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Government Enforcement Actions

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February 28, 2023

Seven defendants who previously pleaded guilty to defrauding a federal program that provides technology to underprivileged schools has been sentenced to up to 4 years in prison each and ordered to pay up to $1 million each in restitution.  Four of the defendants—Peretz Klein, Susan Klein, Ben Klein, and Sholem Steinberg—misrepresented themselves and their companies as vendors to schools participating in the federal E-Rate program, receiving over $14 million in federal funds even though they failed to provide much of the equipment ordered.  Two other defendants—Simon Goldbrener and Moshe Schwartz—misrepresented themselves as consultants who helped schools participate in the E-Rate program, when in fact, they took hundreds of thousands of dollars in bribes from the above vendors to circumvent the bidding process.  A final defendant, Aron Melber, was a school official who falsely certified to having obtained E-Rate-funded equipment and services through a fair and open bidding process.  USAO SDNY

February 27, 2023

Several individuals and entities involved with the Saratoga Center for Rehabilitation and Skilled Nursing Care have agreed to pay over $7.1 million to resolve allegations of violating the False Claims Act by submitting claims for essentially worthless services.  From 2017 until the center closed in 2021, while receiving reimbursements from New York’s Medicaid program, the center’s owners and operators failed to provide adequate staffing, hot water, and clean linens, and failed to dispose of solid waste.  As a result of these failures, conditions fell below regulatory standards, and residents suffered from unnecessary errors and neglect.  NY AG; DOJ

February 27, 2023

The University of Pittsburgh Medical Center (“UPMC”), University of Pittsburgh Physicians (“UPP”), and Dr. James Luketich have agreed to pay $8.5 million to settle a False Claims Act suit launched by a former UPMC surgeon, Dr. Jonathan D’Cunha.  According to the qui tam suit, which was joined by the government, Dr. Luketich regularly billed Medicare for concurrently performed complex cardiothoracic surgeries, often as many as three at a time, in violation of statutes and regulations.  The practice increased the risk of surgical complications to patients, as it meant the physician was not present for key portions of the surgeries, and patients were under anesthesia for longer than necessary.  USAO WDPA

February 24, 2023

Energy & Environmental Investments, LLC (“EEI”) and Energy & Environment, Inc. (“E&E”) have agreed to pay $3.4 million in disgorgement, nearly $1 million in prejudgment interest, and over $1 million in civil monetary penalty to settle SEC charges of conducting a fraudulent securities offering.  A parallel criminal case was filed in California Superior Court in 2021 against EEU’s CEO, Amir Sardari, and former Vice President of Investor Relations, Narysa Luddy, which both have pleaded guilty to.  According to the SEC, EEI employed high-pressure tactics to solicit investments, then misappropriated about 47% of the $9.3 million raised from over 200 investors to cover payroll, marketing, Luddy’s personal expenses, and payments to prior investors.  SEC

February 23, 2023

A collection of corporate entities known as TitleMax has been ordered to pay a $10 million civil monetary penalty and $5 million in consumer relief for defrauding military families and other consumers while providing auto title loans.  TitleMax, which extends short-term, high-cost loans secured by auto titles, was found to have charged consumers nearly three times over the 36% annual interest rate cap.  This is not the first time TitleMax has been accused of similar misconduct; in 2016, the company was ordered to pay a $9 million penalty to settle similar charges.  CFPB

February 22, 2023

In the FTC and DOJ’s first enforcement action under the Health Breach Notification Rule, online prescription drug discount provider GoodRx Holdings Inc.—which does business as GoodRx Gold, GoodRx Care, and Hey Doctor—has been ordered to pay $1.5 million in civil penalties and take corrective action, after it was found to have disclosed the personal health information of millions of its users without their knowledge or consent, despite assuring users it would not.  The disclosure involved personally identifying information, including health conditions and medications used, which were shared with Facebook, Google, and other third parties for advertising purposes.  FTC, DOJ

February 17, 2023

Two individuals who ran a Ponzi scheme involving cattle and marijuana have been sentenced to 6 years in prison and ordered to pay almost $16 million in restitution each.  Additionally, Reva Joyce Stachniw was ordered to forfeit $6 million, and Ron Throgmartin was ordered to forfeit $1 millionDOJ

February 17, 2023

Two more defendants in a massive fraud scheme against the IRS and Paycheck Protection Program (PPP) have been sentenced to roughly 3 years in prison each.  Using his California-based tax preparation business, Mana Tax Services, Thanh Rudin and co-conspirator Seir Havana submitted false income tax returns for at least nine professional athletes, causing $19 million in losses to the IRS.  Rudin and Havana then submitted false applications for PPP loans on behalf of small businesses, shell companies, and other business entities, causing millions more in losses to the PPP.  In October 2022, Rudin’s brother, Quin Rudin, was sentenced to 10 years for his role in the scheme.  USAO EDVA

February 16, 2023

Texas-based ELPSS Career Institute LLC and its director have been ordered to pay $9 million for violating the Post-9/11 GI Bill and False Claims Act.  Under the Post-9/11 GI Bill, the school was required to operate for at least two years before enrolling students receiving benefits.  ELPSS, however, did so less than a year after applying for approval, falsely certified to its compliance with all requirements, and as a result, received more than $2.3 million in reimbursements it was not entitled to.  USAO WDTX

February 16, 2023

Nexo Capital Inc., which provides crypto-asset-related financial services, has agreed to pay $45 million to multiple state and federal securities regulators to resolve allegations that it offered and sold unregistered securities.  An investigation by a working group of state securities regulators, North American Securities Administrators Association (NASAA), had found that Nexo illegally offered interest-bearing digital asset deposit accounts to over 90,000 clients with total assets valued at $800 million.  NJ AG
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