U.S. Navy Commander and Lt. Commander Indicted In Connection with Insurance Fraud Scheme

SAN DIEGO – A federal grand jury in San Diego returned a superseding indictment today that charges U. S. Navy servicemembers Dr. Michael Villarroel, Paul Craig, and Christopher Toups with fraud, false claims and conspiracy to defraud the United States.  The charges arise from a scheme where the defendants filed fraudulent claims to obtain unearned benefits from the Traumatic Servicemembers Group Life Insurance Program (“TSGLI”).  

According to the indictment, the TSGLI program is an insurance program that compensates servicemembers who suffer serious and debilitating injuries while on active duty.  The program is funded by fees paid directly by individual service members and the Department of Defense.  According to the superseding indictment, Dr. Michael Villarroel, a Commander in the U.S. Navy, was the medical doctor for the Explosive Ordinance Disposal Expeditionary Support Unit One  (“EOD ESU One”) from  March 2010 through May 2013.  In that capacity, Dr. Villarroel knowingly signed off on false and fraudulent TSGLI applications on behalf of multiple servicemembers that were part of or connected to EOD ESU One.  Both Christopher Toups, a former Chief Petty Officer Construction Mechanic, and Paul Craig, a former Lt. Commander in the U.S. Navy, filed fraudulent TSLGI applications.   To support their applications, each defendant submitted fabricated applications that included forged signatures and altered hospital records.  According to the superseding indictment, Craig fraudulently collected $150,000 and Toups collected at least $100,000.

In addition to Christopher Toups, four other individuals were previously indicted in connection with this scheme.  Three of those individuals – Richard Cote, Earnest Thompson, and Kelene Meyer – have pleaded guilty to conspiracy to commit wire fraud, and as part of their plea, admitted that the conspirators defrauded the TSGLI program of nearly $2 million.   According to the plea agreement, Meyer, a former nurse in the U.S. Navy, stated that Toups, Villarroel, and she received kickbacks for creating and filing the fraudulent TSGLI applications for other U.S. Navy servicemembers.  

DEFENDANTS                                  Case Number:            18CR1674

Dr. Michael Villarroel                        Age:  47                      Coronado, California

Paul Craig                                           Age:  46                      Austin, Texas

Christopher Toups                              Age: 42                             Woodstock, GA  

SUMMARY OF CHARGES

Count 1: 18 U.S.C. § 1349, Conspiracy to Commit Wire Fraud; Maximum Penalty 20 years in prison, $250,000 fine, forfeiture and restitution.

Counts 2-4: 18 U.S.C. § 1343, Wire Fraud; Maximum Penalty 20 years in prison, $250,000 fine, forfeiture and restitution 

Counts 5-7: 18 U.S.C. § 287, Making a False Claim; Maximum Penalty 5 years in prison, $250,000 fine 

AGENCIES

Federal Bureau of Investigation

Naval Criminal Investigative Service

Veteran Affairs for the Office of Inspector General

*The charges and allegations contained in an indictment or complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Arizona Truck Driver Sentenced to Two Years in Federal Prison for Causing Bus Crash that Left One Man Dead on Fort Irwin Army Base

          RIVERSIDE, California – An Arizona man has been sentenced to 24 months in federal prison for involuntary manslaughter in a fatal bus crash that happened after he parked his truck – without any lights or warning cones – in the middle of a highway on the Fort Irwin Army Base in the Mojave Desert.

          Steven Kilty, 52, of Apache Junction, Arizona, was sentenced late Monday afternoon by United States District Judge Jesus G. Bernal.

          After a five-day trial that ended in early October 2018, a federal jury found Kilty of involuntary manslaughter. The evidence presented at trial showed that Kilty, who was delivering a military tactical vehicle, arrived at Army’s National Training Center at Fort Irwin on June 1, 2014. Kilty had arrived at the base the night before his scheduled delivery, and he parked his tractor-trailer in the right lane of the road on Fort Irwin property. Kilty turned off the lights on the truck and, instead of putting out any safety triangle reflectors or turning on his hazard lights, he went to sleep in the berth of his truck – while the truck was still parked in the middle of the roadway.

          Just after 5 a.m. on June 2, prior to sunrise, a Victor Valley Transit Authority bus transporting commuters to Fort Irwin collided with the parked truck. As a result of the collision, Dail Lee Keiper, 62, of Barstow, was killed and seven people suffered significant injuries, including one man who lost his arm.

          “The death was the direct result of defendant’s decision to park the semi-truck loaded with an armored vehicle in the middle of a moving lane of traffic,” prosecutors wrote in a sentencing memorandum filed with the court. “Rather than a single isolated decision, the accident was the culmination of a number of reckless decisions made by (the) defendant.”

          The evidence presented at trial showed that Kilty was “grossly negligent” because his truck was blocking traffic on the roadway and he failed to place any warning reflectors, both of which are violations of the California Vehicle Code.

          Kilty was indicted in this case in March 2016. He initially was tried in this matter in late 2017, but a jury was unable to reach a unanimous verdict, and a mistrial was declared.

          This case was investigated by the FBI, California Highway Patrol, the U.S. Army Criminal Investigation Command, and the Fort Irwin Police Department.

          This matter was prosecuted by Special Assistant United States Attorney Paul D. Levers and Assistant United States Attorney Jerry C. Yang of the Riverside Branch Office.

Manhattan U.S. Attorney Announces Forfeiture Of North Korean Cargo Vessel

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John C. Demers, Assistant Attorney General for National Security, announced today the entry of a judgment of forfeiture regarding the M/V Wise Honest (the “Wise Honest”), a 17,061-ton, single-hull bulk carrier ship flagged in the Democratic People’s Republic of Korea (“DPRK” or “North Korea”).  The Wise Honest, one of the largest North Korean-flagged vessels, was used to conduct large illicit shipments of coal from North Korea and to import heavy machinery back to the DPRK.  Payments for maintenance, equipment, and improvements of the Wise Honest were made in U.S. dollars through unwitting U.S. banks, in violation of U.S. law and United Nations Security Council resolutions.

U.S. Attorney Geoffrey S. Berman said:  “Today’s judgment of forfeiture finalizes the U.S. government’s seizure of the Wise Honest and officially takes this North Korean vessel out of commission.  It will no longer be used to further a criminal scheme.  Using the full set of tools at our disposal, we will continue to investigate and prosecute attempts to evade U.S. sanctions, including by the North Korean regime.”

Assistant Attorney General for National Security John C. Demers said:  “This order of forfeiture sinks the Wise Honest’s career as one of North Korea’s largest sanctions-busting vessels.  The Department of Justice will continue to pursue other property used to violate U.S. and international sanctions, around the globe, with the cooperation of our international partners.”

According to documents filed in Manhattan federal court:

Pursuant to the International Emergency Economic Powers Act (“IEEPA”) and the North Korea Sanctions and Policy Enhancement Act of 2016 (“NKSPEA”), the DPRK and individuals or entities that the Department of the Treasury, Office of Foreign Assets Control (“OFAC”) has determined are involved in the facilitation of proliferation of weapons of mass destruction (“WMDs”) are prohibited from engaging in transactions with U.S. persons, involving U.S.-origin goods, or using the U.S. financial system.  The United Nations Security Council has similarly prohibited the provision of goods, technology, and services to North Korea, including the sale, supply, or transfer of coal.

From November 2016 through April 2018, the Wise Honest was used by Korea Songi Shipping Company, an affiliate of Korea Songi General Trading Corporation – which, in 2017, OFAC determined was “subordinate to the [Korean People’s Army] and involved in exporting North Korean coal” – and one of Korea Songi Shipping Company’s representatives, Kwon Chol Nam, to export coal from North Korea to foreign purchasers and import machinery to North Korea (the “Korea Songi Scheme”).

On March 14, 2018, the Wise Honest was loaded with coal in Nampo, North Korea.  On April 2, 2018, Indonesian maritime authorities intercepted and detained the Wise Honest.  Although maritime regulations require vessels like the Wise Honest engaged in international voyages to operate an automatic identification system (“AIS”) capable of providing information about the vessel to other ships and to coastal authorities, and despite its March 2018 voyage from North Korea, the Wise Honest had not broadcast an AIS signal since August 4, 2017.

Participants in the Korea Songi Scheme additionally attempted to conceal the Wise Honest’s DPRK affiliation by falsely listing the Wise Honest’s nationality or the origin of the illicit coal on board the vessel in shipping documentation, for example, as from Tanzania or Russia.

In connection with Korea Songi Scheme, Kwon paid for numerous improvements, equipment purchases, and service expenditures for the Wise Honest in U.S. dollars through U.S. financial institutions.  Such transfers constitute a provision of services by U.S. banks to both the sender and recipient of the funds, and U.S. law prohibits banks from providing such services to North Korean parties.  In connection with the March 2018 shipment of coal on board the Wise Honest alone, payments totaling more than $750,000 were transmitted through accounts at a U.S. financial institution.

On May 9, 2019, the U.S. Attorney’s Office filed a civil forfeiture complaint against the Wise Honest, which had previously been seized pursuant to a warrant issued in the Southern District of New York.  Today’s judgment of forfeiture was ordered by U.S. District Judge P. Kevin Castel.

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Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and its New York Field Office, Counterintelligence Division, and thanked the Department of Justice’s Money Laundering and Asset Recovery Section’s Program Operations Unit and Office of International Affairs, the U.S. Coast Guard, and the Department of State for their assistance.

Mr. Berman also thanked Fred and Cindy Warmbier, the parents of the late Otto Warmbier, for their willingness to voluntarily withdraw their claim in the action in order to facilitate the forfeiture of the Wise Honest.

The case is being handled by the Office’s Terrorism and International Narcotics Unit and Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys David W. Denton Jr. and Benet J. Kearney are in charge of the case, with assistance from Trial Attorney Christian Ford of the Counterintelligence and Export Control Section.