Author: MIL-OSI Publisher

Source: United States Department of Justice Criminal Division

Yesterday, on Aug. 20, a federal jury convicted Jinchao Wei, also known as Patrick Wei, of espionage and export violations. Wei was an active-duty U.S. Navy sailor stationed at Naval Base San Diego when he agreed to sell Navy secrets to a Chinese intelligence officer for $12,000.

Following a five-day trial and one day of deliberation, the jury convicted Wei of six counts, including conspiracy to commit espionage, espionage, and unlawful export of, and conspiracy to export, technical data related to defense articles in violation of the Arms Export Control Act and the International Traffic in Arms Regulations. Wei is scheduled to be sentenced on Dec. 1.

“The defendant, who took an oath to protect our Nation and was entrusted with a security clearance as a petty officer in the United States Navy, sold out his country for $12,000,” said Assistant Attorney General for National Security John A. Eisenberg. “He violated his oath, betrayed his uniform and fellow sailors, and turned his back on his adopted nation for money. This verdict serves as a warning to those who do not take seriously the solemn obligations of their positions of trust or their duty to this Nation. Do not be tempted by easy money because you will be prosecuted and sent to prison.”

“The defendant’s actions represent an egregious betrayal of the trust placed in him as a member of the U.S. military,” said U.S. Attorney Adam Gordon for the Southern District of California. “By trading military secrets to the People’s Republic of China for cash, he jeopardized not only the lives of his fellow sailors but also the security of the entire nation and our allies. The jury’s verdict serves as a crucial reminder that the Department of Justice will vigorously prosecute traitors.”

“Jinchao Wei swore oaths to become a U.S. Navy sailor and a U.S. citizen. He then committed espionage by sending photographs and videos of U.S. Navy vessels, ship movement information, technical manuals, and weapons capabilities to a Chinese intelligence officer,” said Assistant Director Roman Rozhavsky of the FBI’s Counterintelligence Division. “China continues to aggressively target U.S. military members with and without clearances. This guilty verdict shows the FBI and our partners will aggressively investigate and hold accountable anyone who threatens U.S. national security. We encourage past and present U.S. government personnel to beware of anyone offering to pay for their information or opinions and to report any suspicious contacts to the FBI.”

According to evidence presented at trial, Wei was a machinist’s mate for the amphibious assault ship U.S.S. Essex. He also held a U.S. security clearance and had access to sensitive national defense information about the ship’s various systems.

The evidence introduced at trial showed that Wei was approached in February 2022 via social media by someone who claimed to be a naval enthusiast. The individual was in reality a Chinese intelligence officer. Between February 2022 and his arrest in August 2023, as their relationship developed, Wei, at the request of the officer, sent extensive information about the Essex, including photographs, videos, and about its weapons. He also sent detailed information about other U.S. Navy ships that he took from restricted U.S. Navy computer systems. In exchange for this information, the intelligence officer paid Wei more than $12,000 over 18 months.

During the trial, the government presented evidence including conversations and other messages that Wei exchanged with his Chinese handler. These communications showed the efforts they made to cover their tracks, the tasks issued by his handler, and how Wei was paid for his work.

In addition to the two espionage charges, Wei was convicted of four counts of conspiring to violate and violating the Arms Export Control Act. That law prohibits individuals from willfully exporting technical data related to a defense article without a license from the Department of State. The government presented evidence that Wei conspired with his Chinese handler to export certain technical information which required a license for export.

The FBI and NCIS investigated the case, with valuable assistance from the U.S. Department of State and Transportation Security Administration.

Assistant U.S. Attorney John Parmley for the Southern District of California and Trial Attorney Adam Barry of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case.

Source: United States Department of Justice Criminal Division

An Illinois doctor was sentenced today to 34 months in prison for committing health care fraud and for hiding assets and lying to the IRS about his ability to pay approximately $1.6 million in taxes, penalties, and interest.

The following is according to court documents and statements made in court: from approximately 2011 to 2017, Krishnaswami Sriram, of Lake Forest, Illinois, evaded payment of approximately $1.6 million he owed to the IRS. Among other evasive steps, Sriram transferred ownership, in name only, of two rental properties to his children without their knowledge while he continued to receive income from the properties. He also transferred approximately $700,000 from bank accounts he controlled in the United States to accounts in India. To fraudulently reduce the money he owed, Sriram submitted documents to the IRS as part of an offer-in-compromise that omitted an investment account in the United States, bank and investment accounts in India, and ownership of the rental properties. In total, Sriram caused a tax loss to the IRS of approximately $1.6 million.

Between 2012 and 2022, Sriram also caused false Medicare billings to be submitted for episodes of in-home physician care that did not occur. Specifically, Sriram claimed to provide care for Medicare beneficiaries on dates when those individuals were either deceased or resided at inpatient facilities other than their homes. Sriram’s false statements in medical records relating to these episodes of care resulted in $136,980.36 in false billings to Medicare.

In addition to his prison sentence, the court ordered Sriram to serve three years of supervised release and to pay approximately $1.7 million in restitution to the United States.

IRS Criminal Investigation investigated the case.

Assistant U.S. Attorney Sara E. Henderson for the Northern District of California prosecuted the case with assistance from former Trial Attorney Victor Yanz of the Criminal Division’s Fraud Section. 

Source: United States Department of Justice Criminal Division

Troy Health, Inc. (Troy), a North Carolina-based provider of Medicare Advantage, Medicare Part D, and Dual Eligible Special Needs Plans, has entered into a non-prosecution agreement with the Department of Justice to resolve a criminal investigation into a health care fraud and identity theft scheme involving the use of artificial intelligence and automation software to illegally obtain Medicare beneficiary information and fraudulently enroll beneficiaries into its Medicare Advantage plans.

“Troy told low-income Medicare beneficiaries that it would use new technologies, including its proprietary artificial intelligence platform, to improve patient health outcomes,” said Acting Assistant Attorney General Matthew Galeotti of the Justice Department’s Criminal Division. “Instead, the company misused patient data to enroll beneficiaries in its Medicare Advantage plan without their consent. Today’s resolution reflects the Criminal Division’s emerging focus on corporate enforcement in the health care space and holding both individuals and companies accountable when they defraud our medical system to enrich themselves at the expense of the American taxpayer.”

“Health care providers that fraudulently enroll individuals in Medicare Advantage plans just to boost company profits undermine the integrity of the Medicare program and the well-being of Medicare enrollees,” said Special Agent in  Charge Kelly J. Blackmon with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “Alongside  our law enforcement partners, HHS OIG will continue to protect the American public and ensure that the personal health information of Medicare beneficiaries remains secured.”

As part of the non-prosecution agreement, Troy admitted that, from approximately October 2020 through the end of 2022, Troy defrauded the Medicare program by enrolling beneficiaries in Troy’s Medicare Advantage plans without their knowledge or consent. Under a Troy executive’s direction, some of Troy’s Territory Managers used proprietary software developed by one of Troy’s executives to unlawfully access pharmacy records and customer lists containing sensitive personal information, including beneficiaries’ names, addresses, dates of birth, Medicare ID numbers, and insurance information. Troy used that information to make unsolicited sales calls to potential beneficiaries. During those sales calls, Troy’s sales personnel provided false and misleading information to Medicare beneficiaries. For example, Troy’s sales personnel told prospective enrollees that they were calling on behalf of the beneficiaries’ pharmacies and representing to beneficiaries that Troy’s Medicare Advantage plan was being offered as a supplement to their existing health care plans rather than as a new plan.

Troy also used an artificial intelligence-based health care management platform it developed and made available to participating pharmacies, known as Troy.ai, as part of the scheme.  As described by the company, Troy marketed Troy.ai as a product that would leverage data and machine learning to lower the cost of care and improve health outcomes. As part of its effort to obtain new enrollments, however, Troy misused the platform by offering pharmacies kickbacks for enrollment referrals submitted through Troy.ai.

Troy also admitted that it used information obtained from the customer lists to enroll beneficiaries in Troy’s Medicare Advantage plan without their consent. At the height of the scheme, during the Medicare Advantage open enrollment period between Jan. 1, 2022 and March 31, 2022, Troy enrolled over 2,700 new Medicare Advantage members, many through automatic or batch enrollments. For example, on March 2, 2022, Troy enrolled over 300 beneficiaries on one day, with the enrollments occurring approximately one minute apart. In addition, some Troy employees manually entered fraudulent enrollments through the Centers for Medicare and Medicaid Services (CMS) website. This conduct followed a Troy executive’s announcement at a 2021 board meeting of an “aggressive but achievable” plan to triple Troy’s enrollment during the 2022 open enrollment period.

As part of the non-prosecution agreement, Troy admitted to and accepted responsibility for the acts of its officers, directors, employees, and agents in connection with the scheme. Troy has also agreed to continue cooperating with the Department in any ongoing or future criminal investigation relating to this conduct. As part of this agreement, Troy agreed to pay a criminal penalty of $1,430,008. This penalty has been adjusted based on Troy’s ability to pay.

The Department reached this resolution with Troy based on several factors, including Troy’s efforts to provide all relevant facts known to it, acceptance of responsibility for criminal conduct, extensive and timely remedial measures taken, commitment to continuing enhancement of compliance and internal control programs, absence of prior criminal history or regulatory actions, commitment to cooperation with federal agencies in any ongoing investigations, and the nature and seriousness of the offense. Troy did not receive voluntary self-disclosure credit, but did receive credit for its cooperation with the Department’s investigation and affirmative acceptance of responsibility, which included (i) self-reporting its 2022 batch member enrollment issue to CMS before it had come to the attention of the Department; (ii) providing timely updates on facts learned during its internal investigation; (iii) providing all relevant facts known to it, including information about individuals involved in the conduct. However, and particularly during the early phase of the Department’s investigation, Troy failed to preserve and produce certain documents and evidence in a timely manner and, at times, took actions that were inconsistent with full cooperation.

The FBI and HHS-OIG are investigating the case.

Trial Attorney Clayton P. Solomon of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Katherine Armstrong for the Western District of North Carolina are prosecuting the case.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting health care fraud (HCF) matters. Additional information about the Justice Department’s HCF enforcement efforts can be found at https://www.justice.gov/criminal/criminal-fraud/health-care-fraud-unit.

Source: United States Department of Justice Criminal Division

Frederick Smith, 56, of Cordova, Tennessee, was sentenced yesterday for his role in an eight-defendant scheme to defraud COVID-19 disaster relief programs (including the Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP) of over $17 million. All eight defendants previously pleaded guilty to charges of wire fraud and have now been sentenced to a total of 96 months in prison and 45 months of home detention.

Details of the sentencings are below:

• Rodrick Flowers, 49, of Memphis, Tennessee, 58 months in prison;
• Frederick Smith, 56, of Cordova, Tennessee, 23 months in prison;
• Jarvys Jones, 40, of West Memphis, Arkansas, 12 months in prison;
• Mary Payne, 63, of Memphis, Tennessee, six months in prison, followed by five months of community confinement, followed by five months of home detention;
• Cleveland Wells, 67, of Memphis, Tennessee, one month in prison, followed by five months of home detention;
• LaTonya Herman, 46, of Memphis, Tennessee, one month in prison, followed by five months of home detention;
• Brian Mays, 41, of Olive Branch, Mississippi, 18 months of home detention; and
• Krystall Sherrod, 36, of Memphis, Tennessee, 12 months of home detention.

According to court documents, the defendants obtained funds under the EIDL program and PPP by submitting false and fraudulent loan applications prepared by Flowers and others on behalf of businesses and entities that the defendants owned, knowing that the applications contained false statements and misrepresentations about the entities’ number of employees, gross revenues, average monthly payroll, and more.  The defendants then used the loan funds for purposes not authorized by the EIDL program or PPP, including for personal expenses.

Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division; Special Agent in Charge Joel Weaver of the U.S. Treasury Inspector General for Tax Administration (TIGTA); Special Agent in Charge Edwin S. Bonano of the Federal Housing Finance Agency Office of Inspector General (FHFA-OIG); and Special Agent in Charge Karston Gaardner of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG) Dallas Regional Office made the announcement.

TIGTA, FHFA-OIG, and FDIC-OIG investigated the case.

Trial Attorneys Ariel Glasner, David Hamstra, and Matthew Kahn of the Criminal Division’s Fraud Section are prosecuting the case.