BEIJING – Envoys to international talks on ending North Korea's nuclear weapons program struggled Friday to find a compromise as differences emerged over a Chinese proposal on how to begin disarmament.

Christopher Hill, the main U.S. envoy to the talks, said all sides agreed on the proposal's broader issues. Hill said the remaining issues focused on a single paragraph of the Chinese proposal for a set of reciprocal steps aimed at implementing a 2005 deal that calls for North Korea to disarm in exchange for security guarantees and aid.

Hill said the envoys were working to rewrite the text to address North Korea's concerns. He did not give any details.

“I think we can be cautiously optimistic,” Hill said after a two-hour lunch meeting with his North Korean counterpart, Vice Foreign Minister Kim Kye Gwan, in the first bilateral session between the two sides at this week's talks.

Japan's envoy, Kenichiro Sasae, said while there was consensus on some points, but that there was no prospect of an imminent agreement.

“There are some parts in which we had progress but on others we ran into difficulty. We will continue with the talks, but at this point in time I don't feel there is a prospect of reaching an agreement,” Sasae said.

Kim said the meeting led to agreement on some unspecified issues, although there were still issues to overcome. “We are going to make more efforts to resolve them,” Kim said.

Late Thursday after the first day of talks, China distributed a draft agreement to the nuclear envoys from China, Japan, the two Koreas, Russia and the United States.

The proposal – presented after North Korea agreed in principle to take initial steps to disarm – would grant the communist nation unspecified energy aid for shutting down its main nuclear facilities within two months, South Korea's Yonhap news agency reported.

Officials declined to confirm details of the draft.

Hill said earlier Friday he saw “differences” among the delegations over the draft deal.

A South Korean official also cautioned against being too optimistic. The official, who spoke on condition of anonymity because of the issue's sensitivity, said it is “not as easy as expected to produce a result due to differences in positions and a conflict of interests.”

Both Hill and the South Korean official declined to elaborate on what the differences were.

But a pro-Pyongyang newspaper in Japan said the North wants the U.S. first to show that it has permanently ceased its “hostile” policy toward Pyongyang.

“As conditions mature, (North Korea) can halt the operation of the Yongbyon nuclear facilities,” the Choson Sinbo said, referring to the site of the North's main nuclear complex north of Pyongyang.

“The (North)'s position is that it can take corresponding measures when the U.S. takes steps to show that it irreversibly gave up its hostile policy,” it said.

The report, carried on the paper's Web site, cited a “diplomatic source well versed in” the negotiations. The paper, with links to the government in Pyongyang, is considered one of the North's propaganda tools.

Any agreement on an initial set of reciprocal moves to implement a September 2005 accord – in which North Korea pledged to disarm in exchange for aid and security guarantees – would set the stage for the first tangible steps in the often-delayed six-nation process.

The 2005 deal, a broad statement of principles that did not outline any concrete steps for dismantling North Korea's nuclear program, was the only agreement since the negotiations began in 2003.

At the last session of the arms negotiations in December, following North Korea's Oct. 9 underground nuclear test, the North refused to even talk about its nuclear programs. Instead, it demanded the U.S. lift financial restrictions targeting alleged North Korean counterfeiting and money laundering.

WASHINGTON – A federal grand jury in Trenton, N.J. has indicted three former U.S. Army officers and two U.S. civilians for their role in a bribery, fraud and money laundering scheme involving the theft of millions of dollars from the Coalition Provisional Authority (CPA) in Iraq, Deputy Attorney General Paul J. McNulty announced today.

The 25-count indictment unsealed today charges U.S. Army Colonel Curtis G. Whiteford, U.S. Army Lt. Colonels Debra M. Harrison and Michael B. Wheeler, and civilians Michael Morris and William Driver with various crimes related to a scheme to defraud the CPA - South Central Region (CPA-SC) in al-Hillah, Iraq. Whiteford, once the second-most senior official at CPA-SC, was charged with one count of conspiracy, one count of bribery, and 11 counts of honest services wire fraud. Harrison, at one time the acting Comptroller at CPA-SC who oversaw the expenditure of CPA-SC funds for reconstruction projects, was charged with one count of conspiracy, one count of bribery, 11 counts of honest services wire fraud, four counts of interstate transport of stolen property, one count of bulk cash smuggling, four counts of money laundering, and one count of preparing a false tax form. Wheeler, an advisor for CPA projects for the reconstruction of Iraq, was charged with one count of conspiracy, one count of bribery, 11 counts of honest services wire fraud, one count of interstate transport of stolen property, and one count of bulk cash smuggling.

Morris, a U.S. citizen in Romania who owns and operates a Cyprus-based financial services business, was charged with one count of conspiracy and 11 counts of honest services wire fraud. Morris was arrested by Romanian authorities on Feb. 6, 2007. The United States is seeking to have him extradited to New Jersey on these charges. Driver, Harrison’s husband, was charged with four counts of money laundering. Harrison and Wheeler, who were previously charged in criminal complaints, remain released on bond.

“This indictment alleges that the defendants flagrantly enriched themselves at the expense of the Iraqi people – the very people they were there to help,” said Deputy Attorney General McNulty. “U.S. government officials working in Iraq are not for sale. We will prosecute anyone who attempts to exploit the reconstruction efforts in Iraq for their personal gain.”

According to the indictment, from December 2003 through December 2005, Whiteford, Harrison, Wheeler and Morris conspired with at least three others—Robert Stein, at the time the Comptroller and Funding Officer for the CPA-SC; Philip H. Bloom, a U.S. citizen who owned and operated several companies in Iraq and Romania; and U.S. Army Lt. Colonel Bruce D. Hopfengardner—to rig the bids on contracts being awarded by the CPA-SC so that all of the contracts were awarded to Bloom. In total, Bloom received more than $8.6 million in rigged contracts. The indictment alleges that Bloom, in return, provided Whiteford, Harrison, Wheeler, Stein, Hopfengardner and others with over $1 million in cash, SUVs, sports cars, a motorcycle, jewelry, computers, business class airline tickets, liquor, promise of future employment with Bloom, and other items of value.

The indictment alleges that Bloom laundered over $2 million in currency that Whiteford, Harrison, Wheeler, Hopfengardner, Stein and others stole from the CPA-SC that had been designated for the reconstruction of Iraq. Bloom then used his foreign bank accounts in Iraq, Romania and Switzerland to send some of the stolen money to Harrison, Stein, Hopfengardner, and other Army officials in return for them awarding contracts to Bloom and his companies. Morris allegedly assisted Bloom in making these wire transfers of stolen CPA funds and in funneling those monies to the co-conspirators. Harrison and her husband, William Driver, for example, allegedly received a Cadillac Escalade as a bribe and used tens of thousands of dollars for improvements to their home in Trenton. Whiteford allegedly received at least $10,000 in cash, a $3,200 watch, a job offer from Bloom, and other valuables.

The indictment further alleges that during the course of the conspiracy, Whiteford, Harrison, Wheeler, Stein and Hopfengardner used U.S. currency stolen from the CPA-SC to funnel funds to Bloom for the purchase of weapons which they converted to their own personal use in the United States, including machine guns, assault rifles, silencers and grenade launchers.

Stein was sentenced on Jan. 29, 2007, to nine years in prison. He previously pleaded guilty to conspiracy, bribery, money laundering, possession of machine guns, and being a felon in possession of a firearm for his role in the scheme to defraud the CPA-SC.

On March 10, 2006, Bloom pleaded guilty to related charges of conspiracy, bribery, and money laundering in connection with the same scheme as Stein. Bloom is scheduled to be sentenced on Feb.16, 2007.

On Aug. 25, 2006, Hopfengardner, pleaded guilty to charges of conspiracy to commit wire fraud and money laundering in connection with the same scheme as Bloom and Stein. Hopfengardner is scheduled for a status conference on March 23, 2007.

These cases are being prosecuted by Trial Attorneys James A. Crowell IV and Ann C. Brickley of the Public Integrity Section, headed by Acting Section Chief Edward C. Nucci, and Trial Attorney Patrick Murphy of the Asset Forfeiture and Money Laundering Section, headed by Chief Richard Weber, of the Criminal Division. These cases are being investigated by the Special Inspector General for Iraq Reconstruction (SIGIR), Internal Revenue Service Criminal Investigations (IRS), the U.S. Immigration and Customs Enforcement at the Department of Homeland Security (ICE), Army Criminal Investigations Division, the U.S. Department of State Office of Inspector General, and the FBI’s Washington Field Office in support of the Justice Department’s National Procurement Fraud Task Force and the International Contract Corruption Initiative. The investigation has received substantial assistance from the ICE Cybercrimes Division. “These indictments not only serve as a deterrent to future crimes of this nature, but also demonstrate the direct benefits of independent oversight and interagency cooperation in guarding American tax dollars invested in Iraq,” said Special Inspector General for Iraq Stuart Bowen. “SIGIR’s investigative team, now in Baghdad for more than three years, should be proud of their significant contribution in bringing these individuals to justice.”

“No matter how complex the fraud scheme, the individuals indicted today illustrate that even military officers are not above the law and will be brought to justice if they engage in procurement fraud in the Iraqi reconstruction.  The FBI, in support of the National Procurement Fraud Task Force and the International Corruption Initiative, stands ready to work with our partners to investigate, as appropriate, and to eliminate contract bid rigging, bribery, fraud, and money laundering schemes that hinder the rebuilding efforts in Iraq,” said Assistant Director Michael A. Mason, Criminal, Cyber, Response and Services Branch of the FBI. “Criminals motivated by profit and greed don’t deserve to work alongside the brave men and women of our military serving in Iraq,” said Julie Myers, Assistant Secretary of Homeland Security for ICE. “These charges highlight the federal government’s commitment in targeting suspected bribery, fraud and money laundering involving Iraq reconstruction funds and the war in Iraq. ICE is proud to have contributed its financial investigative expertise to this important joint operation.”

“The IRS will use the tax code and money laundering authorities to go after corrupt officials and contractors,” said IRS Commissioner Mark W. Everson. “Sometimes this is the fastest and most direct way to hold accountable those who abuse the public trust, as is clearly the case in this instance.” “We are committed to investigating and rooting out these types of crimes to the fullest, wherever the truth may lead us,” said Brig. Gen. Rodney Johnson, commanding general, U.S. Army Criminal Investigation Command and Provost General of the Army. “This goes against the very fabric of our values as an Army and we will continue to aggressively pursue individuals, in or out of uniform, and companies who commit crimes against the Army, the American taxpayer, and the people we serve.”

An indictment is merely an allegation. Defendants are presumed to be innocent until proven guilty. Deputy Attorney General McNulty announced the creation of the National Procurement Fraud Initiative in October 2006, designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in contracting activity for national security and other government programs. As part of this initiative, the Deputy Attorney General has created the National Procurement Fraud Task Force (www.usdoj.gov/criminal/npftf), includes federal prosecutors, the FBI, SIGIR, and the Offices of Inspectors General for key federal agencies, and is chaired by Assistant Attorney General Alice S. Fisher of the Criminal Division. The Task Force has formed regional working groups around the country and is addressing many important topics relating to procurement fraud, including international procurement fraud issues, training, potential legislation, and information sharing between agencies.

Since the formation of the Task Force, federal prosecutors have brought or resolved 15 different criminal cases involving procurement fraud and have recovered more than $100 million through vigorous enforcement of civil remedies available in procurement fraud cases. Other examples of fraud and abuse cases prosecuted by the Department of Justice in recent months include the following:

*On Feb. 2, 2007, former U.S. Army civilian translator Faheem Salam of Michigan was sentenced to three years in prison for offering bribes to a senior Iraqi police official, in violation of the Foreign Corrupt Practices Act;

*On Jan. 30, 2007, Gheevarghese Pappen, a U.S. Army Corps of Engineers employee at Camp Arifjan in Kuwait, was sentenced to two years in prison for accepting $50,000 in illegal gratuities from a Kuwaiti contractor;

*On Jan. 25, 2007, Peleti “Pete” Peleti Jr., a U.S. Army Chief Warrant Officer, was charged in the Central District of Illinois with receiving a $50,000 bribe in exchange for influencing a food supplies services contract. Peleti served as Army’s Theater Food Service Advisor and was stationed at Camp Arifjan in Kuwait;

*On Nov. 13, 2006, four members of the California Army National Guard pleaded guilty to conspiracy charges related to their embezzlement from the U.S. Army while deployed in Iraq.

WASHINGTON – A federal judge has ordered that William J. Kennedy, of Livermore, Calif., be barred from selling “corporation sole” tax fraud schemes, the Justice Department announced today. The preliminary injunction order was entered following a hearing before Judge Jeffrey White of the U.S. District Court for the Northern District of California.

Some states authorize corporations sole to enable religious leaders to hold property and conduct business, the government complaint in the case states. But tax benefits are available to a corporation sole (or any other organization) only if the organization qualifies as a tax-exempt religious or charitable organization under federal tax laws. The court order states that Kennedy falsely advised customers that corporations sole used for their personal benefit can qualify as tax-exempt religious organizations.

According to papers filed in the case, Kennedy charged customers $25,000 to participate in the scheme. The court’s order requires Kennedy to give the government a list with his customers’ names, addresses, and to notify them of the injunction. More information related to this case can be found at http://www.usdoj.gov/tax/txdv06587.htm.

Corporation-sole scams are listed in the IRS’s annual list of the “Dirty Dozen” tax scams at http://www.irs.gov/newsroom/article/0,,id=136337,00.html. The Justice Department has obtained permanent injunctions against a number of people who sell corporation-sole scams. Two examples are found at http://www.usdoj.gov/tax/txdv05657.htm and http://www.usdoj.gov/tax/txdv05030.htm.

Since 2001, the Justice Department’s Tax Division has obtained injunctions against more than 220 tax preparers and tax-fraud promoters. More information about the Justice Department's efforts against tax-scam promoters can be found at http://www.usdoj.gov/tax/taxpress2007.htm. Information about the Justice Department's Tax Division can be found at http://www.usdoj.gov/tax.

WASHINGTON – A federal court in Minnesota has issued a permanent order barring Nash Sonibare, who operated Liberty Financial Group in St. Paul, Minn., from preparing federal income tax returns for others, the Justice Department announced today. The permanent injunction order was entered on February 5, 2007, by Judge Donovan Frank of the U.S. District Court for the District of Minnesota.

The government complaint alleged that Sonibare, a Nigerian immigrant, repeatedly prepared returns for his customers containing false or inflated credits and deductions. The complaint alleged that many of Sonibare’s customers are recent immigrants with limited English-language skills from various African countries, including Somalia, Ethopia, Eritrea, Nigeria, Ghana and Cameroon.

The court found that Sonibare repeatedly prepared federal income tax returns that contained false or inflated Schedule C expenses, false Schedule C businesses, false or inflated Schedule C business losses, false education credits, false dependency exemptions, and other fraudulent items. A Schedule C reports profits and losses from businesses and is used for sole proprietorships.

The Justice Department has sought and obtained injunctions against more than 220 federal tax promoters and preparers since 2001. Information about these cases is available on the Justice Department Tax Division’s Web site at http://www.usdoj.gov/tax/taxpress2006.htm. More information about the Justice Department’s Tax Division can be found at http://www.usdoj.gov/tax.