Tag: Arkansas

Four Indicted for $16 Million Money Laundering Scheme

Four Indicted for $16 Million Money Laundering Scheme

On March 23, 2022, an indictment was unsealed in the Western District of Arkansas, charging four men for their involvement in wire fraud and money laundering schemes involving fake investment offerings amounting to an alleged $16 million.

According to court documents, the four men allegedly engaged in an investment fraud scheme between 2013 and 2021 in which they falsely represented the nature of their investment offerings and promised large returns, which they could not and did not yield. The indictment also alleges that two of the defendants encouraged victims to send their funds to bank accounts controlled by the other two defendants, and then transferred the money through a complex series of accounts worldwide.

The defendants were charged with wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. One defendant was further charged with money laundering. If convicted, the men will face up to 20 years in prison for each count. The additional count of money laundering carries an additional sentence of up to 10 years.

The DOJ press release can be found here.

California Man Pleads Guilty To Stealing Government COVID-19 Relief Funds

On March 18, 2022, a California man pleaded guilty in the Central District of California to misappropriating COVID-19 relief funds obtained through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Under the CARES Act Provider Relief Fund, CARES Act health care providers who were financially harmed by the impact of the COVID-19 pandemic are granted federal funds to provide care to patients suffering from COVID-19. According to court documents, the defendant admitted he owned a hospice agency in North Hollywood that was never operational during the COVID-19 pandemic, yet he received approximately $89,162 designated for the medical treatment and care of COVID-19 patients. The defendant admitted he misappropriated the CARES Act funds by spending them for his personal use and then transferring the funds to family members, including one family member in Armenia, rather than using the funds in any way related to the pandemic relief efforts as required.

As part of his guilty plea, the defendant further admitted that he submitted five Economic Injury Disaster Loan (EIDL) applications to the Small Business Administration (SBA) on behalf of his hospice agency and four other entities he controlled. As a result of his fraudulent applications, the SBA disbursed approximately $428,100 in EIDL funds to the man, which he used for his benefit against EIDL requirements.

The man pleaded guilty to three counts of theft of government property and is scheduled to be sentenced on June 13, facing up to 10 years in prison for each count.

The DOJ press release can be found here.

New Jersey Man Convicted for Fraudulently Obtaining US Visas for Chinese Government Employees

On March 23, 2022, a New Jersey man was convicted by a federal jury of one count of conspiracy to defraud the United States and to commit visa fraud for his participation in a conspiracy to fraudulently obtain United States visas for Chinese government employees.

According to court documents, the defendant was involved in a scheme to fraudulently obtain J-1 research scholar visas for employees of the government of the People’s Republic of China (PRC) to allow them to covertly work for the PRC government while in the United States. The defendant operated an office of the China Association for the International Exchange of Personnel (CAIEP), an agency of the PRC government, in New Jersey that seeks to recruit US scientists, academics, engineers, and other experts for the PRC.

The J-1 research scholar program allows foreign nationals to visit the United States to conduct research at a corporate research facility, library, museum, university, or other research institution. The defendant allegedly worked to obtain a J-1 research scholar visa for a prospective employee based on the false representation that the employee would conduct research at a United States university, to conceal unlawful work of another employee who was present in the United States on a J-1 visa sponsored by a US university. The two employees represented to the US government that they were entering the US for the primary purpose of conducting research at US universities, but their actual purpose consisted of working for the CAIEP. The defendant reported the employee’s arrival to the United States to the US universities, procured a local driver’s license for her and disguised her CAIEP salary as a subsidy for research scholar living expenses to make her presence as a research scholar appear legitimate.

As a result of his conviction, the defendant faces a maximum sentence of five years; he is scheduled to be sentenced on July 11.

The Department of Justice (DOJ) press release can be found here.

UPS To Pay $5.3 Million for False Claims Act Allegations

On March 21, 2022, the DOJ announced that United Parcel Service Inc. (UPS) agreed to pay approximately $5.3 million to settle allegations that the company falsely reported information about the transfer of U.S. mail to foreign posts or other intended recipients under contracts with the U.S. Postal Service (USPS), in violation of the False Claims Act (FCA).

UPS was engaged by USPS to pick up U.S. mail at various locations and deliver it to its international and domestic destinations. As a condition of payment, UPS was required to submit electronic scans to USPS to report when the mail was delivered, and there were specified penalties for mail that was delivered late or to the wrong location. The settlement resolves allegations that scans submitted by UPS were falsified times and that UPS, in fact, transferred possession of the mail.

According to DOJ, this is the fifth civil settlement involving air carrier liability for false delivery scans under the USPS International Commercial Air Contracts, pursuant to which the United States has recovered more than $70 million.

The DOJ press release can be found here.

Article By D. Jacques Smith, Randall A. Brater, Mattie Bowden, and Rebecca W. Foreman of ArentFox Schiff LLP

For more white collar crime legal news, click here to visit the National Law Review.

© 2022 ArentFox Schiff LLP

Arkansas and Kentucky Halt Medicaid Work Requirements

On April 10, 2019, the Department of Justice filed notices[1] appealing two District Court rulings that struck down Medicaid work requirements in both Kentucky[2] and Arkansas[3] to the U.S. Court of Appeals for the District of Columbia Circuit. The rulings, issued on March 27, 2019, by Judge James E. Boasberg of the Federal District Court for the District of Columbia, held that the U.S. Department of Health and Human Services (“HHS”) acted arbitrarily and capriciously in violation of the Administrative Procedure Act (“APA”) when it approved the Arkansas Works Amendments and Kentucky HEALTH programs. Arkansas and Kentucky halted the programs, pending resolution of the appeals.

Background

Arkansas Works Amendments

In 2017, Arkansas Governor Asa Hutchinson proposed substantial amendments to the Arkansas Medicaid program (known as Arkansas Works since 2017) (the “Arkansas Works Amendments”). While States generally must meet specific federal requirements when implementing their Medicaid programs, Federal law allows the Secretary of HHS (the “Secretary”) to waive federal requirements for “experimental, pilot, or demonstration project[s]” proposed by States.[4]   Specifically, if, in the Secretary’s judgment, the proposals would be “likely to assist in promoting [Medicaid’s] objectives,”[5] then the Secretary may waive compliance with certain Federal Medicaid requirements to the extent necessary to enable the State to carry out its proposed project (a “Section 1115 Waiver”).[6]

The Arkansas Works Amendments included a new requirement that adults ages 19 to 49 complete 80 hours of employment, or earn income equivalent to 80 hours of employment, each month as a condition of continued Medicaid coverage.[7] On March 5, 2018, the Secretary approved the work requirements and issued a Section 1115 Waiver allowing Arkansas to implement the new requirements. After the work requirements were implemented, more than 16,900 individuals lost Medicaid coverage for at least some period of time due to not reporting their compliance.[8]

Arkansas Medicaid recipients filed suit against the Secretary in August 2018. They asserted that the Secretary’s approval of the Arkansas Works Amendments was arbitrary and capricious, exceeded the Secretary’s statutory authority, and violated the “Take Care Clause” at Article 2, Section 3 of the Constitution – such clause requiring that the President, “take care that the laws be faithfully executed.”[9]

Kentucky HEALTH

In 2018, Kentucky submitted its own Medicaid proposal – the Kentucky HEALTH program – which CMS approved.[10] Like the Arkansas Works Amendments, Kentucky HEALTH made significant changes to Kentucky Medicaid, including, among other things, the implementation of work requirements. Kentucky HEALTH would require Medicaid beneficiaries to spend at least 80 hours per month on certain qualified activities, including: (i) employment; (ii) job skills training; (iii) education; (iv) community service; and (v) participation in Substance Use Disorder treatment. Failure to meet the 80 hour threshold, or failure to report compliance, would result in loss of Medicaid coverage.[11]

Two weeks after the Kentucky HEALTH program was approved, Kentucky Medicaid recipients sued the Secretary. The plaintiffs argued that the Secretary failed to consider Medicaid’s objectives and exceeded his statutory authority when he approved Kentucky HEALTH. The Federal District Court for the District of Columbia agreed with the plaintiffs, and vacated the Secretary’s approval on June 29, 2018, and remanded to HHS for reconsideration.[12]

Following remand, HHS re-opened public comments for Kentucky HEALTH, and approved a slightly modified proposal on November 20, 2018. Again, Kentucky Medicaid recipients sued the Secretary, arguing that the Secretary still had not considered Medicaid’s core objectives in violation of the APA.[13]

The Administrative Procedure Act

The APA establishes two important frameworks: (1) procedures which executive agencies must follow when developing, reviewing, and promulgating rules and regulations; and (ii) a judicial framework for courts to review executive agency actions.[14] Under the APA, courts must “hold unlawful and set aside agency action, findings, and conclusions” that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”[15] An agency must “examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made,” or the agency’s action may be stuck down by the courts.[16]

The District Court Held That HHS Failed to Consider Medicaid’s Core Objective

Using the APA framework, the court analyzed whether HHS identified the objectives of Medicaid and explained why the Arkansas Works Amendments and Kentucky HEALTH programs would promote such objectives.[17] The court found that, while HHS had considered several Medicaid objectives, HHS failed to consider one critically important objective – providing medical assistance to needy populations.[18]

While HHS itself admitted that providing health coverage to vulnerable populations is “Medicaid’s core objective,”[19] the court found that HHS failed to consider the impact that the Kentucky and Arkansas projects would have on current and future Medicaid coverage.[20] The court determined this failure alone made the Secretary’s approval of the states’ work requirements arbitrary and capricious.[21] The court vacated HHS’s approval of both the Kentucky and Arkansas programs, and remanded both programs to HHS for reconsideration.[22]

Arkansas and Kentucky Halt Implementation of Work Requirements Pending Appeal

Following the District Court decision, Arkansas suspended the changes made by the Arkansas Works Amendments, which have been in effect since June 2018, and Kentucky halted implementation of its Kentucky HEALTH program, which was scheduled to take effect on April 1, 2019. Governor Hutchinson praised the Justice Department’s decision to appeal the cases, and indicated that the Government will likely seek an expedited appeal.

[1] Notice of Appeal, Stewart v. Azar, Case No. 1:18-cv-152-JEB (D.D.C. Apr. 10, 2019); Notice of Appeal, Gresham v. Azar, Case No. 1:18-cv-1900-JEB (D.D.C. Apr. 10, 2019)

[2] Memorandum Opinion, Stewart v. Azar, Case No. 18-152-JEB (D.D.C. Mar. 27, 2019)

[3] Memorandum Opinion, Gresham v. Azar, Case No. 18-1900-JEB (D.D.C. Mar. 27, 2019)

[4] 42 U.S.C. § 1315(a)

[5] Id.

[6] 42 U.S.C. § 1315(a)(i).

[7] Gresham at 7-9.

[8] Id. at 8-9.

[9] Gresham at 10.

[10] Stewart at 4.

[11] Stewart at 5.

[12] Stewart at 6-7.

[13] Stewart at 5-8.

[14] See generally 5 U.S.C. § 551 et seq.

[15] 5 U.S.C. § 706(2).

[16] Stewart at 10 (quoting Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983))

[17] Gresham at 16; Stewart at 14-15.

[18] Gresham at 17-18; Stewart at 14.

[19] Gresham at 17.

[20] Stewart at 16-17

[21] Stewart at 15

[22] Gresham at 33; Stewart at 48.

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

Four States and Two Major Cities Approve Minimum Wage Increases

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Voters in the states of Alaska, Arkansas, Nebraska, and South Dakota voted in favor of ballot initiatives that will increase the state minimum wage. Alaska’s minimum wage will increase from $7.75 to $9.75 an hour by 2016, Arkansas’s from $6.25 to $8.50 by 2017, Nebraska’s from $7.25 to $9.00 by 2016, and South Dakota’s from $7.25 to $8.50 next year.

Those four states join 12 others and Washington, D.C., all of which have increased their minimum wage in the past two years. For example, New Jersey’s 2013 ballot initiative to raise the state minimum to $8.25 passed by more than 60 %, and in 2006, state initiatives to raise the minimum wage passed by large majorities in Arizona (65.6%), Missouri (75.6 %), Montana (74.2 %), Nevada (68.4 %), and Ohio (56.5 %).

Voters in San Francisco overwhelmingly approved a ballot initiative to raise the city’s minimum wage to $15 an hour, the highest level in the nation, on the heels of Seattle’s June decision to raise its minimum wage to $15. As with Seattle’s minimum wage, San Francisco’s will be phased in gradually, from its current rate of $10.74 an hour to $11.05 on January1 and $12.25 in May before increasing every year until reaching $15 in 2018.

On December 2, 2014, the Chicago City Council overwhelmingly approved raising the City’s minimum wage from the current state-wide rate of $8.25 an hour to $13 by mid-2019. Chicago workers will see their first increase next July, when the minimum wage will increase to $10, then increase by 50 cents each of the two years after that, and $1 the next two years.

This minimum wage initiative has also received some pushback. For example, Hotel industry groups on December 16 sued the city of Los Angeles in federal court over the city’s enactment of a minimum wage ordinance requiring large non-union hotels to pay their workers $15.37 an hour. In their lawsuit, the American Hotel & Lodging Association and the Asian-American Hotel Owners Association allege the city ordinance violates federal labor, contract and equal protection laws.

The hotel minimum wage ordinance, which passed the City Council in October on an 11-2 vote, is estimated to cover about 80 large hotels in the city. Starting in July, hotels with more than 300 rooms must pay workers the higher minimum wage; in July 2016 the measure kicks in for hotels with as few as 125 rooms. Hotel Industry groups contend that by allowing exemptions for hotels with union collective bargaining agreements, the ordinance creates an economic disadvantage for non-union hotels, thus forcing their hand to permit union organizing.

These minimum wage increases are not expected to make it more likely that Congress will pass President Obama’s proposed federal minimum wage increase to $10.10, particularly given the results of this past November’s mid-term elections. However, the minimum wage will certainly remain a hot-button issue for the next two years, and a campaign issue during the 2016 Presidential campaign.

ARTICLE BY

Robert W. Mulcahy
Carlos R. Pastrana-Torres
OF
Michael Best & Friedrich LLP