Category: MIL-OSI

Source: United States Department of Justice Criminal Division

Decree Would Prohibit Algorithmic Coordination and Exchanging Competitively Sensitive Data with Competitors

Source: United States Department of Justice Criminal Division

A Colorado man pleaded guilty yesterday to conspiring to defraud the United States and tax evasion related to his promotion and use of an illegal tax shelter. He also pleaded guilty to wire fraud related to his operation of a fraudulent investment scheme.

The following is according to court documents and other statements made in court: from 2018 through 2023, Timothy McPhee, of Estes Park, promoted a fraudulent tax shelter to taxpayers across the country. The tax shelter was made up of a private family foundation and three trusts called a business trust, family trust, and charitable trust. McPhee taught clients who purchased the tax shelter how to use the trusts and foundation to evade paying federal income taxes on nearly all their income.

Among other directions, McPhee instructed clients to assign nearly all their business income to the trusts and to all false tax returns that made it seem as if that income belonged to the trusts, not the client. He also told clients to spend the money in the trust bank accounts on their own personal expenses and to fraudulently claim those expenses as deductions on the trust tax returns. As a result, clients who used the tax shelter paid taxes on only about 2% of their income. But because the clients funded the trusts, controlled the money in the trusts, and benefitted from the trust funds, the income funneled to the trusts was taxable to the clients themselves. In pleading guilty, McPhee acknowledged that he gave directions to clients that he knew directly contradicted IRS guidance and that he deliberately ignored warnings from accountants and attorneys that the tax shelter was fraudulent and illegal.

In total, use of the tax shelter caused a loss to the United States of about $45 million in unpaid federal income taxes.

McPhee also personally used the tax shelter to conceal from the IRS more than $5 million in income earned from 2016 through 2021. In so doing, McPhee did not pay approximately $1.8 million in federal income taxes he owed those years.

From January 2023 through May 2024, McPhee also operated and promoted a fraudulent investment scheme called the “ROI Cash Flow Fund.” McPhee promoted the ROI Cash Flow Fund as an opportunity for investors to earn a 3% monthly payout on a principal investment. He falsely told investors that the ROI Cash Flow Fund would generate monthly returns by sending the investors’ funds to a third-party borrower who would engage in foreign exchange currency trading. In total, based on McPhee’s false representations, investors sent more than $8 million to bank accounts he controlled.

In reality, however, McPhee did not send the investors’ funds to a borrower as promised. Instead, he used investor funds to make monthly 3% payouts to investors. He also spent investor funds on his own personal expenses and investments, including by sending more than $2 million in investor funds to a bank account he held in the name of one of his trusts.

McPhee is scheduled to be sentenced on Oct. 23. He faces a maximum penalty of five years in prison for conspiring to defraud the United States, a maximum penalty of five years in prison for tax evasion, and a maximum penalty of 20 years in prison for wire fraud. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Acting Deputy Assistant Attorney General Karen E. Kelly of the Justice Department’s Tax Division made the announcement.

The FBI and IRS Criminal Investigation are investigating the case.

Trial Attorneys Lauren K. Pope and Amanda R. Scott of the Tax Division are prosecuting the case.

Source: United States Department of Justice Criminal Division

A California man was sentenced today to 46 months in prison and ordered to pay $6,993,700 in restitution and $535,041 in forfeiture for his role in defrauding the Small Business Administration (SBA) out of millions of dollars in loans through the Economic Injury Disaster Loan (EIDL) Program.

According to court documents, from March 2020 through October 2022, Abraham Park, 67, of La Mirada, California, submitted over 120 fraudulent applications to the SBA for EIDL loans on behalf of himself and others which resulted in a total funded and unfunded loss of over $12 million. Park was the owner and CEO of a California financial services company that assisted clients with obtaining financing, including loans, and repairing credit scores. After the Covid-19 pandemic started, Park advised his clients to create fictitious corporate entities so that he could submit fraudulent EIDL loan applications to the SBA on their behalf. In return, his clients paid Park a portion of the funded loans as a kickback. In addition to submitting applications for his clients, Park also submitted several applications for himself and his family members for fictitious entities. In total, 73 fraudulent loans were funded, which resulted in a nearly $7 million dollar loss to the SBA.   

On March 20, Park pleaded guilty to one count of wire fraud and one count of money laundering.

Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division; Special Agent in Charge Tyler Hatcher of the IRS-CI Los Angeles Field Office; Assistant Director in Charge Akil Davis of the FBI Los Angeles Field Office; and Western Region Acting Special Agent in Charge Jonathan Huang of the SBA Office of Inspector General, made the announcement.

The IRS-CI, FBI, and SBA-OIG are investigating the case.

Trial Attorneys Brandon Burkart and Andrew Jaco of the Criminal Division’s Fraud Section are prosecuting the case.

The Fraud Section leads the Criminal Division’s prosecution of fraud schemes that exploit the PPP. Since the inception of the CARES Act, the Fraud Section has prosecuted over 200 defendants in more than 130 criminal cases and has seized over $78 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds. More information can be found at www.justice.gov/criminal-fraud/ppp-fraud.

Source: United States Department of Justice Criminal Division

A federal judge in the District of Kansas sentenced defendant Kaaba Majeed, 51, to 10 years in prison and three years of supervised release for forced labor and forced labor conspiracy. The court sentenced co-defendants Yunus Rassoul, 39, to five years of probation; James Staton, 63, to five years in prison and one year of supervised release; Randolph Rodney Hadley, 50, to five years in prison and one year of supervised release; Daniel Aubrey Jenkins, 44, to four years in prison and one year of supervised release; and Dana Peach, 60, to four years in prison and one year of supervised release for forced labor conspiracy.

In September 2024, after a 26-day trial, a jury convicted all six defendants of forced labor conspiracy and convicted Majeed of five additional counts of forced labor. Two other co-defendants, Etenia Kinard, 49, and Jacelyn Greenwell, 46 who previously pleaded guilty to the forced labor conspiracy, are scheduled to be sentenced on Sept. 22.

“Labor trafficking of children is an egregious crime,” said Assistant Attorney General Harmeet K. Dhillon of the Justice Department’s Civil Rights Division. “These sentences reflect our relentless pursuit of perpetrators and our determination to seek justice for survivors of human trafficking.”

“The defendants were entrusted to care for and nurture vulnerable children but instead chose to exploit and abuse them,” said U.S. Attorney Ryan A. Kriegshauser for the District of Kansas. “Although these crimes were committed many years ago and the children are now adults, the sentences handed down today reflect how the passage of time did not diminish the Department of Justice’s resolve to hold these human traffickers accountable and seek justice for their victims.”

“The FBI works closely with numerous local, state, and federal law enforcement partners, as well as non-governmental agencies and other nonprofits on the front lines to combat human trafficking,” said Special Agent in Charge Stephen Cyrus of the FBI Kansas City Field Office. “This case highlights the value of those partnerships. The Kansas City FBI will continue to prioritize the safety of our community and thanks the Department of Labor and the New York State Department of Labor for their invaluable assistance.”

As established at trial, all six defendants were former high-ranking members of the United Nation of Islam (UNOI) who assisted UNOI’s late founder Royall Jenkins in managing UNOI operations. Defendant Peach was also one of Jenkins’s wives. Jenkins represented himself as Allah, contrary to principles of the Islamic faith, and demanded compliance with strict UNOI rules. UNOI operated multiple businesses including restaurants, bakeries, gas stations, a laboratory, and a clothing factory.

For over 12 years from October 2000 through November 2012, the defendants conspired to enforce rules that required UNOI members to perform unpaid labor, using beatings, threats, punishments, isolation, and coercion to compel the unpaid labor of over a dozen victims, including multiple minors, some as young as eight years old. The defendants required the victims to work up to 16 hours a day performing unpaid labor in UNOI-owned and operated businesses in Kansas City, Kansas; New York, New York; Newark, New Jersey; Cincinnati, Ohio; Dayton, Ohio; Atlanta, Georgia, and elsewhere. The defendants also required the victims to perform unpaid childcare and domestic service in the defendants’ homes. The evidence showed that the defendants lived comfortably while housing the victims in overcrowded, unsanitary conditions along with restricting their food and water.

As proven at trial, the defendants used false promises of education, life skills training, and job training to induce parents to send their children to Kansas. After isolating the victims from their families and making them wholly dependent on UNOI, the defendants required the victims to attend UNOI’s unlicensed, unaccredited school and used strict rules, isolation, punishments, humiliation, threats, and coercion to compel the victims’ unpaid labor. This included restricting and monitoring the victims’ communications with others along with their whereabouts.   

The FBI Kansas City Field Office investigated the case with the assistance of the Department of Labor and the New York State Department of Labor.

Assistant U.S. Attorney Ryan Huschka for the District of Kansas and Trial Attorneys Kate Alexander, Maryam Zhuravitsky, and Francisco Zornosa of the Civil Rights Division’s Human Trafficking Prosecution Unit prosecuted the case

Anyone who has information about human trafficking should report that information to the National Human Trafficking Hotline toll free at 1-888-373-7888, which operates 24 hours a day, 7 days a week.  Further information is available at www.humantraffickinghotline.org. Information on the Justice Department’s efforts to combat human trafficking can be found at www.justice.gov/humantrafficking.