bank where they worked as tellers. In addition, Jean-Paul arranged for the illegally obtained tax refunds to be loaded onto prepaid debit cards, which were used to wire transfer cash. Fils-Aime was previously sentenced to 12 months in prison and ordered to pay $86,748 in restitution. St. Charles was previously sentenced to five years’ probation, with eight months’ home detention, and ordered to pay $73,320 in restitution.

Florida Woman Sentenced on Identity Theft and Fraud Charges

On January 23, 2013, in Jacksonville, Fla., Regina Ward, of Gainesville, Fla., was sentenced to 13 months in prison and three years of supervised release for charges related to identity theft, fraud against the United States, and Treasury check fraud. Ward was also ordered to pay $6,500 in restitution to the IRS. According to court documents, in February 2012, Ward met with an undercover agent (UC) posing as an individual willing and capable of cashing United States Treasury checks without proper identification. Ward presented the UC with a Treasury check for $12,727, in the name of another individual. Ward negotiated a check-cashing fee with the UC and advised that she had other checks that she needed to cash. Ward sold the Treasury check to the UC for $6,500. Later that same month, Ward met with the UC again and attempted to cash two additional Treasury checks. During the meeting, Ward sold ten stolen identities for the purpose of filing fraudulent federal income tax returns. She sold these identities for $850 each.

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Physician Pleads Guilty to Role in Health Care Fraud Conspiracy

On the day his trial was to begin in U.S. federal court, Dr. Daniel K. Leong, 59, who owned South Dallas Community Medical Center (SDCMC) on Martin Luther King Blvd. in Dallas, pleaded guilty to one count of conspiracy to commit health care fraud. Leong, who is in federal custody, faces a maximum penalty of five years in federal prison, a $250,000 fine, and restitution. Sentencing is set for May 1, 2013, before U.S. District Judge Ed Kinkeade.

Leong’s co-conspirator, Cal Graves, who worked as a physician assistant at the SDCMC, pleaded guilty in July 2012 to the same offense. He is scheduled to be sentenced by Judge Kinkeade on February 13, 2013.

According to plea documents filed in the case, from February 2010 to February 2011, Leong and Graves engaged in a conspiracy to defraud Medicare and Medicaid by falsely representing that office visits and diagnostic tests were medically necessary.

In exchange for submitting themselves to diagnostic tests, patients at the clinic were prescribed controlled substances. This ensured that the patients would return to the clinic the next month, thus making themselves available for more tests. Often, patients would exaggerate their pain levels to provide a basis for a prescription for narcotics. Leong benefitted from the exaggeration because this gave him “cover” to order more tests. The patients were rarely referred to specialists for their persistent pain, and this process was repeated for up to several years without any actual treatment for some patients.

Leong and Graves frequently ordered tests known as electromyograms (EMG), which are used to diagnose neurological and nueromuscular problems. These tests are also highly-reimbursable by Medicare and Medicaid. Often, the results of these tests were never read, and Graves did not have the proper training to read them.

In addition, in February 2010, Leong signed a blank prescription that reflected Leong’s authority to prescribe controlled substances. Leong instructed Graves and other SDCMC staff to copy this prescription as needed. When patients came to SDCMC, Graves used the pre-signed prescriptions.

Medicare and Medicaid would not have paid claims for office visits, diagnostic testing, or prescriptions if they had known either that the services were medically unnecessary and that Leong did not prescribe the medications.

The case is being prosecuted by Assistant U.S. Attorneys Michael McCarthy and Mindy Sauter. The investigation was conducted by the FBI, U.S. Health and Human Services (HHS) Office of the Inspector General (OIG), and the Texas Attorney General’s Medicaid Fraud Control Unit.

Since their inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

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The Willing Nanny, the Happy Family: Too Good to Be True

The e-mail arrived two weeks ago.

“I am a Nanny/Babysitter,” it read, “looking for a live out position starting ASAP.”

It was from a woman named Flavia Wasescha. She was responding to an ad on Craigslist posted by Venus Clemons, who was looking for a baby sitter for her 18-month-old son, Jamie.

Ms. Clemons replied with an e-mail that practically sighed with relief. Yes, the position was still open. She was away, she wrote: Her mother had died two weeks earlier, in England, and she was there with Jamie for a little while longer before returning to New York and her engineer husband, Artis. They were originally from California.

She apologized in advance for a long list of questions that she wanted Ms. Wasescha to answer. “A child is not what you leave in the care of just anyone,” she wrote.

Do you smoke? Do you drink? Do you like pets? Do you know CPR? There were 24 questions in all.

Ms. Wasescha replied, expressing condolences on Ms. Clemons’s loss and introducing herself as a 26-year-old immigrant from Switzerland. She had lived and worked in the New York City suburb Hastings-on-Hudson since 2009, and had recently married her boyfriend.

She did not smoke, drank occasionally, was eager and willing to learn CPR and spoke two dialects of German as well as English, and with a few refresher lessons, “I think I could have a conversation in French as well,” she wrote.

The back and forth continued. Ms. Clemons thanked the nanny for her time in filling out the questionnaire and promised a quick decision, as her husband was leaving for China on business very soon and wanted this sorted out. She gave her cellphone number for texting and attached a family portrait, all wide smiles outside a stucco house in California, and two photos of the little boy. In one, he wore a cute costume in the backyard, with claws and horns and three googly eyeballs.

The nanny wrote, “You have a cute little monster :) .” She attached a picture of herself hugging a giant M&M.

The decision came the following day. “Congratulations to you,” Ms. Clemons wrote. “You have the position as you seem nice and very sincere.” The nanny could start as soon as Ms. Clemons and Jamie returned from England. “We all look forward to having you join our family,” she wrote. Her husband’s assistant would mail a check for the first week’s pay to Ms. Wasescha’s home.

The nanny replied, “I will not disappoint you!” She said she did not have a bank account but would open one soon.

Ms. Clemons sent her flight itinerary from KLM Royal Dutch Airlines. She and Jamie would be home the following Wednesday, Sept. 5. Ms. Wasescha suggested that they meet the next day, and Ms. Clemons agreed.

The scam was going perfectly.

Ms. Clemons wrote the day before the flight. Had the check arrived? There has been a mistake, she said. Her husband’s assistant, named Kuan, had sent the week’s pay of $900, as agreed, but had also mistakenly added Ms. Clemons’s airfare, for a total of $2,980.

Ms. Wasescha confirmed that yes, the check had arrived, in the unexpectedly large sum. “What can we do?” she asked. “How can I send you that money?”

Keep your $900 and send me the rest, Ms. Clemons suggested.

Wait, Ms. Wasescha said. I never deposited this check. Tell Kuan to send you the money himself. And by the way, don’t you have a credit card?

“Wow,” Ms. Clemons replied. “You sound really cold.”

Ms. Wasescha never heard another word from Venus Clemons. She was stunned, she said later. All those questions, the photos, all the e-mails. The dead mother, the cute boy — somebody else’s kid.

I went with Ms. Wasescha as she took the check to a bank in Manhattan and asked a manager if it was fake. The manager ran it through a machine and pointed a special light at the paper, and said yes, it was a fake, a photocopy of a real check.

Ms. Wasescha said she had reported the case to the F.B.I. The routine is known as the “nanny scam,” its perpetrators preying on young women who quickly deposit the too-big check at an A.T.M., where some money might be immediately available, before the fraud is detected days later. Some of these nannies, eager to help the new employer, wire money to the fake mother. Efforts to reach the person using the name Venus Clemons were unsuccessful.

Ms. Wasescha has since answered another ad for nanny work. She was relieved when the mother suggested she visit the family’s apartment for a face-to-face interview.

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