Acting Manhattan U.S. Attorney Announces $11.5 Million Settlement With Biotech Testing Company For Fraudulent Billing And Kickback Practices

 

Bio-Reference Laboratories, Inc. Admits to Improperly Billing Government for Hospital Inpatient Testing and Donating Cost of Medical Software to Physicians Based on Volume of Business

 Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Scott J. Lampert, Special Agent in Charge of the New York Regional Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS OIG”), and Leigh-Alistair Barzey, Special Agent in Charge of the Northeast Field Office of the U.S. Department of Defense - Office of Inspector General’s Defense Criminal Investigative Service (“DCIS”), announced today an $11.5 million settlement of a False Claims Act case against BIO-REFERENCE LABORATORIES, INC. (“BRL”), a New Jersey-based biotechnology company that provides molecular and diagnostic tests.  The settlement resolves claims that from 2009 to 2012, BRL fraudulently billed federal healthcare programs for testing conducted on hospital inpatients that should have been billed to the hospitals instead, and that BRL knowingly donated the cost of electronic medical records software to physicians’ offices throughout the country based solely on the volume of business generated by those practices, in violation of the False Claims Act and the federal Anti-Kickback Statute.  Under the settlement approved by U.S. District Judge George B. Daniels, BRL will pay $11,500,960.00 to the United States to resolve the fraudulent billing and kickback claims.  BRL also made extensive admissions regarding the company’s conduct.  

Acting U.S. Attorney Audrey Strauss said:  “Bio-Reference Labs received millions of dollars from federal healthcare programs through its fraudulent billing and kickback schemes.  The company knowingly and recklessly billed the government for tests it should have billed to the hospitals instead, and provided kickbacks to doctors in order to induce them to order more tests.  Our Office will continue to hold healthcare providers accountable when they engage in fraud and other illegal conduct.” 

HHS Special Agent in Charge Scott Lampert said:  “The irresponsible behavior by Bio-Reference Labs compromised the integrity of the Medicare program, and wasted millions of taxpayer dollars.  Working with our law enforcement partners, HHS-OIG will continue to ensure that healthcare providers that do business with federally funded health care programs do so in an honest fashion.”

DCIS Special Agent in Charge Leigh-Alistair Barzey said:  “Fraudulent billing and kickback schemes threaten the integrity of TRICARE, the Defense Department's healthcare system for military members and their families.  Today’s settlement is the result of a joint effort and it demonstrates the DCIS’s ongoing commitment to work with the USAO-SDNY and HHS-OIG to investigate and prosecute companies that seek to fraudulently profit at the expense of federal health care plans.” 

As alleged in the Complaint filed in Manhattan federal court:

Fraudulent Billing Practices & Kickback Scheme

From 2009 through 2012, BRL knowingly and willfully billed Medicare and Tricare for certain testing performed for hospital inpatients that should have been paid by the hospitals themselves.  As a result, BRL received reimbursement from Medicare and Tricare for tests that the federally funded programs had already paid for, because hospitals receive payments for all items and services provided to the patient under the inpatient prospective payment system (“IPPS”), unless an exemption applies, which is inapplicable here.

In addition, in violation of the Anti-Kickback Statute, BRL knowingly and willfully offered and paid remuneration, in the form of a percentage of the cost of electronic medical records software, to physicians based on the volume of business generated by those physicians in order to induce them to use BRL’s services.  The Anti-Kickback Statute prohibits medical service providers, such as testing facilities, from paying any remuneration to providers in order to induce them to refer medical services.

As part of the settlement approved today, BRL admitted, acknowledged, and accepted responsibility for the following conduct:

            Inpatient Testing Claims

• From 2009 through 2012, BRL billed Medicare and Tricare for certain testing (i) listed on the Clinical Lab Fee Schedule (“CLFS”) and (ii) performed on beneficiaries who were hospital inpatients at the time of service. 
• Specifically, from 2009-2012, approximately 2.51% of all of BRL’s Medicare and Tricare billing originating from hospitals consisted of testing performed on hospital inpatients and listed on the CLFS.
• For example, from 2009-2012, BRL did not bill Triad of Alabama/Flowers Hospital in Dothan, Alabama (“Triad”), for any inpatient testing.  As a result, from 2009-2012, BRL improperly billed Medicare and Tricare for approximately 2.51% of all testing BRL performed for Triad and its associated pathology practices on behalf of Medicare or Tricare beneficiaries.
• In 2009, BRL’s requisition form – the form BRL provided to hospitals to order tests for their patients – did not contain any place for a hospital to indicate whether the patient was an inpatient or an outpatient.  But as of at least January 2010, BRL management had a clear understanding of the necessity to bill hospitals – and not Medicare or Tricare – for testing performed on hospital inpatients and listed on the CLFS.  Indeed, on January 27, 2010, the Director of Genpath Accounts Receivable wrote to management, “I’m afraid that we can end up billing Medicare for hospital patients.”  Nevertheless, the requisition forms remained the same, and through at least 2012, BRL billed Medicare and Tricare for hospital inpatient testing listed on the CLFS.

            Software Cost Donations

• In addition, from 2009 through 2012, BRL provided a percentage of the cost of electronic medical records transition software (“EMR Software”) to physicians’ offices based on the volume of business generated by those offices. 
• Specifically, from 2009 through 2012, BRL engaged in a practice – at the direction of its management – entitled the “3 to 1 calculation,” meaning that BRL conditioned the provision of payment for EMR Software to physicians’ offices on whether a physician’s office would generate revenue equal to three times the value of the EMR Software BRL provided. 
• For example, on January 24, 2009, a BRL employee, in an email to BRL management, applied the 3 to 1 calculation to a particular physician’s office and suggested that BRL provide the payment for EMR Software, but noted, “You find the legal way to say that.  I don’t feel they will make us put it in writing.” 
• Similarly, on January 7, 2011, BRL management evaluated a BRL salesperson’s request for payment for EMR Software to a particular physician’s office, and directed that salesperson to “[b]uild volume to meet 3x rule.”
• During this timeframe, BRL provided payment for EMR Software based on this formula to 69 separate physicians’ offices. 

BRL agreed to pay a total of $11,500,960.00 to resolve these claims: $1,396,386 to resolve the Inpatient Testing Claims and $10,104,574 to resolve the Software Cost Donation claims.  OPKO Health Inc. (“OPKO”), which merged with BRL in 2015, will serve as guarantor of BRL’s obligation to pay the settlement amount.

In connection with the filing of the lawsuit and settlement, the Government joined two private whistleblower lawsuits that had previously been filed under seal pursuant to the False Claims Act. 

Ms. Strauss thanked HHS-OIG and DCIS for their assistance with the case. 

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Michael Byars and Ellen Blain are in charge of the case.

Antiquities Dealers Arrested For Fraud Scheme

 

Erdal Dere and Faisal Khan Defrauded Antiquities Buyers and Brokers by Using False Provenances to Offer and Sell Antiquities.

  Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment in Manhattan federal court charging ERDAL DERE, the owner and operator of the Manhattan-based antiquities gallery Fortuna Fine Arts Ltd. (“Fortuna”), and his longtime business associate and co-conspirator, FAISAL KHAN, with engaging in a years-long scheme to defraud buyers and brokers in the antiquities market by using false provenances to offer and sell antiquities.  DERE is also charged with aggravated identity theft for his misappropriation of the identities of deceased collectors who were falsely represented to be the prior owners of the antiquities.

Federal law enforcement agents arrested DERE this morning at his residence in New York, New York.  KHAN was also arrested this morning at his residence in New Jersey.  Both DERE and KHAN will be presented later today before U.S. Magistrate Judge Sarah Netburn.      

Acting U.S. Attorney Audrey Strauss said:  “The integrity of the legitimate market in antiquities rests on the accuracy of the provenance provided by antiquities dealers, which prevents the sale of stolen and looted antiquities that lack any legitimate provenance.  As alleged, Erdal Dere and Faisal Khan compromised that integrity, and defrauded buyers and brokers of the antiquities they sold, by fabricating the provenance of those antiquities, and concealing their true history.  Now, thanks to the FBI’s Art Crime Team, Dere and Khan are in custody and facing prosecution for their alleged crimes.”

FBI Assistant Director William F. Sweeney Jr. said:  “Antiquities and art allow us to see a piece of history from a world that existed hundreds and, in some cases, thousands of years ago. As alleged, the men who trafficked in fake documents and used dead people’s names to bolster their lies had no care for the precious items they sold and no regard for the people they defrauded.  We are asking anyone who may have dealt with Mr. Dere or Mr. Khan to contact us at NYArtCrime@fbi.gov.  You may have been a victim of their alleged scheme.”

According to the allegations in the Indictment[1] unsealed today in Manhattan federal court:

From approximately 2015 through September 2020, DERE and KHAN engaged in a scheme to defraud buyers and brokers in the antiquities market by providing false information regarding the provenance of antiquities they offered for sale.  Specifically, DERE and KHAN falsely claimed that various deceased collectors of antiquities were the prior owners of items being sold and offered for sale, in order to conceal the true provenance of the antiquities and the sources from which Fortuna had acquired them. 

DERE communicated the false provenances featuring the names of deceased collectors to buyers and brokers.  DERE also fabricated documents purporting to evidence the prior ownership of antiquities by the deceased collectors, and provided them to buyers and brokers, including to an auction house in New York, New York in connection with a December 2015 antiquities auction. 

KHAN assisted Fortuna in finding buyers for items from its pre-existing inventory and acquired new items, primarily in Asia, that KHAN worked with Fortuna to sell to collectors in the United States and internationally.  With KHAN’s knowledge, DERE provided false provenance information to potential buyers of items that KHAN had personally located and acquired, listing deceased collectors as the long-time owners of items which KHAN and DERE well knew had not been owned by those collectors.

DERE, 50, of New York, New York, was charged in the Indictment with wire fraud conspiracy, wire fraud, and aggravated identity theft.  The wire fraud conspiracy charge carries a maximum prison term of 20 years.  The wire fraud charge carries a maximum prison term of 20 years.  The aggravated identity theft charge carries a mandatory sentence of two years in prison.

KHAN, 47, of Flanders, New Jersey, was charged in the Indictment with wire fraud conspiracy and wire fraud.  The wire fraud conspiracy charge carries a maximum prison term of 20 years.  The wire fraud charge carries a maximum prison term of 20 years.

The statutory maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence will be determined by the judge.     

Ms. Strauss praised the investigative work of the FBI/NYPD Joint Major Theft Task Force/Art Crime Team.  In addition, Ms. Strauss thanked authorities in Germany, Italy, the United Kingdom, Spain, and France, as well as the United States Justice Department’s Office of International Affairs of the Department’s Criminal Division, the FBI’s Legal Attaché in Frankfurt, Germany, and the New York City Police Department for their assistance.    

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorney Jessica Greenwood is in charge of the prosecution.

To report information related to this case, please contact the FBI’s Art Crime Team at NYArtCrime@fbi.gov.

The allegations in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

 [1] As the introductory phrase signifies, the entirety of the text of the Indictment and the descriptions of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.

BRONX MAN INDICTED FOR MURDER IN SHOOTING OF 17-YEAR-OLD INNOCENT BYSTANDER

 

Victim Was College-Bound Basketball Player 

 Bronx District Attorney Darcel D. Clark today announced that a Bronx man has been indicted on second-degree Murder and additional charges in the death of Brandon Hendricks, a 17-year-old high school basketball player who was shot by a stray bullet. 

 District Attorney Clark said, “The defendant allegedly callously fired into a group of people and ended the life of a young, promising teen. Brandon Hendricks had just graduated James Monroe High School and was set to play college basketball when he was killed on a Morris Heights street. Since his death, Brandon’s mother has channeled her grief into ardently speaking out against gun violence in our community.” 

 District Attorney Clark said the defendant, Najhim Luke, 22, of 1979 Walton Avenue, was arraigned today on second-degree Murder, first-degree Manslaughter and two counts of seconddegree Criminal Possession of a Weapon before Bronx Supreme Court Justice Lester Adler. Remand was continued and the defendant is due back in court on December 2, 2020.

 According to the investigation, on the night of June 28, 2020 at 1726 Davidson Avenue, the defendant fired shots at a group of people who had gathered for a barbecue. One of the shots struck Hendricks in his back. He was taken to St. Barnabas Hospital and was pronounced dead less than an hour after the shooting. The defendant fled the scene and was arrested on July 6, 2020 

 District Attorney Clark thanked Detective Francis Orlando of the Bronx Homicide Squad and Detective Adam Acosta of the 46th precinct.

 An indictment is an accusatory instrument and not proof of a defendant’s guilt.

Comptroller Stringer Calls on State Street to Take Action on Deforestation

 

State Street voted against or abstained from voting on crucial shareholder resolutions focused on deforestation

Deforestation is the second largest contributor of carbon emissions after fossil fuels, releasing 4.9 billion metric tons of carbon into the atmosphere each year, and is associated with human rights violations

Comptroller Stringer: “Given the clear and material environmental, social, and governance risks associated with deforestation and climate change, it is crucial that all investors carefully scrutinize their exposure to deforestation.”

 New York City Comptroller Scott M. Stringer sent a letter to State Street Corporation Chairman and Chief Executive Officer Ronald O’Hanley calling on the company to prioritize addressing deforestation risks in its portfolio. Deforestation is the second largest contributor of carbon emissions after fossil fuels, releasing 4.9 billion metric tons of carbon into the atmosphere each year, and is associated with terrible human rights violations in indigenous communities.

In his letter, Comptroller Stringer argues that as a leading shareholder in several companies linked to deforestation, State Street holds tremendous power to promote more sustainable business practices but has instead in recent years voted against or abstained from voting on crucial shareholder resolutions focused on deforestation according to a recent Friends of the Earth report. Comptroller Stringer urges State Street to press their portfolio companies  on how they will address risks related to deforestation.

Comptroller Stringer also underscores that shareholder proposals aimed at expanded reporting on deforestation in supply chains or that mandate the creation of strategies to reduce deforestation are unequivocally beneficial for the sustainable creation of long term value.

The full text of the letter can be found below.

Dear Mr. O’Hanley,

As man-made fires rage across the Amazon and Indonesia and thousands of acres of forest across the world are mowed down, I am calling on State Street to address its role in abetting global deforestation. Deforestation is the second largest contributor of carbon emissions after fossil fuels and is associated with well-documented abuses of human rights. Given the clear and material environmental, social, and governance risks associated with deforestation and climate change, it is crucial that all investors carefully scrutinize their exposure to deforestation. As a leading shareholder in many companies linked to deforestation, State Street holds tremendous power to help promote more sustainable business practices; however, in recent years State Street has instead voted against or abstained from voting on crucial shareholder resolutions focused on deforestation according to a recent Friends of the Earth report.  As Comptroller of the City of New York and chief investment advisor to the New York City Retirement Systems, I urge State Street to prioritize addressing deforestation risks in its portfolio, both by strengthening engagement and by supporting resolutions that can help minimize the risks deforestation poses to our economy and our climate.

Deforestation is a key driver of the climate crisis. When forests are pillaged and razed, the earth loses its capacity to lock down atmospheric carbon and our ability to achieve the goals of the Paris Agreement are threatened. On average, we have lost an area of forest as large as the United Kingdom every year from 2014-2018.  As a result of deforestation, 4.9 billion metric tons of carbon are released into the atmosphere every year. Forest loss in many parts of the world is accelerating, with the global rate of tree cover loss increasing by 44% since 2014.  Continuing to lose forest at that rate will put our climate goals forever out of reach.

Furthermore, the industries responsible for deforestation are also closely linked with widespread violations of human rights and violence perpetrated against indigenous communities. The past decade has witnessed hundreds of killings of indigenous people and environmental advocates who have worked to resist illegal deforestation, land-grabs, and the destruction of native habitats.  The world cannot continue to allow profit-driven deforestation to threaten safety of indigenous communities who serve as faithful stewards of our environment.

Deforestation and its associated human rights abuses are a direct consequence of the behavior of consumer goods, palm oil, food production, and agribusiness companies, many of which State Street is invested in. According to CDP – in which both State Street Corporation and State Street Global Advisors are investor signatories – “leading consumer goods companies [are] directly linked to deforestation: soybean, cattle, paper & palm oil risks potential threat to global supply chains” and related human rights violations.  Many of these companies, as part of the Consumer Goods Forum, have made commitments to eliminating deforestation in their supply chain, but have so far failed to meet their own goals. Institutional investors like State Street have a clear obligation to press their portfolio companies on how they will address risks relating to deforestation.

Given State Street’s holdings in a range of companies involved in agribusiness or in the Consumer Goods Form (CGF), a trade group of the world’s largest retailers, I believe your company could drive real change if it prioritized deforestation in its R-Factor ESG scoring system and investment stewardship activities. Shareholder proposals that seek expanded reporting on deforestation in supply chains or that mandate the creation of strategies to reduce deforestation are unequivocally beneficial for the sustainable creation of long-term value and the minimization of climate risk. I ask that State Street take a much more proactive role on these risks, including through both its proxy voting and company engagement policies and activities. State Street can demonstrate its commitment to these issues by being fully transparent on its engagement criteria and voting record on issues relating to deforestation and human rights violations linked to deforestation.

State Street has been vocal that addressing ESG issues is a good business practice and a driver of long-term value. I agree. I believe that the long-term prospects of State Street, its portfolio companies, and our climate will all be better served if we urgently confront deforestation.

Sincerely,
Scott M. Stringer

EDITOR'S NOTE:

State Street Corporation is an American financial services and bank holding company headquartered at One Lincoln Street in Boston with operations worldwide. It is the second-oldest continually operating United States bank; its predecessor, Union Bank, was founded in 1792.

CEO: Ronald P. O'Hanley (Jan 1, 2019–)

Headquarters: Boston, MA

Assets under management: 2.511 trillion USD (2018)

Revenue: 11.98 billion USD (2018)

Number of employees: 40,142 (2018)

THE BHARATI FOUNDATION HOSTS BACK TO SCHOOL EVENT - Saturday September 26 - 1 - 3 PM

 

Mistakes by Rookie Consultants in a Campaign.

 

We don't normally put these up, but in this case we are going to make an exception to show the mistakes that can be done by rookie consultants.

At least the wrong name was taken off for just a Good Afternoon, followed later by Dear Friend. However Team Fernandez knows that I am in the media, and should know that I am not going to contribute to any campaign. I wanted to give the assemblywoman some free publicity, but since I was not buying a ticket I got no further than that. Not only that, but this event is at the same time of a very important 49th Precinct Council meeting. 

Good luck Assemblywoman Fernandez, because with the team you have assembled you are going to need lots of it.

Good afternoon,

I just wanted to make sure you saw Nathalia's email yesterday. We're very excited to kick off our campaign next Tuesday. We hope you'll consider joining us!

You can buy your ticket here: https://www.nycvotes.org/campaigns/nathaliafernandez/contributions/new

Every contribution by a NYC resident is matched 8:1 by the city!

To RSVP, just reply to this email, or email Mo at Mohammed@culverplace.com. 

See you then!

Team Fernandez

**********************
Dear Friend,

Next Tuesday, September 29th, I am announcing that I am officially running for Bronx Borough President. I hope you'll be join me at our Zoom kick-off party and fundraiser from 6 to 8 PM.
To RSVP, please email Mo at Mohammed@culverplace.com. 

We will be joined by my dear friend and colleague, Assm. Catalina Cruz! I really hope to see you there as we kick off this historic campaign. 

>> If you donate now, every $1 is matched 8:1 by the city. A small contribution goes a long way in this race, and I need everyone to pitch in.

Best,

Nathalia

Governor Cuomo Announces Five States Added to Travel Advisory and 10 Million COVID-19 Diagnostic Tests Conducted

 

Arizona, Minnesota, Nevada, Rhode Island, and Wyoming Meet Metrics to Qualify; No Areas Are Removed

0.89 Percent of Yesterday's COVID-19 Tests were Positive

3 COVID-19 Deaths in New York State Yesterday

SLA and State Police Task Force Visits 1,023 Establishments; Observes 3 Establishments Not in Compliance

Confirms 754 Additional Coronavirus Cases in New York State - Bringing Statewide Total to 451,227; New Cases in 43 Counties

 Governor Andrew M. Cuomo today announced that five states—Arizona, Minnesota, Nevada, Rhode Island, and Wyoming—have been added to New York State's COVID-19 travel advisory. No areas have been removed. The advisory requires individuals who have traveled to New York from areas with significant community spread to quarantine for 14 days. The quarantine applies to any person arriving from an area with a positive test rate higher than 10 per 100,000 residents over a 7-day rolling average or an area with a 10 percent or higher positivity rate over a 7-day rolling average. 

The governor also announced that New York State has now conducted 10 million COVID-19 diagnostic tests. The number of new cases, percentage of tests that were positive and many other helpful data points are always available at forward.ny.gov. 

"For a clear example of the continuing extent of the COVID crisis in America, look no further than New York's travel advisory list. The virus' spread across the country—new cases have increased more than 15 percent in the last 10 days—makes it all the more urgent that we stay vigilant here at home," Governor Cuomo said. "That's why New Yorkers need to continue wearing masks, socially distancing and washing their hands in conjunction with the careful enforcement of local governments. We can defeat this virus by staying New York Tough, but we have a long way to go."

The full, updated travel advisory list is below:

Alabama, Alaska, Arkansas, Arizona, Delaware, Florida, Georgia, Guam, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Missouri, Mississippi, Montana, North Carolina, North Dakota, Nebraska, Nevada, Oklahoma, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, West Virginia, Wyoming

Yesterday, the State Liquor Authority and State Police Task Force visited 1,023 establishments in New York City and Long Island and observed 3 establishments that were not in compliance with state requirements. A county breakdown of yesterday's observed violations is below:

Nassau - 3

Today's data is summarized briefly below:

• Patient Hospitalization - 470 (+2)
• Patients Newly Admitted - 43
• Hospital Counties - 31
• Number ICU - 133 (-1)
• Number ICU with Intubation - 67 (+1)
• Total Discharges - 76,246 (+28)
• Deaths - 3
• Total Deaths - 25,432

Computer Programmer Pleads Guilty In Manhattan Federal Court To Making False Statements About His Involvement In The “Silk Road” Website

 

Michael R. Weigand Concealed Role in the Silk Road Website, Including Providing Technological Advice Directly to Silk Road’s Principals

  Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Joleen Simpson, Acting Special Agent in Charge of the Boston Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced that MICHAEL R. WEIGAND, a/k/a “Shabang,” a/k/a “~Shabang~,” a/k/a “~s,” a/k/a “s,” pled guilty today to making false statements to federal agents about his involvement in, and his work for, the “Silk Road” online illicit black market, which was responsible for distributing hundreds of millions of dollars of narcotics and other contraband.  WEIGAND’s false statements concealed his role in the operation of the Silk Road website.  WEIGAND surrendered today and pled guilty before United States District Judge William H. Pauley III, to whom his case is assigned.

Acting U.S. Attorney Audrey Strauss said:  “Silk Road was a secret online marketplace for illegal drugs, hacking services, and a number of other criminal activities.  Michael Weigand helped Silk Road by, among other things, identifying technological vulnerabilities in the site, supplying technological advice directly to Silk Road’s leadership, and travelling overseas to remove Silk Road evidence from a co-conspirator’s residence.  When Weigand was questioned by law enforcement in 2019, he falsely claimed not to have done anything at all for Silk Road.  For his various false statements, Weigand now faces potential prison time.”

IRS-CI Acting Special Agent in Charge Joleen Simpson said:  “During its years of operation the Silk Road website allowed thousands of individuals to anonymously conduct narcotics transactions, launder money, and facilitate other illegal transactions.  This investigation took law enforcement above and beyond its traditional role in financial crimes.  In effect, it put us squarely in the middle of the high-tech world of cyber-crime and the dark web.  When given the opportunity to provide truthful statements to the agents, Weigand knowingly and willfully attempted to deceive the agents of the role he played in providing technical expertise to the Silk Road operators.  I hope that this guilty plea will discourage others from providing false information to law enforcement officers in the future.”

FBI Assistant Director William F. Sweeney Jr. said:  “Weigand and others used their skills and savvy to create a secret online enclave for criminals to trade in illegal drugs and illicit goods and services.  They thought they were smart enough to evade law enforcement, but they were wrong.  When Weigand was confronted, he lied about his involvement – once again thinking we weren’t smart enough to catch him.  With today’s plea, he’ll have time to contemplate the truth as he awaits his sentence.”

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “Criminal activity on the dark web continues to be more prevalent, allowing easy accessibility to narcotics and illicit goods with the click of a button.  With online criminal enterprises growing, law enforcement technologies are advancing, and HSI with its partners are infiltrating the dark web, intercepting online dealings and locating the perpetrators.  Today’s guilty plea should stand as reminder to those criminals who have a false sense of security behind their computer screen, that they too will one day face the consequences of their actions.”

According to the allegations in the Information, court filings, statements made in court, and evidence presented during the 2015 trial of Ross Ulbricht, Silk Road’s founder and chief administrator:

Ulbricht created Silk Road in approximately January 2011, and owned and operated the underground website until it was shut down by law enforcement in October 2013.  Silk Road emerged as the most sophisticated and extensive criminal marketplace on the Internet at the time.  During its more than two-and-a-half years in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to well over one hundred thousand buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions.  Silk Road was specifically designed to allow its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement through the use of the Tor network and a Bitcoin-based payment system. 

WEIGAND – who is a computer programmer and electrical engineer – worked with Roger Thomas Clark, the senior adviser to Ulbricht, on certain aspects of Silk Road.  For instance, WEIGAND and Clark worked to identify technological vulnerabilities in the Silk Road website.  WEIGAND also supplied technological advice directly to Clark and Ulbricht.  In January 2019, WEIGAND was questioned by an IRS Special Agent and an FBI Special Agent.  After being specifically warned that it is a federal crime to make a false statement to a federal law enforcement officer, WEIGAND attempted to cover up his involvement in Silk Road by falsely stating, among other things, that (1) he never opened an account on Silk Road; (2) he never used the online pseudonyms “Shabang” or “~Shabang~”; (3) he never transferred Bitcoin to Silk Road; (4) he never exposed computer security vulnerabilities in the Silk Road website; (5) he never communicated with anyone who used the online pseudonym “Dread Pirate Roberts,” “DPR,” or “Silk Road”; (6) he never performed any services for the Silk Road website; and (7) he did not know the true identity of “Variety Jones” (one of Clark’s pseudonyms) on Silk Road.  WEIGAND also falsely stated that the purpose of his trip to London in late 2013, following the takedown of the Silk Road website and arrest of Ulbricht, was to meet with Clark’s associate regarding a marijuana seed business.  In fact, WEIGAND traveled to Clark’s London residence and removed Silk Road evidence.

WEIGAND, 56, of Kirtland, Ohio, pled guilty to one count of making false statements, which carries a maximum sentence of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  WEIGAND is scheduled to be sentenced by Judge Pauley on December 18, 2020, at 2:00 p.m.

The founder and operator of Silk Road, Ross Ulbricht, was previously convicted of seven offenses after a jury trial: distributing narcotics, distributing narcotics by means of the Internet, conspiring to distribute narcotics, engaging in a continuing criminal enterprise, conspiring to commit computer hacking, conspiring to traffic in false identity documents, and conspiring to commit money laundering.  Ulbricht was sentenced principally to life imprisonment and $183 million in forfeiture.  The senior adviser to Ulbricht, Roger Thomas Clark, pled guilty to conspiring to distribute narcotics and his sentencing is currently pending; Clark faces a maximum potential sentence of 20 years in prison.

Ms. Strauss praised the outstanding joint efforts of the IRS-CI, the FBI, and HSI.  Ms. Strauss also thanked the FBI’s Cleveland Office for its assistance.