Former Drugstore Executive Receives Two-Year Sentence, Ordered to Pay $6.3 Million for Kickback Scheme

Former Drugstore Executive Receives Two-Year Sentence, Ordered to Pay $6.3 Million for Kickback Scheme

A Pennsylvania federal judge sentenced a former Rite-Aid advertising executive to two-years imprisonment and ordered him to pay over $6.3 million restitution for his role in a $5.7 million kickback scheme.

James V. Pilsner was accused of sending monthly e-mails to Atlanta-based Nuvision Inc. owners Larry Nuckols and Vance Taylor seeking kickbacks disguised as requests for new equipment. Nuckols pled guilty to wire fraud last year and is awaiting sentencing, and Taylor was acquitted of fraud and other charges in May. Both testified for the government at Pilsner’s trial.

Of the $6.3 million restitution, approximately $5.7 million will be paid to Rite-Aid and just under $600,000 will be paid to the Internal Revenue Service.

Read the charges against Pilsner here.

Additional Charges to be Brought in JPMorgan Precious Metal Market Manipulation Scheme

On October 23, prosecutors with the US Attorney’s Office for the Northern District of Illinois stated in federal court that they will be filing a superseding indictment within 30 days naming at least one more individual involved in an alleged criminal enterprise relating to the manipulation of the price of precious metals.

Prosecutors told US District Court Judge Edmond Chang that the superseding indictment would be largely based on the same set of facts underlying the current charges against Michael Nowak, Gregg Smith, and Christopher Jordan, who are current and former JPMorgan Chase & Co. traders. The defendants are facing charges of racketeering conspiracy, bank fraud, wire fraud, and conspiracy. Nowak and Smith have also been charged with attempted price manipulation, commodities fraud, and “spoofing.” Spoofing is a practice involving manipulating commodity prices by placing orders without intent to fill them.

The indictment alleges that beginning around 2008, the traders, along with unnamed co-conspirators, manipulated the prices of commodities in which they held or sold barrier options, which is a type of option triggered when the underlying commodity reaches a particular price. They also utilized “iceberg orders,” where only a portion of the intended trade is visible, and then one large spoofed order on the opposite side of the trade is made to drive the price down or up.

The charges against the traders are the most serious to have come out of the Department of Justice’s ongoing spoofing probe and the first alleging manipulation involving barrier options.

A copy of the indictment can be found here.

NY Contractors Resolve Alleged False Claims Act Violations for $1 Million

On October 23, the US Attorney’s Office for the Northern District of New York announced that Upstate Construction Services, LLC and Structural Associates, Inc. agreed to pay over $1 million to resolve allegations that they wrongfully obtained government contracts intended for companies qualified as historically underutilized business zone (HUBZone) firms.

HUBZone is a US Small Business Administration program that promotes small businesses through government contracting. To qualify as a HUBZone small business, firms must have their principal office located in a HUBZone and have a certain percentage of employees live in a HUBZone.

Upstate, a qualified HUBZone entity, allegedly entered into joint agreements with Structural (a non-HUBZone entity),which allowed Upstate to obtain bonding on jobs it normally would not have been able to obtain. In exchange, Structural allegedly received approximately half of Upstate’s profits on government contracts. According to the government, none of the agreements between Upstate and Structural were disclosed to the government.

Read the DOJ Press Release here.

SEC Settled Insider Trading Suit for $275K

The Securities and Exchange Commission settled insider trading allegations against a Thai national for approximately $275,000. Bovorn Rungruangnavarat and his brother, Badin Rungruangnavarat, were alleged to have made $3.8 million by trading on inside knowledge of Smithfield Food, Inc.’s sale to a Chinese food company by purchasing thousands of shares of Smithfield stock, call options, and futures contracts just ahead of the company’s 2013 sale. Once the sale was announced, the Rungruangnavarat’s more than doubled their investment.

The SEC’s first suit against Badin Rungruangnavarat, brought approximately one month after Smithfield’s sale, was settled in September 2013 for over $5 million, and included $3.2 million in disgorgement and a $2 million penalty.

The brothers allegedly obtained the insider information from a Thai investment banker – and childhood friend of Bovorn Rungruangnavarat – who had advised a Thai company that made its own bid for Smithfield.

The SEC’s complaint can be found here.