'Purest form of human trafficking': Arizona official indicted in adoption fraud scheme

LILY ALTAVENA ,  JESSICA BOEHM ,  URIEL J. GARCIA   | The Republic | azcentral.com

PHOENIX – An elected official in Arizona, in his private-sector career as an adoption attorney, arranged for 28 pregnant women from the Republic of the Marshall Islands to travel to Arizona to place their children for adoption over the past four years, authorities said Wednesday.

It is illegal for Marshallese women to travel to the United States for the purpose of adoption.

It's also illegal to scam Arizona's Medicaid system, which state Attorney General Mark Brnovich alleges Maricopa County Assessor Paul Petersen did when he helped these women illegally access state-funded medical benefits to the tune of $814,000.

Petersen and a co-defendant, Lynwood Jennet, were indicted in Arizona Monday on 29 counts of fraudulent schemes and three counts of conspiracy, theft and forgery.

Eight pregnant Marshallese women were found in a residence in Mesa on Tuesday night when Department of Public Safety troopers executed a search warrant, according to DPS Director Frank Milstead. There are no plans to charge the women, but it is unclear what will happen to their adoption plans, Milstead said.

A neighbor, Bella Perez, said she has lived in the neighborhood for about a year and saw “a lot of” pregnant women and women with children coming in and out of the home. She thought maybe they were all part of a family living together, she said.

When she saw several law enforcement officers in the area Tuesday, she thought it was a drug bust. Then a reporter knocked on her door, and she found out what had happened.

"That’s crazy, that’s like a lot. How can you do that to kids?” Perez said of Peterson and the allegations against him. “It’s crazy how a neighbor of yours is doing all those things and you don’t even know.”

The charges came out of a multistate investigation involving the Arizona Department of Public Safety, Homeland Security Investigations and the Utah Attorney General’s Office, according to the Arizona Attorney General's Office.

The Utah attorney general charged Petersen with 11 other felonies, including communications fraud, human smuggling and sale of a child.

He also faces 19 federal charges, filed in the U.S. District Court for western Arkansas, related to allegations he illegally brought four people to the United States who continue to reside there.

An investigation by Honolulu Civil Beat last year questioned the legality of the adoptions Petersen administered.

The Republic of the Marshall Islands is located near the equator in the Pacific Ocean between Hawaii and the Philippines. It has a population of about 53,000 people. Petersen, who is member of the Church of Jesus Christ of Latter-day Saints, served his church mission there, according to court documents.

The Arizona charges against Petersen

The Arizona Attorney General's Office investigation focused on Medicaid fraud. The indictment alleges Petersen illegally obtained medical services for the women, falsely claiming the women were Arizona residents.

Milstead said DPS began investigating Petersen's adoption practices in December after a state trooper was tipped off by a friend who considered adopting through Petersen's office but was concerned about the legitimacy of the adoption process.

The Arizona case involves actions dating to November 2015, but according to court records, Petersen has arranged Marshallese adoptions since 2005.

Milstead said he expects the DPS to recommend other charges to the Attorney General's Office.

According to court records, the 28 pregnant women identified by Arizona investigators followed a similar adoption pattern:

• Petersen paid individuals in the Marshall Islands to help locate pregnant women interested in adoption. He then matched them with adoptive families in the U.S.
• Petersen paid the pregnant women $1,000 per month while they were pregnant in the U.S. and covered other expenses. Some birth mothers were promised up to $10,000 to place their unborn child for adoption.
• He charged the adoptive families about $35,000 per adoption, claiming this included the birth mother's medical costs.
• Petersen sent money to the pregnant women in the Marshall Islands to purchase passports.
• Petersen paid for the women to fly to Phoenix and stay in a house he owns for the duration of their pregnancy. In some instances, the women gave birth within days of arriving in Arizona. In other cases, they were in the state as long as six months.
• Shortly before the women gave birth, Petersen or his associates assisted her in signing up for Medicaid benefits, falsely stating they were Arizona residents.
• After the women gave birth and the adoption was complete, Petersen paid for them to fly back to the Marshall Islands or to other states – most often Arkansas.

Petersen is accused of bilking the state out of more than $800,000, the Arizona Attorney General's Office said Wednesday.

Brnovich said the Arizona investigation focuses solely on the alleged fraud to the state's Medicaid system and stressed that his office was not pursuing families who adopted children through Petersen's law office.

"It's unfair to the adoptive parents, and it's also unfair to the hard-working Arizona taxpayers," he said.

According to his website, Petersen charges $40,000 per adoption.

Petersen also serves as general counsel for Bright Star Adoptions, an agency that operates out of the same building as his law office, according to his website.

Linda Henning Gansler is listed on the website as the director of Bright Star Adoptions. A woman who identified herself as "Linda" answered the agency's phone Wednesday but would not comment on the agency's relationship with Petersen.

After Petersen was arrested, prosecutors were concerned about a flight risk. Petersen's cash bond was set at $500,000 in his initial court appearance Tuesday night.

He was asked to surrender his passport at his next court appearance, which was scheduled for Oct. 15.

An attorney for Petersen did not respond to a request for comment.

Utah case: 'The commercialization of children'

The Utah attorney general alleged that Petersen recruited more than 40 pregnant women from the Marshall Islands over the past three years and transported them to Utah, where they were paid to give up their children for adoption in the U.S.

Petersen is facing 11 felony charges in Utah.

The state’s investigation centered on claims of human smuggling, Sean Reyes, Utah’s attorney general, said during a news conference Wednesday.

"The commercialization of children is illegal and the commoditization of children is simply evil," he said.

Leo Lucy, chief investigator with the Utah attorney general’s office, called Petersen’s operation a “large-scale adoption fraud scheme.”

Between December 2016 and September 2018, a little more than $2.7 million was deposited into a bank account Petersen gave adoptive families for wire transfers, according to Utah court documents. Most of the transfers included notes indicating they were payments for adoptions.

Prosecutors in Utah are not questioning completed adoptions, Reyes said. His office does not anticipate any overturned adoptions as a result of the case.

“We have no interest ... in interfering in any adoptions that have taken place,” he said.

However, investigators noted that some adoptions through Petersen’s firm are still pending and people involved in those adoptions are “very concerned.”

It’s unclear how Utah state agencies will handle the pending adoption cases.

Arkansas U.S. Attorney: A scheme to make quick money

The U.S. Attorney’s Office for the Western District of Arkansas detailed the activities of Petersen and his co-defendant there, Maki Takehisa. Authorities characterized their operation as a scheme to defraud and take advantage of Marshallese women and families to make quick money.

The indictment says Petersen would offer to pay up to $10,000 to pregnant Marshallese women to travel to the U.S. to give birth to their babies and give them up for adoption.

“Since 2014, he (Petersen) used his law license and expertise to prey not only on the women of the Marshall Islands but on the families of Arkansas who wanted nothing more than to add to their families,” said Duane Kees, U.S. Attorney for the Western District of Arkansas, at a news conference in Springdale, Arkansas, which was streamed online.

Takehisa is a citizen of the Republic of the Marshall Islands.

According to federal court documents, Petersen and Takehisa had offered to pay at least four Marshallese women to give up their babies for adoption in Arkansas.

The 19-count indictment filed in U.S. District Court in the Western District of Arkansas charges Petersen and Takehisa with conspiracy to smuggle the women for private financial gain; aiding and abetting the smuggling; wire fraud; mail fraud; conspiracy to commit visa fraud; and conspiracy to commit money laundering.

Kees said at the news conference that at this point, there’s no evidence the women are seeking to be reunited with the babies. He said the women were not told to get pregnant. They were approached after they were pregnant, he said.

Kees said the women described “these ordeals as being treated as property.”

“Make no mistake,” he said, “this is the purest form of human trafficking.”

Kees estimated between 30 and 35 adoptions a year were conducted under fraudulent circumstances.

If Petersen is found guilty of all the federal charges in Arkansas, he could be sentenced up to 315 years in prison and be imposed a $5 million fine, Kees said.

Follow Jessica Boehm on Twitter @jboehm_NEWS.