District of New Jersey

NEWARK, N.J. – A North Carolina man today admitted his role in one of the nation’s largest and longest running stolen identity refund fraud schemes ever prosecuted, U.S. Attorney Paul J. Fishman announced.

Luis Martinez, 48, of Matthews, N.C., pleaded guilty today before U.S. District Judge Claire C. Cecchi, to an Information charging him with conspiracy to defraud the United States and theft of government property. The conspiracy caused more than 8,000 fraudulent U.S. income tax returns to be filed, which sought more than $65 million in tax refunds and resulted in losses to the United States of more than $12 million.

According to documents filed in this case and statements made in court:

Stolen Identity Refund Fraud (“SIRF”) is a common type of fraud that results in over $2 billion in losses annually to the U.S. Treasury. SIRF schemes generally share a number of hallmarks:

• SIRF perpetrators obtain personal identifying information, including Social Security numbers and dates of birth, from unwitting individuals, who often reside in the Commonwealth of Puerto Rico;
• SIRF participants complete Individual Income Tax Return 1040 Forms using the fraudulently-obtained information, and falsifying wages earned, taxes withheld and other data. Perpetrators use data to make it appear that the “taxpayers” listed on the fraudulent 1040 form are entitled to tax refunds – when in fact, the various tax withholdings indicated have not been paid and no refunds are due;
• SIRF perpetrators direct the U.S. Treasury Department to issue the refunds through checks to locations they control or can access, in various ways;
• SIRF perpetrators generate cash proceeds. Some sell the checks at a discount to face value. The buyers then cash the checks at banks or check cashing businesses or deposit them into bank accounts.

Federal law enforcement agencies, recognizing that SIRF was a serious problem, created a multi-agency task force in New Jersey comprised of investigators from the IRS and the U.S. Postal Inspection Service, along with the U.S. Secret Service, and with assistance from the Drug Enforcement Administration (the “New Jersey Task Force”).

An investigation led by the New Jersey Task Force with assistance from U.S. Immigration and Customs Enforcement, Homeland Security Investigations has revealed that starting as early as 2007, dozens of individuals in the New Jersey and New York area have been engaged in a large-scale, long running SIRF scheme. The scheme has caused more than 8,000 fraudulent 1040 forms to be filed, seeking more than $65 million in tax refunds, with losses to the U.S. Treasury of more than approximately $12 million.

Members of the conspiracy obtained personal identifiers, such as dates of birth and Social Security numbers, belonging to Puerto Rican citizens. They used those identifiers to create fake 1040s, which falsely reported wages purportedly earned by the “taxpayers” and taxes purportedly withheld, to create the appearance that the “taxpayers” were entitled to tax refunds. The returns were filed electronically. By tracing the specific IP addresses that submitted them, law enforcement officers learned just a handful of IP addresses created many of the fraudulent forms that led to the issuance of tax refund checks.

Martinez and the other members of the conspiracy then gained control of checks, sometimes bribing mail carriers to intercept checks and deliver them to other members of the conspiracy.

During the course of the investigation, members of the task force identified certain “hot spots” of activity and intercepted more than $22 million in fraudulently-applied for refund checks before they were delivered to members of the conspiracy.

U.S. Attorney Fishman praised special agents of IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen; the U.S. Postal Inspection Service, under the direction of Acting Inspector in Charge Marie Kelokates; the U.S. Secret Service, under the direction of Special Agent In Charge James Mottola; and the Drug Enforcement Administration, under the direction of Acting Special Agent in Charge Robert G. Koval, for the investigation leading to today’s guilty plea.

The conspiracy count carries a maximum potential penalty of five years in prison and up to a $250,000 fine. The substantive count of theft of government property carries a maximum potential penalty of 10 years in prison and up to a $250,000 fine. Sentencing is scheduled for July 16, 2013.

The government is represented by Assistant U.S. Attorneys Danielle Alfonzo Walsman, Mala Ahuja Harker, Lakshmi Srinavasan Herman, and Zach Intrater of the U.S. Attorney’s Office Criminal Division in Newark.

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Defense counsel: Barry Goldberg Esq., New York

Martinez, Luis Information

TRENTON, N.J. — A Pennsylvania man today admitted robbing two banks, one in New Jersey and one in Pennsylvania, in October 2011, U.S. Attorney Paul J. Fishman announced.

Odel Taitt, 33, of Denver, Pa., pleaded guilty before U.S. District Judge Mary L. Cooper to an Information charging him with two counts of bank robbery.

According to documents filed in this case and statements made in court:

Taitt admitted that on Oct. 6, 2011, he robbed the National Penn Bank in Wyomissing, Pa., wearing sunglasses and a baseball cap. He presented the teller with a note demanding money and stating that he had a gun. The teller complied with Taitt’s demands and Taitt fled the bank.

He also admitted that on Oct. 25, 2011, he entered the PNC Bank in Tewksbury Township, N.J., wearing sunglasses and a gray, derby hat. He presented the teller with a note that asked for $20, $50 and $100 bills and again threatened that he had a gun. He received the money and fled the bank. Taitt was apprehended later that day in Hunterdon County.

The charges to which Taitt pleaded guilty are each punishable by a maximum potential penalty of 20 years in prison and a $250,000 fine. Sentencing is currently scheduled for July 16, 2013. Taitt is in federal custody pending sentencing.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford, with the investigation leading to today’s guilty plea.  He also thanked the Hunterdon County Prosecutor’s Office, under the direction of Prosecutor Anthony P. Kearns, III; the Union County Prosecutor’s Office, under the direction of Prosecutor Theodore J. Romankow; the Tewksbury Township Police Department, under the direction of Chief Thomas Holmes; the New Providence Police Department, under the direction of Chief Anthony D. Buccelli, Jr.; the Bernards Township Police Department, under the direction of Chief Brian Bobowicz; and the Wyomissing Police Department, under the direction of Chief Jeffrey R. Biehl, for their contributions to the case.

The government is represented by Deputy U.S. Attorney Nelson S.T. Thayer Jr. in Camden and Assistant U.S. Attorney John E. Clabby of the U.S. Attorney’s Office Criminal Division in Trenton.

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Defense counsel: Andrea Bergman Esq. Trenton

Taitt Information

TRENTON, N.J. – A former mortgage broker and bank officer today admitted his role in conspiring to commit bank fraud in order to secure a $1.48 million residential real estate loan, U.S. Attorney Paul J. Fishman announced.

James Cockinos, 58, of Englewood Cliffs, N.J., pleaded guilty before U.S. District Judge Freda L. Wolfson in Trenton federal court to an Information charging him with one count of conspiracy to commit bank fraud. Cockinos defrauded Washington Mutual Bank (later acquired by JPMorgan Chase) in New York, for the purpose of securing a $1.48 million residential loan.

According to documents filed in this case and statements made in court:

Cockinos was the owner/president of Federated Mortgage Company of America (“FMCA”). He was also a member of the Board of Directors at Mariner’s Bank. Cockinos, through FMCA, served as the mortgage broker on a residential loan with Washington Mutual Bank, F.A., in an application dated April 19, 2007. The borrower, identified as Individual 2 in the Complaint, applied for the loan at the request of a spouse identified as Individual 1 in the Complaint. There was no co-borrower on the loan.

The loan was for the purpose of purchasing for $1.9 million a property located in Englewood Cliffs. Cockinos was responsible for obtaining certain information from Individual 2 for purposes of completing the loan application. At the time that Individual 2 signed the loan application, Individual 2 did not review the contents of the application, which included information regarding the purpose of the property and Individual 2’s employment, income, and assets.

The application contained false statements concerning Individuals 2’s employment, income and assets. Cockinos also indicated in the application that he obtained the information from Individual 2 through a face-to-face interview, when in fact, no such interview took place.

The application indicated that Individual 2 had $400,000 in a joint checking account at Mariner’s Bank in New Jersey, when, in fact, Cockinos and Individual 1 caused $350,000 to be temporarily deposited into the joint account for the purpose of misrepresenting that amount as Individual 2’s assets. Cockinos also directed a Mariner’s Bank employee to falsely verify that there was $350,000 in the joint account for the prior two months, when in fact, there were significantly less funds in the account over the prior two months.

Washington Mutual ultimately approved a loan of $1.48 million and wired the loan amount to Individual 2’s closing attorney on June 17, 2007. On Sept. 25, 2008, JPMorgan Chase acquired the banking operations of Washington Mutual Bank. Between Nov. 2, 2010, and Jan. 10, 2011, Individual 2 defaulted on the loan. JP Morgan initiated foreclosure proceedings. The Englewood Cliffs property was sold on March 16, 2012, leaving JPMorgan Chase with a loss of more than $500,000 on the defaulted loan.                                          

The bank fraud conspiracy charge carries a maximum potential penalty of 30 years in prison and a maximum fine of $1 million. Sentencing is scheduled for July 23, 2013.                    

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent In Charge Aaron T. Ford in Newark; special agents of the Federal Deposit Insurance Corp., under the direction of Special Agent in Charge of the Northeast Region A. Derek Evans; and criminal investigators from the U.S. Attorney’s Office in Newark, with the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney Zahid N. Quraishi of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

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Defense counsel: Edward J. Plaza Esq., Newark

Cockinos, James Information

CAMDEN, N.J. – A former employee of The Vacation Ownership Group LLC admitted today to conspiring to defraud owners of timeshare properties, U.S. Attorney Paul J. Fishman announced.

Alfred Giordano, a/k/a “Alex Jordan,” 33. of Myrtle Beach, S.C., pleaded guilty before U.S. District Court Judge Noel L. Hillman in Camden federal court to an Information charging him with one count of conspiracy to commit mail and wire fraud and one count of mail fraud.

According to documents filed in this case and statements made in court:

The Vacation Ownership Group, a/k/a VO Group LLC (the “VO Group”), purported to offer consulting services to owners of timeshares, including timeshare cancellation services. In March 2010, Alfred Giordano started working at the VO Group and was trained by Adam Lacerda to call customers using prepared scripts. Giordano would call customers and give them the false impression that he was working for a bank or lending institution and that he had the customer’s “complaint file” in front of him. After hearing Giordano’s false representations, some customers sent checks to the VO Group. Giordano admitted to causing over $120,000 in losses.

Giordano also admitted to devising a separate scheme to defraud the New Jersey Department of Labor by collecting unemployment compensation benefits while working at the VO Group. Giordano admitted to applying for and collecting $13,676 in unemployment compensation benefits to which he was not entitled.

Two weeks ago, Alfred Giordano’s brother – another former VO Group employee – pleaded guilty to an Information charging him with his role in the fraudulent scheme. On March 27, 2013, Vincent Giordano, 28, of Atlantic county (using the same “Alex Jordan” alias as his brother) pleaded guilty before Judge Hillman to conspiracy to commit mail and wire fraud.

On Jan. 23, 2013, co-owners Adam Lacerda and Ashley Lacerda and other members of the VO Group were charged in a Superseding Indictment with conspiracy to commit mail and wire fraud and other charges. Additional members of the VO Group were also charged by Criminal Complaint in April 2012.

The mail and wire fraud conspiracy charge to which Alfred Giordano pleaded guilty is punishable by a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gain or loss caused by the offense. The mail fraud charge to which Alfred Giordano pleaded guilty is also punishable by a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gain or loss caused by the offense. Sentencing is currently scheduled for Jul 22, 2013.

The mail and wire fraud conspiracy to which Vincent Giordano pleaded guilty is punishable by a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gain or loss caused by the offense. His sentencing is scheduled for July 1, 2013, at 11:30 a.m.

U.S. Attorney Fishman credited special agents from the FBI’s Atlantic City Resident
Agency, under the direction of Special Agent in Charge Aaron T. Ford in Newark; and special agents from the Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Special Agent in Charge Robert Panella, New York Region, for their roles in the investigation leading to these guilty pleas. He also thanked the N.J. Department of Labor, Benefit Payment Control Unit, for its assistance.

The government is represented by Assistant U.S. Attorneys Alyson M. Oswald and R. David Walk, Jr. of the U.S. Attorney’s Office Criminal Division in Camden.

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Defense counsel: Alfred Giordano: Martin I. Isenberg Esq., Gibbsboro, N.J.
Vincent Giordano: Paul A. Sarmousakis Esq., Avalon, N.J.

Giordano Superseding Information

NEWARK, N.J. – An Essex County, N.J., man today admitted his role in a scheme to illegally obtain and use duplicate credit cards, U.S. Attorney Paul J. Fishman announced.

Abdullah Bryant, 34, of Irvington, pleaded guilty before U.S. District Judge Dennis Cavanaugh to Count One of an Indictment charging him with bank fraud. Under the terms of the plea, the remaining four counts of aggravated identity theft and four counts of credit card fraud are dismissed.

According to the documents filed in this case and statements made in court:

Bryant and others got JP Morgan Chase Bank to issue and send, via UPS, 21 duplicate credit cards based on phone calls from persons purporting to be the credit card holders.  The callers falsely represented that they were Chase Bank credit card account holders who needed replacement cards and requested that the cards be shipped to addresses different from those appearing on Chase's records.

Between Sept. 16, 2011, and Sept. 25, 2011, Bryant unlawfully obtained and used four credit cards issued by Chase Bank, making and attempting to make purchases totaling approximately $60,000. The purchases consisted primarily of luxury items such as jewelry and expensive electronic equipment such as computers, as well as 3D and HD television sets.  The aggravated identity theft charges are based on defendant Bryant’s use of the identities of the four true account holders as he used the card.

The bank fraud charge is punishable by a maximum potential penalty of 30 years in prison and a $1 millionfine, or twice the gross gain or loss from the offense. Sentencing is scheduled for Aug. 5, 2013.

U.S. Attorney Fishman credited special agents of the U.S. Secret Service, under the direction of Special Agent in Charge James Mottola, and the Essex County Sheriff’s Office, under the direction of Sheriff Armando B. Fontoura, with the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney Lorraine Gerson of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

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Defense counsel: Dennis Cleary Esq., Newark

Bryant, Abdullah Indictment

NEWARK, N.J. – A well-known cardiologist and the founder, CEO, and sole owner of a pair of large medical services companies in New Jersey and New York admitted today to conspiring in a multimillion-dollar health care fraud scheme that subjected thousands of patients to unnecessary tests and potentially life-threatening, unneeded treatment, as well as treatment by unlicensed or untrained personnel. The guilty plea was announced today by New Jersey U.S. Attorney Paul J. Fishman.

Jose Katz, 68, of Closter, N.J., pleaded guilty before U.S. District Judge Jose L. Linares in Newark federal court to an Information charging him with one count of conspiracy to commit health care fraud and one count of Social Security fraud arising from a separate scheme to give his wife a “no show” job and make her eligible for Social Security benefits.

As part of his plea agreement with the government, Katz agreed that the loss amount sustained by Medicare, Medicaid and other insurers victimized by the fraudulent billings was $19 million. U.S. Department of Health and Human Services, Office of Inspector General and FBI records indicate the loss amount suffered by the victims is the largest recorded in New Jersey, New York and Connecticut for an individual practitioner convicted of health care fraud.

“After years of prominence in his field, Jose Katz will now be remembered for his record-setting fraud,” said U.S. Attorney Fishman. “Katz was so focused on illegal profits that he directed unlicensed and unqualified providers to treat his patients, ordered unnecessary tests and cavalierly ordered treatments that could have caused patient harm. Ripping off the government and insurance companies is bad enough; risking patient health in the bargain is inexcusable.”

“Health care fraud is not a victimless crime. It is a plague on American society and could put the health of people who need medical care at risk, said FBI Special Agent in Charge Aaron T. Ford. “The FBI, together with its law enforcement and regulatory agency partners, will vigorously investigate these crimes and hold those responsible accountable.”

“I am proud to be part of the federal team that brought Dr. Katz to justice after a complicated investigation,” said Tom O’Donnell, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s New York Regional Office. Dr. Katz had very little regard for his patients and the Medicare program, as evidenced by his blatant behavior. Criminals can be assured that if they attempt to defraud Medicare and their patients, they will be brought to justice.”

According to documents filed in this case and statements made in court:

Katz was the founder, CEO, and sole equity-holder of Cardio-Med Services LLC (Cardio-Med), and Comprehensive Healthcare & Medical Services LLC (Comprehensive Healthcare). From 2004 through 2012, Cardio-Med had offices in Union City, Paterson, and West New York, N.J., and Comprehensive Healthcare had offices in Manhattan and Queens, New York. Both Cardio-Med and Comprehensive Healthcare provided cardiology, internal medicine and other medical services to individual patients. During that time period, Katz conspired to bill Medicare Part B, Medicaid, Empire BCBS, Aetna and others for unnecessary tests and unnecessary procedures based on false diagnoses, and for medical services rendered by unlicensed practitioners.

Between July 2006 and February, 2009, Katz spent more than $6 million for advertising on Spanish-language television and radio stations. The ads attracted hundreds of patients to Cardio-Med and Comprehensive Healthcare every day. Overall, Katz was able to bill Medicare and Medicaid more than $70 million for his services from 2005 through 2012.

Over the course of the conspiracy, Katz ordered and performed essentially the same battery of diagnostic tests for nearly all the patients he treated, regardless of their symptoms. Katz also instructed his non-physician employees to order and perform diagnostic tests for patients of other doctors working at his offices, even though he had not examined those patients and the other physicians had not ordered the unnecessary tests.

Most significantly, Katz admitted that he falsified patient charts with fictitious and boilerplate symptoms and falsely diagnosed a majority of his Medicare and Medicaid patients with coronary artery disease and debilitating and inoperable angina. He also admitted to making the diagnoses to justify prescribing and administering an unnecessary treatment for those patients called enhanced external counter pulsation, or EECP. Katz even prescribed EECP treatments for some patients with contraindications for the treatment, therefore subjecting those patients to a substantial risk of serious injury or death.

From 2005 through 2012, Medicare and Medicaid paid Katz more than $15.6 million just for his EECP treatments, most of which were fraudulent.

In addition, Katz ordered conspirator Mario Roncal, 62, of Woodland Park, N.J. – who had a medical degree from San Juan Bautista School of Medicine in San Juan, Puerto Rico, but did not have a license to practice medicine in any of the 50 states – to treat patients, knowing he was not licensed. At Katz’s direction, Roncal held himself out to fellow employees and to patients as “Dr. Roncal,” examined new patients as well as Katz’s follow-up patients, ordered diagnostic tests, diagnosed patients with medical conditions and diseases and recommended and prescribed courses of treatment and surgery – including falsely diagnosing patients with angina and prescribing EECP treatments for those patients.

To conceal this illegal and unlicensed practice of medicine, Roncal forged Katz’s signature on paperwork associated with Roncal’s unlawful medical services, including on patient charts. During the conspiracy, Katz used his own billing numbers to bill Medicare Part B and Medicaid for the illegal services Roncal provided as though they were provided by Katz.

Roncal was indicted on March 2, 2012, for conspiracy to commit health care fraud. He entered a guilty plea on Jan. 4, 2013 and awaits sentencing.

Katz also admitted to a Social Security fraud scheme in which, from 2005 through 2012, he kept his wife on Cardio-Med’s payroll though she performed little or no work. During the course of the scheme, Katz sent false W-2 forms for calendar years 2005 through 2011 to the U.S. Social Security Administration purportedly reflecting $1,251,604 in earnings for his wife, making her eligible for an estimated $263,000 in Social Security benefits to which she was not entitled.

The health care fraud conspiracy and fraud counts with which Katz is charged carry a maximum potential penalty of 10 and five years in prison, respectively. Each count also carries a maximum $250,000 fine, or twice the gross gain or loss from the offense. At sentencing, currently scheduled before Judge Linares on July 23, 2013, Katz will also be ordered to pay restitution to victims of his offenses. Katz was granted $200,000 bail pending sentencing.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; the U.S. Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge O’Donnell; the U.S. Postal Inspection Service, under the direction of Acting Inspector in Charge Maria Kelokates; the Social Security Administration, Office of the Inspector General, under the direction of Special Agent in Charge Edward J. Ryan; IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen; and criminal and civil investigators with the U.S. Attorney’s Office for the investigation leading to the guilty plea.

The case is being prosecuted by Assistant U.S. Attorney Scott B. McBride of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark.

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Defense counsel: Blair R. Zwillman Esq., Parsippany, N.J.
                                    Joseph A. Hayden Jr., Esq.; Roseland, N.J.

Katz Information

NEWARK, N.J. – A well-known cardiologist and the founder, CEO, and sole owner of a pair of large medical services companies in New Jersey and New York admitted today to conspiring in a multimillion-dollar health care fraud scheme that subjected thousands of patients to unnecessary tests and potentially life-threatening, unneeded treatment, as well as treatment by unlicensed or untrained personnel. The guilty plea was announced today by New Jersey U.S. Attorney Paul J. Fishman.

Jose Katz, 68, of Closter, N.J., pleaded guilty before U.S. District Judge Jose L. Linares in Newark federal court to an Information charging him with one count of conspiracy to commit health care fraud and one count of Social Security fraud arising from a separate scheme to give his wife a “no show” job and make her eligible for Social Security benefits.

As part of his plea agreement with the government, Katz agreed that the loss amount sustained by Medicare, Medicaid and other insurers victimized by the fraudulent billings was $19 million. U.S. Department of Health and Human Services, Office of Inspector General and FBI records indicate the loss amount suffered by the victims is the largest recorded in New Jersey, New York and Connecticut for an individual practitioner convicted of health care fraud.

“After years of prominence in his field, Jose Katz will now be remembered for his record-setting fraud,” said U.S. Attorney Fishman. “Katz was so focused on illegal profits that he directed unlicensed and unqualified providers to treat his patients, ordered unnecessary tests and cavalierly ordered treatments that could have caused patient harm. Ripping off the government and insurance companies is bad enough; risking patient health in the bargain is inexcusable.”

“Health care fraud is not a victimless crime. It is a plague on American society and could put the health of people who need medical care at risk, said FBI Special Agent in Charge Aaron T. Ford. “The FBI, together with its law enforcement and regulatory agency partners, will vigorously investigate these crimes and hold those responsible accountable.”

“I am proud to be part of the federal team that brought Dr. Katz to justice after a complicated investigation,” said Tom O’Donnell, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s New York Regional Office. Dr. Katz had very little regard for his patients and the Medicare program, as evidenced by his blatant behavior. Criminals can be assured that if they attempt to defraud Medicare and their patients, they will be brought to justice.”

According to documents filed in this case and statements made in court:

Katz was the founder, CEO, and sole equity-holder of Cardio-Med Services LLC (Cardio-Med), and Comprehensive Healthcare & Medical Services LLC (Comprehensive Healthcare). From 2004 through 2012, Cardio-Med had offices in Union City, Paterson, and West New York, N.J., and Comprehensive Healthcare had offices in Manhattan and Queens, New York. Both Cardio-Med and Comprehensive Healthcare provided cardiology, internal medicine and other medical services to individual patients. During that time period, Katz conspired to bill Medicare Part B, Medicaid, Empire BCBS, Aetna and others for unnecessary tests and unnecessary procedures based on false diagnoses, and for medical services rendered by unlicensed practitioners.

Between July 2006 and February, 2009, Katz spent more than $6 million for advertising on Spanish-language television and radio stations. The ads attracted hundreds of patients to Cardio-Med and Comprehensive Healthcare every day. Overall, Katz was able to bill Medicare and Medicaid more than $70 million for his services from 2005 through 2012.

Over the course of the conspiracy, Katz ordered and performed essentially the same battery of diagnostic tests for nearly all the patients he treated, regardless of their symptoms. Katz also instructed his non-physician employees to order and perform diagnostic tests for patients of other doctors working at his offices, even though he had not examined those patients and the other physicians had not ordered the unnecessary tests.

Most significantly, Katz admitted that he falsified patient charts with fictitious and boilerplate symptoms and falsely diagnosed a majority of his Medicare and Medicaid patients with coronary artery disease and debilitating and inoperable angina. He also admitted to making the diagnoses to justify prescribing and administering an unnecessary treatment for those patients called enhanced external counter pulsation, or EECP. Katz even prescribed EECP treatments for some patients with contraindications for the treatment, therefore subjecting those patients to a substantial risk of serious injury or death.

From 2005 through 2012, Medicare and Medicaid paid Katz more than $15.6 million just for his EECP treatments, most of which were fraudulent.

In addition, Katz ordered conspirator Mario Roncal, 62, of Woodland Park, N.J. – who had a medical degree from San Juan Bautista School of Medicine in San Juan, Puerto Rico, but did not have a license to practice medicine in any of the 50 states – to treat patients, knowing he was not licensed. At Katz’s direction, Roncal held himself out to fellow employees and to patients as “Dr. Roncal,” examined new patients as well as Katz’s follow-up patients, ordered diagnostic tests, diagnosed patients with medical conditions and diseases and recommended and prescribed courses of treatment and surgery – including falsely diagnosing patients with angina and prescribing EECP treatments for those patients.

To conceal this illegal and unlicensed practice of medicine, Roncal forged Katz’s signature on paperwork associated with Roncal’s unlawful medical services, including on patient charts. During the conspiracy, Katz used his own billing numbers to bill Medicare Part B and Medicaid for the illegal services Roncal provided as though they were provided by Katz.

Roncal was indicted on March 2, 2012, for conspiracy to commit health care fraud. He entered a guilty plea on Jan. 4, 2013 and awaits sentencing.

Katz also admitted to a Social Security fraud scheme in which, from 2005 through 2012, he kept his wife on Cardio-Med’s payroll though she performed little or no work. During the course of the scheme, Katz sent false W-2 forms for calendar years 2005 through 2011 to the U.S. Social Security Administration purportedly reflecting $1,251,604 in earnings for his wife, making her eligible for an estimated $263,000 in Social Security benefits to which she was not entitled.

The health care fraud conspiracy and fraud counts with which Katz is charged carry a maximum potential penalty of 10 and five years in prison, respectively. Each count also carries a maximum $250,000 fine, or twice the gross gain or loss from the offense. At sentencing, currently scheduled before Judge Linares on July 23, 2013, Katz will also be ordered to pay restitution to victims of his offenses. Katz was granted $200,000 bail pending sentencing.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; the U.S. Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge O’Donnell; the U.S. Postal Inspection Service, under the direction of Acting Inspector in Charge Maria Kelokates; the Social Security Administration, Office of the Inspector General, under the direction of Special Agent in Charge Edward J. Ryan; IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen; and criminal and civil investigators with the U.S. Attorney’s Office for the investigation leading to the guilty plea. He also thanked the Medicaid Fraud Division of the Office of the New Jersey State Comptroller for its assistance.

The case is being prosecuted by Assistant U.S. Attorney Scott B. McBride of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark.

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Defense counsel: Blair R. Zwillman Esq., Parsippany, N.J.
                                    Joseph A. Hayden Jr., Esq.; Roseland, N.J.

Katz Information

CAMDEN, N.J. – Newark Police Officer Victor Patela was sentenced today to 48 months in prison for his role in a conspiracy to commit bank fraud, bank fraud, two counts of loan application fraud and bank bribery, U.S. Attorney Paul J. Fishman announced.

The jury returned the guilty verdict against Patela, 37, of Newark, following a one-week trial before U.S. District Judge Noel L. Hillman in Camden federal court.

According to documents filed in this case and the evidence at trial:

Patela conspired to defraud Spencer Savings Bank, located in Elmwood Park, N.J., by providing false statements and documents in order to secure a $1,920,000 commercial loan for JVI Realty LLC, ("JVI") a New Jersey limited liability company solely owned by Patela. Patela made bribery payments to a bank employee, who served as the loan officer on JVI Realty's commercial loan. On August 30, 2004, Patela paid a $10,000 bribe to a Spencer Savings Bank employee.

Approximately two weeks later, Patela applied for a commercial real estate loan from Spencer Savings Bank to purchase apartment buildings located in Elizabeth, N.J. In order to obtain the loan, Patela signed a Personal Financial Statement ("PFS") falsely reporting that he had a net worth that included $430,000 cash in bank accounts and real estate valued at $3.5 million. Patela signed the PFS underneath the Representations and Warranties section, agreeing the information was correct, although he knew he did not have the money.

In connection with complying with Spencer Savings Bank's condition that Patela demonstrate proof that he had $480,000 to make a down payment on the properties in Elizabeth, Patela submitted a fake real estate contract to the bank.

The Mortgage & Security Agreement JVI entered into with Spencer Savings prohibited Patela from encumbering or mortgaging the Elizabeth apartment buildings without the bank's written consent. However, JVI, through Patela, subsequently secured a second mortgage on the Elizabeth apartment buildings – signing the second mortgage and mortgage note as a corporate officer of JVI. The $300,000 loan was used as part of the $480,000 equity contribution to purchase the Elizabeth apartment buildings. The same day, Patela, through JVI, paid the bank employee a $20,000 bribe and over the next year paid the bank employee more than $10,000 in separate payments.

In addition to the prison term, Judge Hillman sentenced Patela to three years of supervised release and ordered him to pay $819,793 in restitution.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, for the investigation leading to today's sentence.

The government is represented by Assistant U.S. Attorneys Zahid N. Quraishi and Vikas Khanna of the U.S. Attorney's Office Special Prosecutions Division in Newark.

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Defense counsel: Anna G. Cominsky Esq., Newark

Seven Alleged Members and Supplier of Drug Trafficking Organization Charged

CAMDEN, N.J. – Agents of the FBI, the N.J. State Police and detectives and investigators of the Camden Police Department and Camden County Prosecutor’s Office arrested seven people this morning for their alleged involvement with an illegal drug trafficking operation in Camden, U.S. Attorney Paul J. Fishman announced.

The arrests deal a significant blow to a drug trafficking organization (DTO) allegedly headed by Carl Wiles, a/k/a “Call Call,” 23, of Camden, which operated in the area of Eighth and Tulip streets in the Morgan Village section of Camden. This DTO allegedly sold heroin, crack cocaine and powder cocaine to customers who arrived on foot and by car and who called ahead for service. The arrests of seven of the eight people charged today include all levels of the DTO, from Wiles himself to one of his primary suppliers to lower level managers and workers. Drugs, weapons, ammunition and cash were seized during the arrests, including seven firearms recovered at the residence where Wiles was arrested. The defendants (see chart below) are scheduled to make their initial court appearances this afternoon before U.S. Magistrate Judge Joel Schneider in Camden federal court.

“The defendants in this case operated a well-organized, open-air drug market 24 hours a day, seven days a week, for at least a year,” U.S. Attorney Fishman said. “This prosecution confirms that all of us in law enforcement remain fully committed to improving the quality of life for the people who live in this neighborhood.”

“Dismantling violent gangs is a continuing priority for the FBI, and our law enforcement partners,” Edward J. Hanko, Special Agent in Charge of the FBI’s Philadelphia Division, said. “Today’s arrests are the result of a lengthy investigation by the South Jersey Violent Offender and Gang Task Force, and are an important step toward reclaiming the city of Camden from the thugs who have run its streets for far too long.”

Camden County Prosecutor Warren Faulk said, “These arrests are another example of the cooperative effort among all the law enforcement agencies operating in the city of Camden. Every success in this city stems from these kinds of cooperative efforts.”

“This violent gang has flagrantly terrorized our already challenged city for far too long,” said Camden Police Chief Scott Thomson. “Let today's arrest send a very loud and very clear message to criminals that law enforcement at every level will aggressively target and remove them from the streets with our dynamic C4 (Camden County Crime Commission).initiative.”

According to documents filed in this case and statements made in court:

The organization controlled an area that includes the area of Eighth and Tulip streets, a retail shopping plaza in the 700 block of Morgan Boulevard and areas within the Crestbury Apartments public housing project, located in the 2500 block of South Eighth Street.

An investigation using surveillance, confidential informants, controlled drug purchases, record checks and telephone wiretaps revealed that the Carl Wiles DTO acquired and distributed heroin, crack and powder cocaine; maintained various stash houses; and rented cars to conduct drug-related business.  Wiles and Pulliam handled call-in customers personally and also directed customers to be served at 8th and Tulip streets.  Intercepted conversations and surveillance established that Jackson resupplied Wiles when the organization ran low on heroin.

Intercepted telephone conversations and controlled drug buys reveal that the Wiles DTO used a color-coding based upon the uniform colors of professional sports teams to refer to the different narcotics it sold.  Crack cocaine was packaged in blue-colored bags (“Giants”).  Powder cocaine was sold in clear bags and referred to as “White Sox,” “clear” or “white.”  Heroin was sold over time in red bags (“Redskins”), yellow bags (“Steelers”) and green bags (“Green Bay” or “Jets”).  The narcotics were sold in individual user amounts as well as in re-distribution amounts (bundles), with a heroin bundle typically consisting of 10 to 12 individual bags and a crack bundle containing approximately 40 individual bags.

The investigation further established that Wiles led the organization, with managers Fuquan Pulliam and Kahlil Mims overseeing the workers, William Gideon, Justin Gould, Marqueis Thomas-Randall, Elquinzie Lewis and others.  Intercepted calls reveal not only how the operation was supplied and proceeds collected, but also Wiles’ leadership role. He was intercepted discussing with Pulliam replacing a worker and chastising DTO members for missing customers by moving too slowly, miscounting or not being out on the street enough.  In one conversation, Wiles told a worker: “My thing is loyalty.  You rolling with us, you got loyalty.  You all right.  You rolling with us that mean everybody you see got your back a hundred percent, like that’s what I mean by loyalty.  It’s bigger than what’s just going on.”

U.S. Attorney Fishman credited special agents of the FBI’s Cherry Hill, N.J., resident Agency, Philadelphia Division and the South Jersey Violent Offender and Gang Task Force, under the direction of FBI Special Agent in Charge Hanko; the Camden County Prosecutor’s Office, under the direction of Prosecutor Faulk; the Camden City Police Department, under the direction of Chief Scott Thomson; the N.J. State Police, under the direction of Col. Rick Fuentes; and the Camden Collaborative Crime Commission (“C4”), with the investigation leading to today’s arrests. He also thanked the Philadelphia Police Department, the N.J. Parole Board, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the N.J. Division of Criminal Justice, the Voorhees Police Department, the Gloucester County Prosecutor’s Office, the Salem County Prosecutor’s Office, the Camden County Sheriff’s Office, the Woodbury Police Department and the Pennsauken Police Department for their roles in the case.

The government is represented by Special Assistant U.S. Attorney Ira M. Slovin of the U.S. Attorney’s Office Criminal Division in Camden.

The charges and allegations contained in the Complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

This case was developed through the work of the Camden Collaborative Crime Commission (C-4). Every federal, state and local law enforcement agency and prosecutor’s office responsible for combating drug trafficking, gang activity and violent crime in Camden has come together in one location to share intelligence, develop investigative strategies and support the investigative and prosecutorial efforts of its partners. C-4 has merged the individual missions of the various law enforcement agencies into a single strategic attack on drug trafficking and drug-related violent crime. Such intense coordination greatly enhances the law enforcement community’s ability to correctly identify and successfully prosecute the most dangerous criminals in one of our nation’s most dangerous cities.

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Defendants

Name

Age

Residence

Role

23

Oaklyn, N.J.

Leader

Keith Jackson

30

Camden, N.J.

Supplier

Fuquan Pulliam

23

Pennsauken, N.J.

Manager

Khalil Mims

22

Camden, N.J.

Manager

Justin Gould

24

Camden, N.J.

Worker

Marqueis Thomas-Randall

21

Camden, N.J.

Worker

William Gideon

19

Camden, N.J.

Worker

Elquinzie Lewis*

21

Camden, N.J.

Worker

*Not in custody

Wiles et al. Complaint
Carl Wiles
Fuquan Pulliam
Justin Gould
Kahlil Mims
Keith Jackson
Marqueis Thomas-Randall
William Gideon
Elquinzie Lewis

NEWARK, N.J. – A longtime construction official in the property maintenance department of the City of East Orange, N.J., was sentenced today to 18 months in prison for extorting money from a property owner in exchange for the official’s assistance in city government matters, U.S. Attorney Paul J. Fishman announced.

Kim Davis, 46, of New York and formerly of Newark, previously pleaded guilty before U.S. District Judge William H. Walls to Count Two of an Indictment charging him with extortion under color of official right, for accepting a $5,000 corrupt payment in exchange for official action. Judge Walls imposed the sentence today in Newark federal court.

According to documents filed in this case and statements in court:

Davis was a certified technical assistant to construction officials in the building division of the property maintenance department of East Orange. The building division is responsible for the enforcement of the N.J. Uniform Construction Code and the approval of all applications for construction, alterations and renovations of buildings within the city. 

Davis and an inspector in the code and enforcement division of the property maintenance department – referred to in the Indictment as “Coconspirator One” and identified in court proceedings as Billie Muhammad – conspired in 2007 to advise an East Orange property owner – referred to in the Indictment as Individual One that Davis would provide Individual One, in exchange for a $5,000 cash payment, the requisite permits and certificates from the building department to build a new residence.

On Sept. 7, 2007, Davis met with Individual One and accepted a $5,000 cash payment in exchange for Davis’ official assistance in expediting the process of obtaining the requisite permits and certificates.

In addition to the prison term, Judge Walls sentenced Davis to 1 year of supervised release and fined him $1,000.

On Jan. 21, 2010, Billie Muhammad pleaded guilty to an Information charging him with attempted extortion under color of official right.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford, for the investigation leading to today’s sentence.

The government is represented by Assistant U.S. Attorneys Vikas Khanna and Barbara Llanes of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

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Biodiagnostic Laboratory Services LLC and Employees Allegedly Bribed
Physicians to Refer Blood Samples and Order Unnecessary Tests

NEWARK, N.J. – Federal agents arrested the president and part-owner of Parsippany, N.J.-based Biodiagnostic Laboratory Services LLC (BLS), a New Jersey physician and two other BLS employees this morning on charges they participated in a long-running scheme to bribe doctors to refer patient blood samples to BLS and to order unnecessary tests, resulting in tens of millions of dollars in profit for the company.  The charges were announced today by New Jersey U.S. Attorney Paul J. Fishman.

BLS president David Nicoll, 39, of Mountain Lakes, N.J.; Scott Nicoll, 32, of Wayne, N.J., a senior BLS employee and David Nicoll’s brother; and Craig Nordman, 34, of Whippany, N.J., a BLS employee and the CEO of Advantech Sales LLC – an entity used by BLS to make illegal payments – are charged in a federal Complaint with conspiring to bribe physicians over a period of several years. BLS is also charged with the conspiracy.

Frank Santangelo, 43, of Boonton, N.J., a New Jersey physician with offices in Montville and Wayne, is charged in the Complaint for allegedly accepting bribes to refer patients to BLS and violating his duty of fidelity to his patients. Santangelo allegedly received more than $700,000 in bribe payments from BLS and sent the company more than $4.2 million in blood referrals.

The defendants are scheduled to appear this afternoon before U.S. Magistrate Judge Madeline Cox Arleo in Newark federal court.

“People depend on their doctors to make medical decisions about care based solely on medical need,” said U.S. Attorney Fishman. “When doctors order extra tests or choose particular labs in exchange for cash, they abandon their obligation to their patients and to all of us who support our nation’s health care system. No patients should have to worry that their doctors’ loyalty and judgment have been bought by a salesman trying to make a buck.”

“The FBI views health care fraud as a severe crime problem that affects every American,” said FBI Special Agent in Charge Aaron T. Ford.  “Fraud and abuse take critical resources out of our health care system, and contribute to the rising cost of health care for everyone. Today’s arrests are the result of a long term, multi-agency investigation into a complex health care fraud scheme, requiring substantial investigative resources. The FBI, with its law enforcement partners, will continue to provide a significant amount of expert resources to investigate these crimes.”

“Kickbacks have no place in the healthcare industry. Financial inducements only cloud medical judgment. This elaborate kickback scheme had one goal, and that is greed,” said Tom O’Donnell, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “Federal and state taxpayers, and vulnerable patients, deserve better.”

According to the Complaint unsealed today:

Between 2006 and 2013, BLS and entities it funded paid millions of dollars to physicians to induce them to refer patient blood samples to BLS. From these referrals, BLS received at least tens of millions of dollars from private health insurance companies and Medicare.

Numerous physicians were bribed under the guise of lease, service, and/or consulting agreements. Under the lease and service agreements, between 2006 and 2009, physicians were frequently paid thousands of dollars a month by BLS for space in medical offices that BLS did not need or actually use and to perform routine blood drawing services that had little real dollar value.

In a text message referenced in the Complaint, David Nicoll wrote to Santangelo about the status of their referral agreement, stating that BLS “really can’t afford the 40-50,000 [dollars] a month if the girls aren’t going to be drawing any blood,”  to which Santangelo responded by stating, “U no u can count on me!” and “I never let u down!”

When the state of New Jersey sought to address the problem of laboratories using lease agreements to bribe physicians for referrals – effectively prohibiting all leases between blood laboratories and physicians in 2010 – BLS, David Nicoll, Scott Nicoll, and Nordman funded and used at least half a dozen entities to disguise bribe payments to physicians.

In one example from the Complaint, a physician was paid $1,500 per month by Nordman – who identified himself as both a BLS employee and the CEO of Advantech – for spending less than two minutes each month filling out a one-page questionnaire asking how often sales representatives visited the physician’s office, which insurance companies were in-network for the physician and which out-of-network insurance companies did the physician bill. In reality, the payments were to refer patients’ blood samples to BLS. 

Various recorded conversations are also detailed in the Complaint, including one in which Nordman urges another physician to order “more tests,” stating “that’s where it really is.  I mean if we get 10 bloods for $1,000 as opposed to 10 bloods for $4,000 or 5 bloods for $4,000 obviously there’s more. We get paid a percentage obviously.” In a second conversation, Scott Nicoll tells this same physician, “I would like to be able to get you you know around 1,500 [dollars] a month if I can but I need we would either need more tests or more patients or something along those lines . . .  you’re doing about a $1,000 a bag per patient . . . if we could, we could somehow get that up in the two’s then I’m looking at making 4,000 and I have no problem paying you know 1,500 [dollars] for it.”

Over the course of the charged conspiracy, BLS has made more than $200 million from the testing of blood specimens and related services. David Nicoll received more than $33 million in distributions from BLS during that same time period, during which he also spent millions on personal items: more than $5 million on high-end and collectible automobiles, including approximately $580,000 for a Yenko Nova and approximately $365,000 for a Yenko Chevelle, approximately $300,000 for a Ferrari and approximately $291,000 for a Corvette; more than $700,000 to purchase a Manhattan apartment for a female companion; $600,000 on private jet charters; $392,000 on tickets to sporting events; $216,000 at electronics stores; and $154,000 at a gentleman’s club and restaurant.

“It is alleged in today’s Complaint that the president and other employees of BLS bribed physicians to refer patients to their lab and order unnecessary lab tests, reaping millions of dollars, all in the name of greed,” stated Shantelle P. Kitchen, Acting Special Agent in Charge, IRS-Criminal Investigation, Newark Field office.  “Medical tests should only be run when medically necessary, not so someone can buy exotic cars and charter private jets.  This type of health care fraud will not be tolerated and IRS-Criminal Investigation, along with our law enforcement partners, will vigorously investigate these crimes to bring the perpetrators to justice.”

“Postal Inspectors, along with other law enforcement agents, unraveled a sophisticated false billing scheme that resulted in millions of dollars in losses,” said Acting Inspector in Charge Maria Kelokates, Newark Division of the U.S. Postal Inspection Service. “Postal Inspectors will continue to aggressively pursue investigations in which the U.S. Mail is used to facilitate a crime.”

David Nicoll, Scott Nicoll and Nordman are charged with one count of conspiring to violate the Anti-Kickback Statute and the Federal Travel Act.  Santangelo is charged in two counts – with substantive violations of the Anti-Kickback Statute and the Federal Travel Act, for allegedly using the interstate mails in aid of commercial bribery.  If convicted, the defendants face a maximum potential penalty of five years in prison on each of the counts with which they are charged.  Each count also carries a maximum $250,000 fine, or twice the gross gain or loss from the offense.  BLS is also charged with the conspiracy, and faces a maximum potential penalty of five years of probation and a $500,000 fine, or twice the gross gain or loss.

U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special Agent in Charge Ford; U.S. Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge O’Donnell; IRS–Criminal Investigation, under the direction of Acting Special Agent in Charge Kitchen, and the U.S. Postal Inspection Service, under the direction of Acting Inspector in Charge Kelokates.

The government is represented by Senior Litigation Counsel Andrew Leven, Assistant U.S. Attorney Melissa Jampol and Deputy Chief Jacob T. Elberg of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark, as well as Assistant U.S. Attorney Barbara Ward of the office’s Asset Forfeiture and Money Laundering Unit.

The charges and allegations contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

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BLS et al. Complaint

NEWARK, N.J. – A Bergen County, N.J., woman today admitted making false statements to special agents of Homeland Security Investigations, U.S. Attorney Paul J. Fishman announced.

Vaidehi A. Patel, 26, of Little Ferry, N.J., pleaded guilty before U.S. District Judge William H. Walls in Newark federal court to an Information charging her with knowingly making materially false statements in a matter within the jurisdiction of the Department of Homeland Security, Immigration and Customs Enforcement, Homeland Security Investigations (HSI).

According to documents filed in this case and statements made in court:

After agreeing to work as a confidential source for HSI in January 2012, Patel informed a number of people about her cooperation and HSI’s investigation into Vision Career Consultants and PC Tech Learning Center for visa fraud and other crimes. One of the individuals, identified as H.P., who Patel told about the investigation was someone about whom HSI had asked Patel. Subsequently, on Jan. 30, 2012, Patel lied to special agents when she told them that she had not told anyone about her cooperation or the investigation. In particular, Patel denied that she had told H.P. about the investigation.

The charge to which Patel pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine.  Sentencing is scheduled for July 16, 2013.

U.S. Attorney Fishman credited special agents from Homeland Security Investigations, under the direction of Special Agent in Charge Andrew M. McLees in Newark, with the investigation leading to the guilty plea.

The government is represented by Assistant U.S. Attorney Shana W. Chen of the Organized Crime/Gangs Unit in Newark.

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Defense counsel: Joseph D. Rotella Esq., Newark

Patel, Vaidehi Information

CAMDEN, N.J. – An Atlantic City, N.J., tax preparer today admitted his role in aiding and assisting the preparation of false income tax returns, illegal use of Social Security numbers and unlawfully obtaining United States’ citizenship, U.S. Attorney Paul J. Fishman announced.

Nicolas Gomez-Rua, 54, of Atlantic City, N.J., and Medellin, Colombia, pleaded guilty before U.S. District Judge Noel L. Hillman in Camden federal court to three counts of a 45-count Indictment pending against him.

According to documents filed in this case and statements made in court:

On Oct. 16, 2012, Gomez-Rua was charged in an Indictment with 29 counts of aiding and assisting the preparation of a false income tax return, 10 counts of illegal use of a Social Security number, and two counts of unlawful procurement of citizenship or naturalization. Clara Hernandez-Estrada, Gomez-Rua’s wife, was also charged with unlawful procurement of citizenship or naturalization, false statements in an application for a passport, false claim to U.S. citizenship and aggravated identity theft.

Gomez-Rua was arrested on Nov. 29, 2012, by Homeland Security Investigations special agents at JFK International Airport in New York when he tried to enter the United States from Colombia and was detained.

Between 2008 and 2010, Gomez-Rua operated Quick Tax Solution and Rapid Tax Solution in Ventnor City, N.J. According to Gomez-Rua, he met with clients and obtained information and documents from them which he used to prepare their U.S. Individual Income Tax Returns (1040 Forms). Gomez-Rua admitted that he intentionally included fraudulent items and tax credits, such as false and fraudulent dependents, child tax credits, Earned Income Tax Credit (“EITC”) claims, fuel tax credits and education credits, in order to obtain larger refunds than those to which his clients were entitled.

Gomez-Rua admitted that he maintained a file of Social Security cards and birth certificates for individuals born in Puerto Rico that was used to add fraudulent dependents on the 1040 Forms that were filed with the IRS. Clients paid Gomez-Rua on average $300 to $500 for the use of fraudulent dependents. Gomez-Rua admitted that after preparing the fraudulent returns, he filed the false returns electronically and by U.S. Mail with the IRS.

Gomez-Rua admitted that 729 U.S. individual federal income tax returns containing fraudulent items and credits were prepared by Quick Tax Solution and Rapid Tax Solution on behalf of its clients for tax years 2007 through 2009. Based on the false and fraudulent returns prepared for tax years 2007 through 2009, the United States lost approximately $170,211 in tax revenue.

Gomez-Rua admitted that on March 12, 2009, he filed a Form 1040 Return that he prepared for an individual that contained false deductions, including, Child and Dependent, Car Expenses; Filing Status; and Exemption amount. According to Gomez-Rua, the dependents were added so that the client would receive a bigger refund; the false return caused a loss of $5,827 to the United States.

Gomez-Rua said he was born in Colombia and in October 1993, he illegally entered the United States. Gomez-Rua said that Clara Estrada Hernandez, a citizen of Colombia, also illegally entered the United States from Colombia. Sometime after entering the United States, Gomes-Rua settled in Atlantic City.

While in Atlantic City, Gomez-Rua admitted that he purchased the identity of “Wigaberto Santiago,” including his name, date of birth and Social Security number. Santiago was a citizen of the Commonwealth of Puerto Rico. Gomez-Rua then used that identity to work at various locations in Atlantic City.

Gomez-Rua further admitted that he purchased the identity of “Elizabeth Tirado,” including her name, date of birth and Social Security number, for Hernandez-Estrada. Tirado was a citizen of the Commonwealth of Puerto Rico. Gomez-Rua stated that between 1997 and 2008, Hernandez use the Tirado identity to work in Atlantic City.

Gomez-Rua said that on March 30, 1998, he married Hernandez under the name of Elizabeth Tirado. He admitted that at various times between 1998 and 2008, he prepared and filed with the IRS income tax returns which included W-2 Forms issued to Hernandez under the Tirado identity.

Gomez-Rua admitted that on Feb. 8, 2001, he submitted an application to U.S. Citizenship and Immigration Services for lawful permanent resident status based on his fraudulent marriage to Tirado, a U.S. citizen. On Feb. 13, 2002, U.S. Citizenship and Immigration Services approved Gomez-Rua’s application, granted him permanent resident status in the United States and issued him a “Green Card.”

On May 9, 2006, Gomez-Rua submitted an application to U.S. Citizen and Immigration Services seeking to become a citizen of the United States based on his marriage to a U.S. citizen. Gomez-Rua admitted that he signed the application under penalty of perjury and that the application included the following false representations: that he had never used other names; that he had been married to and living with the same U.S. citizen for the last three years, and that his spouse had been a U.S. citizen for the last three years; and that his spouse was Elizabeth Gomez.

On Feb. 23, 2007, Gomez-Rua was interviewed under oath, subject to the penalty of perjury, by an Immigration Services Officer in Mount Laurel, N.J., and repeated the lies in his application. Gomez-Rua admitted that had he told the Immigration Services Officer the truth then he would not have been eligible to become a United States citizen. On Feb. 27, 2007, U.S. Citizen and Immigration Services approved Gomez-Rua’s application for citizenship and he was naturalized as a citizen of the United States.

The charges to which Gomez-Rua pleaded guilty carry a maximum potential penalty of three years in prison for aiding and assisting the preparation of a false income tax return, five years for illegal use of a Social Security number, and 10 years for unlawful procurement of citizenship or naturalization and a fine of $250,000 per count. Sentencing is scheduled for July 17, 2013.

U.S. Attorney Fishman credited special agents of the IRS – Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen; special agents of U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations, under the direction of Special Agent in Charge Andrew M. McLees; and special agents of the U.S. Department of State’s Diplomatic Security Service (DSS), under the direction of Robert Goodrich, Special Agent in Charge of the DSS New York Field Office, for the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney Jason M. Richardson of the U.S. Attorney’s Office Criminal Division in Camden.

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Defense attorney: Maggie Moy Esq., Assistant Federal Public Defender, Camden

Gomez-Rua Indictment

NEWARK, N.J. – As the April 15 deadline for filing taxes approaches, U.S. Attorney Paul J. Fishman and Shantelle P. Kitchen IRS-Criminal Investigations Acting Special Agent in Charge, Newark Field Office, are reminding taxpayers to accurately and completely fill out their returns and make sure they file them on time.

“Tax evasion is a felony, punishable by prison time and heavy fines and penalties,” U.S. Attorney Fishman said. “It’s important for the public to take time to carefully prepare their returns and make sure they file them – or seek a filing extension – before the deadline.”

“The prosecution of individuals who intentionally conceal income and evade taxes is a vital element in maintaining public confidence in our tax system,” Acting SAC Kitchen said. “Year round efforts of IRS-Criminal Investigation are directed at that portion of Americans who willfully and intentionally violate their legal duty to voluntarily file lawful and accurate tax returns.”

U.S. Attorney Fishman and Acting SAC Kitchen said taxpayers who are hiring someone else to prepare their returns for them should ensure they are working with reputable tax return preparers.

“Be careful when choosing someone else to prepare your taxes,” U.S. Attorney Fishman said. “Even if someone else prepares your return, you are ultimately responsible for all the information on it. Make sure you review your return, and never sign a blank form.”

“While the vast majority of return preparers are professional, honest and provide a valuable service to their clients, there are some who are not,” Acting SAC Kitchen said, noting the recent case of a Hudson County tax preparer who pleaded guilty Feb. 1, 2013, to filing false returns and tax evasion:

Elijah Washington Jr., of Jersey City, N.J., owned and operated a tax preparation business – Elijah’s Professional Tax Service – in Jersey City, where he prepared tax returns for tax years 2005 through 2008. He admitted that he fabricated various items to obtain larger refunds for clients, including tuition and fees deductions, child tax credits, charitable contributions and job expenses. He also failed to report his own income on the money he earned from the tax preparation business.

Tax evasion is a felony, punishable by up to five years in prison and a $250,000 fine. Other tax cases prosecuted recently by the U.S. Attorney’s office in New Jersey include:

Nicholas Papanier Sr., 57, of Sewell, N.J., pleaded guilty on March 22, 2013, to one count of tax evasion. Between 2006 and 2009, Papanier owned Nellie’s Provisions, a meat distribution company that provided all of the meat for Primo Hoagies franchises and other independent restaurants. In 2006, 2007 and 2008, Papanier persuaded Primo Hoagies franchise owners to buy Thumann’s deli products from Nellie’s Provisions, often paying for them in cash. He took a significant amount of the cash paid to Nellie’s Provisions and deposited it into his personal bank accounts. Papanier admitted that he did not report the diverted cash to the IRS and only reported Form W-2 wages, interest and dividend income, and property tax information. By omitting all of the diverted cash, he failed to disclose and report a significant portion of this income on his tax returns, causing those tax returns to substantially understate the amount of income he received.

Rakesh Chitkara, 60, of Marlboro, N.J., pleaded guilty March 21, 2013, to making and subscribing to a 2007 federal income tax return to the IRS that he did not believe to be true. Chitkara admitted that he had a financial interest in at least two financial accounts at UBS AG in Zurich, Switzerland, and that he knowingly failed to disclose these accounts, and income from these accounts, on his personal tax returns for five years.

Joseph Gallagher, 69, of Rutherford, N.J., a tax preparer and disbarred New Jersey lawyer, was sentenced on March 20, 2013, to 36 months in prison for submitting false tax returns or failing to file returns for five years, resulting in a tax loss to the government of more than $1.1 million.

“IRS-Criminal Investigation is committed to working with the United States Attorney’s Office in the investigation and prosecution of tax crimes,” Acting SAC Kitchen said. “We should not expect the honest taxpayer to foot the bill for those who hide income from the IRS.”

IRS-Criminal Investigation is the law enforcement side of the IRS. IRS Special Agents investigate potential violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law.

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TRENTON, N.J. – A Middlesex County, N.J., man was sentenced today to 60 months in prison for distributing images and videos of child sexual abuse over the Internet, U.S. Attorney Paul J. Fishman announced.

Jacob Rios, 25, of Old Bridge Township, N.J., previously pleaded guilty before U.S. District Judge Peter G. Sheridan to an Information charging him with one count of distribution of child pornography. Judge Sheridan imposed the sentence today in Trenton federal court.

According to documents filed in this case and statements made in court:

Rios admitted distributing child pornography between March 3, 2011, and July 11, 2011, using a peer-to-peer network. Rios created accounts on the network through which he downloaded pictures and videos of child pornography. He placed those pictures and videos into the shared directory of his peer-to-peer accounts and shared them with other users.

In addition to the prison term, Judge Sheridan sentenced Rios to 10 years of supervised release. Rios agreed to forfeit the laptop and hard drives that he used to commit the offense. He must also register as a sex offender.

U.S. Attorney Fishman credited special agents of the FBI’s Cyber Crimes Squad, under the direction of Acting Special Agent in Charge David Velazquez in Newark, for the investigation leading to today’s sentence.

The government is represented by Assistant U.S. Attorney Rahul Agarwal of the U.S. Attorney’s Office General Crimes Unit in Newark.

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Defense counsel: Darren M. Gelber Esq., Woodbridge, N.J.

TRENTON, N.J. – A West New York, N.J., man was sentenced today to 210 months in prison for robbing a TD Bank branch in Weehawken, N.J., on May 31, 2011, U.S. Attorney Paul J. Fishman announced.

Maximo Castro, a/k/a “Carl Worthington,” 32, was convicted by a federal jury on Dec. 22, 2011, of both counts of the Indictment on which he was tried: armed bank robbery and possession of a firearm in furtherance of the bank robbery. He was sentenced today by U.S. District Judge Freda L. Wolfson in Trenton federal court.

According to documents filed in this case and the evidence at trial:

Castro entered the TD Bank branch wearing a hat and sunglasses and carrying a gold-plated handgun. He then announced that he was robbing the bank, threw a black bag at the tellers and demanded that they hand over the bank’s money. Castro also stole money from bank customers and ordered everyone in the bank to the ground before leaving the bank.

In addition to the prison term, Judge Wolfson sentenced Castro to five years of supervised release and ordered him to pay restitution of $4,843.

U.S. Attorney Fishman credited special agents and task force officers of the FBI’s Newark Violent Crime Squad, under the direction of Acting Special Agent in Charge David Velazquez, as well as officers from the Weehawken Township Police Department, for the investigation leading to today’s sentence.

The government is represented by Assistant U.S. Attorney Fabiana Pierre-Louis of the Criminal Division in Trenton and Senior Litigation Counsel Serina Vash of the U.S. Attorney’s Office Criminal Division in Newark.

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Defense counsel: Jerome A. Ballarotto Esq., Trenton

TRENTON, N.J. – A Staten Island, N.Y., man today admitted his role in the robbery of Blue Stove Antiques in Fair Haven, N.J., on June 2, 2012, U.S. Attorney Paul J. Fishman announced.

Robert A. Fiolka, 69, pleaded guilty before U.S. District Judge Freda L. Wolfson in Trenton federal court to an Information charging him with Hobbs Act robbery and use of a firearm in furtherance of a crime of violence.

According to documents filed in this case and statements made in court:

On June 2, 2012, at approximately 9:30 a.m., Fiolka entered Blue Stove Antiques in Fair Haven wearing a hat and flesh-colored face mask and brandishing a handgun. Fiolka approached the store owner, pointed the handgun at him and demanded that he open the store’s safe. After the owner opened the safe, Fiolka ordered him to the ground and then proceeded to empty the safe’s contents into a satchel that he had with him. After filling the bag with the safe’s contents, Fiolka exited the store with approximately $200,000 worth of jewelry.

The Hobbs Act robbery charge is punishable by a maximum potential penalty of 20 years in prison; the charge of use of a firearm in furtherance of a crime of violence is punishable by a maximum potential penalty of life in prison. Each charge carries a statutory maximum fine equal to the greatest of $250,000 or twice the gross loss or gain.

U.S. Attorney Fishman credited special agents with the FBI, under the direction of Acting Special Agent in Charge David Velazquez in Newark, with the investigation leading to today’s guilty plea; he also thanked the Colts Neck Police Department, Fair Haven Police Department, Old Bridge Police Department, Wall Township Police Department, and the Monmouth County Prosecutor’s Office.

Sentencing before Judge Wolfson is scheduled for July 11, 2013.

The government is represented by Assistant U.S. Attorney Fabiana Pierre-Louis of the Criminal Division in Trenton.

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Defense counsel: John W. Mitchell Esq. and Jerome A. Ballarotto Esq.

Fiolka Information

CAMDEN, N.J. – An Atlantic County, N.J., man today admitted his involvement in a scheme to distribute heroin in and through New Jersey, U.S. Attorney Paul J. Fishman announced.

Nassaun Hines, a/k/a “Bubbles,” a/k/a “Nay,” 27, pleaded guilty before U.S. District Judge Joseph H. Rodriguez to a Superseding Information charging him with knowingly and intentionally conspiring to distribute 100 to 400 grams of heroin, and possession of a firearm by a previously convicted felon. Hines was previously indicted for the heroin distribution conspiracy and the possession of the firearm.

According to documents filed in this case and statements made in court:

Beginning in March 2010, FBI special agents and members of the Atlantic County Prosecutor’s Office used wiretaps to intercept telephone conversations between Jamal Reid, Nassaun Hines, and others. The monitored calls and other information revealed that Hines, Reid, and others were distributing large amounts of heroin. During the calls, agents overheard Hines agreeing to deliver heroin to others, agreeing to gather money from others for heroin, and agreeing to purchase heroin. Agents observed Hines meeting with his conspirators on numerous occasions.

Hines acknowledged that between April 2, 2010, and May 15, 2010, he sold quantities of heroin in Atlantic County and conspired with others in connection with his drug trafficking activity. Hines also admitted that he knowingly possessed a firearm on May 15, 2010.

Hines faces a statutory, mandatory, minimum term of five years in prison; a statutory, maximum prison term of 40 years, and a $5 million fine on the conspiracy count and a maximum potential sentence of 10 years in prison and a $250,000 fine on the weapons count. Sentencing is scheduled for July 8, 2013.

Ten people have been charged for their roles in this heroin distribution conspiracy. To date, five individuals have pleaded guilty to conspiracy to distribute heroin, three remain incarcerated pending trial, and two are fugitives. On Feb. 14, 2013, Leroy Farmer, 38, of Pleasantville, and Baseem Taliaferro, 27, of Pleasantville, pleaded guilty to Superseding Informations charging each in connection with their roles in this heroin distribution conspiracy. Farmer’s sentencing is scheduled for May 20, 2013, at 10:00 a.m., and Taliaferro’s sentencing is scheduled for May 23, 2013, at 10:00 a.m., both before Judge Rodriguez. Edward Brown Jr., a/k/a “Eddie Brown, a/k/a “Eddie Cane,” a/k/a “Cane,” and Matthew Palmer, a/k/a “Matt,” a/k/a “White Boy Matt,” a/k/a “White Boy” – remain fugitives.

U.S. Attorney Fishman credited special agents of the FBI's Atlantic City Resident Agency – Safe Streets Task Force, which during the Reid investigation consisted of task force officers from Atlantic County Prosecutor's Office, Atlantic City Police Department, Northfield Police Department and Pleasantville Police Department, under the direction of Acting Special Agent in Charge David Velazquez; and special agents from the Bureau of Alcohol, Tobacco, Firearms & Explosives, under the direction of Special Agent in Charge Thomas J. Cannon in Newark.

The government is represented by Assistant U.S. Attorneys Jason M. Richardson and Alyson M. Oswald of the U.S. Attorney's Office Criminal Division in Camden.

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Defense counsel: Hines: John F. Renner Esq., Marlton, N.J.
Farmer: Justin T. Loughry Esq., Camden
Taliaferro: Paul A. Sarmousakis Esq., Avalon, N.J.

Hines Superseding Information

NEWARK, N.J. – The former chief financial officer and chief executive officer of a leading supplier of athletic equipment and reconditioning services today admitted their roles in a conspiracy to defraud schools in New Jersey and elsewhere, U.S. Attorney Paul J. Fishman announced.

Mitchell Kurlander, 54, of Allentown, Pa., and his father-in-law, Alan Abeshaus, 81, of Highland Beach, Fla., each pleaded guilty before U.S. District Judge William H. Walls in Newark federal court to one count of mail and wire fraud conspiracy. They were indicted in May 2011.

“The long-running fraud Kurlander and Abeshaus ran cheated students, teachers and the taxpayers who support them,” U.S. Attorney Fishman said. “Just as offensive is the conduct of school officials who turned a blind eye to the deceit in exchange for cash payoffs and gifts. The admissions of guilt by these two main defendants will help turn a page on this sorry chapter.”

“For years, Circle Systems Group Inc. utilized deceptive business practices to defraud schools throughout New Jersey and the United States for their own personal gain,” FBI Acting Special Agent in Charge David Velazquez said. “These well-orchestrated schemes not only affected the schools they were defrauding, but innocent students and taxpayers as well. The pleas entered today are indicative of the continuing efforts of the FBI and its law enforcement partners to identify and fully investigate complex financial fraud schemes. "

“The corporate executives and the educators who participated in this scheme not only abused their position of trust for personal gain, but did so at the expense of students at schools across the country. That is completely unacceptable,” said William Hamel, Assistant Inspector General for Investigations with the U.S. Department of Education. “I’m proud of the work of OIG Special Agents and our partners in law enforcement for holding these individuals accountable for their selfish and reckless actions.”

According to documents filed in the case and statements made in court:

Circle System Group Inc. (Circle) sold and reconditioned athletic equipment, uniforms, and apparel. Although its services were marketed nationally, a large portion of Circle’s business focused on middle schools, high schools, colleges, and youth sports programs in New Jersey. Circle’s business depended primarily on a sales force that attempted to maintain relationships with the school officials—including athletic directors, equipment managers, trainers, and coaches—who were responsible for purchasing athletic equipment and reconditioning services on behalf of the schools.

From at least 1997 to June 2007, Circle engaged in a number of business practices aimed at defrauding schools, including keeping duplicate payments by schools that should have been returned or credited back to schools, submitting fake quotes to school officials, and submitting fraudulent invoices to schools.

Circle sent invoices and monthly statements of account to schools. Schools often paid both the invoices and statements, paying twice for the same items or services. At the direction of Kurlander and Abeshaus, Circle improperly retained at least $822,000 in overpayments from various schools in New Jersey and elsewhere and converted these overpayments to the personal use and benefit of Abeshaus.

Circle and its sales staff often would provide multiple price quotes, including some that appeared to come from other companies, to allow schools with requirements to obtain multiple price quotes to justify a contract with Circle. Using quote forms with the letterhead of other companies, Circle administrative staff would prepare fake, higher quotes at the direction of Kurlander and others. Circle submitted numerous such fake quotes to schools in New Jersey and elsewhere during the course of the conspiracy.

As a routine business practice, and to ingratiate Circle with school officials, Kurlander authorized Circle employees to make gifts and donations to schools and school officials, and often would take officials on golf outings and to meals. Kurlander routinely inflated Circle’s invoices for services and goods to those schools to reimburse Circle for these donations and gifts. Gifts provided by Circle to school officials included computers, digital cameras, flat-screen TVs, golf clubs, leather jackets and other personal apparel.

Circle sometimes also submitted bid packages and price quotations for goods and reconditioning services that were lower than the prices that Circle intended to charge schools. After Circle obtained a school’s business, Circle would, at Kurlander’s direction, garner its desired profits by fraudulently inflating the quantity or nature of the reconditioning work or by fraudulently inflating other invoices to those schools for reconditioning services.

The conspiracy count to which the defendants pleaded guilty are punishable by a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gross pecuniary gain or loss from the offense. Sentencing is scheduled for July 9, 2013.

Three other individuals previously pleaded guilty to their involvement in the conspiracy. On Dec. 22, 2008, former Circle president David Drill pleaded guilty to conspiring to defraud, among other Circle customers, various New Jersey schools. Two school officials—former Long Branch High School Athletic Director Charles Ferrara Jr. and former Elizabeth High School official Robert Firestone—pleaded guilty on Nov. 22, 2010, and Jan. 5, 2011, respectively, to participating in the conspiracy. Ferrara and Firestone admitted, among other things, that they received items from Circle for their personal use and directed Circle to fraudulently bill the cost of those items back to their respective schools. All three await sentencing before U.S. District Judge Dickinson R. Debevoise.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velasquez in Newark; and U.S. Department of Education, Office of Inspector General, under the direction of Special Agent in Charge Steven Anderson of the Mid-Atlantic region and Special Agent in Charge Brian Hickey of the Northeastern Region, with the investigation leading to today’s guilty pleas.

The government is represented by Assistant U.S. Attorney Lee M. Cortes Jr. and Senior Litigation Counsel J Fortier Imbert of the U.S. Attorney’s Office Special Prosecutions Division in Newark.

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Defense counsel: Kurlander: William A. DeStefano Esq., Philadelphia
Abeshaus: Kevin H. Marino Esq., Chatham, N.J.

Kurlander, Mitchell, Et al. Indictment (Circle Systems)

TRENTON, N.J. – A Mercer County, N.J., man today admitted his role in the New Year’s Eve 2011 hate crime assault of two Middle Eastern men in Sayreville, N.J., U.S. Attorney Paul J. Fishman announced.

Michal Gunar, 28, of East Windsor, NJ, a purported member of the white supremacist group known as the “Aryan Terror Brigade,” pleaded guilty before U.S. District Judge Joel A. Pisano in Trenton federal court to an Indictment charging him with conspiracy to commit a hate crime assault, as well as the actual commission of a hate crime assault, in violation of the Matthew Shepard and James Byrd Jr., Hate Crimes Prevention Act.

According to documents filed in this case and statements made in court: Gunar admitted attended a New Year’s Eve “meet and greet” white supremacist event at a residence in East Brunswick, N.J., on Dec. 31, 2011. That night, Gunar, Christopher Ising and Kyle Powell drove to an apartment complex in Sayreville, N.J., with the express purpose of assaulting random, non-Caucasian individuals. Gunar brandished a knife and attacked two Middle Eastern men, shouting anti-Arab slurs. He admitted today that he assaulted at least one man by pulling the individual out of a parked car and punching the man about the face and head, causing physical injury.

Ising, 31, of Waretown, N.J., a purported member of a white supremacist group known as the “Atlantic City Skins,” previously entered a guilty plea on both counts of the same Indictment before Judge Pisano on Feb. 13, 2013. Powell, 24, of Wildwood, N.J., and a member of the Aryan Terror Brigade, entered a guilty plea on Jan. 23, 2013, before Judge Pisano to an Information charging him with conspiracy to commit a hate crime assault.

The hate crimes to which Gunar pleaded guilty are punishable by a maximum of potential penalty of 10 years in prison on the assault count, and by a maximum of five years in prison on the conspiracy count. Both counts are also punishable by a $250,000 fine.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez; special agents of the U.S. Secret Service, under the direction of Special Agent in Charge James Mottola, as well as detectives from the N.J. State Attorney General’s Office, under the direction of Attorney General Jeffrey S. Chiesa, with the investigation that lead to today’s guilty plea.

The government is represented by Assistant U.S. Attorneys Dennis C. Carletta of the U.S. Attorney’s Office National Security Unit in Newark, and Trial Attorney Fara Gold of the criminal section of the Civil Rights Division of the Department of Justice in Washington, D.C.

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Gunar Indictment

TRENTON, N.J. – A Essex County, N.J., man was convicted by a federal jury in Trenton federal court today on all counts related to the robbery and shooting of a retired police officer working as an armed money courier, U.S. Attorney Paul J. Fishman announced.

The jury returned guilty verdicts against James Sodano, 69, of West Orange, N.J., following a two-and-a-half-week trial before U.S. District Judge Peter G. Sheridan. Sodano was convicted on all three counts charged in the Indictment: conspiracy to commit Hobbs Act robbery; Hobbs Act robbery; and possessing, carrying and using a firearm, which was discharged in connection with the robbery.

According to documents filed in this case and the evidence at trial:

On May 19, 2011, Sodano and another armed man confronted a retired police officer working as an armed money courier for a check cashing service as he was delivering a bag containing $400,000 to a Newark bar. As he exited his car, an armed man approached him, and the two men exchanged gunfire. The courier fell to his knees, and the armed man fled.

Sodano approached the courier from behind, shooting him in the jaw. As the victim fell, he fired a shot, hitting Sodano in the leg. Sodano shot him again, hitting the victim in the arm. Sodano then pulled the bag of money from beneath the victim as he was lying face down on the ground. Sodano drove off in his car, but crashed three and a half blocks away. When police arrived, they found Sodano, wearing a bulletproof vest and a pair of gloves, slipping in and out of consciousness, still holding on to the steering wheel. Police found a pool of blood, several weapons, ammunition and the bag containing the $400,000 inside the car.

Sodano faces a maximum potential penalty of 20 years in prison on the Hobbs Act conspiracy charge and a maximum of 20 years for the Hobbs Act robbery charge. For the conviction on the count of possessing, carrying and using a firearm, which was discharged in furtherance of the Hobbs Act robbery, Sodano faces a mandatory minimum penalty of 10 years in prison and a maximum potential penalty of life in prison, which must run consecutively to any Hobbs Act robbery prison term. Each count also carries a maximum $250,000 fine. Sentencing is currently scheduled for July 8, 2013.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez in Newark, for the investigation leading to today’s guilty verdict. He also thanked the Essex County Prosecutor’s Office and the Newark Police Department, for their roles in the case.

The government is represented by Senior Litigation Counsel Serina M. Vash and Assistant U.S. Attorney Dara Aquila Govan of the U.S. Attorney’s Office Organized Crime/Gangs Unit in Newark.

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Defense counsel: Hal Haveson Esq., Princeton, N.J.

TRENTON, N.J. — A Hunterdon County, N.J., man was sentenced today to 15 years in prison for distributing images of child sexual abuse over the Internet, U.S. Attorney Paul J. Fishman announced.

John Livoti, 42, of Hampton, N.J., previously pleaded guilty before U.S. District Judge Joel A. Pisano in Trenton federal court to an Information charging him with one count of distribution of child pornography. Judge Pisano imposed the sentence today in Trenton federal court.

According to documents filed in this case and statements made in court:

Livoti admitted that from May 2011 through February 2012 he used peer-to-peer file sharing software to download and to share images of child pornography through the Internet. He accessed the Internet through his neighbor’s wireless Internet connection. He further admitted that for a period of time in 2011 he paid for a minor, living in another state, to access the peer-to-peer network so that the minor could access child pornography.

Special agents of the FBI and other law enforcement executed a search warrant at Livoti’s apartment in Hampton, N.J., on Feb. 2, 2012. Law enforcement seized a netbook computer and an external hard drive that contained child pornography.

U.S. Attorney Fishman credited the FBI Cyber Crimes Task Force, under the direction of Acting Special Agent in Charge David Velazquez in Newark; the Hunterdon County Prosecutor's Office, under the direction of Prosecutor Anthony P. Kearns III; and Hunterdon County Chief of Detectives John J. Kuczynski, with the investigation leading to today’s sentence.

In addition to the prison term, Judge Pisano sentenced Livoti to lifetime supervised release, with restricted contact with minors, and ordered to pay $5,000 in restitution. He must also register as a sex offender.

The government is represented by Assistant U.S. Attorney John E. Clabby of the U.S. Attorney’s Office Criminal Division in Trenton.

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Defense counsel: Lisa Van Hoeck Esq., Assistant Federal Public Defender, Trenton

NEWARK, N.J. – A federal grand jury in Newark today returned a three-count Indictment charging a former Bergen County dealer in ancient coins, with aiding and assisting in the filing of false federal income tax returns, U.S. Attorney Paul J. Fishman announced.

Gantcho Zagorski, 59, formerly a resident of Hackensack, N.J., was charged with aiding and assisting in the filing of false federal income tax returns for calendar years 2006, 2007 and 2008. A date for Zagorski’s arraignment will be scheduled once the case has been assigned to a federal district judge.

According to the Indictment:

Zagorski owned and operated a business that sold ancient coins to domestic and international customers, primarily on eBay, from his residence in Hackensack. Zagorski, along with his wife and, at times, his daughter, operated the coin-selling business under the names “Diana Coins,” “Paganecoins,” and “Diana Coins, LLC.” For calendar years 2006, 2007, and 2008, Zagorski provided his tax preparer with false and fraudulent information by understating the amount of gross receipts and sales earned by his business. Zagorski then caused to be filed with the IRS those federal income tax returns for 2006, 2007 and 2008 containing that false and fraudulent information.

Each of the three tax counts carries a maximum potential penalty of three years in prison and a $250,000 fine.

U.S. Attorney Fishman credited special agents of Department of Homeland Security, Homeland Security Investigations New York, under the direction of Special Agent in Charge James T. Hayes Jr.; IRS – Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen, Newark Field Office; and the FBI, under the direction of Acting Special Agent in Charge David Velasquez, with the investigation leading to the Indictment.

The government is represented by Assistant U.S. Attorneys Maureen Nakly of the U.S. Attorney’s Office Special Prosecutions Division and Leslie Schwartz of the U.S. Attorney’s Office Economic Crimes Unit.

The charges and allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

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Defense counsel: John Yauch Esq., Assistant Federal Public Defender, Newark

Zagorski Indictment

NEWARK, N.J. – A Passaic County, N.J., man was sentenced today to 51 months in prison for his role in a conspiracy to distribute the prescription painkiller Oxycodone and MDMA, an illegal drug commonly known as “ecstasy,” U.S. Attorney Paul J. Fishman announced.

Following a six-day trial before U.S. District Judge Jose L. Linares in December 2012, a jury found Bahadir Yahsi, 30, of Paterson, N.J., guilty on all five counts charged against him in the Second Superseding Indictment: One count of conspiring to distribute and to possess with intent to distribute quantities of Oxycodone and ecstasy; one count of distributing and possessing with intent to distribute Oxycodone; and three counts of distributing and possessing with intent to distribute ecstasy.

According to documents filed in this case and the evidence at trial:

Starting in June 2010 and continuing through October 2010, Yahsi conspired with Ersin Eroglu, a fellow Paterson resident, and others to illegally traffic black market Oxycodone pills and large quantities of ecstasy. On Sept. 30, 2010, Yahsi set up and carried out an illegal drug transaction with Eroglu, during which Yahsi and Eroglu dealt 96 80-milligram black market Oxycodone pills in the vicinity of Paterson, near the border with Clifton, N.J. After the illegal drug deal, which Yahsi and Eroglu intended to be a 100-pill transaction, Yahsi ensured that Eroglu distributed the remaining four 80-milligram Oxycodone pills in October 2010, at a subsequent black market Oxycodone deal carried out by Eroglu. Also, in August 2010, Yahsi dealt ecstasy pills on three separate occasions, in Paterson on August 15, 19 and 25, 2010.

In addition to the prison term, Judge Linares sentenced Yahsi to three years of supervised release.

Eroglu pleaded guilty to distribution charges, including the Sept. 30, 2010, illegal distribution with Yahsi, and was previously sentenced to 24 months in prison.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez in Newark, with the investigation leading to today’s sentence.

The government is represented by Assistant U.S. Attorney Shirley U. Emehelu and Special Litigation Counsel Mark J. McCarren of the U.S. Attorney's Office in Newark.

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Defense counsel: Catherine M. Brown Esq., Morristown, N.J., and Paulette Pitt Esq., Woodbridge, N.J.

TRENTON, N.J. — A Monmouth County, N.J., man was sentenced today to 41 months in prison for using his Blackberry smartphone to distribute images of child sexual abuse, including to a stranger in Nevada, U.S. Attorney Paul J. Fishman announced.

John Nutt, 55, of Asbury Park, N.J., previously pleaded guilty before U.S. District Judge Joel A. Pisano in Trenton federal court to an Information charging him with one count of distribution of child pornography. Judge Pisano imposed the sentence today in Trenton federal court.

According to documents filed in this case and statements made in court:

On April 10, 2011, a woman in Nevada received an image of child pornography on her cellular telephone via picture message from a phone number not known to her. When she reported this event to Nevada law enforcement, law enforcement officers determined that the phone number belonged to Nutt, and that Nutt lived in Asbury Park.

On May 19, 2011, officers from the Asbury Park Police Department and the Monmouth County Prosecutor’s Office executed a search warrant at Nutt’s residence and seized his Blackberry smartphone, which federal investigators later determined had been used to distribute and receive child pornography.

U.S. Attorney Fishman credited special agents of the Department of Homeland Security Immigration and Customs Enforcement, Homeland Security Investigations, in New Jersey under the direction of Special Agent in Charge Andrew M. McLees; the Monmouth County Prosecutor’s Office, under the direction of Acting Prosecutor Christopher Gramiccioni; the Asbury Park Police Department, under the direction of Chief Mark Kinmon; and the Mineral County, Nev., Sheriff’s Department, under the direction of Sheriff Michael Dillard, with the investigation leading to today’s guilty plea.

In addition to the prison term, Judge Pisano sentenced Nutt to five years of supervised release. He must register as a sex offender.

The government is represented by Assistant U.S. Attorney John E. Clabby of the U.S. Attorney’s Office Criminal Division in Trenton.

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Defense counsel: Lisa Van Hoeck Esq., Assistant Federal Public Defender, Trenton

CAMDEN, N.J. - Complaints charging two men with credit card fraud conspiracy were unsealed today in federal court in New Jersey after the pair, who have allegedly attempted to fraudulently charge more than $500,000 using stolen account numbers, were arrested early Saturday, March 29, 2014, at the Borgata Casino, in Atlantic City, N.J., U.S. Attorney Paul J. Fishman announced.

Tracey Coleman, 46, of Rosedale, N.Y., and Wanell Wallace, 23, of Fresh Meadow, N.Y., are each charged with one count of conspiracy to produce, use, and traffic in one or more counterfeit access devices, with intent to defraud, in a manner affecting interstate commerce; and one count of conspiracy to do so during any one-year period and obtaining $1,000 or more.

Both defendants are expected to appear this afternoon before U.S. Magistrate Judge Joel Schneider in Camden federal court.

According to the documents filed in this case and statements made in court: Coleman and Wallace fraudulently obtained funds, which were deposited into American Express accounts in their names, by using numerous credit card account numbers issued by Capital One Bank. Coleman and Wallace fraudulently obtained the numbers, which Wallace would then use to purchase prepaid debit cards in CVS Caremark drug stores throughout the New Jersey area. Those prepaid debit cards – or “Vanilla Reload” cards – were used to deposit funds into the American Express accounts.

Fraudulent transactions in Wallace’s name – consisting of both attempted transactions and successful transactions – are estimated at more than $500,000 during the period between April 2013 and the present.  More than $50,000 in such transactions was conducted in March 2014 alone.

Each of the counts with which each defendant is charged carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense.

U.S. Attorney Fishman credited special agents of the U.S. Secret Service, under the direction of Special Agent in Charge Cynthia Wofford with the ongoing investigation.

The government is represented by Assistant U.S. Attorney Justin C. Danilewitz of the U.S. Attorney’s Office Criminal Division in Camden.

The charges and allegations contained in the complaints are merely accusations and the defendants are presumed innocent unless and until proven guilty.

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Defense counsel:

Tracey A. Coleman: Assistant Federal Public Defender Lori Koch Esq., Camden
Wanell Wallace: Edward Borden Esq., Cherry Hill, N.J.

Coleman, Tracey Complaint
Wallace, Wanell Complaint

TRENTON, N.J. – A physician who was the owner and founder of Visiting Physicians of South Jersey – a Hammonton, N.J., provider of home-based physician services for seniors –pleaded guilty today for charging lengthy visits to elderly patients that they did not receive, U.S. Attorney Paul J. Fishman announced.

Lori Reaves, 52, of Waterford Works, N.J., entered her guilty plea, to an Information charging her with one count of health care fraud, before U.S. District Judge Freda L. Wolfson in Trenton federal court. During her guilty plea, Reaves admitted lying in Medicare billings about the amount of face-to-face time she spent with patients, which led to her receiving at least $511,068 in criminal profits. Reaves was the highest billing home care provider among the more than 24,000 doctors in New Jersey from Jan. 1, 2008 through Oct. 14, 2011, according to court documents.

“Today, Lori Reaves, a South Jersey physician, admitted intentionally overbilling Medicare and pocketing more than half a million dollars she didn’t earn,” U.S. Attorney Fishman said. “The Medicare system depends on doctors and other medical professionals truthfully billing for services they actually provide. Here, Dr. Reaves chose to lie about the major service she was providing to her homebound, elderly patients: her time.”

According to documents filed in this case and statements made in court:

Visiting Physicians of South Jersey (“VPA”) provided home-based physician health care for elderly and homebound patients in New Jersey, offering services throughout South Jersey. As part of her responsibilities at VPA, Reaves was responsible for VPA’s Medicare billings as a Medicare-approved provider.

The claim submitted by the health care provider requires a physician to state a diagnosis and provide a procedure code – called a Current Procedural Technology (CPT) code – identifying services rendered. Medicare regulations require that each provider certify that the services rendered were medically necessary and were furnished by that provider. A warning at the bottom of the form specifically states that any false claims or statements in relation to the submission of a claim for reimbursement are prosecutable under federal or state law.

In most instances during the relevant time period, Reaves submitted forms that falsely claimed she had provided prolonged service visits to her patients in order to induce Medicare to make payments to her that were significantly higher than the payments she should have received.

Reaves routinely billed Medicare using codes that would have required her – under Medicare regulations and depending on the corresponding service – to spend between 60 and 150 minutes with a patient. Many of the claims Reaves submitted would have required her to spend a minimum of 2.5 hours of face-to-face time with her elderly clients, when she actually spent far less. As a result, Medicare reimbursed Reaves more than $511,068 for the fraudulent prolonged service visits Reaves claimed to have made.

Reaves faces a maximum potential penalty of 10 years in prison and a fine of the greatest of $250,000 or twice the gross gain or loss caused by her offense. She will also be required to forfeit the proceeds of her crime. Sentencing is currently scheduled for July 13, 2013.

U.S. Attorney Fishman credited special agents of the FBI in Newark, under the direction of Acting Special Agent in Charge David Velazquez, and special agents of the Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge Tom F. O’Donnell of the New York Regional Office, with the investigation leading to the guilty plea.

The government is represented by Assistant U.S. Attorneys Deborah J. Gannett and R. David Walk Jr. of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark.

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Defense counsel: Rocco Cipparone Jr. Esq., Haddon Heights, N.J.

Reaves Information

TRENTON, N.J. –A Mercer County, N.J., woman today admitted she conspired with Joseph “JoJo” Giorgianni, Charles Hall III and others to illegally distribute oxycodone pain pills, U.S. Attorney Paul J. Fishman announced.

Stephanie Lima, 41, of Yardville, NJ, pleaded guilty before U.S. District Judge Michael A. Shipp in Trenton federal court to an Information charging her with conspiracy to distribute and possession with intent to distribute oxycodone.

According to documents filed in this case and statements made in court: Between August 2011 and September 2011, Lima agreed with Hall, Carol Kounitz and Giorgianni to obtain oxycodone from a doctor and distribute that oxycodone in exchange for payment. On Aug. 17, 2011, Lima traveled with Kounitz and Hall to a doctor in Nutley, N.J. Lima admitted that during this trip she tried to attend an appointment with the doctor in order to obtain a prescription for oxycodone pills, but was unsuccessful. Kounitz obtained a prescription for oxycodone on Aug. 17, 2011, and Lima admitted that she and Kounitz filled this prescription and provided the pills to Hall for distribution.

Lima and Kounitz, in coordination with Hall, made a second trip to the doctor on Sept. 14, 2011, during which Lima obtained a prescription for 120 15-mg oxycodone pills and Kounitz obtained a prescription for 120 30-mg oxycodone pills. Lima admitted that she and Kounitz later filled those prescriptions and provided the pills to Hall in exchange for payment. Lima understood Giorgianni to be overseeing the sale of the oxycodone that she and Kounitz provided to Hall.

The drug conspiracy charge is punishable by a maximum potential penalty of 20 years in prison and a $1 million fine. Sentencing is scheduled for July 2, 2013.

U.S. Attorney Fishman credited special agents of the FBI’s Trenton Resident Agency, Newark Field Office, under the direction of Acting Special Agent in Charge David Velazquez, for the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorneys Eric W. Moran and Matthew J. Skahill of the U.S. Attorney’s Office Special Prosecutions Division in Trenton and Camden, respectively.

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Defense counsel: Paul W. Norris Esq., Lawrenceville, N.J.

Lima Information

TRENTON, N.J. –A Mercer County, N.J., woman today admitted she conspired with Joseph “JoJo” Giorgianni, Charles Hall III and others to illegally distribute oxycodone pain pills, U.S. Attorney Paul J. Fishman announced.

Stephanie Lima, 41, of Yardville, NJ, pleaded guilty before U.S. District Judge Michael A. Shipp in Trenton federal court to an Information charging her with conspiracy to distribute and possession with intent to distribute oxycodone.

According to documents filed in this case and statements made in court: Between August 2011 and September 2011, Lima agreed with Hall, Carol Kounitz and Giorgianni to obtain oxycodone from a doctor and distribute that oxycodone in exchange for payment. On Aug. 17, 2011, Lima traveled with Kounitz and Hall to a doctor in Nutley, N.J. Lima admitted that during this trip she tried to attend an appointment with the doctor in order to obtain a prescription for oxycodone pills, but was unsuccessful. Kounitz obtained a prescription for oxycodone on Aug. 17, 2011, and Lima admitted that she and Kounitz filled this prescription and provided the pills to Hall for distribution.

Lima and Kounitz, in coordination with Hall, made a second trip to the doctor on Sept. 14, 2011, during which Lima obtained a prescription for 120 15-mg oxycodone pills and Kounitz obtained a prescription for 120 30-mg oxycodone pills. Lima admitted that she and Kounitz later filled those prescriptions and provided the pills to Hall in exchange for payment. Lima understood Giorgianni to be overseeing the sale of the oxycodone that she and Kounitz provided to Hall.

The drug conspiracy charge is punishable by a maximum potential penalty of 20 years in prison and a $1 million fine. Sentencing is scheduled for July 2, 2013.

U.S. Attorney Fishman credited special agents of the FBI’s Trenton Resident Agency, Newark Field Office, under the direction of Acting Special Agent in Charge David Velazquez, for the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorneys Eric W. Moran and Matthew J. Skahill of the U.S. Attorney’s Office Special Prosecutions Division in Trenton and Camden, respectively.

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Defense counsel: Paul W. Norris Esq., Lawrenceville, N.J.

Lima Information

Twenty-five Alleged Members and Associates of ‘Dirty Block’ Street Gang Arrested in Pre-dawn Raids; Others in Custody from Previous Arrest

CAMDEN, N.J. – Twenty-five people associated with a criminal street gang that allegedly used threats, intimidation and violence to maintain control of the illegal drug trade in Atlantic City were arrested today in pre-dawn raids by agents of the FBI, the N.J. State Police and officers of the Atlantic City Police Department, U.S. Attorney Paul J. Fishman announced.

The arrests deal a significant blow to the criminal street gang known as “Dirty Block,” a/k/a “Crime Fam,” “3.6.6.12,” or “3.6,” which allegedly operates in a geographic area of Atlantic City that includes the public housing apartment complexes of Stanley Holmes, Carver Hall, Schoolhouse, Adams Court and Cedar Court. The defendants are scheduled to make their initial court appearances this afternoon before U.S. Magistrate Judges Ann Marie Donio and Karen M. Williams in Camden federal court.

“The defendants in this case created an atmosphere of fear and presented real danger to the people who shared their Atlantic City neighborhood,” U.S. Attorney Fishman said. “And they did it so that they could prosper from selling illegal drugs. The law-abiding people of New Jersey – whether they live in the suburbs, on a farm, or in the oldest housing project in New Jersey – deserve to have neighborhoods that are safe places to walk and raise their families. I really hope that today’s arrests will give them that chance.”

FBI Acting Special Agent in Charge David Velazquez said, “The Dirty Block gang had placed a community under siege and extraordinary law enforcement efforts became necessary.  The collaboration of federal, state, and local law enforcement authorities have made possible the return of the community to its people.”

Acting Atlantic County Prosecutor James P. McClain said: “This operation has been an excellent example of how cooperating law enforcement can take down a criminal organization and therefore make our community safer. In Atlantic County, we will continue to work with all other available law enforcement agencies to take down those criminal groups that remain or those that might spring up to replace this one.”

The 25 defendants arrested today are among 34 people charged by Complaint – including two brothers who have already been arrested and charged in connection with Atlantic City’s first homicide of 2013 and several defendants already in custody – with participating in a conspiracy to distribute heroin since at least October 2012.
 
According to documents filed in this case and statements made in court: An investigation using surveillance, confidential informants, controlled drug purchases, record checks and telephone wiretaps revealed that Dirty Block acquires and distributes heroin, cocaine and prescription drugs; maintains various stash houses and drug dens; and possesses numerous illegal firearms to maintain control of drug distribution and to intimidate, threaten and kill rivals.
 
Intercepted telephone conversations reveal that two of the principal targets charged today – Mykal Derry, a/k/a “Koose,” and his brother Malik Derry, a/k/a “Lik” – conspired to murder a rival drug dealer, Tyquinn James, a/k/a “T.Y.,” and that on Feb. 10, 2013, Malik Derry allegedly carried out the homicide. The two brothers were arrested on Feb. 11, 2013. The intercepted conversations also describe an incident at the Tropicana Casino on Dec. 24, 2012, in which members of the Dirty Block gang spotted members of a rival gang and attempted to obtain weapons in order to ambush them before they left the casino. Failing that, they chased down and violently assaulted their rivals.

The Dirty Block drug trafficking organization utilizes many people who performed various functions to facilitate the enterprise. These include narcotics suppliers (who sell bulk quantities of heroin at discounted prices), gang leaders (such as Mykal Derry and Tyrone Ellis, a/k/a “Rome”), enforcers or “shooters,” distributors, dealers, runners, couriers, facilitators (who provide cars, phones, locations, and money laundering services) and testers (who ingest narcotics, at the request of a distributor, in order to assess quality).

Mykal Derry, a Dirty Block gang leader and mid-level heroin distributor, has used several conspirators, who are also charged in the Complaint, to store drugs, money and weapons in their homes and to acquire narcotics from higher-level suppliers for distribution in the Atlantic City area. Derry distributed more than a kilogram of heroin to street buyers in quantities referred to as “bricks” (or “walls”), “bundles,” and “bands” (or “rubber bands”). This heroin was marketed using numerous “stamps” that suppliers, distributors, and dealers use to brand their product.

Mykal Derry, along with Ellis, and their conspirators frequently possessed firearms, despite prior felony convictions prohibiting such possession, in furtherance of the conspiracy’s goals. On two separate occasions in October 2012, Derry and other co-conspirators – all previously convicted felons – photographed themselves, and were observed and video recorded, holding, loading and using firearms at the Shore Shot shooting range in Lakewood, N.J.

Defendants Maurice Thomas and Mark Frye were the primary heroin suppliers to Mykal Derry and Tyrone Ellis, providing them with more than a thousand bricks of heroin between October 2012 and February 2013. Wiretaps revealed that Derryand Ellis are but two of Thomas’ and Frye’scustomers. Thomas and Frye are believed to be leaders of a sophisticated drug trafficking organization that has multiple lines of supply and uses multiple subjects who meet with customers and distribute large quantities of heroin from multiple tower style apartment buildings, on multiple floors. Thomas and Frye were both intercepted over the wiretaps arranging and conducting drug transactions with both Derryand Ellis.
Following Hurricane Sandy in late October 2012, conspirators defrauded the Federal Emergency Management Agency (“FEMA”) by lying about the extent of damage they sustained and provided an address for the receipt of FEMA disaster relief funds that was a storage location used for drug trafficking.

Dirty Block was able to secure the release of its members from prison with the services of a corrupt bail bondsman, identified in the complaint as “P.J.L.,” who is employed at Rapid Bail Bonds in Atlantic City. P.J.L. assisted Mykal Derry and other Dirty Block members by procuring fraudulent evidence of employment in order for individuals to act as co-signers of bonds. Derry also has provided P.J.L. with heroin, which intercepted communications reveal was used by P.J.L. for resale.

Despite its specialization in the supply of heroin, Dirty Block members abused various prescription medications and occasionally supplied cocaine as well. On one occasion, one of Mykal Derry’s couriers, Ambrin Qureshi, advised him that she had access to Roxicet prescription medication: “My peoples got a line on pure Roxy straight from the pharmaceutical company, uncut. Raw….”

Intercepted communications also revealed the fascination of several conspirators with “The Wire,” the popular HBO series (2002 to 2008) about the wiretap of a Baltimore-based drug conspiracy. In one conversation between Mykal Derry and his younger brother Malik, Mykal said that he was watching “The Wire” at the time, to which Malik responded that he, too, was watching “The Wire,” and, like Mykal, had “all the seasons.”

U.S. Attorney Fishman credited special agents of the FBI’s Newark Division, Atlantic City Resident Agency, under the direction of Acting Special Agent in Charge Velazquez; the Atlantic County Prosecutor’s Office, under the direction of Acting Prosecutor McClain; the Atlantic City Police Department, under the direction of Police Chief Ernest Jubilee and Public Safety Director William R. Glass; and the South Jersey Safe Streets Violent Incident and Gang (“Safe Streets”) Task Force, with the investigation leading to today’s arrests.

He also thanked the N.J. State Police; the Atlantic County Sheriff’s Office; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the Northfield Police Department; the Vineland Police Department; the Brigantine Police Department; the Millville Police Department; the Mullica Township Police Department; the South Jersey Transportation Authority; and the U.S. Secret Service for their contributions.

The government is represented by Assistant U.S. Attorneys Patrick C. Askin and Justin C. Danilewitz of the U.S. Attorney’s Office Criminal Division in Camden.

The charges and allegations contained in the Complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

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Defendants

Age

Residence

Role

20

Pleasantville, N.J.

Enforcer/dealer

Kamal Allen

25

Atlantic City, N.J.

Enforcer/dealer

Rashada Allen

26

Atlantic City, N.J.

Facililtator

Kareem Bailey

19

Atlantic City, N.J.

Dealer/youngin’

Wanda Bishop

32

Atlantic City, N.J.

Distributor

Wallace Boston

61

Atlantic City, N.J.

Dealer

Jodi Brown

40

Atlantic City, N.J.

Facilitator/dealer/tester

Latasha Cherry

29

Millville, N.J.

Facilitator/courier

Ronald Davis

27

Atlantic City, N.J.

Dealer

Terry Davis

24

Atlantic City, N.J.

Enforcer/dealer

Malik Derry

22

Atlantic City, N.J.

Enforcer/distributor

Mykal Derry

32

Atlantic City, N.J.

Leader/distributor

Quasim Duncan

19

Mays Landing, N.J.

Dealer

Tyrone Ellis

31

Galloway, N.J.

Leader/distributor

Mark Frye

32

Paterson, N.J.

Supplier

Jeffrey Harvey

28

Collings Lakes, N.J.

Distributor

Kasan Hayes

26

Atlantic City, N.J.

Dealer/runner/youngin’

Ronald Johnson

29

Atlantic City, N.J.

Distributor

Raymond Mack

19

Atlantic City, N.J.

Dealer/youngin’

Lamar Macon

24

Atlantic City, N.J.

Dealer/runner/youngin’

Ambrin Qureshi

32

Atlantic City, N.J.

Courier/runner/facilitator

Franklin Simms

29

Atlantic City, N.J.

Distributor/facilitator

Kimberly Spellman

31

Egg Harbor Township, N.J.

Courier/runner/facilitator

Laquay Spence

22

Atlantic City, N.J.

Dealer/runner/youngin’

Shaamel Spencer

29

Atlantic City, N.J.

Enforcer/dealer

Rayshell Strong

32

Atlantic City, N.J.

Distributor/courier/facilitator

Patricia Taylor

33

Atlantic City, N.J.

Distributor

Maurice Thomas

31

Paterson, N.J.

Supplier

Aree Toulson

24

Atlantic City, N.J.

Distributor

Dwayne Townsend

19

Atlantic City, N.J.

Dealer/runner/youngin’

Tiarrah Turner

23

Atlantic City, N.J.

Courier

Dominique Venable

23

Atlantic City, N.J.

Dealer/runner/youngin’

Kareem Young

20

Absecon, N.J.

Dealer/youngin’

Saeed Zaffa

23

Atlantic City, N.J.

Distributor

Dirty Block Complaint
Abdullah, Ibn complaint
Allen, Kamal complaint
Allen, Rashada complaint
Bailey, Kareem complaint
Bishop, Wanda complaint
Boston, Wallace complaint
Brown, Jodi complaint
Cherry, Latasha complaint
Davis, Ronald complaint
Davis, Terry complaint
Derry, Malik complaint
Derry, Mykal complaint
Duncan, Quasim complaint
Ellis, Tyrone complaint
Frye, Mark complaint
Harvey, Jeffrey complaint
Hayes, Kasan complaint
Johnson, Ronald complaint
Mack, Raymond complaint
Macon, Lamar complaint
Qureshi, Ambrin complaint
Simms, Franklin complaint
Spellman, Kimberly complaint
Spence, Laquay complaint
Spencer, Shaamel complaint
Strong, Rayshell complaint
Taylor, Patricia complaint
Thomas, Maurice complaint
Toulson, Aree complaint
Townsend, Dwayne complaint
Turner, Tiarrah complaint
Venable, Dominique complaint
Young, Kareem complaint
Zaffa, Saeed complaint

NEWARK, N.J. – A former New Jersey-based defense contractor employee – who was convicted by a federal jury for exporting sensitive U.S. military technology to the People’s Republic of China (PRC), stealing trade secrets and lying to federal agents – was sentenced today to 70 months in prison, New Jersey U.S. Attorney Paul J. Fishman announced.

Sixing Liu, a/k/a, “Steve Liu,” 49, a PRC citizen who had recently lived in Flanders, N.J., and Deerfield, Ill., has been in custody since the September 2012 verdict, based on his risk of flight.

“Instead of the accolades he sought from China, Sixing Liu today received the appropriate reward for his threat to our national security: 70 months in prison,” said U.S. Attorney Fishman. “As an innovation leader, the United States is a target for those seeking to cut corners at the expense of American businesses and consumers. As this sentence shows, the Department of Justice is making great progress in the fight against trade secret theft in order to protect the engines of our nation’s economic recovery.”

The jury convicted Liu of nine of the 11 counts in the Second Superseding Indictment with which he was charged, including six counts of violating the Arms Export Control Act and the International Traffic in Arms Regulations, one count of possessing stolen trade secrets in violation of the Economic Espionage Act of 1996, one count of transporting stolen property in interstate commerce and one count of lying to federal agents.

In addition to the prison term, Liu was sentenced to serve three years of supervised release and ordered to pay a $15,000 fine.  Restitution is to be determined at a later date.

According to documents filed in the case and evidence presented at trial:

In 2010, Liu stole thousands of electronic files from his employer, L-3 Communications, Space and Navigation Division, located in Budd Lake, N.J. The stolen files detailed the performance and design of guidance systems for missiles, rockets, target locators and unmanned aerial vehicles. Liu stole the files to position and prepare himself for future employment in the PRC. As part of that plan, Liu delivered presentations about the technology at several PRC universities, the Chinese Academy of Sciences and conferences organized by PRC government entities.

On Nov. 12, 2010, Liu boarded a flight from Newark Liberty International Airport to the PRC. Upon his return to the United States on Nov. 29, 2010, agents found Liu in possession of a non-work-issued computer containing the stolen material. The following day, Liu lied to agents of the Department of Homeland Security about the extent of his work on U.S. defense technology, which the jury found to be a criminal false statement. 

The U.S. Department of State’s Directorate of Defense Trade Controls later verified that several of the stolen files on Liu’s computer contained export-controlled technical data that relates to defense items listed on the United States Munitions List (USML). Under federal regulations, items and data covered by the USML may not be exported without a license, which Liu did not obtain. The regulations also provide that it is the policy of the United States to deny licenses to export items and data covered by the USML to countries with which the United States maintains an arms embargo, including the PRC.

The jury heard testimony that Liu’s company trained him about the United States’ export control laws and told him that most of the company’s products were covered by those laws.   

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez; special agents of ICE-Homeland Security Investigations, under the direction of Special Agent in Charge Andrew McLees; and officers of U.S. Customs and Border Protection, under the leadership of Director of New York Field Operations Robert E. Perez, for the investigation leading to the sentence.

The government is represented by Assistant U.S. Attorney L. Judson Welle of the U.S. Attorney’s Office National Security Unit and Assistant U.S. Attorney Gurbir S. Grewal of the Computer Hacking and Intellectual Property Section of the U.S. Attorney’s Office Economic Crimes Unit, both in Newark. The prosecution received valuable support from attorneys of the U.S. Department of Justice’s National Security Division, Counterespionage Section.

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Defense counsel: James Darryl Tunick Esq., Chicago

CAMDEN, N.J. – Two alleged conspirators in a $13 million mortgage fraud scam that used phony documents and straw buyers to make illegal profits on overbuilt condos at the Jersey shore are charged in connection with the scheme, U.S. Attorney Paul J. Fishman announced.

New Jersey residents John Leadbeater, 54, of Kearny and Daniel Cardillo, 49, of Wildwood, are each charged in a superseding Indictment with conspiracy to commit wire fraud.  Leadbeater is also charged with conspiracy to commit money laundering.

Leadbeater surrendered to special agents of the FBI this morning and is expected to appear this afternoon before U.S. Magistrate Judge Ann Marie Donio in Camden federal court. Cardillo, who was previously indicted in this case, is expected to appear in federal court on March 25, 2013, before U.S. District Chief Judge Jerome B. Simandle in Camden.

According to the superseding Indictment, unsealed today:

Leadbeater and his co-conspirators located for purchase ocean town condominiums overbuilt by financially distressed developers in Wildwood and Wildwood Crest, N.J., and recruited straw buyers, including Cardillo, to purchase those properties. The straw buyers had good credit scores, but lacked the financial resources to qualify for the mortgage loans. The conspirators created false documents such as fake employment records, W-2 forms and investment statements to make the straw buyers appear more credit-worthy than they actually were in order to induce the lenders to make the loans.

To prepare the straw buyers’ false loan applications, Leadbeater and his conspirators caused fraudulent mortgage loan applications in the name of the straw buyers, including the supporting documents, to be submitted to mortgage brokers that the brokers knew were false, attributing to the straw buyers inflated income and assets. Once the loans were approved and the mortgage lenders sent the loan proceeds in connection with real estate closings on the properties, Leadbeater and his conspirators took a portion of the proceeds, having funds wired or checks deposited into various accounts they controlled. They also distributed a portion of the proceeds to the other members of the conspiracy for their respective roles.

Some previously charged co-conspirators have already pleaded guilty in connection with the scheme.  Angela Celli, 42, of Somerset, Mass.; Robert Horton, 37, of Nashport, Ohio; and Justin Spradley, 35, of Cincinnati, pleaded guilty before Chief Judge Simandle and await sentencing.

The wire fraud conspiracy charge carries a maximum potential penalty of 30 years in prison and a $1 million fine. The money laundering conspiracy charge carries a maximum potential penalty of 10 years in prison and a $250,000 fine.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez in Newark, and special agents from IRS - Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen in Newark, for the investigation leading to today’s charges.

The government is represented by Assistant U.S. Attorney Jacqueline M. Carle of the U.S. Attorney’s Office Criminal Division in Camden.

The charges and allegations contained in the superseding Indictment are merely accusations, and the defendants are considered innocent unless and until proven guilty.

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Defense counsel: Leadbeater: Thomas J. Cammarata Esq., Jersey City, N.J.
Cardillo: Justin T. Loughry Esq., Camden

Leadbeater, John et al. Indictment

CAMDEN, N.J. – The owner of a meat distribution company admitted today to evading taxes related to income diverted from his companies for his personal use, U.S. Attorney Paul J. Fishman announced.

Nicholas Papanier Sr., 57, of Sewell, N.J., pleaded guilty before U.S. District Judge Noel L. Hillman to an Information charging him with one count of tax evasion.

According to documents filed in this case and statements made in court:

Between 2006 and 2009, Papanier owned Nellie’s Provisions, a meat distribution company that provided all of the meat for Primo Hoagies franchises and other independent restaurants. In 2006, 2007 and 2008, Papanier persuaded Primo Hoagies franchise owners to buy Thumann’s deli products from Nellie’s Provisions, often paying for them in cash. He took a significant amount of the cash paid to Nellie’s Provisions and deposited it into his personal bank accounts. He then used the money from his personal accounts to pay personal expenditures. He diverted a total of $556,664 for the calendar years 2006, 2007 and 2008 in the amounts of $56,395, $349,264, and $151,005, respectively.

Papanier admitted that he did not report the diverted cash to the IRS and only reported Form W-2 wages, interest and dividend income, and property tax information. By omitting all of the diverted cash, he failed to disclose and report a significant portion of this income on his tax returns, causing those tax returns to substantially understate the amount of income he received.

He admitted that for 2006, 2007 and 2008, had he reported the additional cash on his income tax returns he would have owed the government $189,656.

As part of the plea and in addition to the restitution, Papanier agreed to forfeit $484,010 to the United States. On Oct. 14, 2009, the United States filed a Verified Complaint for Forfeiture In Rem to forfeit and condemn to the use and benefit of the United States $372,042.54 in United States currency that was seized from Papanier’s bank accounts. On Sept. 16, 2010, the United States filed another Verified Complaint for Forfeiture In Rem to forfeit and condemn to the use and benefit of the United States an additional $111,967.50 in United States currency that was seized from Papanier’s bank accounts. The Complaints alleged that the subject funds were subject to forfeiture to the United States because they were involved in and were traceable to Structuring of Currency to Avoid a Reporting Requirement.

The charge to which Papanier pleaded guilty is punishable by a maximum potential penalty of five years in prison and a fine of $250,000. Sentencing is scheduled for June 28, 2013.

U.S. Attorney Fishman credited special agents of IRS – Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen, for the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorneys Jason M. Richardson of the U.S. Attorney’s Office Criminal Division in Camden in the criminal case, and Jordan Anger of the U.S. Attorney’s Office Asset Forfeiture Unit in Newark in the civil action.

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Defense counsel: Ronald Warren Esq., Haddonfield, N.J.         

Papanier, Nicholas Information

TRENTON, N.J. – The former director of Community Planning and Compliance for Hamilton Township, N.J., who admitted laundering a $5,000 bribe from an insurance broker to township Mayor John Bencivengo, was sentenced today to 18 months in prison, U.S. Attorney Paul J. Fishman announced.

Robert Warney, 47, of Hamilton, previously pleaded guilty before U.S. District Judge Peter G. Sheridan to an Information charging him with one count of money laundering. U.S. District Judge Anne E. Thompson imposed sentenced today in Trenton federal court.

According to documents filed in this case and statements in court:

On May 12, 2011, while serving as the director of Community Planning and Compliance for Hamilton Township, Warney accepted on Bencivengo’s behalf a $5,000 check from, Marliese Ljuba (identified in the Information to which Warney pleaded guilty as the Cooperating Witness), the health insurance broker for the Hamilton Township School District. Warney gave the proceeds of the check to Bencivengo in cash increments over several weeks. He, Bencivengo, and Ljuba agreed to have the check made payable to Warney’s spouse in order to conceal the payment. They also agreed that if anyone asked Warney or Ljuba about the check, they would say that Ljuba purchased a bedroom set from Warney’s spouse. A notation “Cherry Bedroom Set” was put on the check to support that story. 

On Nov. 20, 2012, following a five-day trial before U.S. District Judge Anne E. Thompson, Bencivengo was found guilty of obstruction of commerce by extortion under color of official right, attempted obstruction of commerce by extortion under color of official right, two counts of violating the federal Travel Act, for causing the interstate travel and using facilities in interstate commerce in connection with the bribes that he accepted, and one count of money laundering in connection with $12,400 in bribes he allegedly solicited and accepted in exchange for his official influence in helping Ljuba maintain the position of health insurance broker with the township’s school district. On March 13, 2013, he was sentenced to 38 months in prison.

Warney also admitted that in March 2006 and November 2007, while serving as a member of the Hamilton Township Board of Education, he received corrupt payments from Ljuba in exchange for his official action and influence in voting in favor of the School Board entering into a three-year contract with the Ljuba and her employer for them to provide health insurance brokerage services to the school district. Warney admitted that on March 26, 2006, at a meeting of the school board, he voted in favor of entering into a three-year contract with Ljuba and that he received two payments of $5,000 in March 2006 and in November 2007– $10,000 total – from her in exchange for his official action.

In addition to the prison term, Judge Thompson sentenced Warney to two years of supervised release and fined him $2,000.

U.S. Attorney Fishman credited special agents of the FBI’s Trenton Resident Agency, Newark Field Office, under the direction of Acting Special Agent in Charge David Velazquez, for the investigation leading to today’s sentence.

The government is represented by Harvey Bartle, Attorney in Charge of the U.S. Attorney’s Office’s Trenton Office.

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Defense counsel: William L. Hughes Esq., Atlantic City, N.J.

TRENTON, N.J. - Warren County, N.J., man was sentenced today to 48 months in prison for possessing images on his computer and an external hard drive of children being sexually abused, including violent video images, U.S. Attorney Paul J. Fishman announced.

Leonard Ramirez, 41, of Great Meadows, N.J., previously pleaded guilty before U.S. District Judge Freda L. Wolfson to one count of an Indictment charging him with possession of child pornography. Judge Wolfson imposed the sentence today in Trenton federal court.

According to documents filed in this case and statements made in court:

On April 21, 2009, law enforcement agents from the Phillipsburg, N.J., police department interviewed Ramirez at his former girlfriend’s residence in Phillipsburg. They obtained Ramirez’s consent to search his laptop computer and discovered the criminal images.

On May 13, 2009, law enforcement agents from the Warren County Prosecutor’s Office and the N.J. State Police executed a search warrant at Ramirez’s residence. Law enforcement seized an iMac computer and an external hard drive that contained numerous pictures and videos depicting child pornography. The external hard drive also contained videos of sadistic conduct and other violent images involving minors.

In addition to the prison term, Judge Wolfson sentenced Ramirez to five years of supervised release, with restricted contact with minors and computer-use monitoring. Ramirez also must register as a sex offender.

U.S. Attorney Fishman credited the FBI Cyber Crimes Task Force, under the direction of Acting Special Agent in Charge David Velazquez in Newark; the Warren County Prosecutor’s Office, under the direction of Prosecutor Richard T. Burke; the Warren County Chief of Detectives William R. Eppell; the Phillipsburg Police Department, under the direction of Chief James Faulborn; and the N.J. State Police, under the direction of Col. Rick Fuentes, Superintendent, with the investigation leading to today’s sentencing.

The government is represented by Assistant U.S. Attorneys John E. Clabby and R. Joseph Gribko of the U.S. Attorney's Office Criminal Division in Trenton.

13-136                           

Defense counsel: Brian Reilly, Assistant Federal Public Defender, Trenton

NEWARK, N.J. – A Linden, N.J., man was arrested yesterday and charged for allegedly distributing child pornography from his home computer, U.S. Attorney Paul J. Fishman announced.

John Ellenbacher, 47, of Linden, N.J., is charged by Complaint with one count of distributing images of child sex abuse over the Internet.  He is scheduled to appear this afternoon before U.S. Magistrate Judge Mark Falk in Newark federal court.

According to the criminal Complaint:

In August 2012, law enforcement officers engaged in a child exploitation investigation intercepted emails containing criminal images and videos.  Subsequent investigation into the origin of the emails led to a computer at Ellenbacher’s home.

Special agents of Immigration and Customs Enforcement, Homeland Security Investigations (ICE HSI) executed a search warrant yesterday at Ellenbacher’s residence in Linden, seizing digital evidence that contained multiple images depicting child sexual abuse, including material involving prepubescent minors.  Ellenbacher was taken into custody following the search.

The distribution count carries a mandatory minimum penalty of five years in prison, and a maximum potential penalty of 20 years in prison and a $250,000 fine.

U.S. Attorney Fishman credited special agents of ICE HSI, under the direction of Special Agent in Charge Andrew M. McLees in Newark, with the investigation leading to the charge.

The government is represented by Assistant U.S. Attorney Danielle Alfonzo Walsman of the U.S. Attorney’s Office General Crimes Unit in Newark.

The charge and allegations against Ellenbacher are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Anyone with information which may be relevant to this investigation is encouraged to contact ICE HSI through its toll-free hotline at 1-866-DHS-2ICE or by completing its online tip form at http://www.ice.gov/exec/forms/hsi-tips/tips.asp.

13-135                                          

Ellenbacher, John Complaint

$2.6 Million Will Go To Projects to Aid Coastal Environment Hit by Hurricane Sandy

WASHINGTON – Two shipping firms based in Germany and Cyprus today pleaded guilty to felony obstruction of justice charges and violating the Act to Prevent Pollution from Ships related to the deliberate concealment of vessel pollution from four ships that visited ports in New Jersey, Delaware and Northern California, the U.S. Attorney’s Offices in New Jersey and Delaware, the Department of Justice Environment and Natural Resources Division and the U.S. Coast Guard announced.

U.S. Attorney for the District of New Jersey Paul J. Fishman and U.S. Coast Guard Deputy Commander of the Delaware Bay Sector Capt. Todd Wiemers announced the plea agreement – which includes a $10.4 million penalty, $2.6 million of which will be used to address environmental damage caused by Hurricane Sandy – at a press conference in Newark.

According to a multi-district plea agreement arising out of charges brought in the District of New Jersey and District of Delaware, Columbia Shipmanagement (Deutschland) GmbH (CSM-D), a German corporation, and Columbia Shipmanagement Ltd. (CSM-CY), a Cypriot company, have agreed to pay a $10.4 million penalty and be placed on probation for four years. During probation, the companies will be subject to the terms of an environmental compliance program that requires outside audits by an independent company and oversight by a court appointed monitor. The shipping firms admitted that four of their ships (three oil tankers and one container ship) had intentionally bypassed required pollution prevention equipment and falsified the oil record book, a required log regularly inspected by the U.S. Coast Guard. The case is the largest vessel pollution settlement in either New Jersey and Delaware. The guilty pleas were entered before U.S. District Judge Susan D. Wigenton in Newark federal court.

“We in New Jersey are as sensitive as anyone to the need to preserve the shoreline,” U.S. Attorney Fishman said. “Shipping companies who foul the water by deliberately discharging oil and lying about it to the Coast Guard can expect to be prosecuted.”

“Deliberate pollution and intentional falsification of ship records to hide environmental crimes are serious offenses. These reprehensible actions not only damage the marine environment, but also put law breakers at a competitive advantage over those who respect the law and play by the by rules,” said Ignacia S. Moreno, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “We intend to send a message with these prosecutions that those engaged in deliberate despoiling of our precious natural resources will be vigorously prosecuted.”

“This prosecution is a fine example of multi-district cooperation in enforcing federal environmental law and achieving a just sentence,” U.S. Attorney for the District of Delaware Charles M. Oberly III said.

“This was a case of wilful pollution and deliberate falsification of records designed to deceive the Coast Guard,” said Captain David Fish, Chief of Investigations for the Coast Guard. “It takes both resources and a culture of compliance to abide by the law. We are hopeful that the remedial measures required as part of this criminal conviction will have a positive impact on these companies and serve as a message to other maritime companies as to what is expected.”

According to documents filed in this case and statements made in court: The $10.4 million penalty includes $2.6 million in organizational community service payments to assist the coastal maritime environment in New Jersey and Delaware damaged by Hurricane Sandy. The plea agreement directs the funds to environmental projects that will be selected by the National Fish & Wildlife Foundation to help conserve, preserve and restore the coastal environment of New Jersey and Delaware hit by Hurricane Sandy.

The investigation into the M/T King Emerald was launched on May 7, 2012, after several crew members provided cell phone photos and other evidence to Coast Guard officers conducting a routine inspection. The King Emerald was engaged in various types of illegal discharges of bilge waste dating back to at least 2010. The defendants admitted that illegal discharges of both sludge and oily bilge waste were discharged at night off the coast of Central America, including a discharge within the Exclusive Economic Zone of Costa Rica where a national park is located. The ship’s second engineer pleaded guilty previously and will be sentenced in Newark on April 3, 2013.

The Delaware investigation began in October 2012, after several crew members of the M/T Nordic Passat provided the Coast Guard with a thumb drive containing photographs and video showing how illegal discharges had been sent overboard through the ship’s sewage system. They also alleged that sludge had been put into the ship’s cargo tanks and that logs showing sludge had been incinerated onboard had been falsified. The charges involving the M/V Cape Maas stem from a whistleblower report to the Coast Guard when the ship visited the port in San Francisco. He provided a video showing the operation of the oily water separator pumping overboard without the use of the oil content monitor to detect and prevent oil from being illegally discharged.

Just two weeks prior to today’s plea, the defendants and their attorneys disclosed violations on a fourth ship, the M/T Cape Taft that was then anchored in New York waters and destined for New Jersey. After the ship disclosed problems to the company, an internal investigation revealed that the ship’s oily water separator had been used improperly for some time. Instead of sensing a sample of overboard discharges, it was instead flushed with fresh water by the crew. The ship’s oil record book was revised by CSM-D to reveal 16 instances where it was false. The defendants cooperated with the investigation and provided the government with video replays of the oil content monitor showing when the crew had “tricked” the sensor with fresh water.

In pleading guilty, the defendants have admitted the following in a detailed joint factual statement filed in Court: • The King Emerald oil tanker used three different methods to illegally dispose of oily bilge waste. In April 2012, approximately five tons of oily waste was discharged in the exclusive economic zone of Costa Rica approximately 45 miles from a national park.

• At least three chief engineers and the second engineer were involved in illegal discharges and intentional falsification of the oil record book for the King Emerald. In one instance, the oily water separator was operated solely for the purpose of generating data on the ship’s electronic recording device to account for an illegal discharge that had already taken place.

• During the Coast Guard boarding in Carteret, N.J., the second engineer lied to inspectors and then hid a valve used to make illegal discharges in an overhead space on the ship.

• Oil contaminated bilge waste was illegally pumped overboard from the M/T Nordic Passat on the orders of the chief engineer and second engineer with a portable pump and “magic hose” that was draped down three levels of the engine room to dump overboard through the sewage system.

• Illegal discharges have been made from the M/T Nordic Passat since 2006 by “tricking” the sensor designed to detect oil with fresh water during overboard discharges on a regular and routine practice by or at the direction of the chief engineer and second engineer. As a result, virtually every discharge totaling approximately 2,000 tons of unmonitored and oil contaminated bilge waste were discharged into ocean waters illegally and in violation of MARPOL over at least a six-year period, and all of the corresponding entries in the oil record book were false.

• During the Coast Guard boarding of the Nordic Passat, senior ship engineers lied to the Coast Guard and told lower level crew members to lie.

• On the M/V Cape Maas, a container ship, the manufacturer’s seal on the oil content monitor had been broken and fresh water had been used to trick the sensor.

The plea agreement sets forth the counts charged as to each defendant in each district including six counts involving three vessels in New Jersey and four counts involving one ship in Delaware. The guilty pleas include violations of the Act to Prevent Pollution from Ships for failing to maintain an accurate oil record book, obstruction of justice and making false statements. The maximum penalty for each of these felony offenses is $500,000 or up to twice the gross gain or loss from the offense for a corporation.

This prosecution was made possible through the combined efforts of the U.S. Coast Guard Districts 1, 5 and 11; Coast Guard Sectors New York, Delaware Bay, and San Francisco; Coast Guard Investigative Service, Coast Guard Office of Maritime and International Law; and Coast Guard Office of Investigations and Analysis.

The government is represented by Kathleen P. O’Leary, Assistant U.S. Attorney in the Criminal Division in New Jersey; Richard A. Udell, Senior Trial Attorney, and Stephen Da Ponte, Trial Attorney, of the Environmental Crimes Section of the U.S. Department of Justice Environment and Natural Resources Division; and Edmond Falgowski, Assistant U.S. Attorney in Delaware. Assistance was also provided by the U.S. Attorney’s Office for the Northern District of California.

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Defense counsel: Thomas L. Mills Esq., Washington, D.C.

New Jersey Information
Delaware Information
Columbia Joint Factual Statement
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TRENTON, N.J. - A Monmouth County, N.J., man today admitted filing false personal federal income tax returns, U.S. Attorney Paul J. Fishman announced.

Rakesh Chitkara, 60, of Marlboro, N.J., pleaded guilty today before U.S. District Judge Mary L. Cooper to Count Four of a five-count Information, charging him with making and subscribing to a 2007 federal income tax return to the IRS that he did not believe to be true.

According to documents filed in this case and statements made in court:

Chitkara admitted that he had a financial interest in at least two financial accounts at UBS AG in Zurich, Switzerland, and that he knowingly failed to disclose these accounts, and income from these accounts, on his personal tax returns for five years.

Citizens and residents of the United States who have an interest in, or signature or other authority over, a financial account in a foreign country at any time during the relevant tax year are required to so indicate on a U.S. Individual Income Tax Return, Form 1040, by checking “Yes” or “No” in the appropriate box on Schedule B, Part III - Foreign Accounts and Trusts.  Citizens and residents of the United States are also required to report any interest and dividend income, as well as capital gain income, earned from such accounts.

On April 20, 1989, Chitkara caused to be opened an account in his own name at UBS AG in Zurich, Switzerland. On Jan. 13, 2000, Chitkara opened an account at UBS (Bahamas) Ltd. in the name of GMX. GMX Industries Inc. was a corporation formed under the laws of the Commonwealth of the Bahamas that was utilized to conceal Chitkara’s beneficial ownership in one of his two UBS accounts. On Oct. 10, 2002, Chitkara caused to be opened an account at UBS AG in Zurich, Switzerland, in the name of GMX, which was intended to be the successor account of the GMX account opened at UBS (Bahamas) Ltd. Chitkara was the sole beneficial owner of the GMX accounts at UBS (Bahamas) Ltd. and at UBS AG in Zurich.

Chitkara admitted that for tax years 2004 through 2008, he failed to report income received by him in one or more accounts at UBS and failed to report that he had an interest in, or a signature or other authority over, the financial accounts in Switzerland when he knew he had received income in one or more of the Swiss bank accounts.

As part of his plea agreement, Chitkara must repay back taxes – which the government contends total approximately $27,000, in addition to a civil penalty of $839,885, for willfully failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) to the IRS.

The charge to which Chitkara pleaded guilty carries a maximum potential penalty of three years in prison and a $250,000 fine. Sentencing is currently scheduled for June 26, 2013.

U.S. Attorney Fishman credited special agents of the IRS – Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen, with the investigation that resulted in today’s sentencing.

The government is represented by Assistant U.S. Attorney John E. Clabby of the U.S. Attorney’s Office Criminal Division in Trenton and Trial Attorney Tino Lisella of the Justice Department’s Tax Division.

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Defense counsel: Ian M. Comisky and Matthew D. Lee Esqs., Philadelphia

Chitkara, Rakesh Information

TRENTON, N.J. – A Mercer County, N.J., woman today admitted her role in conspiring with Joseph “JoJo” Giorgianni, Charles Hall III and others to illegally distribute oxycodone pain pills, U.S. Attorney Paul J. Fishman announced.

Carol M. Kounitz, 57, of Hamilton, N.J., pleaded guilty before U.S. District Judge Michael A. Shipp in Trenton federal court to an Information charging her with one count of conspiracy to distribute and possess with intent to distribute oxycodone.

According to documents filed in this case and statements made in court: Between August 2011 and September 2011, Carol M. Kounitz agreed with Charles Hall III, Stephanie Lima and Joseph A. Giorgianni to obtain oxycodone from a doctor in exchange for payment. In coordination with Hall, on Aug. 17, 2011, Kounitz went to a Nutley, N.J., doctor and obtained a prescription for 120 15-milligram oxycodone pills for resale. Kounitz and Lima later filled that prescription and gave the pills to Hall in exchange for payment. Kounitz, Hall and Lima made a second trip to the doctor on Sept. 14, 2011, during which she obtained a prescription for 120 30-milligram oxycodone pills, and Lima obtained a prescription for 120 15-milligram oxycodone pills. Kounitz and Lima later filled those prescriptions and provided the pills to Hall in exchange for payment. Kounitz understood Giorgianni to be overseeing the sale of the oxycodone that she and Lima provided to Hall.

The drug conspiracy count to which Kounitz pleaded guilty is punishable by a maximum potential penalty of 20 years in prison and a $1 million fine. Sentencing is scheduled for June 26, 2013.

U.S. Attorney Fishman credited special agents of the FBI’s Newark Field Office, under the direction of Acting Special Agent in Charge David Velazquez, for the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorneys Eric W. Moran and Matthew J. Skahill of the U.S. Attorney’s Office Special Prosecutions Division in Trenton and Camden, respectively.

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Defense counsel: Paul W. Norris Esq., Lawrenceville, N.J.

Kounitz Information

Evasion Resulted in Tax Loss of More Than $1 Million

CAMDEN, N.J. – A tax preparer and disbarred New Jersey lawyer was sentenced today to 36 months in prison for submitting false tax returns or failing to file returns for five years, resulting in a tax loss to the government of more than $1.1 million, U.S. Attorney Paul J. Fishman announced.

Joseph Gallagher, 69, of Rutherford, N.J., previously pleaded guilty before U.S. District Judge Noel L. Hillman to an Information charging him with one count of tax evasion. Judge Hillman imposed the sentence today in Camden federal court.

According to documents filed in this case and statements made in court: For at least five years, Gallagher used a consulting company – established at Gallagher’s direction and purportedly operated by another person – to evade income taxes by having his income from working as a tax preparer deposited into the company’s bank account. Gallagher filed income tax returns with the IRS, failing to report $590,513, $600,157 and $682,373 for the calendar years 2004, 2005 and 2006, respectively. Gallagher failed to file any income tax return at all for calendar years 2007 and 2008, failing to report $715,694 and $770,445 for those years. In total, Gallagher admitted failing to report $3,359,182 in taxable income to the IRS, resulting in a tax loss to the government of $1,198,196.

In addition to the prison term, Judge Hillman sentenced Gallagher to two years of supervised release and ordered him to pay a $60,000 fine. He is also required to pay his more than $1 million in outstanding taxes to the IRS, plus interest and penalties.

U.S. Attorney Fishman credited special agents of IRS – Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen, with the investigation that resulted in today’s sentence.

The government is represented by Jacob T. Elberg, Deputy Chief of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark.

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Defense counsel: Brian Neary Esq., Hackensack, N.J.

NEWARK, N.J. – The former New Jersey-based operator of Suarez Investment and Development LLC was sentenced today to 54 months in prison for his role in a conspiracy that bilked victims out of $1 million through fraudulent investment schemes, U.S. Attorney Paul J. Fishman announced.

Joseph Suarez, 48, of Woodcliff Lake, N.J., previously pleaded guilty before U.S. District Judge William J. Martini to an Information charging him with one count of conspiracy to commit wire fraud. Judge Martini imposed the sentence today in Newark federal court.

According to documents filed in this case and statements made in court:

Suarez conspired with others, including Katherine Ferro, 38, of Port St. Lucie, Fla., a disbarred attorney, to commit wire fraud by inducing their victims to invest a total of $1 million dollars into various fraudulent schemes. Suarez admitted he convinced an individual to invest more than $300,000 in connection with certain business ventures, including a credit card factoring scheme. Credit card factoring is a form of accounts receivable where businesses can receive cash in advance of future credit card receipts.

Suarez also admitted that he and Ferro convinced an individual to invest approximately $222,000 in a plan to purchase D2 diesel fuel from foreign sources and resell the fuel at a profit. Suarez admitted that, contrary to the representations he and Ferro made regarding how the funds would be used, nearly all of the $222,000 wired into Ferro’s attorney trust account was depleted by transferring large amounts into other accounts for their personal use.

Suarez and Ferro also used false representations to convince additional victims to invest approximately $500,000 in the D2 diesel fuel purchase and sale plan. Ferro executed a written escrow agreement with several of these additional victims, which stated, among other things, that the investment would remain in Ferro’s attorney trust account for the duration of the investment period. Days after the victims wired the $500,000 investment into accounts controlled by Suarez and Ferro, Ferro transferred substantially all of the funds into other accounts.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez; and IRS – Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen, for the investigation leading to today’s sentence. He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office, under the leadership of Director Andrew Calamari; and the Bergen County Prosecutor’s Office, under the direction of John L. Molinelli, for their assistance.

In addition to the prison term, Judge Martini sentenced Suarez to serve two years of supervised release. Suarez will also be required to pay restitution in an amount to be determined.

Ferro pleaded guilty in March 2012 to wire fraud and awaits sentencing.

The government is represented by Assistant U.S. Attorney Mala Ahuja Harker of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

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Defense counsel: Curtis LaForge Esq., Saddle Brook, N.J.

NEWARK, N.J. – A Bergen County, N.J., man today admitted knowingly receiving over the Internet images and videos of child sexual abuse, U.S. Attorney Paul J. Fishman announced.

Joseph Anthony Amari, 81, of Fair Lawn, N.J., pleaded guilty before U.S. District Judge Katharine S. Hayden in Newark federal court to Count One of an Indictment charging him with receipt of child pornography.

Amari, who was initially federally charged by complaint in 2009, is currently serving a sentence in state prison following a separate state conviction for endangering the welfare of two minors. The court stayed the federal prosecution pending the resolution of the state charges.

Amari admitted during his guilty plea that he used peer-to-peer file-sharing software to download images and videos in February 2007 of children being sexually abused.

Amari faces a mandatory minimum penalty of five years in prison and a maximum potential penalty of 20 years, as well as a $250,000 fine. Sentencing is currently scheduled for May 13, 2013.

U.S. Attorney Fishman credited the FBI Cyber Crimes Task Force in New Jersey, under the direction of Acting Special Agent in Charge David Velazquez in Newark, with the investigation leading to today’s plea. He also thanked the Bergen County Prosecutor’s Office, under the direction of Prosecutor John L. Molinelli, and the Fair Lawn Police Department, under the direction of Chief of Police Erik Rose.

The government is represented by Assistant U.S. Attorneys Jane H. Yoon and Shirley U. Emehelu of the U.S. Attorney’s Office Criminal Division in Newark.

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Defense counsel: Chester Keller, Esq., Newark, N.J.

Amari Indictment

TRENTON, N.J. – A Mercer County, N.J., man today admitted his role in a conspiracy to distribute oxycodone pain pills, U.S. Attorney Paul J. Fishman announced. An Atlantic City, N.J., man also admitted to engaging in related drug transactions by obtaining oxycodone pills and to being a felon in possession of a firearm.

Giuseppe A. Scordato, 47, of Hamilton, N.J, pleaded guilty to an Information charging him with one count of conspiracy to distribute and possess with intent to distribute oxycodone. Eugene Brown, 71, of Atlantic City, NJ, also pleaded guilty to an Information charging him with one count of distribution of oxycodone and one count of being a felon in possession of a firearm. Scordato and Brown entered their guilty pleas before U.S. District Judge Michael A. Shipp in Trenton federal court.

According to documents filed in this case and statements made in court: Between November 2011 and July 2012, Scordato obtained oxycodone-based prescription pain pills from Joseph A. “JoJo” Giorgianni, Mary Manfredo and Charles Hall III from a restaurant  on Martin Luther King Boulevard in Trenton (“JoJo’s Steakhouse”) and a clubhouse located next door to JoJo’s Steakhouse (“Giorgianni’s Clubhouse”). He would sell those pills and remit the proceeds to Giorgianni and Manfredo at JoJo’s Steakhouse in exchange for a portion of the proceeds from those sales.

Eugene Brown admitted to engaging in related drug transactions. On May 12, 2012, Brown traveled from Atlantic City to Trenton to provide Endocet® pills, an oxycodone-based pain pill, to Charles Hall III in exchange for payment. Brown also admitted to previously giving Endocet® pills to Hall in Atlantic City and Camden, N.J. Brown, who previously had been convicted of a felony, admitted to possessing a .22 caliber semi-automatic pistol on July 20, 2012.

The drug conspiracy and distribution charges are punishable by a maximum potential penalty of 20 years in prison and a $1 million fine. The offense of being a felon in possession of a firearm is punishable by 10 years in prison and a $250,000 fine. Sentencing for Scordato is scheduled for June 25, 2013, and for Brown, June 26, 2013.

U.S. Attorney Fishman credited special agents of the FBI’s Trenton Resident Agency, Newark Field Office, under the direction of Acting Special Agent in Charge David Velazquez, for the investigation leading to today’s guilty pleas.

The government is represented by Assistant U.S. Attorneys Eric W. Moran and Matthew J. Skahill of the U.S. Attorney’s Office Special Prosecutions Division in Trenton and Camden, respectively.

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Defense counsel: Scordato: Scott Krasny Esq., West Trenton, N.J.
Brown: Bruce Throckmorton Esq., Trenton

Scordato, Giuseppe Information
Brown, Eugene Information

NEWARK, N.J. – A Sussex County, N.J., man was sentenced today to 120 months in prison for luring a teenage boy to Pennsylvania for illegal sexual activity, as well as downloading and receiving images on his home computer of children being sexually abused, U.S. Attorney Paul J. Fishman announced.  
                  
Robert Mucha, 58, of Newton, N.J., previously pleaded guilty before U.S. District Judge William H. Walls in Newark federal court to one count of enticing a minor to engage in criminal sexual activity and one count of receiving child pornography. Judge Walls imposed the sentence today in Newark federal court.

According to documents filed and statements made in court:

In October 2010, Mucha convinced a teenage boy to travel from New Jersey to Pennsylvania to spend the day with him and then sleep over at Mucha’s apartment in Stroudsberg, Pa. After he was arrested in July 2012, Mucha admitted to sexual contact with the teenager.

Prior to his arrest, Mucha worked as a volunteer Emergency Medical Technician in Andover, N.J.  He also previously taught band and Bugle Corps to teenagers in Belleville, N.J., and Lakewood, N.J.

In addition to the prison term, Judge Walls sentenced Mucha to serve a lifetime of supervised release – during which his access to computers, the Internet and children will be restricted – and ordered him to pay $10,000 in restitution. Mucha is also required to register as a sex offender.

Today’s sentencing is part of Operation Holitna, an ongoing HSI-led investigation that originated in Boston. U.S. Attorney Fishman credited special agents of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), under the direction of Special Agent in Charge Andrew M. McLees in Newark, with the investigation leading to sentencing. He also thanked the U.S. Attorney’s Office for the District of Massachusetts and the HSI Boston office.

HSI encourages the public to report suspected child predators and any suspicious activity through its toll-free hotline at 1-866-347-2423 or its online tip form at http://www.ice.gov/tips Both are staffed around the clock by investigators. Suspected child sexual exploitation or missing children may be reported to the National Center for Missing & Exploited Children at 1-800-843-5678 or http://www.cybertipline.com.

CAMDEN, N.J. – Two principals of a Pennsylvania construction company were arrested today in connection with an employee kickback scheme that occurred during a reconstruction project at the Ft. Dix military base in Burlington County, U.S. Attorney Paul J. Fishman announced today.

A federal grand jury returned a five-count Indictment on March 4, 2013, charging Leonard Santos, 66, of Yardley, Pa., and Alex Rabinovich, 57, of Richboro, Pa., with one count each of conspiracy to obtain kickbacks from public works employees; malicious destruction of a vehicle by fire; travel in interstate commerce to commit a crime of violence; conspiracy to accept kickbacks on federal projects; and conspiracy to commit false payroll records. Both men are expected to make their initial court appearances today before U.S. Magistrate Judge Anne Marie Donio in Camden federal court.

According documents filed in this case and statements made in court:

Between November 2009 and September 2010, Santos and Rabinovich operated Sands Mechanical Inc. as a subcontractor on the restoration and rehabilitation of the Marine Corps Reserve Training Center at Joint Base-McGuire-Dix-Lakehurst in Burlington County, N.J. Sands provided sheet metal, electrical and plumbing work. The general contractor was a company headquartered in Marriotsville, Md. Santos and Rabinovich demanded that select employees kickback a percentage of their weekly paychecks or face termination. Two Sands’ supervisors have already pleaded guilty to these charges: Richard Cottone (Santos’ son-in-law) pleaded guilty Dec. 11, 2012, and will be sentenced Oct. 10, 2013; Michael Featherston pleaded guilty Jan. 10, 2012 and will be sentenced Oct. 9, 2013.

In February 2010, the U.S. Department of Labor’s Wage and Hour Division (WHD) was tipped off that the Sands employees were not being paid the prevailing wage for Burlington County. Santos conceded that Sands failed to pay the proper prevailing wage to its employees and agreed to repay $80,000 to those deprived employees. Santos cut settlement checks to those employees who were owed back wages. However, Cottone and Featherston warned those employees not to cash their settlement checks. Instead, Cottone and Featherston took the employees to a nearby check cashing business, where many of these checks were then endorsed over to Cottone, who cashed them and returned the funds to Santos. Since these kickbacks were removed from employees’ checks, Santos and Rabinovich routinely submitted inaccurate weekly payroll forms that are required whenever the federal government subsidizes a construction project.

The general contractor’s site manager was routinely critical of the work performance of Sands’ employees, which, at times, necessitated that work be done over. The site manager was targeted by Santos, Cottone and others by having his truck torched in front of his residence at 4 a.m. on May 17, 2010. This tactic failed to warn off the site manager. On June 10, 2010 at 5 AM, while riding his bike, the site manager was intentionally run down by a car driven by Cottone’s nephew and two friends. The victim sustained multiple serious injuries.

The defendants are charged with providing kickbacks to a prime contractor to improperly obtain subcontracts on federally funded construction projects. Between November 2009 and January 2013, Santos and Rabinovich paid off a Philadelphia contractor’s representative to get “last looks” at other competitors’ bids. Santos accumulated a total of $46,200 in kickbacks owed for the 10 subcontracts awarded to Sands Mechanical. By the summer of 2012 he still owed about $15,000 in kickbacks. On two occasions, in November and December 2012, at the behest of Santos, Alex Rabinovich was recorded giving a total of $4,156 in cash to the contractor’s representative in payment of the kickbacks still due and owing.

The counts of conspiracy to demand kickbacks from employees on a federally subsidized project, conspiracy to provide kickbacks to a prime contractor and conspiracy to submit false payroll records each carry a maximum potential penalty of five years in prison and a $250,000 fine. The count of traveling in interstate commerce to commit a crime of violence is punishable by a maximum potential penalty of 20 years in prison; and the arson count is punishable by up to 20 years in prison, with a mandatory minimum of five years in prison.

Seven defendants have previously pled guilty to various charges ranging from collecting kickbacks, arson and aggravated assault.

Fishman credited special agents of the Department of Labor, Office of Labor Racketeering and Fraud Investigations, under the direction of Special Agent-in-Charge Robert Panella; the Department of Labor-Wage and Hour Division, under the direction of George Ference, regional administrator; Naval Criminal Investigative Service, under the direction of Special Agent in Charge Cheryl DiPrizio, Northeast field office; and the Air Force Office of Special investigations, under the direction of Special Agent Seth Neville, detachment commander, Joint Base McGuire-Dix-Lakehurst.

The government is represented by Senior Litigation Counsel V. Grady O’Malley of the U.S. Attorney’s Office Organized Crime\Gangs Unit in Newark.

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Santos, Leonard and Rabinovich, Alex Indictment

Stole E-mail Addresses and Personal Information Belonging to 120,000 Apple iPad 3G Subscribers; Disclosed Information to Internet Magazine

NEWARK, N.J. – The head of a self-described “security research” hacking group was sentenced today to 41 months in prison for breaching AT&T’s servers, stealing e-mail addresses and other personal information belonging to approximately 120,000 Apple iPad users, and disclosing that information to an Internet magazine, U.S. Attorney Paul J. Fishman announced.    

Andrew Auernheimer, 27, of New York, was convicted Nov. 20, 2012, of both counts of a Superseding Indictment: Conspiracy to access AT&T’s servers without authorization and disclose that information to a reporter at Gawker magazine, and possession and transfer of means of identification for more than 120,000 iPad users. Auernheimer was tried before U.S. District Judge Susan D. Wigenton, who imposed the sentence today in Newark federal court. His co-conspirator, Daniel Spitler, 27, of San Francisco, Calif., previously pleaded guilty to the same charges and is awaiting sentencing. 

“Andrew Auernheimer knew he was breaking the law when he and his partner hacked into AT&T’s servers and stole personal information from unsuspecting iPad users,” U.S. Attorney Fishman said. “When it became clear that he was in trouble, he concocted the fiction that he was trying to make the Internet more secure, and that all he did was walk in through an unlocked door. The jury didn’t buy it, and neither did the Court in imposing sentence upon him today.”

“Auernheimer coordinated a self-serving cyber attack on a United States corporation and tens of thousands of innocent customers, in order to promote his business,” FBI Acting Special Agent in Charge David Velazquez said. “Immediately after the attack he attempted to hide all the evidence. Auernheimer's conviction and today's sentence signifies the continued and growing efforts of the U.S. Attorney's Office and the FBI in investigating and prosecuting computer hacking and intellectual property crimes.”

According to documents filed in this case and the evidence at trial:

The iPad is a touch-screen tablet computer, developed and marketed by Apple Computers Inc., which allows users to, among other things, access the Internet and send and receive electronic mail.  Since its introduction in January 2010, AT&T has provided iPad users with Internet connectivity via AT&T’s 3G wireless network.  During the registration process for subscribing to the network, a user is required to provide an e-mail address, billing address, and password. 

Prior to mid-June 2010, AT&T automatically linked an iPad 3G user’s e-mail address to the Integrated Circuit Card Identifier (“ICC-ID”), a number unique to the user’s iPad, when he or she registered. Every time a user accessed the AT&T website, the ICC-ID was recognized and the e-mail address was automatically populated for faster, user-friendly access to the site. AT&T kept the ICC-IDs and associated e-mail addresses confidential.

At that time, when an iPad 3G communicated with AT&T’s website, its ICC-ID was automatically displayed in the Universal Resource Locator, or “URL,” of the AT&T website in plain text. Seeing this, and discovering that each ICC-ID was connected to an iPad 3G user e-mail address, hackers wrote a script termed the “iPad 3G Account Slurper” and deployed it against AT&T’s servers.

The Account Slurper attacked AT&T’s servers for several days in early June 2010 and was designed to harvest as many ICC-ID/e-mail address pairings as possible. It worked by mimicking the behavior of an iPad 3G so that AT&T’s servers would be deceived into granting the Account Slurper access. Once deployed, the Account Slurper used a process known as a “brute force” against the servers, randomly guessing at ranges of ICC-IDs. An incorrect guess was met with no additional information, while a correct guess was rewarded with an ICC-ID/e-mail pairing for a specific, identifiable iPad 3G user.

From June 5, 2010, through June 9, 2010, the Account Slurper stole for its hacker-authors approximately 120,000 ICC-ID/e-mail address pairings for iPad 3G customers.

Immediately following the theft, the hacker-authors of the Account Slurper provided the stolen e-mail addresses and ICC-IDs to the website Gawker, which published the stolen information in redacted form, along with an article concerning the breach. The article indicated that the breach “exposed the most exclusive email list on the planet,” and named a number of famous individuals whose emails had been compromised, including Diane Sawyer, Harvey Weinstein, New York Mayor Michael Bloomberg, and then-White House Chief of Staff Rahm Emanuel. The article also stated that iPad users could be vulnerable to spam marketing and malicious hacking. A group calling itself “Goatse Security” was identified as obtaining the subscriber data.

Goatse Security is a so-called “security research” group, comprised of Internet hackers, to which both Spitler and Auernheimer belonged.  

During the data breach, co-defendant Daniel Spitler and Auernheimer communicated with one another using Internet Relay Chat, an Internet instant messaging program. Those chats not only demonstrated that Spitler and Auernheimer were responsible for the data breach, but also that they conducted the breach to simultaneously damage AT&T and promote themselves and Goatse Security. As the data breach continued, so, too, did the discussions between Spitler, Auernheimer, and other Goatse Security members about the best way to take advantage of the breach and associated theft. On June 10, 2010, immediately after going public with the breach, Spitler and Auernheimer discussed destroying evidence of their crime.

In addition to the prison term, Judge Wigenton sentenced Auernheimer to three years of supervised release and ordered him to pay restitution of $73,162.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez in Newark, with the investigation leading to the charges. He also thanked special agents of the FBI, under the direction of Special Agent in Charge Valerie Parlave in Little Rock, Ark., and the U.S. Attorney’s Office for the Western District of Arkansas, under the direction of U.S. Attorney William Conner Eldridge.

The government is represented by Executive Assistant U.S. Attorney Michael Martinez and Assistant U.S. Attorney Zach Intrater of the Computer Hacking and Intellectual Property Section of the U.S. Attorney’s Office Economic Crimes Unit.

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Defense counsel: Tor Ekeland Esq., Brooklyn, N.Y.      

NEWARK, N.J. – A jury has convicted attorney Paul W. Bergrin, 57, of Nutley, N.J., of all 23 counts on which he was tried, including conspiracy to murder a witness and other racketeering, cocaine and prostitution offenses.  The verdict was announced today by New Jersey U.S. Attorney Paul J. Fishman.

The jury returned the verdict after two months of trial before U.S. District Judge Dennis M. Cavanaugh in Newark federal court.

“Bergrin’s conduct was a stunning violation of his role as an officer of the court and a betrayal of his roots as a member of law enforcement,” said U.S. Attorney Fishman.  “Today, the jury returned the verdict compelled by the evidence and imposed the justice he deserved.  We take no joy from his tragic fall, but I am extremely proud of the work done by those in my office and agents from the FBI, IRS and DEA that led to this just result.”

According to documents filed in this case and the evidence at trial:

Bergrin turned his law firm and related corporations into a racketeering enterprise, through which he conspired to tamper with witnesses, distribute cocaine and facilitate drug trafficking, prostitution and bribery, among other things.  The government also proved Bergrin conspired to murder witnesses to protect the drug trafficking enterprise, one of whom was shot to death to prevent him from testifying in court.

At sentencing, currently scheduled for July 18, 2013, Bergrin faces a mandatory sentence of life in prison on each of the following counts: count three, violent crimes in aid of racketeering; count 12, conspiring to murder a federal witness to prevent his testimony at an official proceeding; and count 13, aiding and abetting the murder of a federal witness to prevent testimony at an official proceeding.  He also faces a maximum term of life in prison on four other counts.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge David Velazquez; Internal Revenue Service – Criminal Investigation, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen; and the Drug Enforcement Administration’s New Jersey Division – under the direction of Acting Special Agent in Charge Robert G. Koval, with the investigation leading to the conviction.

The government is represented by John Gay, Deputy Chief of the U.S. Attorney’s Office Criminal Division; Assistant U.S. Attorney Joseph N. Minish of the office’s Organized Crime/Gangs Unit; and Steven Sanders of the office’s Appeals Division in Newark.

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Defense counsel: Pro se; Lawrence Lustberg Esq., Newark; Bruce Levy; Amanda Protess (standby)

NEWARK, N.J. – Three New Jersey men and one New York man have been arrested in connection with a scheme to allegedly distribute kilogram amounts a controlled substance commonly known as “bath salts,” U.S. Attorney Paul J. Fishman said today.

Kyle Jobes, 23, of East Brunswick, N.J., and Charles Knierim, 24, of Old Bridge, N.J., were arrested on March 14, 2013; Benjamin Caturano, 22, of New Brunswick, N.J., and Conor Healion, 22, of West Hempstead, N.Y. were arrested on March 15, 2013. All are charged in connection with their respective roles in a conspiracy to distribute Methylenedioxypryovalerone (“MDPV”) in New Jersey and New York. “Bath salts” is the street name for a family of designer drugs that have effects similar to amphetamine and cocaine. Their white and yellow crystals often resemble legal bath salts, like Epsom salts, but are chemically different.

The current investigation involved a package containing approximately two kilograms of MDPV that was intercepted by law enforcement. The package originated in the People’s Republic of China and was supposed to be shipped to an address in Old Bridge. Law enforcement removed the MDPV and replaced it was sham drugs that resembled bath salts.  On March 14, 2013, law enforcement delivered the package to where it was addressed and watched over the next two days as Knierim, Jobes, Caturano, and Healion transferred the package amongst themselves. After their arrests, a number of the defendants admitted that they had distributed multiple kilograms of bath salts over the past year and that some of the drugs were sold at local college campuses, including Rutgers University and Monmouth University. As part of the investigation, agents of Immigration and Customs Enforcement-Homeland Security Investigations seized more than $90,000 in cash and two luxury automobiles obtained with proceeds from the drug conspiracy.

Knierim made his initial appearance before U.S. Magistrate Judge Michael A. Hammer in Newark federal court on March 15, 2013. Jobes, Caturano and Healion made their initial appearance before U.S. Magistrate Judge Falk in Newark federal court today.

U.S. Attorney Fishman credited special agents of the ICE-HSI, under the direction of Special Agent in Charge Andrew McLees, with the investigation leading to the arrests, assisted by inspectors of the U.S. Postal Inspection Service, under the direction of Acting Inspector in Charge Maria Kelokates, and U.S. Customs and Border Protection, under the direction of Robert E. Perez, Director of CBP's New York Field Operations.

The Government is represented by Assistant U.S. Attorney Danielle M. Corcione of the U.S. Attorney’s General Crimes Unit in Newark, N.J.

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Defense counsel: Jobes: Wanda Akin Esq., Newark
Caturano: Frank Arleo Esq., West Orange, N.J.
Healion: Ronald Kliegerman Esq., New York

Jobes, Kyle Complaint

CAMDEN, N.J. – A former vice president of operations at Prism Career Institute, a private, post-secondary educational institution with campuses in Cherry Hill, N.J., Egg Harbor Township, N.J., and Pennsylvania, was sentenced today to 24 months in prison for stealing more than $400,000 from her employer between 2008 and 2011, U.S. Attorney Paul J. Fishman announced.

Diane Bowler, 53, of Sewell, N.J., previously pleaded guilty before U.S. District Judge Renée Marie Bumb to embezzling, stealing and obtaining by fraud money belonging to Prism Career Institute, which receives federal funds from the U.S. Department of Education. Judge Bumb imposed the sentence today in Camden federal court.

According to documents filed in this case and statements made in court:

Diane Bowler was a regional vice president of operations at Prism, authorized to make purchases on behalf of Prism with her personal credit cards and then submit the receipts of these purchases to Prism for reimbursement. Bowler admitted that she stole more than $400,000 from Prism by submitting fraudulent reimbursement requests for purchases of supplies, furniture, equipment, and other items that were never received by Prism. She falsified invoices by cutting and pasting new dates and invoice numbers onto prior receipts for purchases and by fraudulently creating invoices for certain vendors with which Prism no longer did business. Bowler would forge the signature of the CEO of Prism on reimbursement checks and in some instances signed the checks herself before depositing the money into her personal bank account.

In addition to the prison term, Judge Bumb sentenced Bowler to three years of supervised release and ordered her to pay $551,596 in restitution.

U.S. Attorney Fishman credited special agents of the FBI’s Resident Agency in Cherry
Hill, N.J., under the direction of Acting Special Agent in Charge John Brosnan; and special agents of the Department of Education - Office of the Inspector General, under the direction of Special Agent in Charge Brian Hickey, with the investigation leading to today’s sentence.

The government is represented by Assistant U.S. Attorney Matthew J. Skahill of the Special Prosecutions Division in Camden.

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Defense counsel: Richard Sparaco Esq., Cherry Hill, N.J.

NEWARK, N.J. – A Texas woman working as a contractor for the Federal Emergency Management Agency (“FEMA”) admitted today that she demanded and received an illegal gratuity from a New Jersey resident who had applied for FEMA assistance for property damaged by Hurricane Irene, U.S. Attorney Paul J. Fishman announced.

Tara Fannin-Mark, a/k/a Tara Mark, 44, of Houston, Texas, pleaded guilty before U.S. District Judge Jose L. Linares in Newark federal court to an Information charging her with one count of receipt of an illegal gratuity by a public official.

According to documents filed in this case and statements made in court:

Fannin-Mark was employed as an inspector by a company that had entered into a contract with FEMA to inspect property belonging to individuals who sought FEMA assistance for damage caused by natural disasters. Fannin-Mark was assigned to conduct inspections of houses and other property of New Jersey residents who had applied for FEMA disaster assistance for damage caused by Hurricane Irene, which struck New Jersey in August 2011.    

On Oct. 26, 2011, after a person listed in the information as a “Cooperating Witness” had initiated a request for FEMA disaster assistance, Fannin-Mark conducted an inspection at the Cooperating Witness’s residence in Essex County, N.J. On Oct. 31, 2011, having been informed that the Cooperating Witness had received a $2,313 disaster assistance check from FEMA, Fannin-Mark told the Cooperating Witness that Fannin-Mark needed $230 of the FEMA payment. Fannin-Mark received the $230 illegal gratuity from the Cooperating Witness in early November 2011.

The count to which Fannin-Mark pleaded guilty is punishable by a maximum potential penalty of two years in prison. Sentencing is scheduled for July 9, 2013.

U.S. Attorney Fishman credited the Department of Homeland Security, Office of Inspector General, under the direction of Special Agent in Charge Gregory Null, with the investigation leading to today’s guilty plea.

The government is represented by Senior Litigation Counsel J Fortier Imbert of the U.S. Attorney’s Office Special Prosecutions Division Newark.

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Defense counsel: André Ligon Esq., Houston, Texas

Fannin-Mark, Tara Information