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Source: United States Department of Justice Criminal Division

A New Jersey construction company owner was sentenced yesterday to 15 months in prison for evading employment tax penalties assessed against him.

The following is according to court documents and statements made in court: Joseph Caravella, of Randolph, owned several masonry companies in New Jersey. From 2008 to 2016, the IRS assessed approximately $650,000 in Trust Fund Recovery penalties against Caravella for causing three masonry businesses that he owned to not pay their federal employment taxes. The timely payment of federal employment taxes is critical to the functioning of the U.S. government because, for example, they are the primary source of funding for Social Security and Medicare. The federal income taxes that are withheld from employees’ wages also account for a significant portion of all federal income taxes collected each year. Congress empowered the IRS to impose a penalty equal to the amount of the unpaid taxes — called a Trust Fund Recovery Penalty — against any responsible individual who fails to ensure that these taxes are paid timely. Caravella pleaded guilty to attempting to evade these Trust Fund Recovery penalties.  

From around March 2008 through April 2019, Caravella sought to evade the payment of these penalties by placing companies that he controlled in the names of nominee owners and avoiding the use of a bank account in his own name to prevent the IRS from levying the funds. Also during that time, Caravella continued to cause his businesses not to pay employment taxes, resulting in an additional loss of $1.2 million to the IRS.

In total, Carvalla caused a tax loss to the IRS of $1,885,519.39.

Acting Deputy Assistant Attorney General Karen E. Kelly of the Justice Department’s Tax Division and U.S. Attorney Alina Habba for the District of New Jersey made the announcement.

IRS Criminal Investigation is investigating the case.

Trial Attorney Hayter L. Whitman of the Tax Division and Assistant U.S. Attorney Christopher Fell for the District of New Jersey are prosecuting the case.

Source: United States Department of Justice Criminal Division

Operation Grayskull Eradicated Four Dark Web Child Abuse Sites and Led to the Convictions of 18 Offenders to Date, Who Have Collectively Received More than 300 Years in Prison

Source: United States Department of Justice Criminal Division

Manchester, New Hampshire, based Global Plastics LLC (Global Plastics) and Melville, New York, based Marco Polo International LLC (Marco Polo), both subsidiaries of MGI International LLC, have agreed to pay $6.8 million to resolve their civil liability under the False Claims Act for knowingly failing to pay customs duties on certain plastic resin imported from the People’s Republic of China (PRC). In connection with the settlement, the United States acknowledged that MGI International and its subsidiaries took a number of significant steps entitling them to credit for cooperating with the government.

To enter goods into the United States, an importer must declare, among other things, the country of origin of the goods, the value of the goods, whether the goods are subject to duties, and the amount of duties owed. U.S. Customs and Border Protection (CBP) collects applicable duties.

In 2024, MGI and its subsidiaries disclosed to CBP and the U.S. Attorney’s Office for the District of New Hampshire that, beginning in May 2019, Global Plastics and Marco Polo failed to declare the correct country of origin and value on certain entries of plastic resin products manufactured in the PRC and, as a result, failed to pay the proper duties owed to CBP.   

“The Department will pursue those who gain an unfair trade advantage in U.S. markets, including those who knowingly evade or underpay duties owed on foreign imports,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “As today’s settlement reflects, when importers fail to pay customs duties owed, they can mitigate the consequences by making timely self-disclosures, cooperating with investigations, and taking appropriate remedial measures.”

“Companies doing business in the United States must play by the rules, including paying full custom duties owed for imports,” said Acting U.S. Attorney Jay McCormack for the District of New Hampshire. “This resolution demonstrates that when companies self-disclose misconduct, cooperate fully with the government’s investigation, and take meaningful corrective action, they can receive credit for those admissions. We will continue to hold accountable those who attempt to avoid paying what they owe to the federal government, while also recognizing responsible corporate behavior.”

“When companies use unfair trade practices and fraudulent methodologies to avoid paying customs duties, it robs the American people of revenue and undermines our economy,” said acting Executive Assistant Commissioner Susan S. Thomas of the Office of Trade, U.S. Customs and Border Protection. “I am proud that CBP was able to work with the Department of Justice to help ensure a level playing field for law abiding businesses.”

MGI cooperated with the United States’ investigation by, among other things: making a timely voluntary self-disclosure of the potential violations; performing a thorough and independent internal investigation;  preserving, collecting, and disclosing facts not known to the government but relevant to its investigation; conducting an analysis of potential damages that was shared with the government; and implementing appropriate remedial actions, including disciplining personnel and making improvements to compliance procedures. As a result, MGI, Global Plastics, and Marco Polo received credit under the Department’s guidelines for taking disclosure, cooperation, and remediation into account in False Claims Act settlements.

This resolution obtained in this matter was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the District of New Hampshire, with assistance from the CBP’s Office of Chief Counsel.

This matter was handled by Assistant United States Attorney Raphael Katz of the District of New Hampshire and Senior Trial Counsel Art J. Coulter of the Civil Division’s Commercial Litigation Branch, Fraud Section.

The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Source: United States Department of Justice Criminal Division

Yesterday, the final judgments were issued for five Nevada men, including a citizen of Germany, who were sentenced on May 29 and 30 to terms of up to 84 months in prison for running Jetflicks, one of the largest illegal television streaming services in the United States.

“The defendants operated Jetflicks, an illegal paid streaming service that made available more television episodes than any licensed streaming service on the market,” said Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division. “This scheme generated millions of dollars in criminal profits, and hurt thousands of U.S. companies and individuals who owned the copyrights to these shows but never received a penny in compensation from Jetflicks. The sentences issued in this case demonstrate the Criminal Division’s commitment to protect American creativity and to ensure that large-scale infringers are brought to justice and punished for their crimes.”

“Digital crimes are not victimless crimes,” said U.S. Attorney Sigal Chattah for the District of Nevada. “The copyright owners lost millions of dollars as a result of the illegal paid streaming service. These sentences underscore our joint commitment with the Computer Crime and Intellectual Property Section and FBI to deter and disrupt intellectual property crime via thorough investigation and prosecution of those who violate federal intellectual property laws.”

“By building and running one of the largest unauthorized streaming services in the U.S., these individuals not only stole from content creators and legitimate streaming services, they undermined the integrity of our economy and the rule of law,” said Assistant Director Jose A. Perez of the FBI Criminal Investigative Division. “These sentencings are a reminder that illegal actions have consequences. The FBI and our partners are unwavering in our commitment to protect intellectual property rights and hold criminals accountable.”

After a 14-day trial that ended in June 2024, a federal jury in the District of Nevada convicted Kristopher Lee Dallmann, 42; Peter H. Huber, 67; Jared Edward Jaurequi, also known as Jared Edwards, 44; Felipe Garcia, 43; and Douglas M. Courson, 65, all of Las Vegas, of conspiracy to commit copyright infringement. The jury also convicted Dallmann of criminal copyright infringement by distribution, criminal copyright infringement by public performance, and money laundering. Subsequently, the court sentenced Dallmann to 84 months in prison; Huber to 18 months in prison; Jaurequi to time served (almost 5 months in prison), 180 days of home confinement, and 500 hours of community service; Garcia to three years probation with 49 days in prison and 1000 hours of community service; and Courson to three years probation with 48 days in prison.

According to court documents and evidence presented at trial, the defendants ran a site called Jetflicks, an online subscription-based service headquartered in Las Vegas, that permitted users to stream and at times download copyrighted television programs without the permission of the relevant copyright owners. At one point, Jetflicks claimed to have 183,285 different television episodes, significantly more than Netflix, Hulu, Vudu, Amazon Prime, or any other licensed streaming service. This was the largest internet piracy case — as measured by the estimated total infringement amount and total number of infringements — ever to go to trial as well as the first illegal streaming case ever to go to trial. The defendants’ conduct harmed every major copyright owner of a television program in the United States. Copyright owners lost millions of dollars from the operation.

Evidence presented at trial showed that the defendants used automated software and computer scripts that ran constantly to scour sites around the world hosting pirated content. The software and scripts would download, process, and store illegal content, and then make it immediately available on servers in the United States and Canada to tens of thousands of paid subscribers located throughout the United States for streaming and/or downloading. The defendants often delivered episodes to subscribers the day after the shows originally aired on television. The service was not only available to subscribers over the internet but specifically designed to work on many different types of devices, platforms, and software.

Each defendant performed at least one and often multiple roles at Jetflicks including management, computer programming and coding, design of the website, applications, and customer interface, technical assistance, content acquisition, subscriptions and revenue, and customer support.

Dallmann reaped millions of dollars in profit from the operation. The government conservatively estimated the value of the copyright infringement in the case at $37.5 million. This included the approximate retail value of the defendants’ reproduction of infringing works to create the Jetflicks inventory as well as the approximate retail value of the streams of pirated television episodes that the defendants provided to subscribers.

The five defendants sentenced were among eight defendants originally indicted in the Eastern District of Virginia in connection with operating Jetflicks. In addition to the defendants just sentenced in Nevada, defendant Darryl Polo previously pleaded guilty in the Eastern District of Virginia to four counts of criminal copyright infringement and one count of money laundering for his involvement with Jetflicks as well as an equally large illegal streaming site he ran called iStreamItAll. Similarly, defendant Luis Villarino also previously pleaded guilty in the Eastern District of Virginia to conspiracy to commit criminal copyright infringement. In May 2021, a judge in the U.S. District Court for the District of Virginia sentenced Polo and Villarino to, respectively, 57 months in prison and 12 months and a day in prison.

After the case was transferred to the District of Nevada for trial, defendant Yoany Vaillant was tried separately from the other five remaining defendants. In November 2024, after an eight-day trial, a federal jury convicted Vaillant of conspiracy to commit criminal copyright infringement. Vaillant is scheduled to be sentenced on Sept. 4.

The FBI Washington Field Office investigated the case, with assistance from the FBI Las Vegas Field Office. 

Senior Counsel Matthew A. Lamberti, Trial Attorney Michael Christin, and Acting Deputy Chief Christopher S. Merriam of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorneys Jessica Oliva and Edward G. Veronda for the District of Nevada are prosecuting the case. The CCIPS Cybercrime Lab, the Justice Department’s Office of International Affairs, and the Royal Canadian Mounted Police in Canada provided significant assistance.