Eastern District of New York
Press releases recorded for this federal judicial district.
Long Island Investment Advisor Pleads Guilty in Multi-Million Dollar Securities Fraud and Ponzi SchemeRead the Press Release
Earlier today, in federal court in Central Islip, Steven Pagartanis pleaded guilty before United States District Judge Joseph F. Bianco to conspiracy to commit mail and wire fraud for orchestrating a Ponzi scheme over the course of 18 years.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and James Robnett, Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), announced the charges.
“Pagartanis perpetrated his fraud scheme against elderly investors who could least afford to lose their life savings,” stated United States Attorney Donoghue. “Protecting older Americans from financial predators like the defendant is a priority of the Department of Justice.”
As admitted at his guilty plea and as detailed in court documents, from January 2000 to March 2018, Pagartanis, a formerly licensed financial advisor and affiliate of a registered broker-dealer, solicited elderly victims to invest in real estate-related investments, including those affiliated with publicly traded entities, a Canadian company and an international hotel conglomerate. Pagartanis promised the victims that their principal would be secure and earn a fixed return, which he typically claimed to be between 4.5 to 8 percent annually. At Pagartanis’s direction, the victims wrote checks payable to an entity secretly controlled by Pagartanis. Pagartanis utilized a network of bank accounts to launder the stolen funds, which he used to pay personal expenses, buy luxury items and make the guaranteed “interest” or “dividend” payments to other victims. Pagartanis created fictitious account statements reflecting ownership interests in the purported investments to induce investment and conceal the scheme. In all, the victims invested over $13 million and sustained actual losses of over $9 million. Many lost substantial portions of their life savings as a result of the scheme.
When sentenced, Pagartanis faces up to 20 years’ imprisonment. The SEC has filed a civil case against Pagartanis, which was stayed pending resolution of the criminal case.
The government’s criminal case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorney Artie McConnell is in charge of the prosecution.
The Defendant:
STEVEN PAGARTANIS
Age: 58
East Setauket, New YorkE.D.N.Y. Docket No. 18-CR-374 (DRH)
Former CEO at Long Island Mortgage Lender Sentenced to 24 Months’ Imprisonment for $8.9 Million FraudRead the Press Release
Earlier today, at the federal courthouse in Central Islip, Matthew T. Voss, formerly the Chief Operating Officer of Long Island mortgage lender Vanguard Funding, LLC (Vanguard), was sentenced by United States District Judge Sandra J. Feuerstein to 24 months’ imprisonment to be followed by three years’ supervised release. The amount of restitution will be ordered by the Court at a later date. In February 2018, Voss pleaded guilty to conspiring to commit wire and bank fraud in connection with the diversion of more than $8.9 million of warehouse loans that Vanguard had fraudulently obtained purportedly to fund home mortgages and mortgage refinancing.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Maria T. Vullo, Superintendent, New York State Department of Financial Services (DFS), announced the sentence.
“With today’s sentence, Matthew Voss has been held accountable for using his extensive knowledge of the mortgage industry to deceive banks that trusted and relied upon him as a business partner and divert money for his personal use,” stated United States Attorney Donoghue. “This Office, together with our law enforcement partners, will vigorously investigate and prosecute those who commit fraud to advance their own financial interests at the expense of businesses and residents of our community.”
“A compromised banking system threatens economic stability and the safety of the mortgage industry, which puts communities and the American institution of homeownership at risk,” stated FBI Assistant-Director-in-Charge Sweeney. “Thanks to the dedicated work of our law enforcement partners, today’s sentence proves that those who use their expertise to deceive others for their own financial gain will be held accountable to the fullest extent of the law.”
“As New York’s financial services regulator, DFS is proud to have worked with the U.S. Attorney’s Office and other law enforcement partners to hold this defendant accountable for his actions,” stated DFS Superintendent Vullo. “DFS will continue to combat fraud and bring criminals to justice in order to safeguard the industry and protect consumers.”
Between August 2015 and March 2017, Voss and his co-conspirators at Vanguard engaged in a scheme whereby they obtained more than $8.9 million in short-term loans, referred to as warehouse loans, by falsely representing that the loan proceeds would fund specific mortgages, or refinance specific mortgages, for Vanguard clients. Instead, Voss and his co-conspirators diverted the funds to pay personal expenses and compensation, and to pay off loans they had previously obtained through false loan applications.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Whitman G.S. Knapp and Elizabeth Losey Macchiaverna are in charge of the prosecution.
The Defendant:
MATTHEW T. VOSS
Age: 43
Northport, New YorkE.D.N.Y. Docket No. 18-CR-027 (SJF)
Father and Son Members of Nineties Crew Gang in Brooklyn Convicted of Racketeering and Drug DistributionRead the Press Release
Following eight days of trial, a federal jury in Brooklyn today returned guilty verdicts against Tammeco Cargill and his father, Winston Cargill, convicting them of racketeering and racketeering conspiracy, including predicate acts of distribution and possession of marijuana and passport fraud. When sentenced by United States District Judge Raymond J. Dearie, Tammeco Cargill and Winston Cargill each face up to 20 years’ imprisonment.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Ray P. Donovan, Special Agent-in-Charge, Drug Enforcement Administration, New York Division (DEA), and James P. O’Neill, Commissioner, New York City Police Department (NYPD), announced the verdicts.
“Nineties Crew members Tammeco Cargill and his father Winston Cargill have been held to account for the drug crimes inflicted on their neighborhood,” stated United States Attorney Donoghue. “I commend our prosecutors, the DEA Special Agents and the NYPD detectives for their outstanding work in this case.”
“This trial demonstrated the scope of the Cargills’ drug operation and this conviction is a testament to the diligent work by U.S. Attorney’s Office EDNY and the DEA’s New York Division, Group D-22,” stated DEA Special Agent-in-Charge Donovan.
Winston Cargill and Tammeco Cargill were long-standing members of the Nineties Crew, a Brooklyn-based street gang that between January 2003 and December 2014 operated as a criminal enterprise in the Flatbush and Canarsie neighborhoods of Brooklyn. The gang engaged in marijuana trafficking, earning hundreds of thousands of dollars, operating numerous stash houses and using firearms. Winston Cargill and Tammeco Cargill also fraudulently procured United States passports in order to travel back and forth from Jamaica as part of their criminal scheme.
The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Hiral Mehta and Ryan Harris are in charge of the prosecution.
The Defendants:
TAMMECO CARGILL
Age: 36
Brooklyn, New YorkWINSTON CARGILL (also known as “Pops”)
Age: 56
Brooklyn, New YorkE.D.N.Y. Docket No. 17-CR-330 (RJD)
Crips Gang Member Charged with Attempted Murder of an On-Duty FBI AgentRead the Press Release
A criminal complaint was filed today in federal court in Brooklyn charging Ronell Watson with attempting to murder a Federal Bureau of Investigation (FBI) Special Agent and with using, carrying and discharging a firearm during and in relation to a crime of violence. A separate criminal complaint was also filed today charging Molissa Gangapersad with making false statements to the FBI. At their initial appearances this afternoon before United States Magistrate Judge Steven L. Tiscione, Watson was ordered detained and Gangapersad was released on a $500,000 bond.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, New York Field Office (FBI), announced the charges.
“Watson showed an utter disregard for human life when he fired multiple shots without provocation at an on-duty FBI Special Agent,” stated United States Attorney Donoghue. “Despite sustaining a serious gunshot wound, the agent courageously returned fire, hitting Watson, which ultimately led to the defendant’s capture when he sought medical treatment. Gangapersad will be prosecuted for lying to federal agents after she witnessed her boyfriend’s cold-blooded attack. The shooting on Saturday should serve as a reminder to all about the danger members of law enforcement face in the course of performing their duties and the debt of gratitude they are owed for putting their lives on the line to protect the community from violent criminals.” Mr. Donoghue expressed his grateful appreciation to the FBI and the New York City Police Department for its assistance during the investigation and thanked the skilled medical professionals who treated the agent.
“The unprovoked assault of a law enforcement officer is a grievous crime that threatens the safety and security of our communities. As alleged, Watson demonstrated callous disregard for life when he targeted and then deliberately opened fire on a fellow citizen. In this instance, that citizen was an FBI Special Agent who fought back. Today’s charges demonstrate that the FBI and our partners will identify and apprehend anyone and everyone who participated in this violent attack – whether you are the person who pulled the trigger or helped cover up after the fact. We will pursue every possible investigative lead and legal charge to ensure justice is served,” stated FBI Assistant Director-in-Charge Sweeney. “I also wanted to personally thank our fellow citizens who called 911 in order to get aid dispatched for our agent, and we are very appreciative of the talented medical team who worked on him. The FBI New York office is tremendously grateful for the superb NYPD response out in Brooklyn, where our agent was treated like one of their own, and for the swift and decisive action by EDNY to bring charges in this case. Thank you for your professionalism and partnership.”
As alleged in the complaints and other court documents, on December 8, 2018, an FBI Special Agent was on-duty and parked in an unmarked car on Canarsie Road, a one way street, in Brooklyn. Watson, a member of the Crips street gang, drove his vehicle the wrong way on Canarsie Road and partially blocked the agent’s car. Watson approached the driver side door of the agent’s car with one hand inside the front pocket of his hooded sweatshirt. As the agent maneuvered his car around Watson’s vehicle, Watson pulled out a gun and began firing at the agent as he drove away. The agent was hit in the torso by one bullet. The agent then exited his car, drew his firearm and fired at Watson striking him in the hand. Watson fled the scene in his car and drove to a nearby auto body shop where he left the vehicle. Watson then sought treatment for his wounds at Kingsbrook Jewish Medical Center where he falsely claimed that he had been a bystander victim of a gunfight between other individuals. Law enforcement officers at the hospital then overheard the defendant telephone a female, believed to be Gangapersad, and tell her to go to the house and “get the jewelry and get rid of it.”
Law enforcement officers responded to Watson’s and Gangapersad’s shared residence. Gangapersad agreed to a voluntary interview and falsely told FBI agents that she had not seen the shooting. After being confronted with surveillance video showing that she was on her front porch during the shooting and in a position to observe it, Gangapersad admitted that she had witnessed the incident. Members of law enforcement searched the residence and found approximately 1.5 pounds of marijuana, $15,000 in cash and a large amount of jewelry in the defendants’ bedroom. Both defendants were arrested that evening.
The charges in the complaints are allegations, and the defendants are presumed innocent unless and until proven guilty.
If convicted of using and carrying a firearm during and in relation to a crime of violence, Watson faces a mandatory minimum of 10 years’ imprisonment and a maximum of life imprisonment. If convicted of lying to the FBI, Gangapersad faces up to five years’ imprisonment.
Assistant United States Attorney Francisco J. Navarro is in charge of the prosecution.
The Defendants:
Ronell Watson
Age: 31
Brooklyn, New YorkE.D.N.Y. Docket No. 18-MJ-1191
Molissa Gangapersad
Age: 30
Brooklyn, New YorkE.D.N.Y. Docket No. 18-MJ-1192
Texas Man Charged with Enticing 15-Year-Old Girl to Travel Interstate to Engage in Sexual Activity and with Producing Child PornographyRead the Press Release
A complaint has been unsealed in federal court in Brooklyn against Billy Harmon Dunn, Jr., for transporting a 15-year-old girl from Brooklyn, New York to Kosse, Texas, for the purpose of engaging in illegal sexual activity with her. Dunn is also charged with producing child pornography. Dunn was arrested Tuesday in Texas and will make his initial appearance today at the federal courthouse in Waco. The government will seek Dunn’s removal to the Eastern District of New York for prosecution.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the charges.
As alleged in the complaint and other court filings, beginning in August 2018, Dunn began an online relationship with a 15-year-old girl (the “victim”) who lived in Brooklyn. Dunn and the victim communicated regularly, and much of the discussion concerned Dunn’s desire to engage in sex with her. Dunn also persuaded the victim to take sexually explicit photographs of herself and send them to him. Initially, Dunn discussed purchasing a bus ticket for the victim to travel to Texas, but abandoned that plan upon learning she was too young to travel unaccompanied without permission from her parents, according to bus company rules. Dunn then rented a car, drove to Brooklyn and transported the victim back to a trailer park in Kosse, Texas. The victim’s mother notified law enforcement that her daughter was missing, and officers located the victim at the trailer park.
“We stand firm in our commitment to stop online predators from exploiting children,” stated United States Attorney Donoghue. “I commend the dedicated members of law enforcement who quickly collaborated across the country to locate the victim and apprehend the defendant.” Mr. Donoghue expressed his appreciation to the Kings County District Attorney’s Office, the New York City Police Department, the Brooklyn Human Trafficking Task Force, the Limestone County (Texas) Sheriff’s Office, the Kosse (Texas) Police Department, the Limestone County District Attorney’s Office and the National Human Trafficking Resource Center for their assistance in the investigation of this case.
“Child predators take advantage of children’s youth and inexperience for their own gratification. As alleged, Dunn preyed on a young girl, enticing her into an online ‘relationship’ with him all the while knowing that she was underage. He then allegedly drove more than 1600 miles to pick up the victim here in New York and transport her to his home in Texas,” stated FBI Assistant Director-in-Charge Sweeney. “Thanks to the quick work of our law enforcement partners across the country, the victim was recovered and returned to her family. We take crimes like those alleged in this complaint very seriously, and we will work tirelessly to investigate and bring to justice those who would harm our children.”
The charges are allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted of transporting a minor interstate to engage in illegal sexual activity, the defendant faces a mandatory minimum of 10 years in prison and a maximum of life in prison. If convicted of producing child pornography, he faces a mandatory minimum of 15 years in prison and a maximum of 30 years in prison.
The government’s case is being handled by the Office’s Civil Rights Section, in collaboration with the Brooklyn Human Trafficking Task Force and Kings County District Attorney’s Office. Assistant United States Attorney Francisco J. Navarro and Assistant District Attorney Vanessa McEvoy from the Kings County District Attorney’s Office are in charge of the prosecution.
The Defendant:
BILLY HARMON DUNN, JR.
Age: 48
Kosse, TexasE.D.N.Y. Docket No. 18-MJ-1133
Queens Resident Sentenced to More than 18 Years’ Imprisonment for Hate Crimes Targeting Arabs, Muslims and HindusRead the Press Release
Earlier today, in federal court in Brooklyn, Ray Lazier Lengend was sentenced by United States District Judge LaShann DeArcy Hall to 18 years and 10 months in prison, to be followed by three years’ supervised release, for perpetrating hate crimes in Queens, New York. Lengend pleaded guilty in December 2017 to two counts of hate crimes through the use of fire and explosives.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the sentence.
“Lengend’s firebombing of houses of worship out of hatred of certain religions and races is the antithesis of what this country is all about,” stated United States Attorney Donoghue. “Such hate-filled crimes, through which he spread fear and endangered the lives of first responders and others, will never be tolerated by the Justice Department or the American people. I commend the law enforcement officers who quickly apprehended the defendant and restored a sense of security to our community.”
“In 2012, Lengend, motivated by hate, fire-bombed five buildings in Queens with the intent to kill or maim innocent people simply because of their religion or national origins,” stated FBI Assistant Director-in-Charge Sweeney. “Today, he learned the consequences of his despicable actions. His sentence should serve as a reminder the FBI will never waver in its commitment to protecting and preserving the rights of all Americans, including the free exercise of one’s chosen religion.”
On January 1, 2012, the defendant went on a firebombing spree, attacking five buildings in Queens with Molotov cocktails, including a Shiite mosque, the Imam Al-Khoei Foundation and a private residence that housed a Hindu temple. He was arrested the next day. Following the defendant’s arrest, he stated that he hated Arabs, Muslims and Middle Easterners. With respect to the mosque bombing, the defendant stated that he had intended to “take out as many Arabs as possible.” No one was injured by the defendant’s attacks.
Lengend was prosecuted in a parallel proceeding in State Supreme Court in Queens, and pleaded guilty to attempted arson as a hate crime and was sentenced to 20 years’ imprisonment in October 2017. Today’s sentence will run concurrent with the state sentence.
The government’s case is being handled by the Office’s Civil Rights Section. Assistant United States Attorneys Taryn A. Merkl and Nomi Berenson are in charge of the prosecution.
The Defendant:
RAY LAZIER LENGEND
Age: 46
Queens, New YorkE.D.N.Y. Docket No. 12-CR-188 (LDH)
Luchese Crime Family Soldier Sentenced to 12 Years and Colombo Crime Family Associate Sentenced to 40 Months’ Imprisonment for Conspiring to Distribute OxycodoneRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, Anthony Grado, a member of the Luchese organized crime family, and Lawrence Tranese, an associate of the Colombo organized crime family, were sentenced by United States District Judge Carol B. Amon to 12 years’ and 40 months’ imprisonment respectively for conspiring to distribute oxycodone that they obtained through fraudulent prescriptions. The Court also ordered Grado to pay $70,000 in forfeiture and Tranese $12,000 in forfeiture.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and James P. O’Neill, Commissioner, New York City Police Department (NYPD), announced the sentence.
“Today’s sentence punishes the defendants for ruthlessly endangering our community through their organized crime-backed distribution of highly-addictive opioid drugs,” stated United States Attorney Donoghue. “This Office, working together with our law enforcement partners, will continue our relentless efforts against those responsible for the opioid epidemic.” Mr. Donoghue thanked the Richmond County District Attorney’s Office for its assistance during this investigation.
“Opioid and prescription drug abuse affects communities and families in New York and across the country. Grado and Tranese’s conspiracy to distribute oxycodone contributed to this nationwide crisis, and even worse, they threatened a doctor with violence in order to coerce him into providing fraudulent prescriptions,” stated FBI Assistant Director-in-Charge Sweeney. “Today’s sentence should stand as a warning to organized crime families, their associates, and anyone else who would commit similar acts in order to further the scourge of opioid addiction for their own benefit: you will be found out and brought to justice.”
“Dismantling criminal enterprises, in all their forms, will always be a priority for the NYPD and our law-enforcement partners at the Eastern District and the FBI,” stated NYPD Commissioner O’Neill. “Collectively, we have a very long reach and we will not tire in our mission of fighting crime and keeping people safe – which includes removing from our streets anyone who adds to our nation’s opioid crisis by dealing illegal narcotics.”
Grado and Tranese, together with their coconspirators, gave a Brooklyn-based doctor the names of people for whom the doctor should write prescriptions, and the doctor complied, usually without conducting any physical examinations. The defendants then filled the prescriptions and sold the pills. Alternatively, the defendants and their coconspirators used violence and threats of violence to force the doctor to write the prescriptions, or seized the doctor’s prescription pad and Grado completed the prescription. In one recorded conversation, Grado told the doctor that he would make the doctor write “a thousand scripts a day and [expletive] feed you to the [expletive] lions” if the doctor wrote prescriptions without Grado’s approval. In the same conversation, Grado told the doctor that if newly ordered prescription pads “go in anybody’s hands” besides Grado’s, “I’ll put a bullet right in your head.” During the course of the conspiracy, one of Grado’s associates stabbed the doctor in a dispute over the doctor’s prescription pads.
The government’s case is being handled by the Office’s Organized Crime and Gangs Section. Assistant United States Attorneys Mathew S. Miller and Matthew J. Jacobs are in charge of the prosecution.
The Defendants:
ANTHONY GRADO
Age: 54
Monroe Township, New JerseyLAWRENCE TRANESE (also known as “Fat Larry”)
Age: 55
Brooklyn, New YorkE.D.N.Y. Docket No. 17-559 (CBA)
Six Defendants Arrested for Distributing Heroin in the Williamsburg Section of Brooklyn and ElsewhereRead the Press Release
Earlier today, a complaint was unsealed in federal court in Brooklyn charging seven defendants for their participation in an opioid distribution ring operating in the Williamsburg section of Brooklyn, the Bronx, and Hawaii. Five defendants were arrested in Brooklyn, the Bronx, Queens and Manhattan this morning, and will make their initial appearances this afternoon before United States Magistrate Judge Robert M. Levy. A sixth defendant was arrested in Hawaii and will appear later today at the federal courthouse in Honolulu.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and James P. O’Neill, Commissioner, New York City Police Department (NYPD), announced the charges.
“As alleged, the defendants distributed opioids day after day in our community, feeding addiction without regard for the potentially lethal consequences of their actions,” stated United States Attorney Donoghue. “With today’s arrests, the drug ring has been dismantled, and the defendants will now be held to account in a court of law.”
“The epidemic of opioid abuse is a public health crisis. Those who choose to profit from trafficking in these potent narcotics show a flagrant disregard not just for the law, but for the safety of their communities,” said FBI Assistant Director-in-Charge Sweeney. “As alleged, these defendants enabled the cycle of addiction with their narcotics distribution enterprise spanning the country. The FBI will continue to work with our federal, state and local partners to get drug traffickers and their dangerous products off the streets.”
As detailed in the complaint, since the autumn of 2017, FBI agents and NYPD detectives have been investigating the defendants’ drug trafficking ring. The investigation included physical surveillance, pen registers and communications intercepted pursuant to judicially authorized wiretaps. The pattern of the intercepted communications and the pen register data established that the defendants were in frequent contact nearly 2,000 times during one six-month period, and that the those contacts were primarily narcotics-related. During this time, the defendants regularly transported, repackaged and distributed heroin on the streets of New York City. The ring was also responsible for shipping at least $7,000 worth of heroin to be sold in Hawaii over the course of several months. In total, the defendants distributed well over a kilogram of heroin and bragged about its potency, referring to it as “fever” and “fire.”
Earlier this morning, law enforcement executed search warrants at five of the defendants’ residences and, in total, recovered approximately 150 grams of heroin including at least 350 glassines packaged for sale on the streets; more than five pounds of marijuana; more than $20,000 in U.S. currency, more than 150 pairs of luxury sneakers valued at tens of thousands of dollars; and drug paraphernalia including a kilogram press, multiple scales, hundreds of empty glassines and stamps used to mark the glassines for sale. Law enforcement also recovered a stolen loaded .40 caliber Glock firearm and more than 80 rounds of additional ammunition from defendant Robert Martinez.
The charge announced today is an allegation, and the defendants are presumed innocent unless and until proven guilty. If convicted, defendants Martinez, Victor Cruz, Jeffrey Caamano, Jason Reyes and Jason Garcia face mandatory minimum sentences of 10 years’ imprisonment and up to life imprisonment. Alanna Kelly faces a mandatory minimum of five years and up to 40 years’ imprisonment.
The government’s case is being handled by the Office’s Organized Crime and Gangs Section. Assistant United States Attorney Jennifer M. Sasso is in charge of the prosecution.
The Defendants:
VICTOR CRUZ (also known as “Vic” and “VI”)
Age: 29
Brooklyn, New YorkROBERT MARTINEZ (also known as “Rob”)
Age: 34
Maspeth, New YorkJEFFREY CAAMANO (also known as “Jefe”)
Age: 30
Bronx, New YorkJASON REYES
Age: 34
Brooklyn, New YorkJASON GARCIA (also known as “Jay”)
Age: 27
Brooklyn, New YorkALANNA KELLY
Age: 31
The Big Island, HawaiiE.D.N.Y. Docket No. 18-MJ-1157
Member of Mexican Sex Trafficking Ring Sentenced in Brooklyn Federal Court to Eight Years’ ImprisonmentRead the Press Release
Earlier today, in federal court in Brooklyn, Raul Granados-Rendon, a member of the Granados family sex trafficking ring based in Tenancingo, Tlaxcala, Mexico, was sentenced by United States District Judge Kiyo A. Matsumoto to eight years’ imprisonment following his guilty plea in December 2017 to trafficking young Mexican women into the United States and forcing them into prostitution. As part of his sentence, the defendant was ordered to pay $1,305,393.80 in restitution to Jane Doe.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York, announced the sentence.
“With today’s sentence, Raul Granados-Rendon is the latest member of his family’s Mexican sex trafficking operation to be held responsible for preying upon countless women, and profiting from their exploitation and dehumanization,” stated United States Attorney Donoghue. “This prosecution and sentence mark another important outcome in a nearly decade-long commitment by this Office and our law enforcement partners to obtain justice for the victims.”
“The victims of this man were forced into prostitution after being lured to the U.S. with false promises then threatened, beaten and sexually assaulted,” stated HSI Special Agent-in-Charge Melendez. “This man was on our agency’s top 10 fugitive list before being extradited and taken into custody early last year. It has been a long road, but now he will face the consequences of his reprehensible actions.”
From October 1998 to December 2011, Raul Granados-Rendon participated in a sex trafficking conspiracy with other members of the Granados family, to smuggle numerous young women from Mexico to New York and force them to work as prostitutes in New York City and elsewhere. The male members of the conspiracy used false promises of romance and marriage to lure the victims into relationships and convince them to travel to the United States to make money so that they could build homes for themselves in Mexico. Once in the United States, the victims were subjected to violence, threats and sexual assaults by the defendants. Raul Granados-Rendon directed one of his victims to teach another victim “Jane Doe” how to prostitute. When Jane Doe did not produce as much income as other Granados family victims, the defendant physically abused her, dragging her by her hair into a bathroom and forcing her head into a sink. The defendant also helped transport another victim back to Mexico after his brother impregnated her and failed at his efforts to induce an abortion.
The investigation, prosecution, bilateral enforcement action and extraditions of the defendants apprehended in Mexico were coordinated through the U.S.-Mexico Bilateral Human Trafficking Enforcement Initiative. Since 2009, the Departments of Justice and Homeland Security have collaborated with Mexican law enforcement counterparts in the Initiative to more effectively dismantle human trafficking networks operating across the U.S.-Mexico border, bring human traffickers to justice, restore the rights and dignity of human trafficking victims and reunite victims with their children. These efforts have resulted in successful prosecutions in both Mexico and the United States, including U.S. federal prosecutions of over 175 defendants in cases in Georgia, New York, Florida and Texas, in addition to numerous federal and state prosecutions in Mexico of associated sex traffickers. The convictions in this case are also the latest development in the Eastern District of New York’s comprehensive anti-trafficking program, which has to date indicted more than 80 defendants and assisted more than 150 victims, including 44 minors. In addition, through the District’s anti-trafficking program, 19 children have been reunited with their victim-mothers.
The government’s case is being handled by the Office’s Civil Rights Section. Assistant United States Attorney Jennifer M. Sasso is in charge of the prosecution.
The Defendant:
RAUL GRANADOS-RENDON
Age: 31
Tenancingo, MexicoE.D.N.Y. Docket No. 11-CR-557 (KAM)
Two Men Charged with Four Robberies of Convenience Stores in QueensRead the Press Release
A criminal complaint was filed today in federal court in Brooklyn charging Scott Brack and Elgin Brack with the armed robberies of four convenience stores in Queens. Elgin Brack was also charged with brandishing a firearm in furtherance of a crime of violence and discharging a firearm in furtherance of a crime of violence. Both defendants were arrested yesterday evening, made their initial appearances this afternoon before United States Magistrate Judge Steven M. Gold and were ordered detained.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Ashan M. Benedict, Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and James P. O’Neill, Commissioner, New York City Police Department (NYPD), announced the arrests.
“As alleged, the defendants struck four all-night commercial businesses in Queens in a span of fewer than three hours, including a Duane Reade store in Woodside where an employee was callously shot in the head simply for resisting the robbery,” stated United States Attorney Donoghue. “While most people slept through this night of terror, members of the ATF/NYPD Joint Robbery Task Force were working tirelessly to identify and quickly apprehend the perpetrators who will now face justice for their multiple crimes.”
“The aforementioned individuals are alleged to have committed brazen acts of violence terrorizing business owners in their community,” stated ATF Special Agent-in-Charge Benedict. “In one of their acts, a store manager was shot during a robbery attempt. If not for the work of multiple NYPD units and the ATF/NYPD Joint Robbery Task Force, they would be out on the streets continuing to reign terror on the innocent. ATF will continue to work with our partners to send a strong message to individuals that seek to spread violence in their community that all law enforcement resources will be used to apprehend and prosecute them for their violent actions. I would like to thank the United States Attorney’s office for their work in prosecuting this case.”
“New York City has achieved historic reductions in crime over the past two decades, but some outliers continue to traffic in violence and fear,” stated NYPD Commissioner O’Neill. “That is why the men and women of the NYPD must continue to be the very best at what we do: fighting crime and keeping people safe. Today’s charges highlight their exemplary work, and I commend the ATF investigators who work daily with our detectives on the Strategic Pattern Armed Robbery and Technical Apprehensions Task Force, or SPARTA. By so efficiently pursuing and strengthening high-profile armed-robbery cases like this, we – together with the U.S. Attorney’s Office for the Eastern District and all of our law-enforcement partners – are making the safest large city in the nation even safer.”
As detailed in the complaint, on November 26, 2018, at approximately 3:36 a.m., Elgin Brack entered a Duane Reade store at 60-02 Roosevelt Avenue in Woodside and pointed a gun at the store clerk. Brack then moved behind the store counter, attempted to force the clerk to turn over money and shot the clerk in the hand and the head as he resisted. Brack fled the Duane Reade and together with Scott Brack, traveled by car to a 7-Eleven store located at 50-92 Northern Boulevard in Long Island City where, at approximately 3:58 a.m., Elgin Brack demanded money at gunpoint and took $300 from an employee. Next, the defendants drove to a Rite Aid store located at 33-01 30th Avenue in Astoria at approximately 4:20 a.m., where Elgin Brack approached a store clerk and asked to purchase chewing gum. When the store clerk opened the cash register, Brack pointed a gun and demanded money. The store clerk handed over $802. Immediately outside the Rite Aid store, video surveillance captured Scott Brack discarding an item consistent in size and shape with the cash register tray taken from the prior 7-Eleven armed robbery. Finally, at approximately 5:45 a.m., Elgin Brack entered a second Rite Aid store located at 115-10 Merrick Boulevard in Jamaica, approached a store clerk, pointed a gun and demanded money. The store clerk complied and gave Elgin Brack $200.
The charges in the complaint are merely allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted, each defendant faces a minimum of seven years in prison.
Assistant United States Attorney Phil Selden is in charge of the prosecution.
The Defendant:
SCOTT BRACK
Age: 50
Bronx, New YorkELGIN BRACK
Age: 22
Brooklyn, New YorkTwo International Cybercriminal Rings Dismantled and Eight Defendants Indicted for Causing Tens of Millions of Dollars in Losses in Digital Advertising FraudRead the Press Release
A 13-count indictment was unsealed today in federal court in Brooklyn charging Aleksandr Zhukov, Boris Timokhin, Mikhail Andreev, Denis Avdeev, Dmitry Novikov, Sergey Ovsyannikov, Aleksandr Isaev and Yevgeniy Timchenko with criminal violations for their involvement in perpetrating widespread digital advertising fraud. The charges include wire fraud, computer intrusion, aggravated identity theft and money laundering. Ovsyannikov was arrested last month in Malaysia; Zhukov was arrested earlier this month in Bulgaria; and Timchenko was arrested earlier this month in Estonia, all pursuant to provisional arrest warrants issued at the request of the United States. They await extradition. The remaining defendants are at large.
Also unsealed today in federal court in Brooklyn were seizure warrants authorizing the FBI to take control of 31 internet domains, and search warrants authorizing the FBI to take information from 89 computer servers, that were all part of the infrastructure for botnets engaged in digital advertising fraud activity. The FBI, working with private sector partners, redirected the internet traffic going to the domains (an action known as “sinkholing”) in order to disrupt and dismantle these botnets.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and James P. O’Neill, Commissioner, New York City Police Department (NYPD) announced the charges and domain seizures.
“As alleged in court filings, the defendants in this case used sophisticated computer programming and infrastructure around the world to exploit the digital advertising industry through fraud,” stated United States Attorney Donoghue. “This case sends a powerful message that this Office, together with our law enforcement partners, will use all our available resources to target and dismantle these costly schemes and bring their perpetrators to justice, wherever they are.” Mr. Donoghue thanked the FBI Cyber Division for its extraordinary efforts in carrying out the multi-year investigation.
“As alleged, these individuals built complex, fraudulent digital advertising infrastructure for the express purpose of misleading and defrauding companies who believed they were acting in good faith, and costing them millions of dollars. This kind of exploitation undermines confidence in the system, on the part of both companies and their customers,” stated FBI Assistant Director-in-Charge Sweeney. “Thanks to the hard work of our legal attachés and law enforcement partners overseas, with the cooperation of our international and U.S.-based private sector partners, the defendants will face justice for their alleged crimes.”
“This investigation highlights public- and private-sector collaboration across the globe, and again confirms the absolute necessity for interagency information-sharing. Criminals – especially those operating via the internet – do not concern themselves with jurisdictional boundaries, so it is critical that the law-enforcement community works together to achieve our shared goal of protecting the people we serve,” stated NYPD Commissioner O’Neill. “I thank and commend the U.S. Attorney for the Eastern District, and all the investigators with the FBI Cyber Division and the NYPD. Together, we are ensuring that the vital systems and technologies of our economy are kept safe.”
The Criminal Scheme
The internet is, in large part, freely available to users worldwide because it runs on digital advertising: website owners display advertisements on their sites and are compensated for doing so by intermediaries representing businesses seeking to advertise their goods and services to real human customers. In general, digital advertising revenue is based on how many users click or view the ads on those websites. As alleged in court filings, the defendants in this case represented to others that they ran legitimate companies that delivered advertisements to real human internet users accessing real internet webpages. In fact, the defendants faked both the users and the webpages: they programmed computers they controlled to load advertisements on fabricated webpages, via an automated program, in order to fraudulently obtain digital advertising revenue.
The Datacenter-Based Scheme (Methbot)
As alleged in the indictment, between September 2014 and December 2016, Zhukov, Timokhin, Andreev, Avdeev and Novikov operated a purported advertising network (“Ad Network #1”) and, with Ovsyannikov’s assistance, carried out a digital ad fraud scheme. Ad Network #1 had business arrangements with other advertising networks whereby it received payments in return for placing advertising placeholders (“ad tags”) on websites. Rather than place these ad tags on real publishers’ websites, however, Ad Network #1 rented more than 1,900 computer servers housed in commercial datacenters in Dallas, Texas and elsewhere, and used those datacenter servers to load ads on fabricated websites, “spoofing” more than 5,000 domains. To create the illusion that real human internet users were viewing the advertisements loaded onto these fabricated websites, the defendants programmed the datacenter servers to simulate the internet activity of human internet users: browsing the internet through a fake browser, using a fake mouse to move around and scroll down a webpage, starting and stopping a video player midway, and falsely appearing to be signed into Facebook. Furthermore, the defendants leased more than 650,000 Internet Protocol (“IP”) addresses, assigned multiple IP addresses to each datacenter server, and then fraudulently registered those IP addresses to make it appear that that the datacenter servers were residential computers belonging to individual human internet users who were subscribed to various residential internet service providers. As a result of this scheme, Ad Network #1 falsified billions of ad views and caused businesses to pay more than $7 million for ads that were never actually viewed by real human internet users.
The Botnet-Based Scheme (3ve.2 Template A)
As also alleged in the indictment, between December 2015 and October 2018, Ovsyannikov, Timchenko and Isaev operated a purported advertising network (“Ad Network #2”) and carried out another digital ad fraud scheme. In this scheme, the defendants used a global “botnet”¾a network of malware-infected computers operated without the true owner’s knowledge or consent¾to perpetrate their fraud. The defendants developed an intricate infrastructure of command-and-control servers to direct and monitor the infected computers and check whether a particular infected computer had been flagged by cybersecurity companies as associated with fraud. By using this infrastructure, the defendants accessed more than 1.7 million infected computers, belonging to ordinary individuals and businesses in the United States and elsewhere, and used hidden browsers on those infected computers to download fabricated webpages and load ads onto those fabricated webpages. Meanwhile, the owners of the infected computers were unaware that this process was running in the background on their computers. As a result of this scheme, Ad Network #2 falsified billions of ad views and caused businesses to pay more than $29 million for ads that were never actually viewed by real human internet users.
The Botnet Takedown
Following the arrest of Ovsyannikov by Malaysian authorities, U.S. law enforcement authorities, in conjunction with various private sector companies, began the process of dismantling the criminal cyber infrastructure utilized in the botnet-based scheme, which involved computers infected with malicious software known in the cybersecurity community as “Kovter.” The FBI executed seizure warrants to sinkhole 23 internet domains used to further the charged botnet-based scheme or otherwise used to further the Kovter botnet. The FBI also executed search warrants at 11 different U.S. server providers for 89 servers related to the charged botnet-based scheme or Kovter.
In addition, as part of its investigation, the FBI discovered an additional cybercrime infrastructure committing digital advertising fraud through the use of datacenter servers located in Germany and a botnet of computers in the United States infected with malicious software known in the cybersecurity community as “Boaxxe.” The FBI executed seizure warrants to sinkhole eight domains used to further this scheme and thereby disrupt yet another botnet engaged in digital advertising fraud.
Finally, the United States, with the assistance of its foreign partners, executed seizure warrants for multiple international bank accounts in Switzerland and elsewhere that were associated with the schemes.
The charges in the indictment are merely allegations and the defendants are presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by the Office’s National Security and Cybercrime Section. Assistant United States Attorneys Saritha Komatireddy, Alexander F. Mindlin, Michael T. Keilty and Karin K. Orenstein are in charge of the prosecution.
The Justice Department’s Office of International Affairs, the FBI’s Legal Attachés abroad and foreign authorities in multiple countries provided critical assistance in this case. The Office extends its appreciation to the Attorney General’s Chambers of Malaysia, the Royal Malaysian Police, the Malaysian National Central Bureau of Interpol, the Supreme Cassation Prosecution Office of Bulgaria, the Regional Prosecution Office of Varna, the Cybercrime Department of the Bulgarian General Directorate for Combating Organized Crime, the Bulgarian Ministry of Interior Regional Directorate of Varna, the Office of the Prosecutor General of Estonia, the Estonian Police and Border Guard Board and the FBI’s Legal Attaché Offices in Malaysia, Bulgaria and Estonia for their assistance in apprehending defendants in this case. The Office also extends its appreciation to the German Bundeskriminalamt Cybercrime Intelligence Operations Department and Polizei Sachsen Polizeidirektion Zwickau Criminal Investigation Department, the Dutch National Police, the United Kingdom National Crime Agency, the French Police Cybercrime Central Bureau, the Swiss Federal Office of Justice, FBI’s Legal Attaché Offices in those countries, and Europol for their assistance in various aspects of the investigation and botnet takedown.
Multiple private sector organizations also provided critical assistance in this case. The Office extends its appreciation to White Ops, Inc. and Google LLC for their assistance in the investigation and botnet takedown. The Office also extends its appreciation to Proofpoint, Inc, Fox IT B.V., Microsoft Corporation, ESET, Trend Micro Inc., Symantec Corporation, CenturyLink, Inc, F-Secure Corporation, Malwarebytes, MediaMath, the National Cyber-Forensics and Training Alliance and The Shadowserver Foundation for their assistance in the botnet takedown.
For technical details on the malware and botnets referenced in this case, please see US-CERT Alert TA18-331A: https://www.us-cert.gov/ncas/alerts/TA18-331A
The Defendants:
ALEKSANDR ZHUKOV
Age: 38
Russian FederationBORIS TIMOKHIN
Age: 39
Russian FederationMIKHAIL ANDREEV
Age: 34
Russian Federation and UkraineDENIS AVDEEV
Age: 40
Russian FederationDMITRY NOVIKOV
Age: Unknown
Russian FederationSERGEY OVSYANNIKOV
Age: 30
Republic of KazakhstanALEKSANDR ISAEV
Age: 31
Russian FederationYEVGENIY TIMCHENKO
Age: 30
Republic of KazakhstanE.D.N.Y. Docket No. 18-CR-633 (ERK)
New York Man Pleads Guilty to Stolen Identity Tax Refund FraudRead the Press Release
WASHINGTON - A Springfield Gardens, New York, resident pleaded guilty yesterday to an indictment charging him with nine counts of wire fraud, nine counts of aggravated identity theft, and 17 counts of aiding or assisting in the preparation and filing of false returns, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Richard P. Donoghue for the Eastern District of New York.
According to court documents, Oyeniyi Jaiyesimi, the owner of Pace Financial Services, a tax preparation business located in Springfield Gardens, New York used stolen IDs to file fraudulent tax returns with the Internal Revenue Service and to obtain refunds to which he was not entitled. In addition, from 2013 through 2015, Jaiyesimi filed multiple false tax returns for clients that fraudulently claimed dependent exemptions.
Magistrate Judge James Orenstein scheduled sentencing for April 3, 2019, before District Court Judge Edward R. Korman. Jaiyesimi faces a maximum sentence of 20 years in prison for each count of wire fraud, a mandatory minimum sentence of two years in prison for each count of aggravated identity theft, and a maximum sentence of three years in prison for each count of aiding or assisting in the preparation of false returns. He also faces a period of supervised release, restitution, forfeiture, and monetary penalties.
Principal Deputy Assistant Attorney General Zuckerman and U.S. Attorney Richard P. Donoghue commended special agents of IRS Criminal Investigation, who conducted the investigation, and Trial Attorneys Mark McDonald and Eric Powers of the Tax Division, who are prosecuting the case.
New York Woman Pleads Guilty to Providing Material Support to ISISRead the Press Release
Zoobia Shahnaz, 27, of Brentwood, New York, pleaded guilty to providing material support to the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization.
Assistant Attorney General for National Security John C. Demers, U.S. Attorney Richard P. Donoghue for the Eastern District of New York, Assistant Director in Charge William F. Sweeney, Jr. for the FBI’s New York Field Office, and Commissioner James P. O’Neill for the NYPD announced the guilty plea. The guilty plea was entered before U.S. District Judge Joanna Seybert.
According to court filings and facts presented at the plea hearing, between March 2017 and the date of her attempted travel to Syria on July 31, 2017, the defendant engaged in a scheme to defraud numerous financial institutions. Specifically, Shahnaz obtained a loan for approximately $22,500 by way of materially false pretenses, representations and promises. She also fraudulently applied for and used over a dozen credit cards, which she used to purchase approximately $62,000 in Bitcoin and other cryptocurrencies online. She then engaged in a pattern of financial activity, culminating in several wire transactions totaling over $150,000 to individuals and shell entities in Pakistan, China and Turkey that were fronts for ISIS.
During the time she was committing bank fraud and laundering money overseas, the defendant was accessing ISIS propaganda online, including violent jihad-related websites and message boards, and social media and messaging pages of known ISIS recruiters, facilitators and financiers. Additionally, the defendant conducted numerous internet searches for information that would facilitate her entry into Syria, but ultimately was intercepted by the Joint Terrorism Task Force (JTTF) at John F. Kennedy International Airport (JFK) in Queens, New York, while attempting to board a flight with a multi-day layover in Istanbul, Turkey – a common point of entry for individuals travelling from Western countries to join ISIS in Syria.
As part of her plea agreement with the government, Shahnaz admitted to defrauding numerous financial institutions and laundering the stolen proceeds out of the country with the intent to support a specified unlawful activity, namely the provision of material support to ISIS, after which she attempted to leave the United States and travel to Syria.
When she is sentenced, Shahnaz faces up to 20 years in prison, as well as restitution, criminal forfeiture and a fine. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes. Any sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.
Mr. Demers and Mr. Donoghue extended their grateful appreciation to the FBI’s JTTF, which comprises a number of federal, state and local agencies from the region.
The government’s case is being handled by Assistant U.S. Attorney Artie McConnell of the Eastern District of New York and Trial Attorney Joseph Attias of the National Security Division’s Counterterrorism Section.
Long Island Woman Pleads Guilty to Providing Material Support to ISISRead the Press Release
Earlier today, in federal court in Central Islip, Zoobia Shahnaz pleaded guilty to providing material support to a foreign terrorist organization, the Islamic State of Iraq and al-Sham (“ISIS”), which has been designated by the U.S. Secretary of State as a foreign terrorist organization. As part of her plea agreement with the government, Shahnaz admitted defrauding numerous financial institutions, and then laundering and transferring the stolen proceeds out of the country with the intent to support a specified unlawful activity, namely the provision of material support to ISIS, after which she attempted to leave the United States and travel to Syria. When sentenced, Shahnaz faces up to 20 years in prison, as well as restitution, criminal forfeiture and a fine. The guilty plea was entered before United States District Judge Joanna Seybert.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, John C. Demers, Assistant Attorney General for National Security, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and James P. O’Neill, Commissioner, New York City Police Department (NYPD), announced the guilty plea.
“With today’s guilty plea, Shahnaz, a resident of our district, admitted to engaging in a complex scheme using cryptocurrencies designed to put thousands of dollars into the coffers of ISIS, a foreign terrorist organization dedicated to murder and destruction,” stated United States Attorney Donoghue. “Counterterrorism is the highest priority of the Department of Justice and our law enforcement partners, and together we will continue to hold accountable those who abet terrorists seeking to harm the United States and its allies.”
Mr. Demers and Mr. Donoghue expressed their grateful appreciation to the FBI’s Joint Terrorism Task Force (JTTF), which comprises a number of federal, state and local agencies from the region.
“In the interest of empowering and enriching a terrorist organization whose aim is to harm America, Zoobia Shahnaz turned her back on her country and her fellow citizens,” stated FBI Assistant Director-in-Charge Sweeney. “Thanks to the diligent work of the FBI New York Joint Terrorism Task Force, her crimes were uncovered, and she was unable to succeed in her ultimate goal of traveling to Syria to join ISIS. This conviction sends a message to anyone who seeks to manipulate our financial systems to provide support to our adversaries: you too will be discovered, investigated, and brought to justice.”
According to court filings and facts presented at the guilty plea proceeding, between March 2017 and the date of her attempted travel to Syria on July 31, 2017, Shahnaz engaged in a bank fraud scheme to raise money for ISIS. In furtherance of that scheme, she obtained a loan for approximately $22,500 through materially false representations, used more than a dozen fraudulently obtained credit cards to purchase approximately $62,000 in Bitcoin and other cryptocurrencies online and then wired over $150,000 to individuals and shell entities in Pakistan, China and Turkey that were fronts for ISIS.
At the same time, Shahnaz accessed ISIS propaganda at various violent jihad-related websites and message boards, and social media and messaging pages of known ISIS recruiters, facilitators and financiers. She also searched the internet for information to facilitate her travel into Syria, but ultimately was intercepted by the JTTF at John F. Kennedy International Airport.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorney Artie McConnell of the Eastern District of New York and Trial Attorney Joseph Attias of the National Security Division’s Counterterrorism Section are in charge of the prosecution.
The Defendant:
Zoobia Shahnaz
Age: 27
Brentwood, NYE.D.N.Y. Docket No. 17-CR-690 (JS)
District Court Enters Temporary Restraining Order Blocking Three Elder Fraud Schemes from Sending Fraudulent LettersRead the Press Release
A federal court in Central Islip, New York entered a temporary injunction today against individuals and corporations allegedly responsible for operating three international mail fraud schemes, the Department of Justice announced. These cases are part of the Department of Justice’s Elder Justice Initiative.
In a complaint filed today, the United States alleged that the 15 defendants mailed, or facilitated the mailing of, fraudulent solicitations related to three mail fraud schemes that primarily victimized the elderly or vulnerable. The solicitations purported to be personalized notices informing recipients that they had won a large cash prize but needed urgently to pay a fee to claim their winnings. The solicitations targeted victims throughout the world, and victims returned their payments to mailboxes located in the United States. Although victims sent in the requested fees by cash, check, or credit card, they did not receive large cash prizes in return. The complaint further alleges that the defendants were aware that the mailings deceived consumers into paying a fee and believing they had already won a valuable prize. The complaint alleges that victims sent thousands of dollars each week in response to the defendants’ fraudulent solicitations. The complaint alleged that in the last year, the three mail fraud schemes collectively mailed over half a million fraudulent letters, grossing an estimated $4.8 million in fraudulent proceeds.
Along with the complaint, the United States sought a temporary restraining order against the defendants to prevent them from continuing to send fraudulent solicitations during the pendency of the action. The district court found probable cause to believe that those defendants are engaged in mail fraud and entered the order. A preliminary injunction hearing is scheduled for December 3, 2018.
“We will not tolerate fraud, and we will not allow the U.S. Mail to be used as a conduit for fraudulent conduct,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “Illegal schemes that prey on people’s hopes are reprehensible, and we will continue to vigorously pursue the operators of such schemes.”
“These fraudulent solicitation schemes target elderly and vulnerable residents in our district, around the country and around the world with a promise of cash prizes that never arrive,” stated Richard P. Donoghue, United States Attorney for the Eastern District of New York. “We are committed to protecting our residents, and victims everywhere, from these cruel schemes.”
“The U.S. Postal Inspection Service has been at the forefront of protecting consumers from fraud schemes for many years,” said Inspector in Charge Delany De Leon-Colon for the U.S. Postal Inspection Service’s Criminal Investigations Group. “Deceptive solicitations take advantage of the American public with promises of easy money, when in reality, the scammers are the only ones making money. Investigations like this one let the American public – especially our vulnerable population – know that Postal Inspectors are working hard to protect them and ensure their confidence in the U.S. Mail.”
The complaint alleged that defendants Charles Kafeiti of Phoenix, Arizona; Anthony Kafeiti of Port Jefferson, New York; and Steven Diaz of Mt. Sinai, New York, operate fraud schemes that lead victims to believe a large cash awards awaits them. The three schemes were assisted by Drew Wilson, a resident of Vancouver, Canada, who provided logistical support. Other named defendants, Dennis Hunsaker, a resident of Las Vegas Nevada, and his company, Digital Matrix International Inc., assisted the direct mailers with online tools to manage their mailings, lists of recipients, lists of respondents, and fulfillments. Carmine Maietta and Elizabeth Maietta, residents of Westbury, New York, opened and processed victim returns. The suit also named a German corporation that processed victim payments for the scheme, SixEvolution GmbH, and its operator, David Anthony.
Since President Trump signed the bipartisan Elder Abuse Prevention and Prosecution Act (EAPPA) into law, The Department of Justice has participated in hundreds of enforcement actions in criminal and civil cases that targeted or disproportionately affected seniors. In particular, this past February the Attorney General announced the largest elder fraud enforcement action in American history, charging more than 200 defendants in a nationwide elder fraud sweep. The Department has likewise conducted hundreds of trainings and outreach sessions across the country since the passage of the Act.
Last week, the Department of Justice and the Department of Agriculture hosted an inaugural Rural and Tribal Elder Justice Summit in Des Moines, Iowa. The Summit focused on supporting the efforts of elder justice professionals to combat elder abuse and financial exploitation in rural and tribal communities, and included remarks from Acting Attorney General Matthew Whitaker.
In the matter filed today, the government is represented by Trial Attorney Jacqueline Blaesi-Freed of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorneys Seth Eichenholtz and John Vagelatos of the U.S. Attorney’s Office for the Eastern District of New York. The United States Postal Inspection Service provided investigative support.
A complaint is merely a set of allegations that, if the case were to proceed to trial, the government must prove to receive a determination of liability.
Additional information about the Consumer Protection Branch and its enforcement efforts may be found at www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Eastern District of New York, visit its website at www.justice.gov/usao-edny. Information about the Department of Justice’s Elder Fraud Imitative is available at www.justice.gov/elderjustice.
District Court Enters Temporary Restraining Order to Shut Down Three Elder Fraud SchemesRead the Press Release
CENTRAL ISLIP – A federal court in Central Islip, New York, entered a temporary injunction yesterday against 15 individuals and corporations allegedly responsible for operating three international mail fraud schemes, the Department of Justice announced. The Department of Justice alleges that, in 2018 alone, the three schemes collectively mailed over half a million fraudulent letters and grossed an estimated $4.8 million in fraudulent proceeds. The case is part of the Department of Justice’s Elder Fraud Initiative.
In a complaint filed yesterday, the United States alleged that defendants mailed, or facilitated the mailing of, fraudulent solicitations related to three mail fraud schemes that primarily victimized the elderly or vulnerable. The solicitations purported to be personalized notices informing recipients that they had won multi-million dollar cash prizes but needed urgently to pay a fee to claim their winnings. The solicitations targeted victims throughout the world, and victims returned their payments to mailboxes located in the United States, primarily on Long Island. Although victims sent in the requested fees by cash, check or credit card, they did not receive large cash prizes in return. The complaint further alleges that the defendants were aware that the mailings deceived consumers into paying a fee and believing they had already won a valuable prize. The complaint alleges that victims sent thousands of dollars each week in response to the defendants’ fraudulent solicitations.
Along with the complaint, the United States sought a temporary restraining order against the defendants to prevent them from continuing to send fraudulent solicitations during the pendency of the action. The District Court found probable cause to believe that the defendants are engaged in mail fraud and entered the order. A preliminary injunction hearing is scheduled for December 3, 2018.
“These fraudulent solicitation schemes target elderly and vulnerable residents in our district, around the country and around the world with a promise of cash prizes that never arrive,” stated Richard P. Donoghue, United States Attorney for the Eastern District of New York. “We are committed to protecting our residents, and victims everywhere, from these cruel schemes.”
“We will not allow the U.S. Mail to be used as a conduit for fraud,” stated Joseph H. Hunt, Assistant Attorney General for the Department of Justice’s Civil Division. “Schemes that prey on people’s hopes are reprehensible. We will continue to pursue the operators of such schemes.”
“These individuals thought they would get away with a crime targeting the elderly and vulnerable who in many cases gave away money needed for day to day necessities. The victims were told they had won the lottery and needed to pay fees to receive their winnings,” stated Philip R. Bartlett, Inspector-in-Charge of the United States Postal Inspection Service, New York Division. “Postal Inspectors remind consumers that paying to play a lottery is a telltale sign it’s a scam. If you prey on the elderly and vulnerable, you will be brought to justice for your crimes.”
According to the complaint, Charles Kafeiti of Scottsdale, Arizona; Anthony Kafeiti of Port Jefferson, New York; and Steven Diaz of Mt. Sinai, New York, operate fraud schemes that lead victims to believe that large cash awards await them. Those defendants were assisted by Drew Wilson, a resident of Vancouver, Canada, who provided logistical support. Other named defendants, Dennis Hunsaker, a resident of Las Vegas Nevada, and his company, Digital Matrix International Inc., assisted the direct mailers with online tools to manage their mailings, lists of recipients, lists of respondents and fulfillments. Carmine Maietta and Elizabeth Maietta, both residents of Westbury opened and processed victim returns. The lawsuit also named a German corporation, SixEvolution GmbH and its operator, David Anthony, that processed victim payments for the scheme.
The government is represented by Trial Attorney Jacqueline Blaesi-Freed of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorneys Seth Eichenholtz and John Vagelatos of the U.S. Attorney’s Office for the Eastern District of New York. The United States Postal Inspection Service provided investigative support.
The claims made in the complaint are allegations that, if the case were to proceed to trial, the government must prove to receive a determination of liability.
Additional information about the Consumer Protection Branch and its enforcement efforts may be found at www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Eastern District of New York, visit its website at www.justice.gov/usao-edny. Information about the Department of Justice’s Elder Fraud Imitative is available at www.justice.gov/elderjustice.
E.D.N.Y. Docket No. 18-CV-6581 (JMA)
Long Island Gang Leader Sentenced to 15 Years’ Imprisonment for Shooting Two Rivals in HempsteadRead the Press Release
Earlier today, at the federal courthouse in Central Islip, Alton Gore, also known as “A-Murder,” the leader of the Outlaws street gang, was sentenced by United States District Judge Joseph F. Bianco to 15 years’ imprisonment following his April 6, 2018 guilty plea to assault in aid of racketeering and discharging a firearm in connection with a crime of violence.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Patrick J. Ryder, Commissioner, Nassau County Police Department (NCPD), announced the sentence.
“Gore earned today’s sentence by blindly shooting into a house, permanently disabling one man and injuring another,” stated United States Attorney Donoghue. “Violence in the name of a street gang jeopardizes the safety of the entire community and will not be tolerated. We will continue working tirelessly with our law enforcement partners to rid Long Island of the Outlaws and every other street gang.”
“Violent street gangs endanger public safety and paralyze communities through fear and intimidation,” stated FBI Assistant Director-in-Charge Sweeney. “Gore showed a flagrant disregard for the safety of others in opening fire on that home – two rival gang members were shot, one gravely injured, and his reckless actions could have endangered the lives of many others. The FBI’s Long Island Safe Streets Gang Task Force will continue to pursue justice for gang members who act outside the boundaries of the law.”
“The sentence of Defendant Gore is a clear example of how these violent crimes will not be tolerated in Nassau County,” stated NCPD Commissioner Ryder. “These street rival gangs exiting their violence place our residents and communities in harm’s way and injured two others. It is a testament of the hard work of dedicated professionals that the combined effort of law enforcement was able to bring this defendant to justice to further show that he will be punished for his actions.”
On September 11, 2013, Outlaws gang member Pedro Merchant shot and killed 17-year-old Dante Quinones in Hempstead over gang allegiances. Following Quinones’ murder, Gore led Outlaws members in a year-long gang war between the Outlaws and the Bloods, which included multiple shootings. On September 14, 2014, Gore and two Outlaws members staked out a house in Hempstead where Bloods members were watching a boxing match. Gore and his co-conspirators opened fire into the house, hitting one gang member in the leg and a second gang member in the head, causing him to lose an eye.
This Office has prosecuted six members and associates of the Outlaws and six members of the Bloods for their participation in this violent gang war. To date, the following individuals have been sentenced or pled guilty:
- Pedro Merchant, a member of the Outlaws in Hempstead, was sentenced to 20 years’ imprisonment for the September 11, 2013 firearm-related murder of Dante Quinones.
- Everett Brown, an associate of the Outlaws, was sentenced to 10 years’ imprisonment following his guilty plea to discharging a firearm during a crime of violence for his role in one of three shootings of rivals’ homes committed by the gang on August 19, 2014.
- Philip Saunders, a member of the Bloods, was sentenced to 12 years’ imprisonment following his guilty plea to discharging a firearm during a crime of violence for his role in a May 9, 2014 assault of a rival gang member.
- Khalil Brown and Naree Barnes, members of the Bloods, were each sentenced to 10 years’ imprisonment following their guilty pleas to discharging firearms during a crime of violence for shooting at a rival gang member on October 21, 2014.
- Billy McLen, a member of the Bloods, pled guilty to attempted murder in-aid-of racketeering and discharging a firearm during a crime of violence and is awaiting sentence. When sentenced, McLen faces a minimum of 10 years in prison and a maximum term of life.
- Jonathan Mayzick, a member of the Bloods charged with racketeering, conspiracy to murder and assault rival gang members with dangerous weapons and attempted murder and attempted assault with dangerous weapons, is awaiting trial.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Nicole Boeckmann, Christopher Caffarone and Michael Maffei are in charge of the prosecution.
The Defendants:
ALTON GORE (also known as “A-Murder”)
Age: 27
Hempstead, New YorkE.D.N.Y. Docket No. 16-CR-322 (S-1) (JFB)
Defendant Pleads Guilty to Defrauding Investors in Binary Options and Cryptocurrency Scheme and Admits to Obstructing JusticeRead the Press Release
Earlier today in federal court in Central Islip, Blake Kantor, who formerly operated a binary options company known as Blue Bit Banc and Blue Bit Analytics (“BBB”), pleaded guilty to conspiracy to commit wire fraud. As part of his plea agreement, Kantor admitted to obstructing an investigation into his fraudulent scheme. When he is sentenced, Kantor faces up to 20 years in prison, as well as restitution, criminal forfeiture and a fine. The guilty plea was entered before United States Magistrate Judge Gary R. Brown.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), James D. Robnett, Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), and James McDonald, Director, Division of Enforcement, U.S. Commodity Futures Trading Commission (CFTC), announced the guilty plea.
“Kantor defrauded investors to enrich himself and then tried to cover his tracks by lying to the federal agents investigating the scheme,” stated United States Attorney Donoghue. “We will continue to protect the integrity of the financial marketplace by prosecuting to the fullest extent those who deceive the investing public and obstruct the pursuit of justice.”
According to court filings and facts presented at the guilty plea proceeding, in March 2014, Kantor established BBB, which sold binary options, a type of investment in which investors are promised an opportunity to be paid predetermined amounts based upon the price of securities, commodities or other investments at particular points in time. From approximately 2014 to 2017, Kantor and others solicited and took in approximately $1.5 million from more than 700 investors in BBB’s binary options. Kantor told investors that they could place binary option trades, or a BBB representative could do so for them, and that the predetermined profits promised them would be based on the actual prices of securities, currencies and other investments at particular points in time. However, Kantor did not inform the investors that a computer software program of BBB’s fraudulently altered data associated with binary options investments so that the probability of investors earning a profit favored BBB and disadvantaged investors. To further his scheme, Kantor directed that bank accounts—including one in the island nation of St. Kitts and Nevis—be opened using aliases and identifying information of others, making it more difficult to trace the funds that Kantor fraudulently took from investors. Kantor also converted BBB investments into ATM Coin, a worthless cryptocurrency that he misleadingly told investors was worth substantial sums of money.
In October 2017, after FBI agents informed Kantor that they were investigating his involvement in binary options, Kantor directed a co-conspirator to alter BBB customer lists. When interviewed by the FBI, Kantor falsely stated that he had not been involved in binary options since August 2013.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Bradley T. King and Madeline M. O’Connor are in charge of the prosecution.
The Defendant:
BLAKE KANTOR (also known as “Bill Gordon”)
Age: 42
Fort Lee, New JerseyE.D.N.Y. Docket No. 18-CR-177 (SJF)
Two Alleged Associates of Gambino Organized Crime Family Indicted for Arson and ExtortionRead the Press Release
An indictment was unsealed today in federal court in Brooklyn charging Peter Tuccio and Jonathan Gurino with arson and arson conspiracy, extortion and extortion conspiracy and using fire to commit a felony. The defendants were arrested today and are scheduled to be arraigned this afternoon before United States Magistrate Judge Steven L. Tiscione.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the charges.
“As alleged in the indictment, the defendants delivered a frightening message in the form of fire to force a businessman to pay protection money to a high-ranking gangster,” stated United States Attorney Donoghue. “Today’s charges against two alleged crime family associates demonstrate that whether you are a made member or a young associate looking to advance in a crime family, the end result is the same – prosecution and prison.” Mr. Donoghue thanked the New York City Police Department and the New York City Fire Department’s Bureau of Fire Investigation for their assistance in the investigation.
“Organized crime families have long relied on extortion and threats of violence in exchange for so-called ‘protection,’” stated FBI Assistant Director-in-Charge Sweeney. “As alleged, the defendants set a man's car on fire to send a message, but now they are the ones feeling the heat as they face justice for their crimes. As long as organized crime families and their associates continue to act outside the law, the FBI and our partners will investigate and bring charges against them.”
As alleged in court filings, a captain in the Gambino Organized Crime Family (referred to herein as Co-Conspirator-1), had been extorting a local businessman $400 per year. During 2015, the businessman began dodging Co-Conspirator-1 to avoid making payments. On December 3, 2015, Tuccio, Gurino and Gino Gabrielli observed the businessman leave a smoke shop in Howard Beach and drive away. The three men followed at a high rate of speed and confronted him outside a pizzeria. Tuccio asked, “how’s Co-Conspirator-1?” and commented on the business owner’s car, a 2014 Mercedes Benz. The businessman fled into the pizzeria. Later that night, the businessman heard a loud noise and saw that his car was on fire. Shortly thereafter, the businessman paid Co-Conspirator-1. As detailed in court filings, the businessman’s home security video system had recorded Gabrielli pouring a substance on the Mercedes, the car erupting in flames, and Gabrielli running away with his pant leg on fire. Shortly thereafter, Gabrielli and Tuccio were caught on surveillance video entering Jamaica Hospital.
Gabrielli pleaded guilty to arson in August 2016.
The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted, the defendants each face a 15-year mandatory minimum sentence.
The government’s case is being handled by the Office’s Organized Crime & Gangs Section. Assistant United States Attorney Nadia E. Moore is in charge of the prosecution.
The Defendants:
PETER TUCCIO
Age: 25
Queens, New YorkJONATHAN GURINO
Age: 25
Queens, New YorkE.D.N.Y. Docket No. 18-CR-610 (LDH)
Seven Owners and Employees of Import-Export Companies Arrested for Conspiracy to Launder Drug Trafficking Proceeds and Related CrimesRead the Press Release
A six-count indictment was unsealed today in federal court in Central Islip charging Enayatullah Khwaja, Abdulrahman Khwaja, Rani Rahimi, Shikeba Rhamatzada, Roberto Saenz, Maynor Melendez-Mendoza and Naseem Bokhari with conspiracy to commit money laundering, operation of an unlicensed money transmitting business, failure to file currency transaction reports and IRS forms 8300, structuring monetary deposits, and interstate and foreign travel and transportation in aid of a racketeering enterprise. The defendants, all owners and employees of import-export businesses located on Long Island and in Miami, were arrested this morning.
Enayatullah Khwaja, Abdulrahman Khwaja, Rahimi and Rhamatzada will be arraigned this afternoon in Central Islip before United States District Judge Joseph F. Bianco. Saenz, Melendez-Mendoza and Bokhari, who were arrested in Florida, will be arraigned at the federal courthouse in Miami, and the government will seek their removal to the Eastern District of New York.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), New York, and James D. Robnett, Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), announced the charges.
“Money laundering is the lifeblood of international narcotics trafficking organizations and with today’s arrests the defendants’ ability to profit from illicit proceeds has been crippled,” stated United States Attorney Donoghue. “I commend our prosecutors and the Special Agents in this case for their relentless work following the money trail here and abroad in order to disrupt this criminal scheme.”
“Those arrested today allegedly employed an international money laundering scheme relying on the complexities of global trade, and the use of their businesses here in New York and in Florida, to launder millions of dollars for transnational drug traffickers and other bad actors,” stated HSI Special Agent-in-Charge Melendez. “This investigation exemplifies HSI’s efforts in securing the integrity of our country’s trade and financial systems, and the importance of law enforcement partnerships here and abroad.”
“Special Agents of IRS-CI are experts in identifying and uncovering criminal violations with a financial aspect whether committed at home or abroad as alleged in the indictment,” stated IRS-CI Special Agent-in-Charge Robnett.
As alleged in the indictment and other court documents, family-owned businesses operated by the defendants on Long Island and in Miami were used to launder millions of dollars in illegal drug proceeds between the United States and South America. Enayatullah Khwaja was the owner and manager of Tronix Telecom Corp., an electronics and mobile phone import-export company with an office in Miami. Enayatullah Khwaja managed the company from his home in Farmingdale. The defendants took in bulk cash deliveries from drug dealers and disguised the transfer of money through the actual and purported purchase and export of mobile phones. The government’s investigation included extensive court-ordered wiretaps of the defendants, as well as undercover federal agents posing as drug dealers.
The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted, the defendants face a maximum sentence of 20 years’ imprisonment.
The government’s case is being handled by the Office’s Long Island Criminal and Civil Divisions. Assistant U.S. Attorneys Charles P. Kelly, Burton T. Ryan, Jr. and Madeline O’Connor are in charge of the prosecution.
The Defendants:
ENAYATULLAH KHWAJA (also known as “Nat”)
Age: 45
Farmingdale, N.Y.ABDULRAHMAN KHWAJA
Age: 62
Syosset, N.Y.RANA RAHIMI
Age: 48
Farmingdale, N.Y.SHIKEBA RHAMATZADA
Age: 45
Farmingdale, N.Y.ROBERTO SAENZ
Age: 36
Miami, FloridaMAYNOR MELENDEZ-MENDOZA
Age: 33
Miami, FloridaNASEEM BOKHARI (also known as “Sammy”)
Age: 59
Miami, FloridaE.D.N.Y. Docket No. 18-CR-607(JFB)
Chief Executive Officer and Associates Indicted for Orchestrating Multi-Million Dollar Stock Manipulation Scheme Involving a Publicly Traded CompanyRead the Press Release
An indictment was unsealed today in federal court in Central Islip charging Christian Romandetti, Sr., the Chief Executive Officer of First Choice Healthcare Solutions, Inc (FCHS), a publicly traded company based in Melbourne, Florida, and his associates Frank Sarro, Jeffrey Miller and Mark Burnett, with conducting a pump and dump scheme in coordination with Elite Stock Research (ESR), a boiler room, to defraud investors in FCHS that operated in Plainview, New York. The charges include conspiracies to commit securities fraud, wire fraud and money laundering, and substantive securities fraud.
Miller and Burnett will be arraigned this afternoon before Magistrate Judge Anne Y. Shields, at the federal courthouse in Central Islip. Romandetti’s and Sarro’s initial appearance for removal proceedings to the Eastern District of New York is scheduled for this afternoon at the federal courthouse in Orlando, Florida.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the charges.
“As alleged, the defendants conducted a classic pump and dump scheme designed to defraud the investing public, many of whom were senior citizens, by pressuring them to purchase shares of the manipulated stock,” stated United States Attorney Donoghue. “Today’s arrests show our continuing commitment to protect investors and hold accountable those who abuse our financial markets in order to line their own pockets.” Mr. Donoghue expressed his grateful appreciation to the United States Securities and Exchange Commission for their significant cooperation and assistance in the investigation.
As alleged in the indictment, between May 2013 and June 2016, the defendants, together with others, engaged in a multi-million dollar scheme to defraud investors in FCHS, many of whom were elderly, by artificially controlling the price and volume of traded shares in the FCHS by artificially generating price movements and trading volume in the shares, and by including material misrepresentations and omissions in their communications with victim investors about FCHS stock. The defendants promoted the stocks primarily through cold-call campaigns and circulation of a newsletter. The defendants fraudulently concealed their control of FCHS shares by holding them in brokerage accounts in the names of other individuals or entities. The defendants then laundered over $3 million in proceeds of the foregoing stock manipulation scheme.
The charges announced today are allegations, and the defendants are presumed innocent unless and until proven guilty.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorney Charles N. Rose is in charge of the prosecution.
The Defendants:
CHRISTIAN ROMANDETTI, SR.
Age: 58
Indialantic, FloridaFRANK SARRO
Age: 63
Palm Bay, FloridaJEFFREY MILLER
Age: 63
Bellmore, New YorkMARK BURNETT
Age: 59
Roslyn, New YorkE.D.N.Y. Docket No. 18-CR-614 (SJF)
Brooklyn Businessman Pleads Guilty to Defrauding Investors through Two Initial Coin OfferingsRead the Press Release
Earlier today, in federal court in Brooklyn, Maksim Zaslavskiy pleaded guilty before United States Magistrate Judge Ramon E. Reyes, Jr., to conspiracy to commit securities fraud in connection with two Initial Coin Offerings (ICOs) – REcoin Group Foundation, LLC (REcoin) and DRC World, Inc., also known as Diamond Reserve Club (Diamond).
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the guilty plea.
“The calculated lies of Zaslavskiy and others led unsuspecting investors who thought they were purchasing cryptocurrency securities to buy worthless certificates,” stated United States Attorney Donoghue. “This Office will continue to aggressively prosecute those who exploit and defraud investors, whether through traditional means of securities fraud, or new forms – such as the use of purported cryptocurrency offerings and blockchain technology.” Mr. Donoghue extended his grateful appreciation to the Securities and Exchange Commission (SEC), New York Regional Office, for their assistance in this case.
“Criminals who manipulate and defraud the public for their own personal financial gain undermine the stability and security of our investment markets,” stated FBI Assistant Director-in-Charge Sweeney. “Investing often involves risk, but nobody should be at risk of being preyed upon by unscrupulous individuals. Zaslavskiy and his associates cloaked old-fashioned criminal schemes in the language of new currency in order to take advantage of investors, and as today’s conviction demonstrates, the FBI will continue to pursue any individual who seeks to profit by exploiting others.”
As he admitted at his guilty plea and as detailed in court documents, Zaslavskiy fraudulently marketed RECoin as “The First Ever Cryptocurrency Backed by Real Estate,” and subsequently touted Diamond as an “exclusive and tokenized membership pool” hedged by diamonds. In reality, Zaslavskiy bought neither real estate nor diamonds, and the certificates he sent to investors were not backed by the promised blockchain technology. In furtherance of his scheme, Zaslavskiy falsely advertised that REcoin had a “team of lawyers, professionals, brokers and accountants” who would invest the proceeds from the REcoin ICO into real estate, that 2.8 million REcoin tokens had been sold (only about 1,000 investors paid for REcoin tokens) and that the investment in Diamond tokens was “hedged by physical diamonds.”
Earlier this year, United States District Court Judge Raymond J. Dearie denied Zaslavskiy’s motion to dismiss the indictment. Zaslavskiy asserted that the securities laws did not apply to cryptocurrency offerings and were unconstitutionally vague. The court upheld the validity of the laws, noting that “there can be no serious debate” that the indictment was sufficient. The court further held that a jury was entitled to decide if REcoin and Diamond tokens were securities. “Stripped of the 21st-century jargon,” the court wrote, referring to Zaslavskiy’s ICO marketing solicitations, the indictment described a “scam, replete with common characteristics of many financial frauds.” The court added, “simply labeling an investment opportunity as ‘virtual currency’ or ‘cryptocurrency’ does not transform an investment contract—a security—into a currency,” and does not, therefore, remove the offerings from the ambit of securities law.
When sentenced, Zaslavskiy faces up to five years’ imprisonment. In addition to the criminal charges filed by this Office, the SEC has filed civil charges against Zaslavskiy. The civil case was stayed pending resolution of the criminal matter.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Julia Nestor and Andrey Spektor are in charge of the prosecution.
The Defendant:
MAKSIM ZASLAVSKIY
Age: 39
Brooklyn, New YorkE.D.N.Y. Docket No. 17-CR-647 (S-1) (RJD)
15 Defendants Arrested for Trafficking Crack Cocaine throughout the East End of Long IslandRead the Press Release
Earlier today, three separate indictments were unsealed in federal court in Central Islip charging 12 defendants as part of a coordinated federal and state takedown of several large-scale crack cocaine distribution operations in various areas of the East End of Long Island. In addition, one defendant was charged in a complaint with possession of a firearm in furtherance of drug trafficking and possession of crack cocaine. The defendants facing federal charges were arrested today, arraigned this afternoon before United States Magistrate Judges Anne Y. Shields and Steven I. Locke, and all ordered detained pending trial. Two additional defendants were arrested on related New York state drug charges by members of the East End Drug Task Force. Three federal defendants remain fugitives.
Richard P. Donoghue, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), Timothy Sini, District Attorney, Suffolk County District Attorney’s Office (SCDA), Geraldine Hart, Commissioner, Suffolk County Police Department (SCPD), George P. Beach II, Superintendent, New York State Police (NYSP), David Heggermiller, Chief, Riverhead Police Department (RPD) and Ashan M. Benedict, Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives, New York Field Office (ATF), announced the charges.
“The toxic mix of street gangs, drug dealing and illegal firearms poses a direct threat to the safety of our citizens and our community,” stated United States Attorney Donoghue. “The Eastern District and our law enforcement partners in the FBI, ATF and Suffolk County will continue to target, penetrate and destroy criminal gangs that inflict addiction, violence and grief on the people of Suffolk County.” Mr. Donoghue expressed his grateful appreciation to the NYSP Troop L and its Commander, Major David C. Candelaria, for their assistance in the investigation.
“The epidemic of illegal drugs and associated criminal activity negatively affects individuals and communities across the country, from every background and walk of life,” stated FBI Assistant Director-in-Charge Sweeney. “As these arrests today demonstrate, the FBI’s Long Island Gang Task Force, along with our federal, state and local partners, will not rest until the individuals and criminal networks responsible for creating this atmosphere of lawlessness and violence are held accountable for their alleged crimes.”
“The defendants as alleged, were part of a ring made up of gang members that spread dangerous narcotics throughout their communities, stated ATF Special Agent-in-Charge Benedict. “ATF stands with our law enforcement partners as a united front to prevent these illegal narcotics rings from harming our citizens. I would like to thank the United States Attorney’s Office and the District Attorney’s office for their work in prosecuting the case.”
“Because of the great collaboration among federal, state and local law enforcement, the East End of Long Island is safer,” stated Suffolk County District Attorney Sini. “My office will continue to work tirelessly with all of our law enforcement partners to eradicate violent street gangs from our communities. I want to particularly applaud the outstanding work done by my office’s East End Drug Task Force and the prosecutors in the Eastern District of New York.”
“The importance of working with our law enforcement partners is evident in the results of the takedown of these crack cocaine distribution operations,” stated SCPD Commissioner Hart. “These individuals, many of whom are affiliated with the Bloods street gang, have spread narcotics in our communities and have preyed upon the addicted. We will continue to target dealers and dedicate resources to fighting this epidemic.”
“Today’s arrests are the result of an aggressive strategy to stop illegal drug trafficking and keep crack cocaine and other deadly drugs off our streets,” stated NYSP Superintendent Beach. “Together, with our partners in federal, local and state law enforcement, we can and will stop the infiltration of harmful narcotics into our communities and we will continue to work vigilantly to put dangerous individuals like these gang members behind bars.”
“The cooperation between agencies in this investigation is unparalleled,” stated RPD Chief Heggermiller. “Thanks to everyone for their dedication and relentless work protecting our communities here on the East End.”
As alleged in court filings, in early 2018, members of the FBI’s Long Island Gang Task Force and the Suffolk County East End Drug Task Force began conducting an investigation into street gangs and narcotics traffickers operating in and around Riverhead. The defendants, many of whom were members or associates of the Bloods street gang, were involved in the large-scale distribution of crack cocaine. Several of the defendants would “cook” powder cocaine into crack cocaine, to increase its potency and street value. In one instance, while a defendant was cooking cocaine, a child was present in the residence. Members of law enforcement executed search warrants at multiple locations today, recovering seven firearms, including an AR-15 rifle, three kilograms of cocaine, four pounds of marijuana, a quantity of crack cocaine and heroin and $10,000 in cash.
The charges in the indictments are allegations, and the defendants are presumed innocent unless and until proven guilty.
This case is part of Project Safe Neighborhoods (PSN), a program bringing together all levels of law enforcement and the communities they serve to reduce violent crime and make our neighborhoods safer for everyone. The Department of Justice reinvigorated PSN in 2017 as part of the its renewed focus on targeting violent criminals, directing all U.S. Attorney’s Offices to work in partnership with federal, state, local and tribal law enforcement and the local community to develop effective, locally based strategies to reduce violent crime.
The federal cases are being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Nicole Boeckmann and Michael Maffei are in charge of the prosecution.
The Defendants:
Terrill Latney (also known as “Motis” and “Mo”)
Age: 39
Riverhead, New YorkRomaine Hopkins (also known as “Foo”)
Age: 36
Riverhead, New YorkMatthew Pittma (also known as “Pearl”)
Age: 43
Southampton, New YorkKenneth Belcher (also known as “KB”)
Age: 31
Riverhead, New YorkKotarra jackson (also known as “Red”)
Age: 36
Riverhead, New YorkJohn Gamble (also known as “Bones”)
Age: 37
Shirley, New YorkRandy Smith
Age: 33
Riverhead, New YorkDeon Shorter
Age: 22
Mastic, New YorkE.D.N.Y. Docket No. 18-CR-606 (JS)
Tramaine Brown (also known as “Bootsie”)
Age: 29
Jamesport, New YorkQuandol Lewis
Age: 34
Riverhead, New YorkDemario Weston (also known as “MK”)
Age: 34
Riverhead, New YorkE.D.N.Y. Docket No. 18-CR-604 (JS)
Dayna Barrow (also known as “SI”)
Age: 35
Riverhead, New YorkE.D.N.Y. Docket No. 18-CR-605 (JFB)
Daniel Harris
Age: 25
Riverhead, New YorkE.D.N.Y. 18-MJ-1112
Long Island MS-13 Gang Member Pleads Guilty to Murder and Assault ChargesRead the Press Release
Earlier today, in federal court in Central Islip, Mario Aguilar-Lopez, a member of the Sailors Locos Salvatruchas Westside (Sailors) clique of the La Mara Salvatrucha street gang, also known as the MS-13, pleaded guilty to murder and assault charges relating to his participation in the January 30, 2017 murder of Esteban Alvarado-Bonilla, whom he suspected of being a rival 18th Street gang member, and shooting of an innocent bystander, “Jane Doe.” The guilty plea was entered before United States District Judge Joseph F. Bianco. When sentenced, the defendant faces up to life imprisonment for the murder, 20 years for the assault and deportation from the United States.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), Geraldine Hart, Commissioner, Suffolk County Police Department (SCPD), and Patrick J. Ryder, Commissioner, Nassau County Police Department (NCPD), announced the guilty plea.
“Aguilar-Lopez committed a deliberate, cold-blooded broad daylight murder in the name of MS-13, shooting a suspected rival gang member from behind and seriously wounding an innocent bystander who was simply working her job,” stated United States Attorney Donoghue. “The Eastern District of New York and our law enforcement partners will continue to relentlessly investigate and prosecute MS-13 and other gangs until our communities are rid of this menace.”
“Global criminal enterprises like MS-13 thrive by terrorizing communities with fears of violence, intimidation, and retribution,” stated FBI Assistant Director-in-Charge Sweeney. “When Aguilar-Lopez decided to serve as judge, jury, and executioner in carrying out MS-13’s version of vigilante justice in killing a rival gang member, he also put the lives of innocent bystanders at risk. As today’s conviction demonstrates, the FBI’s Long Island Safe Streets Gang Task Force will continue to hold violent gangs and murderers fully accountable for their actions, and work to ensure safety and peace of mind for our citizens and communities.”
“This guilty plea will ensure that yet another violent member of MS-13 will be imprisoned for his senseless crimes,” stated SCPD Commissioner Hart. “The Suffolk County Police Department will continue to work with our law enforcement partners and combine resources to aggressively target gang members who have no regard for human life. I would like to thank the Eastern District of New York for their unwavering commitment to prosecute gang members and our partners at the FBI Long Island Gang Task Force as we work together to eradicate MS-13 in Suffolk County.”
“The guilty plea of defendant Aguilar-Lopez to charges of the murder of Esteban Alvardo-Bonilla and the shooting of another victim is a clear example of how law enforcement has been instrumental in removing MS-13 members from our streets and incarcerating them,” stated NCPD Commissioner Patrick Ryder. “Our residents and communities are safer due to all associated agencies working side by side to combat gang violence and I would like to congratulate all of the investigators who dedicated themselves to this case.”
According to prior court filings and statements made during today’s guilty plea, on the day of the murder, a member of the Sailors clique saw Alvarado-Bonilla inside El Campesino Deli in Central Islip. Believing that Alvarado-Bonilla was a rival 18th Street gang member, the Sailors decided to kill him. Aguilar-Lopez and two MS-13 associates drove to the deli. Aguilar-Lopez entered, approached Alvarado-Bonilla from behind and shot him multiple times, killing him. One of the bullets traveled through Alvarado-Bonilla’s head and hit a deli employee standing directly in front of him, seriously injuring her. Aguilar-Lopez and the other gang associates then fled the scene. The wounded store employee was taken to a local hospital for treatment and survived.
Today’s guilty plea is the latest in a series of federal prosecutions by the United States Attorney’s Office for the Eastern District of New York targeting members of the MS-13, a violent international criminal organization. The MS-13’s leadership is based in El Salvador and Honduras, but the gang has thousands of members across the United States, comprised primarily of immigrants from Central America. With numerous branches, or “cliques,” the MS-13 is the largest and most violent street gang on Long Island. Since 2003, hundreds of MS-13 members, including dozens of clique leaders, have been convicted on federal felony charges in the Eastern District of New York. A majority of those MS-13 members have been convicted on federal racketeering charges for participating in murders, attempted murders and assaults. Since 2010, this Office has obtained indictments charging MS-13 members with carrying out more than 45 murders in this district, and has convicted dozens of MS-13 leaders and members in connection with those murders. These prosecutions are the product of investigations led by the FBI’s Long Island Gang Task Force, comprising agents and officers of the FBI, SCPD, NCPD, Bureau of Alcohol, Tobacco, Firearms and Explosives, Nassau County Sheriff’s Department, Suffolk County Probation, Suffolk County Sheriff’s Office, Rockville Centre Police Department and the New York State Police.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys John J. Durham, Paul G. Scotti, Raymond A. Tierney, Justina L. Geraci and Michael T. Keilty are in charge of the prosecution.
The Defendant:
MARIO AGUILAR-LOPEZ (also known as “Cuchumbo” and “Flexible”)
Age: 20
Brentwood, New YorkE.D.N.Y. Docket No. 16-CR-403 (S-6) (JFB)
Brooklyn Man Convicted of Kidnapping and Extortion ConspiracyRead the Press Release
Following six days of trial, a federal jury in Brooklyn today returned a guilty verdict against Mark Krivoi on all four counts of an indictment charging him with kidnapping, kidnapping conspiracy, extortion and extortion conspiracy in connection with the violent assault of a teenage victim who had started a cleaning business that competed with a similar business operated by Krivoi’s co-defendant Ruslan Reizin. Krivoi faces up to 20 years’ imprisonment on each count when he is sentenced by United States District Judge Eric N. Vitaliano. Reizin pleaded guilty to the same four counts on October 4, 2018.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the verdict.
“As found by the jury, Krivoi provided the muscle in the vicious shakedown of a young man who was threatened and beaten simply for starting a competing business,” stated United States Attorney Donoghue. “Using violence to intimidate a business competitor will never be tolerated in our community. I commend the FBI Special Agents and our prosecutors for responding swiftly and effectively to the victim’s complaint resulting in today’s verdict.” Mr. Donoghue also expressed his grateful appreciation to the agents and detectives of U.S. Customs and Border Protection and the New York City Police Department.
The evidence presented at trial showed that Krivoi and Reizin, who are cousins, participated in a violent extortion conspiracy targeting the 19-year-old victim after he had left Reizin’s employ to start his own power-washing business. Reizin warned the victim that he was not permitted to work in Brooklyn and demanded a meeting with him to resolve the issue. On May 22, 2017, Krivoi and Reizin drove the victim to a secluded location in Sheepshead Bay. Reizin held the victim at knifepoint and warned him that Krivoi was a “soldier” in “Bratva,” a local motorcycle club that’s name means “brotherhood” in Russian. Reizin demanded $10,000 from the victim and when the victim replied that he could not afford to pay that amount, Reizin turned to Krivoi and uttered a Russian word that means “go.” Krivoi repeatedly punched the victim knocking him to the ground. Krivoi threatened to kill the victim and bury him on the spot. The victim agreed to pay $5,000, but then contacted the FBI.
The government’s case is being handled by the Office’s Organized Crime and Gang Section. Assistant United States Attorneys Matthew J. Jacobs and Andrey Spektor are in charge of the prosecution.
The Defendant:
MARK KRIVOI (also known as “Igor”)
Age: 55
Brooklyn, New YorkE.D.N.Y. Docket No. 18-CR-100 (ENV)
Government Forfeits More Than $143 Million in Fraud Proceeds Seized from David H. BrooksRead the Press Release
Earlier today, U.S. District Judge Joanna Seybert entered an order forfeiting more than $143 million in assets that had been seized from David H. Brooks, the now-deceased founder and former Chief Executive Officer of DHB Industries, Inc. (DHB), a supplier of body armor to the U.S. military and law enforcement agencies. In 2010, following an eight-month trial, Brooks was convicted of mail and wire fraud, securities fraud and obstruction of justice. He subsequently pleaded guilty to filing false tax returns. The Court had ordered the seized assets to be used to pay forfeiture and victim restitution as part of Brooks’s sentence. Brooks appealed his fraud convictions and sentence, but died in prison while that appeal was pending. As a result, his fraud convictions and sentence were vacated. The seized assets, however, remained restrained in a parallel civil forfeiture action previously filed by the government. Pursuant to a global settlement agreement reached in the civil forfeiture action, the forfeited assets will be made available to compensate close to 90 percent of the approved losses suffered by thousands of investor victims and by DHB’s successor, SS Body Armor I, Inc. (SSBA), through the remission process administered by the Department of Justice (DOJ).
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the forfeiture.
“This case demonstrates the critical role that civil forfeiture plays in depriving criminals of their ill-gotten gains and putting those funds back in the hands of victims,” stated United States Attorney Donoghue. “Brooks’s sentence – which justly included criminal forfeiture and victim restitution – was frustrated for reasons having nothing to do with his well-established guilt. While justice may have been delayed, it will not be denied. Our Office remains dedicated to vindicating the rights of victims and insuring that crime does not pay.” Mr. Donoghue thanked the Internal Revenue Service (IRS) and the U.S. Marshals Service for their assistance in this case.
“Brooks was rightfully sentenced to a lengthy prison term and ordered to pay more than $90 million in victim restitution following his conviction, but, due to circumstances out of the government’s control, the restitution order was abated,” stated FBI Assistant Director-in-Charge Sweeney. “Today’s civil forfeiture order effectively reinstates the financial sanctions imposed on Brooks and will allow the government to compensate Brooks’s victims for the bulk of their losses. Through these type of civil forfeiture actions, the FBI will continue to seek justice for victims and remind criminals that their misdeeds will not be rewarded.”
As proven at his criminal trial, Brooks committed a series of fraud schemes that were varied and pervasive. Brooks, along with his co-conspirators, manipulated DHB’s books and records and then lied to auditors in an effort to cover-up the schemes. In late 2004, by which time the accounting fraud had inflated the price of DHB stock to over $20 per share, Brooks began selling millions of DHB shares, netting him over $185 million. After these insider sales, the price of DHB stock fell to pennies on the dollar and the stock was de-listed from the American Stock Exchange. In another scheme, Brooks looted DHB by using corporate funds to finance his family’s lavish lifestyle, including a multi-million-dollar bat mitzvah party for his daughter, vacations in exotic locations and cosmetic surgery.
In August 2013, Brooks was sentenced to 17 years in prison. As part of his sentence, the Court ordered Brooks to: forfeit approximately $65 million; pay an $8.7 million fine; pay approximately $2.9 million in restitution to the IRS; and pay approximately $91.5 million in restitution to thousands of investor victims and to SSBA, which sought bankruptcy protection in the wake of Brooks’s fraud. The forfeiture and restitution were to be satisfied from the assets that the government seized from Brooks, including funds in accounts at a number of financial institutions, foreign currency, gold Krugerrands, luxury cars, jewelry and a commissioned replica of the famous Wall Street “Charging Bull” statue.
Brooks died in prison in October 2016. In September 2017, the Second Circuit Court of Appeals ruled that Brooks’s obligation to pay approximately $91.5 million in victim restitution abated because he died before the completion of his appeal. With the abatement of the restitution order, along with the fraud convictions, forfeiture and fine, Brooks’s death effectively erased more than $165 million in criminal penalties and victim restitution. Brooks’s tax convictions and tax restitution order, however, survived his death as they were based on his guilty plea to separate tax charges.
Following Brooks’s death, the government prosecuted its civil forfeiture action, which was not abated, against the seized assets. The civil forfeiture action proceeded on many of the same fraud allegations presented in the criminal case as well as on allegations that Brooks and his family laundered the fraud proceeds through a web of trusts, tax shelters and shell companies that Brooks created and placed in his family members’ names. The global settlement resolves the civil forfeiture action as well as other litigation involving Brooks’s victims and the Securities and Exchange Commission.
The forfeiture of more than $143 million represents the largest civil forfeiture recovery by the U.S. Attorney’s Office for the Eastern District of New York. Pursuant to the remission process, the DOJ has exercised its discretion to use the forfeited assets to compensate victims. It is expected that the funds to be remitted to investors and SSBA will reimburse these victims for approximately 90 percent of their DOJ-approved losses. The settlement further provides for the full payment of the approximately $2.9 million tax restitution order to the IRS.
The government’s case was prosecuted by Assistant United States Attorneys Laura D. Mantell, Tanya Y. Hill, Karin Orenstein and Artemis Lekakis.
E.D.N.Y. Docket No. 10-CV-4750
Queens Resident Sentenced to 30 Months’ Imprisonment for Smuggling Counterfeit Apparel into the United States from ChinaRead the Press Release
Earlier today, in federal court in Brooklyn, Su Ming Ling, a resident of Queens, New York, was sentenced by United States District Judge Carol Bagley Amon to 30 months’ imprisonment and ordered to pay $12,905.67 in restitution for one count of fraudulent importation and transportation of goods and one count of conspiracy to traffic in counterfeit goods. The charges arose out of Ling’s participation in a scheme to import more than 200 shipping containers of counterfeit brand-name apparel from the People’s Republic of China. In aggregate, the counterfeit apparel imported by the defendant and his co-conspirators between May 2013 and January 2017, if sold in the United States as genuine, would have retailed for an estimated $297 million. Ling pleaded guilty to the charge on January 5, 2018.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Brian Michael, Special-Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) Newark Division, and Troy Miller, Director, U.S. Customs and Border Protection (CBP), New York Field Office, announced the sentence.
“With today’s sentence, Ling has been held responsible for illegally importing millions of dollars’ worth of knockoff goods that displace consumer demand for companies’ genuine products,” stated United States Attorney Donoghue. “This Office is committed to prosecuting counterfeit traffickers like the defendant whose criminal conduct causes harm to the American economy.”
“Homeland Security Investigations (HSI) is committed to ensuring the integrity of the legitimate trade, travel and financial systems of the United States,” stated HSI Special Agent-in-Charge Michael. “This defendant smuggled massive amounts of counterfeit goods into the country, harming legitimate businesses and shortchanging consumers who thought they were getting authentic products. HSI aggressively targets transnational criminal organizations that profit from smuggling counterfeit merchandise, seizing their illicit goods and arresting those responsible.”
“These seizures by U.S. Customs and Border Protection provided the critical link to an ongoing investigation that resulted in the takedown of an elaborate criminal enterprise,” stated CBP Director Miller. “It is through our interagency partnerships, and collaborative approaches like the one leading to today’s sentence, that law enforcement successfully combats modern criminal organizations.”
The 211 shipping containers Ling smuggled into the United States included counterfeit goods, such as Nike shoes, UGG boots and NFL jerseys. As part of the scheme, Ling used aliases to register and create numerous Internet domain names and email addresses that resembled the Internet domain names of real U.S. businesses. Ling also hired CBP-licensed customs brokers to file customs entry forms on behalf of the businesses whose identities he had stolen and provided those customs brokers with falsified shipping documents. The counterfeit goods were distributed to locations in Brooklyn, Queens and New Jersey, among other areas.
The government’s case is being handled by the Office’s National Security and Cybercrime Section. Assistant United States Attorneys Ian C. Richardson and Alexander Mindlin are in charge of the prosecution.
The Defendant:
SU MING LING
Age: 50
Middle Village, New YorkE.D.N.Y. Docket No. 17-CR-541
Long Island Member of Outlaws Street Gang Sentenced to 20 Years’ Imprisonment for MurderRead the Press Release
Earlier today, at the federal courthouse in Central Islip, Pedro Merchant, a member of the Outlaws street gang, was sentenced by United States District Judge Joseph F. Bianco to 20 years’ imprisonment for shooting and killing 17-year-old Dante Quinones during a dispute over gang allegiance. Merchant pled guilty in April 2018.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Patrick J. Ryder, Commissioner, Nassau County Police Department (NCPD), announced the sentence.
“With today’s sentence Merchant is being held accountable for the senseless act he committed—taking a human life in the name of his gang, which also put an entire community on Long Island in danger,” stated United States Attorney Donoghue. “This Office, together with our law enforcement partners, remains committed to dismantling all gangs on the streets of Long Island.”
“In the midst of the Outlaws’ declared war on a rival gang, Merchant shot and killed his victim and, at the same time, put the lives of innocent people in danger,” stated FBI Assistant Director-in-Charge Sweeney. “With today’s sentence, Merchant is held accountable for his crime, and the people of Hempstead and surrounding Long Island communities can rest assured he will no longer be a threat to their collective safety.”
“Nassau County is no place for the illegal and dangerous actions of gang members, in particular, Pedro Merchant,” stated NCPD Commissioner Ryder. “This defendant has placed innocent residents in harm’s way during the murder of a rival gang member. Today’s sentence should send a stern message that the collaborative efforts of law enforcement will prevail to keep our communities safe.”
On September 11, 2013, Merchant and fellow Outlaws gang members confronted Quinones on Dartmouth Street in Hempstead, to determine where Quinones’ allegiance lay between the Outlaws gang and their rivals, the Bloods. During the confrontation, Merchant pulled out a handgun and shot Quinones several times at close range, killing him.
In the wake of Quinones’ murder, a yearlong violent gang war with numerous shootings ensued between the Outlaws and the Bloods in Hempstead. Merchant was tried and acquitted of murdering Quinones in 2015 in a Nassau County trial marked by witness intimidation by Merchant’s associates. Following the acquittal, Merchant and six additional members and associates of the Outlaws and six members of the Bloods were charged federally in this district for their participation in the violent gang war. To date, the following individuals have been sentenced or pleaded guilty:
- Everett Brown, an associate of the Outlaws, was sentenced to 10 years’ imprisonment following his guilty plea to discharging a firearm during a crime of violence for his role in one of three shootings of rivals’ homes committed by the gang on August 19, 2014.
- Philip Saunders, a member of the Bloods, was sentenced to 12 years’ imprisonment following his guilty plea to discharging a firearm during a crime of violence for his role in a May 9, 2014 assault of a rival gang member.
- Khalil Brown and Naree Barnes, members of the Bloods, were each sentenced to 10 years’ imprisonment following their guilty pleas to discharging firearms during a crime of violence for shooting at a rival gang member on October 21, 2014.
- Billy McLen, a member of the Bloods, pled guilty to attempted murder in-aid-of racketeering and discharging a firearm during a crime of violence and is awaiting sentence. When sentenced, McLen faces a minimum of 10 years in prison and a maximum term of life.
- Alton Gore, also known as “A-Murder,” a leader of the Outlaws in Hempstead, pled guilty to assault in-aid-of racketeering and discharging a firearm during a crime of violence and is awaiting sentence. When sentenced, Gore faces a minimum of 10 years in prison and a maximum term of life.
- Jonathan Mayzick, a member of the Bloods charged with racketeering, conspiracy to murder and assault rival gang members with dangerous weapons and attempted murder and attempted assault with dangerous weapons, is awaiting trial.
The government’s case against Merchant is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Nicole Boeckmann, Christopher Caffarone and Michael Maffei are in charge of the prosecution.
The Defendant:
PEDRO MERCHANT (also known as “Dro”)
Age: 25
Valley Stream, New YorkE.D.N.Y. Docket No. 16-CR-322 (S-1) (JFB)
Long Island Man Sentenced to 46 Months in Prison for Conspiracy to Distribute OxycodoneRead the Press Release
Earlier today, at the federal courthouse in Central Islip, Terrance Belford was sentenced by United States District Judge Joanna Seybert to 46 months in prison following his guilty plea in May 2018 to conspiracy to distribute oxycodone, a Schedule II controlled substance. Belford was arrested in June 2017 for his participation in an oxycodone distribution ring active on Long Island.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Keith Kruskall, Acting Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division, announced the sentence.
“Today’s sentence reflects the seriousness of Belford’s crime, using stolen prescription forms to feed the opioid epidemic and enrich himself, then blatantly discussing the price and availability of his illegal drugs on Facebook,” stated United States Attorney Donoghue. “This Office will continue to vigorously prosecute opioid dealers like the defendant.” Mr. Donoghue expressed his gratitude to all the alert and responsible pharmacists nationwide, including those in Enterprise, Alabama, whose reports of a suspicious prescription form presented by Belford were integral to the success of this prosecution.
“Today, my office will use social media and tweet about today’s sentencing, much like the defendant’s use of Facebook to broadcast his drug deals,” stated Acting Special Agent-in-Charge Kruskall. “DEA’s message is very clear- if you deal drugs, you go to jail. I commend the men and women on the LIDO—TDS and Eastern District of New York for their diligent work on this case and many others targeting opioid traffickers.”
According to court filings and facts presented during the plea proceeding, beginning in late 2016 and continuing into early 2017, Belford and his co-conspirators filled out stolen prescription forms and used them to obtain controlled substances, typically 30 milligram oxycodone tablets, which they then sold at a substantial profit. In December 2016, Belford attempted to fill one of the stolen prescriptions in Enterprise, Alabama, under a false name. An employee of the pharmacy refused to fill the prescription and called the local police, resulting in Belford’s arrest.
Belford boasted on Facebook of his ability to obtain multiple controlled substances unlawfully, including oxycodone, powder cocaine and crack cocaine. He also stated on Facebook that had he not been intercepted in Alabama, he would have profited $10,000 by reselling oxycodone acquired with fraudulent prescriptions.
This case was investigated by the DEA’s Long Island Tactical Diversion Squad comprising agents and officers of the DEA, Nassau County Police Department, Rockville Centre Police Department, Suffolk County Police Department, Port Washington Police Department and Internal Revenue Service.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorney J. Matthew Haggans is in charge of the prosecution.
The Defendant:
TERRANCE BELFORD
Age: 36
Bellport, New YorkE.D.N.Y. Docket No. 17-CR-399 (JS)
Malaysian Financier Low Taek Jho, Also Known as “Jho Low,” and Former Banker Ng Chong Hwa, Also Known as “Roger Ng,” Indicted for Conspiring to Launder Billions of Dollars in Illegal Proceeds and to Pay Hundreds of Millions of Dollars in BribesRead the Press Release
A three-count criminal indictment was unsealed today in federal court in the Eastern District of New York charging Low Taek Jho, 36, also known as “Jho Low,” and Ng Chong Hwa, 51, also known as “Roger Ng,” with conspiring to launder billions of dollars embezzled from 1Malaysia Development Berhad (1MDB), Malaysia’s investment development fund, and conspiring to violate the Foreign Corrupt Practices Act (FCPA) by paying bribes to various Malaysian and Abu Dhabi officials. As part of the three-count indictment, Ng is also charged with conspiring to violate the FCPA by circumventing the internal accounting controls of a major New York-headquartered financial institution (Financial Institution), which underwrote more than $6 billion in bonds issued by 1MDB in three separate bond offerings in 2012 and 2013, while Ng was employed at the Financial Institution as a managing director. Ng was arrested earlier today in Malaysia, pursuant to a provisional arrest warrant issued at the request of the United States. Low remains at large.
Also unsealed today in federal court in the Eastern District of New York was the guilty plea of Tim Leissner, 48, the former Southeast Asia Chairman and participating managing director of the Financial Institution, to a two-count criminal information charging Leissner with conspiring to launder money and conspiring to violate the FCPA by both paying bribes to various Malaysian and Abu Dhabi officials and circumventing the internal accounting controls of the Financial Institution while he was employed by it. According to court filings, Leissner has been ordered to forfeit $43.7 million as a result of his crimes.
Principal Deputy Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Richard P. Donoghue for the Eastern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI New York Field Office, and Special Agent in Charge R. Damon Rowe of IRS Criminal Investigation (IRS-CI) Los Angeles Field Office announced the charges.
The Criminal Scheme
1MDB is a Malaysian state-owned and controlled fund created to pursue investment and development projects for the economic benefit of Malaysia and its people. As alleged in court filings, between approximately 2009 and 2014, as 1MDB raised money to fund its projects, billions of dollars were misappropriated and fraudulently diverted from 1MDB, including funds 1MDB raised in 2012 and 2013 through three bond transactions that it executed with the Financial Institution. As part of the scheme, and as alleged in court filings, Low, Ng, Leissner, and others conspired to bribe government officials in Malaysia, including at 1MDB, and Abu Dhabi to obtain and retain lucrative business for the Financial Institution, including the 2012 and 2013 bond deals. They also allegedly conspired to launder the proceeds of their criminal conduct through the U.S. financial system by purchasing, among other things, luxury residential real estate in New York City and elsewhere, and artwork from a New York-based auction house, and by funding major Hollywood films.
As alleged, Low’s close relationships with high-ranking government officials in Malaysia and Abu Dhabi were central to the scheme. Ng, Leissner, and others at the Financial Institution allegedly knew Low was close to these government officials, including a high-ranking Malaysian government official who had authority to approve 1MDB business decisions (Malaysian Official #1). According to allegations in court filings, beginning in approximately 2009 and continuing through 2014, Low, Ng, Leissner, and the other co-conspirators used Low’s relationships to obtain and retain business for the Financial Institution through the promise and payment of hundreds of millions of dollars in bribes, including to ensure 1MDB awarded the Financial Institution a role on three bond transactions known internally at the Financial Institution as “Project Magnolia,” “Project Maximus,” and “Project Catalyze.” As a result of its work for 1MDB during that time, the Financial Institution allegedly received approximately $600 million in fees and revenues along with increased reputational prestige. At the same time, Ng, Leissner and others allegedly received large bonuses and enhanced their own reputations at the Financial Institution. In total, according to allegations in court filings, more than $2.7 billion was misappropriated from 1MDB and Low, Ng, Leissner and others conspired to launder this money through the U.S. financial system to pay bribes to foreign officials and for the personal benefit of themselves and their relatives.
Project Magnolia
In early 2012, according to allegations in court filings, following a series of meetings in Malaysia and the United Kingdom, Low, Leissner, Ng and the co-conspirators agreed that, with the assistance of the Financial Institution, 1MDB would issue $1.75 billion in bonds guaranteed by an entity wholly-owned and controlled by the government of Abu Dhabi. Low allegedly explained to Ng, Leissner, and others at the time that, to complete the transaction, bribes would need to be paid to officials in Malaysia and Abu Dhabi and hundreds of millions of dollars were allegedly paid to officials in these countries. Court filings also allege that Low, Ng, Leissner, and other co-conspirators knew that Low intended to use funds misappropriated from the bond transaction to bribe and influence the officials to obtain the necessary approvals and any additional assistance to execute Project Magnolia for the Financial Institution and to pay kickbacks to Ng, Leissner, and others.
In or around March 2012, 1MDB allegedly selected the Financial Institution to be the sole bookrunner and arranger for Project Magnolia. As part of the scheme, Low and other co-conspirators allegedly enlisted the assistance of 1MDB officials, promising to pay them bribes and kickbacks. In one instance, as alleged in court filings, in connection with Project Magnolia, Low told one 1MDB official that he would “[g]ive [the official a] big present” when the transaction closed. According to allegations in court documents, the fact that bribes and kickbacks were being paid in connection with Project Magnolia was known to Ng, Leissner, and other employees of the Financial Institution.
After Project Magnolia closed on or about May 21, 2012, more than $500 million of the bond proceeds were allegedly misappropriated and diverted from 1MDB through numerous wire transfers to bank accounts in the name of shell companies beneficially owned and controlled by Low, Leissner, Ng, and other co-conspirators, including a high-level official at the Abu Dhabi entity that guaranteed the Project Magnolia bonds and a close relative of Malaysian Official #1. As alleged, the bond proceeds transferred to Malaysian Official #1’s close relative were later used by the relative’s U.S. motion picture company to assist in the production of the film “The Wolf of Wall Street.”
Project Maximus and Project Catalyze
Court filings further allege that from May 2012 and continuing through 2013, Low, Ng, Leissner, and their co-conspirators continued to work to ensure that the Financial Institution obtained and retained additional 1MDB business, including the bond transactions known as “Project Maximus” and “Project Catalyze,” which transactions generated substantial fees and revenues for the Financial Institution. As alleged, although both transactions were designed to raise more than $4 billion for 1MDB’s investment and development projects, Low, Ng, Leissner, and other co-conspirators used the transactions to further the criminal scheme, ultimately laundering hundreds of millions of dollars of diverted funds from these transactions into bank accounts beneficially owned and controlled by, among others, the co-conspirators, including Low, Leissner and officials in Malaysia and Abu Dhabi. As alleged in court filings, throughout this time, Ng, Leissner, and at least one other employee of the Financial Institution knew that Low would and did pay bribes to influence officials in Malaysia and Abu Dhabi to obtain the necessary approvals to execute Project Maximus and Project Catalyze. Low, Ng, Leissner, and others also allegedly knew that large portions of the bond proceeds would be illegally diverted to themselves and others, including to foreign government officials.
As part of the scheme alleged in court filings, Low, Ng, Leissner and other co-conspirators again used a series of wire transfers to launder billions of dollars of misappropriated and fraudulently diverted funds from Project Maximus and Project Catalyze. Following the close of Project Maximus, approximately $790 million of the bond proceeds was allegedly transferred through a series of shell company accounts beneficially owned and controlled by Low, Leissner and others, including accounts of officials in Malaysia and Abu Dhabi. In particular, Leissner and Ng allegedly caused millions of dollars of these funds to be transferred to accounts of 1MDB officials or relatives of such officials in exchange for their assistance in obtaining and retaining business for the Financial Institution. Over $35 million of the bond proceeds also allegedly was used by a co-conspirator to help acquire a condominium in New York, New York beneficially owned by Low.
Similarly, according to allegations in court filings, after Project Catalyze closed in March 2013, more than $1 billion of diverted funds, traceable to the transaction, were laundered, at Low’s direction, to bank accounts in the name of entities beneficially owned and controlled by Low, Leissner, and others, including 1MDB officials. As alleged, more than $4 million of the funds were transferred to a bank account beneficially owned by a relative of Ng. Additionally, as part of the scheme, Low allegedly used a shell company account to receive more than $1 billion of the Project Catalyze bond proceeds and spent approximately $137 million of these funds to purchase works of art at a high-end art auction house in New York, New York.
Post-Catalyze 1MDB Transactions at the Financial Institution
The Financial Institution continued to seek business from 1MDB after Project Catalyze. As alleged, Leissner and others were particularly focused on securing a role for the Financial Institution on a proposed initial public offering (IPO) of 1MDB’s energy assets. To influence certain officials to award the Financial Institution a role in the proposed IPO, Low and Leissner allegedly continued to pay bribes to certain officials at 1MDB.
For example, as alleged, in an online chat between Low and Leissner in June 2014, Low and Leissner discussed the need to “suck up to” a 1MDB official and to send “cakes” to a person believed to be the wife of Malaysian Official #1. A few months after this chat, a bank account owned and controlled by Leissner and his relative was used to transfer approximately $4.1 million to a high-end New York jeweler, in part, to pay for gold jewelry for the wife of Malaysian Official #1.
The charges in the indictment as to Low and Ng are merely allegations, and those defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
The investigation was jointly conducted by the FBI’s International Corruption Unit and IRS-CI. The government’s criminal case is being handled by the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) and Fraud Section and the Business and Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York. MLARS Trial Attorneys Jennifer E. Ambuehl, Woo S. Lee, and Mary Ann McCarthy, Fraud Section Trial Attorneys Katherine A. Nielsen and Nikhila Raj, and Assistant U.S. Attorneys Jacquelyn M. Kasulis and Drew Rolle of the Eastern District of New York are prosecuting the case. Additional Criminal Division Trial Attorneys and Assistant U.S. Attorneys within U.S. Attorney’s Offices for the Eastern District of New York and Central District of California have provided valuable assistance with various aspects of this investigation, including with civil and criminal forfeitures.
The Criminal Division’s Office of International Affairs provided critical assistance in this case. The Department also appreciates the significant cooperation and assistance provided by the U.S. Securities and Exchange Commission and the Board of Governors of the Federal Reserve System along with the Federal Reserve Bank of New York. The Department also appreciates the significant assistance provided by the Attorney General’s Chambers of Malaysia, the Royal Malaysian Police, the Malaysian Anti-Corruption Commission, the Attorney General’s Chambers of Singapore, the Singapore Police Force-Commercial Affairs Division, the Office of the Attorney General and the Federal Office of Justice of Switzerland, the judicial investigating authority of the Grand Duchy of Luxembourg, and the Criminal Investigation Department of the Grand-Ducal Police of Luxembourg.
The International Unit of the Criminal Division’s MLARS is home to the Kleptocracy Asset Recovery Initiative—a team of dedicated prosecutors working to prosecute individuals and forfeit the proceeds of foreign official corruption that has affected the U.S. financial system and, where appropriate, return those proceeds to benefit the people harmed by these acts of corruption and abuse of office. MLARS’s Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system.
The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to [email protected].
The Defendants:
LOW TAEK JHO and NG CHONG HWA
E.D.N.Y. Docket No. 18-CR-538 (MKB)
TIM LEISSNER
E.D.N.Y. Docket No. 18-CR-439 (MKB)
Malaysian Financier Low Taek Jho, AKA “Jho Low,” and Former Banker Ng Chong Hwa, AKA “Roger Ng,” Indicted for Conspiring to Launder Billions of Dollars in Illegal Proceeds and to Pay Hundreds of Millions of Dollars in Bribes in Connection with 1MDB FundRead the Press Release
BROOKLYN, NY – A three-count criminal indictment was unsealed today in federal court in the Eastern District of New York charging Low Taek Jho, also known as “Jho Low,” and Ng Chong Hwa, also known as “Roger Ng,” with conspiring to launder billions of dollars embezzled from 1Malaysia Development Berhad (1MDB), Malaysia’s investment development fund, and conspiring to violate the Foreign Corrupt Practices Act (FCPA) by paying bribes to various Malaysian and Abu Dhabi officials. As part of the three-count indictment, Ng is also charged with conspiring to violate the FCPA by circumventing the internal accounting controls of a major New York-headquartered financial institution (Financial Institution), which underwrote more than $6 billion in bonds issued by 1MDB in three separate bond offerings in 2012 and 2013, while Ng was employed at the Financial Institution as a managing director. Ng was arrested earlier today in Malaysia, pursuant to a provisional arrest warrant issued at the request of the United States. Low remains at large.
Also unsealed today in federal court in the Eastern District of New York was the guilty plea of Tim Leissner, the former Southeast Asia Chairman and participating managing director of the Financial Institution, to a two-count criminal information charging Leissner with conspiring to launder money and conspiring to violate the FCPA by both paying bribes to various Malaysian and Abu Dhabi officials and circumventing the internal accounting controls of the Financial Institution while he was employed by it. According to court filings, Leissner has been ordered to forfeit $43,700,000 as a result of his crimes.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, John P. Cronan, Principal Deputy Assistant Attorney General of the Department of Justice’s Criminal Division, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and R. Damon Rowe, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation (IRS-CI), Los Angeles Field Office, announced the charges.
The Criminal Scheme
1MDB is a Malaysian state-owned and controlled fund created to pursue investment and development projects for the economic benefit of Malaysia and its people. As alleged in court filings, between approximately 2009 and 2014, as 1MDB raised money to fund its projects, billions of dollars were misappropriated and fraudulently diverted from 1MDB, including funds 1MDB raised in 2012 and 2013 through three bond transactions that it executed with the Financial Institution. As part of the scheme, and as alleged in court filings, Low, Ng, Leissner and others conspired to bribe government officials in Malaysia, including at 1MDB, and Abu Dhabi to obtain and retain lucrative business for the Financial Institution, including the 2012 and 2013 bond deals. They also allegedly conspired to launder the proceeds of their criminal conduct through the U.S. financial system by purchasing, among other things, luxury residential real estate in New York City and elsewhere, and artwork from a New York-based auction house, and by funding major Hollywood films.
As alleged, Low’s close relationships with high-ranking government officials in Malaysia and Abu Dhabi were central to the scheme. Ng, Leissner, and others at the Financial Institution allegedly knew Low was close to these government officials, including a high-ranking Malaysian government official who had authority to approve 1MDB business decisions (Malaysian Official #1). According to allegations in court filings, beginning in approximately 2009 and continuing through 2014, Low, Ng, Leissner and the other co-conspirators used Low’s relationships to obtain and retain business for the Financial Institution through the promise and payment of hundreds of millions of dollars in bribes, including to ensure 1MDB awarded the Financial Institution a role on three bond transactions known internally at the Financial Institution as “Project Magnolia,” “Project Maximus” and “Project Catalyze.” As a result of its work for 1MDB during that time, the Financial Institution allegedly received approximately $600 million in fees and revenues along with increased reputational prestige. At the same time, Ng, Leissner and others allegedly received large bonuses and enhanced their own reputations at the Financial Institution. In total, according to allegations in court filings, more than $2.7 billion was misappropriated from 1MDB and Low, Ng, Leissner and others conspired to launder this money through the U.S. financial system to pay bribes to foreign officials and for the personal benefit of themselves and their relatives.
Project Magnolia
In early 2012, according to allegations in court filings, following a series of meetings in Malaysia and the United Kingdom, Low, Leissner, Ng and the co-conspirators agreed that, with the assistance of the Financial Institution, 1MDB would issue $1.75 billion in bonds guaranteed by an entity wholly owned and controlled by the government of Abu Dhabi. Low allegedly explained to Ng, Leissner and others at the time that, to complete the transaction, bribes would need to be paid to officials in Malaysia and Abu Dhabi and, as alleged, hundreds of millions of dollars were actually paid to officials in these countries. Low, Ng, Leissner and other co-conspirators also knew that Low intended to use funds misappropriated from the bond transaction to bribe and influence the officials to obtain the necessary approvals and any additional assistance needed to execute Project Magnolia for the Financial Institution and to pay kickbacks to Ng, Leissner and others.
In or around March 2012, 1MDB allegedly selected the Financial Institution to be the sole bookrunner and arranger for Project Magnolia. As part of the scheme, Low and other co-conspirators enlisted the assistance of 1MDB officials, promising to pay them bribes and kickbacks. In one instance, as alleged in court filings, in connection with Project Magnolia, Low told one 1MDB official that he would “[g]ive [the official a] big present” when the transaction closed. According to allegations in court documents, the fact that bribes and kickbacks were being paid in connection with Project Magnolia was known to Ng, Leissner and other employees of the Financial Institution.
After Project Magnolia closed on or about May 21, 2012, more than $500 million of the bond proceeds were misappropriated and diverted from 1MDB through numerous wire transfers to bank accounts in the name of shell companies beneficially owned and controlled by Low, Leissner, Ng and other co-conspirators, including a high-level official at the Abu Dhabi entity that guaranteed the Project Magnolia bonds and a close relative of Malaysian Official #1. As alleged, the bond proceeds transferred to Malaysian Official #1’s close relative were later used by the relative’s U.S. motion picture company to assist in the production of the film “The Wolf of Wall Street,” a movie based on a previous Eastern District of New York prosecution.
Project Maximus and Project Catalyze
Court filings further allege that from May 2012 and continuing through 2013, Low, Ng, Leissner and their co-conspirators continued to work to ensure that the Financial Institution obtained and retained additional 1MDB business, including the bond transactions known as “Project Maximus” and “Project Catalyze,” which transactions generated substantial fees and revenues for the Financial Institution. As alleged, although both transactions were designed to raise more than $4 billion for 1MDB’s investment and development projects, Low, Ng, Leissner and other co-conspirators allegedly used the transactions to further the criminal scheme, ultimately laundering hundreds of millions of dollars of diverted funds from these transactions into bank accounts beneficially owned and controlled by, among others, the co-conspirators, including Low, Leissner and officials in Malaysia and Abu Dhabi. As alleged in court filings, throughout this time, Ng, Leissner, and at least one other employee of the Financial Institution knew that Low would and did pay bribes to influence officials in Malaysia and Abu Dhabi to obtain the necessary approvals to execute Project Maximus and Project Catalyze. Low, Ng, Leissner and others allegedly knew that large portions of the bond proceeds would be illegally diverted to themselves and others, including to foreign government officials.
As part of the scheme alleged in court filings, Low, Ng, Leissner and other co-conspirators again used a series of wire transfers to launder billions of dollars of misappropriated and fraudulently diverted funds from Project Maximus and Project Catalyze. As alleged, following the close of Project Maximus, approximately $790 million of the bond proceeds was transferred through a series of shell company accounts beneficially owned and controlled by Low, Leissner and others, including accounts of officials in Malaysia and Abu Dhabi. In particular, Leissner and Ng caused millions of dollars of these funds to be transferred to accounts of 1MDB officials or relatives of such officials in exchange for their assistance in obtaining and retaining business for the Financial Institution. Over $35 million of the bond proceeds also allegedly was used by a co-conspirator to help acquire a condominium in New York, New York beneficially owned by Low.
Similarly, according to allegations in court filings, after Project Catalyze closed in March 2013, more than $1 billion dollars of diverted funds, traceable to the transaction, were laundered, at Low’s direction, to bank accounts in the name of entities beneficially owned and controlled by Low, Leissner and others, including 1MDB officials. As alleged, more than $4 million of the funds were transferred to a bank account beneficially owned by a relative of Ng. Additionally, as part of the scheme, Low used a shell company account to receive more than $1 billion of the Project Catalyze bond proceeds and spent approximately $137 million of these funds to purchase works of art at a high-end art auction house in New York, New York.
Post-Catalyze 1MDB Transactions at the Financial Institution
The Financial Institution continued to seek business from 1MDB after Project Catalyze. As alleged, Leissner and others were particularly focused on securing a role for the Financial Institution on a proposed initial public offering (“IPO”) of 1MDB’s energy assets. To influence certain officials to award the Financial Institution a role in the proposed IPO, Low and Leissner allegedly continued to pay bribes to certain officials at 1MDB.
For example, as alleged, in an online chat between Low and Leissner in June 2014, Low and Leissner discussed the need to “suck up to” a 1MDB official and to send “cakes” to a person believed to be the wife of Malaysian Official #1. A few months after this chat, a bank account owned and controlled by Leissner and his relative was used to transfer approximately $4.1 million to a high-end New York jeweler, in part, to pay for gold jewelry for the wife of Malaysian Official #1.
The charges in the indictment as to Low and Ng are allegations, and those defendants are presumed innocent unless and until proven guilty.
The investigation was jointly conducted by the FBI’s International Corruption Unit and IRS-Criminal Investigation. The government’s criminal case is being handled by the Business and Securities Fraud Section of the United States Attorney’s Office for the Eastern District of New York and the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) and Fraud Section. Assistant United States Attorneys Jacquelyn M. Kasulis and Drew Rolle and Trial Attorneys Jennifer E. Ambuehl, Woo S. Lee, Mary Ann McCarthy, Katherine A. Nielsen and Nikhila Raj are prosecuting the case. Additional Criminal Division Trial Attorneys and Assistant U.S. Attorneys within U.S. Attorney’s Offices for the Eastern District of New York and Central District of California have provided valuable assistance with various aspects of this investigation, including with civil and criminal forfeitures.
The Criminal Division’s Office of International Affairs provided critical assistance in this case. The Department also appreciates the significant cooperation and assistance provided by the U.S. Securities and Exchange Commission, and the Board of Governors of the Federal Reserve System along with the Federal Reserve Bank of New York. The Department also appreciates the significant assistance provided by the Attorney General’s Chambers of Malaysia, the Royal Malaysian Police, the Malaysian Anti-Corruption Commission, the Attorney General’s Chambers of Singapore, the Singapore Police Force-Commercial Affairs Division, the Office of the Attorney General of Switzerland, the Judicial Investigating Authority of the Grand Duchy of Luxembourg, and the Criminal Investigation Department of the Grand-Ducal Police of Luxembourg.
The Defendants:
LOW TAEK JHO
Age: 36NG CHONG HWA
Age: 51E.D.N.Y. Docket No. 18-CR-538 (MKB)
TIM LEISSNER
Age: 48E.D.N.Y. Docket No. 18-CR-439 (MKB)
Defendant Sentenced to 51 Months’ Imprisonment for Defrauding Elderly Victims in Lottery and Sweepstakes ScamsRead the Press Release
Earlier today, in federal court in Brooklyn, Lorindo Powell was sentenced by United States District Judge Margo K. Brodie to 51 months’ imprisonment and ordered to pay $770,632.50 in restitution following Powell’s guilty plea to one count of conspiracy to commit wire and bank fraud and one count of access device fraud for her schemes to defraud elderly victims over the course of more than a decade. In total, Powell stole at least $770,632.50 from her victims. Powell pleaded guilty to the charges in May 2018. A co-defendant, Tavoy Malcolm, pleaded guilty in August 2017 and is awaiting sentencing.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), New York, announced the sentence.
“Powell has now been held to account for targeting vulnerable victims, gaining their trust and stealing their savings,” stated United States Attorney Donoghue. “Elder fraud enforcement is a Department of Justice priority, and this Office will continue to investigate and prosecute criminals who prey on senior citizens.”
“Powell’s actions were shameful as she preyed on the susceptibilities of the elderly, including a couple with dementia and another who was left homeless,” stated HSI Special Agent-in-Charge Melendez. “Elder fraud is of serious concern and law enforcement will continue to investigate, arrest and prosecute those who choose to take advantage of our aging population rather than take care of them.”
In 2009, Powell contacted Jane Doe #1, a 79-year-old teacher in Brooklyn, with a purported opportunity to claim lottery winnings. Powell induced Jane Doe #1 to skip her mortgage payments and make payments to her instead. Powell also persuaded Jane Doe #1 to cash and hand over her paychecks for years. As a result, Jane Doe #1 was evicted from her home in 2011. Powell took control of Jane Doe #1’s retirement account, changing the email address to Powell’s own and impersonating Jane Doe #1 in order to make withdrawals. Jane Doe #1 lost at least $589,000 as a result of Powell’s actions.
Beginning in 2011, Powell induced Jane Doe #3 and her husband, a Maryland couple suffering from dementia, to wire money to Powell and others, purportedly to claim lottery winnings. In total, the two victims lost at least $119,476.50.
In October 2016, Powell defrauded John Doe #1, an 89-year-old man living in Florida, of approximately $23,000 after contacting him about purported sweepstakes winnings.
In between December 2016 and April 2017, Powell obtained Jane Doe #2’s personal identification information by posing as a bank representative and stole over $38,000 by making withdrawals from her checking account and charging purchases to her credit card. At the time, Jane Doe #2, a woman in her 90s, was residing in a New Jersey retirement home.
The government’s case is being prosecuted by Assistant United States Attorney Alexander Mindlin.
The Defendant:
LORINDO POWELL
Age: 30
Brooklyn, New YorkE.D.N.Y. Docket No. 17-CR-311 (MKB)
Mexican National Sentenced to 57 Months in Prison for Illegally Reentering the United States Following DeportationRead the Press Release
Earlier today, in federal court in Central Islip, Rogelio Mendez was sentenced by United States District Judge Sandra Feuerstein to 57 months’ imprisonment for illegally reentering the United States after being deported. After illegally reentering the United States for a second time following his conviction for possessing a loaded firearm, Mendez was convicted in the County Court of Suffolk County of rape. Judge Feuerstein ordered that the sentence imposed today would run consecutively to a 30-month term of imprisonment that Mendez received for his rape conviction.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William Joyce, Acting Field Office Director, U.S. Immigration and Customs Enforcement (ICE), Office of Enforcement and Removal Operations (ERO), New York, announced the sentence.
“Mendez repeatedly showed contempt for the rule of law by reentering the United States twice after he was first deported,” stated United States Attorney Donoghue. “The Department of Justice has made criminal immigration enforcement a priority, and today’s sentence should serve as a deterrent to others who would illegally return to the United States after having been deported.” Mr. Donoghue expressed his appreciation to the Town of Southampton Police Department and the United States Marshals NY/NJ Regional Fugitive Task Force, Long Island Division, for their assistance with the case.
“Mendez had a past criminal history in the U.S. and was removed twice, but then decided to illegally reenter the country only to commit a more heinous crime,” stated ERO Acting Field Office Diriector Joyce. “This man is already incarcerated for his recent rape conviction, and now, thanks for the proactive approach of the men and women of ICE, he will serve a lot more time behind bars for his felony reentry offense.”
According to court filings and facts presented during court proceedings, Mendez, a Mexican citizen, was initially deported from the United States in 2004, after he served a two-year New York State prison term for his conviction for possessing a loaded firearm in Queens, New York. Mendez illegally reentered the United States in 2005 and was deported in March 2009. Mendez again illegally reentered the United States from Mexico in 2010. On September 11, 2016, while he was employed at a restaurant in Southampton, New York, Mendez raped a woman at a home that the defendant shared with his co-workers. The defendant pleaded guilty to third-degree rape in February 2017 and was sentenced to 30 months’ imprisonment.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorney Bradley T. King is in charge of the prosecution.
The Defendant:
ROGELIO MENDEZ (also known as “Rogelio Mendez-Puebla”)
Age: 38
Jackson Heights, New YorkE.D.N.Y. Docket No. 17-CR-83 (SJF)
United States Attorneys Available to Receive Election ComplaintsRead the Press Release
Richard P. Donoghue and Geoffrey S. Berman, the United States Attorneys for the Eastern and Southern Districts of New York, respectively, announced today that special telephone numbers have been set up to receive complaints of possible violations of federal election laws relating to the upcoming general elections in New York City and other counties in their districts.
The United States Attorneys said that their Offices will be available to receive complaints at the following numbers on Tuesday, November 6, 2018:
(718) 254-6790 (for Brooklyn, Queens, Staten Island, Nassau, and Suffolk counties)
(646) 369-4739 (for Manhattan, Bronx, Dutchess, Orange, Putnam, Rockland, Sullivan, and Westchester counties)
In addition, complaints of possible violations of federal election laws may be made directly to the Federal Bureau of Investigation at (212) 384-1000.
The Department of Justice has an important role in deterring election fraud and discrimination at the polls, and combating these violations whenever and wherever they occur. The Department’s long-standing Election Day Program furthers these goals, and also seeks to ensure public confidence in the integrity of the election process by providing local points of contact within the Department for the public to report possible election fraud and voting rights violations while the polls are open on Election Day.
Federal law protects against such crimes as intimidating or bribing voters, buying and selling votes, impersonating voters, altering vote tallies, stuffing ballot boxes, and marking ballots for voters against their wishes or without their input. It also contains special protections for the rights of voters, and provides that they can vote free from acts that intimidate or harass them. For example, actions of persons designed to interrupt or intimidate voters at polling places by questioning or challenging them, or by photographing or videotaping them, under the pretext that these are actions to uncover illegal voting, may violate federal voting rights law. Further, federal law protects the right of voters to mark their own ballot or to be assisted by a person of their choice.
The right to vote is a cornerstone of American democracy. We all must ensure that those who are entitled to vote exercise that right if they choose, and that those who seek to corrupt it are brought to justice.
The United States Attorneys also noted that the following additional telephone numbers are available on Election Day for citizens to call for routine inquiries, such as where to vote or how late the polls are open, or to register complaints that may concern violations of New York State election laws:
IN NEW YORK CITY
City Board of Elections
Main Office (866) 868-3692 TTY #:
(212) 487-5496
IN COUNTIES OUTSIDE NEW YORK CITY
County Boards of Elections
Dutchess (845) 486-2473
Nassau (516) 571-8683
Orange (845) 360-6500
Orange (Spanish language) (855) 331-2444
Putnam (845) 808-1300
Rockland (845) 638-5172
Suffolk (631) 852-4500
Sullivan (845) 807-0400
Westchester (914) 995-5700
Assistant United States Attorney Erik Paulsen is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Eastern District of New York.
Assistant United States Attorney David J. Kennedy is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Southern District of New York.
Long Island MS-13 Gang Members Plead Guilty to Racketeering and Other ChargesRead the Press Release
Earlier today, in federal court in Central Islip, Ronald Catalan, a former leader of the Brentwood Locos Salvatruchas (BLS) clique of La Mara Salvatrucha, also known as the MS-13, a transnational criminal organization, and Jerlin Villalta, a member of the Freeport Locos Salvatruchas (FLS) clique of the MS-13, pleaded guilty to racketeering charges relating to their participation in crimes of gang-related violence on Long Island. Catalan pleaded guilty to three attempted murders and a conspiracy to distribute cocaine and marijuana as predicate racketeering acts, as well as illegally using firearms in connection with crimes of violence. Villalta pleaded guilty to the June 3, 2016 murder of Jose Pena and conspiracy to distribute marijuana as predicate racketeering acts. The guilty pleas were entered in separate proceedings before United States District Judge Joseph F. Bianco. When sentenced, each defendant faces up to life imprisonment, and Villalta faces deportation.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), Geraldine Hart, Commissioner, Suffolk County Police Department (SCPD), and Patrick J. Ryder, Commissioner, Nassau County Police Department (NCPD), announced the guilty pleas.
“The defendants have admitted carrying out numerous MS-13 attacks on Long Island, including murder and attempted murders, as part of the gang’s campaign of wanton violence,” stated United States Attorney Donoghue. “Working with our partners on the Federal Bureau of Investigation’s Long Island Gang Task Force, we will not rest until MS-13 and the threat this transnational criminal enterprise presents to our communities is eliminated.” Mr. Donoghue thanked the Task Force for their invaluable assistance during the investigation.
According to the superseding indictment and statements made in court, on June 23, 2009, Catalan and two other MS-13 members, all of whom were new members of the BLS clique, armed themselves with handguns and drove through Brentwood, hunting for rival gang members to attack and kill in order to increase their standing in the gang. They observed a group of males on Barleau Street, whom they believed to be members of the rival Bloods street gang. The MS-13 members exited the car, approached the group and started firing. John Doe #1 was struck in the armpit and back as he tried to run; he underwent surgery and ultimately survived.
Catalan also admitted to participating in the October 21, 2015 attempted murders of two men on Bancroft Road in North Bay Shore. Catalan, who was the leader of the BLS clique from 2015 until his arrest in July 2017, and other MS-13 members retaliated against suspected members of the rival Latin Kings gang for the assault of an MS-13 member earlier that day. Armed with two .38 caliber revolvers, the MS-13 gang members drove around Brentwood and Bay Shore and observed a group of people they believed to be Latin Kings. Catalan directed two newer MS-13 members to carry out the shooting and gave them the .38 caliber revolvers. The MS-13 members approached the group and fired multiple shots before fleeing the scene. Two victims were struck by gunfire, but survived their wounds.
Villalta admitted that he and several co-conspirators murdered Jose Pena, a member of the MS-13, because he was suspected of cooperating with law enforcement and being homosexual. After consulting with MS-13 leadership in El Salvador, Villalta and the other MS-13 members obtained weapons and a vehicle to be used in the murder. On June 3, 2016, they lured Pena into the car and drove to a secluded wooded area in Brentwood, where they stabbed and slashed him with knives until he was dead. Pena’s body was not discovered for four months.
Both Catalan and Villalta pleaded guilty to participating in drug conspiracies with the BLS and FLS cliques, respectively.
Today’s guilty pleas are the latest in a series of federal prosecutions by the United States Attorney’s Office for the Eastern District of New York targeting members of the MS-13, a violent international criminal organization. The MS-13’s leadership is based in El Salvador and Honduras, but the gang has thousands of members across the United States, comprised primarily of immigrants from Central America. With numerous branches, or “cliques,” the MS-13 is the largest and most violent street gang on Long Island. Since 2003, hundreds of MS-13 members, including dozens of clique leaders, have been convicted on federal felony charges in the Eastern District of New York. A majority of those MS-13 members have been convicted on federal racketeering charges for participating in murders, attempted murders and assaults. Since 2010, this Office has obtained indictments charging MS-13 members with carrying out more than 45 murders in the Eastern District of New York, and has convicted dozens of MS-13 leaders and members in connection with those murders. These prosecutions are the product of investigations led by the FBI’s Long Island Gang Task Force, comprising agents and officers of the FBI, Suffolk County Police Department, Nassau County Police Department, Bureau of Alcohol, Tobacco, Firearms and Explosives, Nassau County Sheriff’s Department, Suffolk County Probation, Suffolk County Sheriff’s Office, Rockville Centre Police Department and the New York State Police.
The government’s cases are being prosecuted by the Office’s Long Island Criminal Division. Assistant United States Attorneys John J. Durham, Paul G. Scotti, Raymond A. Tierney and Michael T. Keilty are in charge of the prosecution.
The Defendants:
RONALD CATALAN (also known as “Stranger” and “Extrano”)
Age: 27
Brentwood, New YorkJERLIN VILLALTA (also known as “Sonic”)
Age: 21
Brentwood, New YorkE.D.N.Y. Docket No. 16-CR-403 (S-6) (JFB)
Investment Adviser Sentenced to 100 Months in Prison for Stealing Investors’ Money While on Pre-Trial Release for Another Fraud SchemeRead the Press Release
Earlier today, Louis F. Petrossi, the founder and president of the Wealth Research Institute, a purported investment research firm, was sentenced by United States Chief District Judge Christopher C. Conner of the Middle District of Pennsylvania to 100 months and three days in prison for stealing investors’ money. The sentence will run concurrent (with three days consecutive) to the 44-month sentence he received in the Eastern District of New York in May 2017 for his role in the ForceField Energy Inc. securities fraud scheme. On March 8, 2018, following a four-day trial, a federal jury in the Middle District of Pennsylvania found Petrossi guilty of securities fraud, investment adviser fraud and wire fraud. Petrossi was also ordered to pay $2,265,735.84 in restitution and $1,170,940 in forfeiture.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the sentence.
“Petrossi abused the trust placed in him by investors, many of whom reported that they suffered significant loss of savings for retirement and education expenses as a result of his scheme. With today’s sentence, Petrossi has been held responsible for misappropriating more than $1 million of investor funds for his personal use – a fraud he carried out while on pre-trial release for a related criminal case in the Eastern District of New York,” stated United States Attorney Donoghue. Mr. Donoghue expressed his appreciation to the United States Attorney’s Office for the Middle District of Pennsylvania for their assistance with the case.
Between January 2015 and January 2017, Petrossi solicited more than $1.8 million in investments in one of his “Chadwicke” funds from more than 25 investors, including an investor residing in the Middle District of Pennsylvania. Petrossi promoted Chadwicke as an opportunity to invest in high-profile startup companies such as Lyft, Inc., Maplebear Inc., Pinterest Inc., Spotify Technology SA and Palantir Technologies, Inc., among others. Petrossi invested approximately $665,400 in privately held startup companies but used more than $1.1 million in investor funds to pay for personal expenses, including payment for his BMW, renovations to his home and payment of his legal fees.
On May 3, 2016, Petrossi was arrested in Nevada pursuant to an indictment returned by a federal grand jury in the Eastern District of New York for his role in a securities fraud scheme involving ForceField Energy Inc. Under the terms of Petrossi’s pre-trial release, he was prohibited from employment “directly involving the handling of investors.” Nevertheless, Petrossi continued to engage in the Chadwicke scheme.
The fraud charges pursuant to which the defendant was sentenced today were initially brought as part of the ForceField Energy case, but were subsequently transferred to the Middle District of Pennsylvania.
The Chadwicke securities fraud case is being prosecuted by Assistant United States Attorney Mark E. Bini of the Eastern District of New York’s Business and Securities Fraud Section and Special Assistant United States Attorney John O. Enright of the United States Securities and Exchange Commission’s Enforcement Division.
The Defendant:
LOUIS F. PETROSSI
Age: 77
Residence: Reno, NevadaM.D.P.A. Docket No. 17-CR-192 (CCC)
Queens Man Sentenced to 21 Months in Prison for Defrauding Mortgage Lending InstitutionsRead the Press Release
Earlier today, in federal court in Brooklyn, James Bayfield was sentenced by United States District Judge Eric N. Vitaliano to 21 months’ imprisonment, to be followed by three years of supervised release, for conspiracy to commit bank and wire fraud. Bayfield was also ordered to pay $184,651 in forfeiture. Bayfield, a self-described mortgage specialist, was convicted by a federal jury in January 2017 for his role in a multi-million dollar mortgage fraud scheme.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the sentencing.
“Bayfield has portrayed himself as a mortgage specialist, but now stands exposed as a convicted thief who used his knowledge of real estate transactions to carry out his fraudulent schemes against lending institutions,” stated United States Attorney Donoghue. “This Office will continue working with our law enforcement partners to vigorously prosecute those who commit mortgage fraud and enrich themselves at the expense of lenders left holding the loans.” Mr. Donoghue thanked the Federal Bureau of Investigation; the Federal Housing Finance Agency, Office of Inspector General; the U.S. Department of Housing and Urban Development, Office of Inspector General; the Federal Deposit Insurance Corporation, Office of Inspector General; and the New York State Department of Financial Services for their hard work and dedication over the course of this multi-year investigation and prosecution.
Between September 2008 and May 2011, Bayfield and his co-conspirators caused mortgage loan applications with false information to be submitted to lending institutions, including Amtrust, Bank of America and JPMorgan Chase, in connection with the purchase of residential properties located in Brooklyn and Queens. These applications contained fraudulently inflated purchase prices and false information about the assets and income of the purported purchasers, many of whom were paid to act as straw purchasers. Bayfield and his co-conspirators also provided false down payment checks to make it appear as if the straw purchasers and other borrowers had made down payments on the properties.
To complete their scheme, Bayfield and his co-conspirators conducted simultaneous and secretive purchases and sales of the properties, sometimes called “flips,” at inflated prices. Ultimately, the lending institutions issued millions of dollars of mortgage loans secured by properties with inflated appraisal values, and many of these loans were placed into default status.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys David C. Pitluck, Mark E. Bini and Michael T. Keilty are in charge of the prosecution.
The Defendant:
JAMES BAYFIELD
Age: 46
Queens, New YorkE.D.N.Y. Docket No. 14-CR-356 (S-1) (ENV)
Ten Eastern District of New York Employees and One Former Assistant United States Attorney Receive Attorney General AwardsRead the Press Release
WASHINGTON – Nine Assistant United States Attorneys (AUSA), one paralegal specialist and a former AUSA from the Eastern District of New York (EDNY) were among the 244 department employees recognized by Attorney General Jeff Sessions for their distinguished public service today at the 66th Annual Attorney General’s Awards Ceremony. Thirty-six other individuals outside of the department were also honored for their work. This annual ceremony recognizes employees and other individuals who have demonstrated exceptional achievements, leadership and service to the Department of Justice and the American people. This year’s awards ceremony included an award for exceptional heroism to U.S. Marshal Senior Inspector Basilio S. Perez, Jr., for his courageous actions to protect and aid victims of the October 1, 2017, mass shooting in Las Vegas, Nevada.
“Service in the Department of Justice is more than a normal job; it is a calling to the highest standards of professionalism,” Attorney General Jeff Sessions said. “That is true for all of the 115,000 Department of Justice employees. But it is especially true for these award winners. And so I want to thank them and their families for their exemplary service to this Department and to the American people. They have made this Department proud.”
“The outstanding work of EDNY prosecutors, working in conjunction with our law enforcement partners, exposed an international culture of corruption within organized soccer, dismantled a fraud scheme that victimized the elderly and held responsible the brutal killers of a heroic federal agent,” stated United States Attorney Donoghue. “The wide scope of the achievements recognized today demonstrates that this Office will pursue justice for the people of the Eastern District of New York wherever the evidence takes us.”
This year’s program honors individuals across the department and our federal, state, local and tribal partners for their selfless efforts, protecting our national security and our civil rights, addressing rising violent crime in our communities, and going after gangs and those trafficking in dangerous narcotics and human beings. The awards also honor the work of civil and environmental litigation, which enforces the rule of law and upholds our Constitution. They also recognize employees whose ideas and efforts save taxpayer dollars and help our government operate more effectively and efficiently, among other contributions to public safety and good governance.
FIFA
Assistant U.S. Attorneys Keith D. Edelman, Kaitlin T. Farrell, M. Kristin Mace, Brian D. Morris and Samuel P. Nitze, Paralegal Specialist Sherene Watson and former Assistant U.S. Attorney Paul A. Tuchmann, together with their team of FBI and IRS Special Agents, were recognized for their path-breaking investigative and prosecutorial work in combating an entrenched culture of corruption at the highest levels of organized soccer in the United States and around the world and the accompanying abuse of the U.S. financial system. The case was the first to use the RICO and wire fraud statutes to attack corruption in international sports organizations and involved an extraordinary array of investigative techniques, complex tracing and analysis of foreign and domestic money flows, and unprecedented coordination and collaboration with foreign law enforcement authorities. In addition to more than 20 convictions secured through guilty pleas, the team secured convictions of José Maria Marin, a former president of the Brazilian soccer federation, perhaps the most powerful soccer federation in the world, and Juan Angel Napout, the president of CONMEBOL, the regional confederation that oversees soccer in South America, after a six-week trial conducted in November and December 2017.
Elder Fraud Sweep
Assistant U.S. Attorneys Michael J. Castiglione, Evan P. Lestelle and John Vagelatos were recognized for their outstanding contributions to the 2018 national Elder Fraud Sweep. The sweep was the largest operation in U.S. history targeting fraud on the elderly. The team both independently and in coordination with the Consumer Protection Branch of DOJ and the United States Postal Inspection Service, investigated and filed some of the sweep’s biggest cases. The EDNY team filed four civil actions and obtained temporary restraining orders against 24 individual and corporate defendants for operating multi-million dollar international mail fraud schemes that targeted elderly and vulnerable victims. The team obtained permanent consent judgments against defendants in three of the actions and, in the final action, has obtained a permanent consent judgment against several of the defendants and preliminary injunctions against the remaining defendants while the case is being actively litigated.
Los Zetas – “Operation Fallen Hero”
Senior Litigation Counsel Andrea Goldbarg and a team of Trial Attorneys and AUSAs from the DOJ Organized Crime and Gangs Section, DOJ Narcotic and Dangerous Drug Section and the United States Attorney’s Office for the District of Columbia were recognized for their extraordinary efforts and commitment in the prosecution of Los Zetas Mexican Cartel Members. Members of the cartel brutally murdered Homeland Security Investigations (HSI) Special Agent Jaime Zapata and wounded HSI Special Agent Victor Avila on February 15, 2011, during an attempted car-jacking on a highway south of San Luis Potosi, Mexico. The HSI Special Agents were on an official mission in an armored SUV when a Zetas “hit” squad attacked the vehicle. Deploying immediately after the attack, the team pursued every evidentiary lead and soon began filing charges against the perpetrators. After the attack and over the following six years, seven defendants were extradited to the United States, five of whom pleaded guilty and agreed to cooperate. Two defendants proceeded to trial. On July 27, 2017, after a three-week trial, a jury convicted two defendants of, among other crimes, murder and attempted murder of an officer or employee of the United States. Both trial defendants were sentenced to life imprisonment.
Leader of Brooklyn Street Gang, Eight Trey Crips, Convicted of Murder In-Aid-Of RacketeeringRead the Press Release
Following eight days of trial, a federal jury in Brooklyn today convicted Larry Pagett, a leader of the Eight Trey Crips street gang, of murder in-aid-of racketeering. Pagett faces a mandatory sentence of life in prison when he is sentenced by United States District Judge William F. Kuntz, II.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and James P. O’Neill, Commissioner, New York City Police Department, announced the verdict.
“Motivated by his twisted allegiance to the Eight Trey Crips street gang, Pagett opened fire with a handgun in a crowded nightclub, murdering a rival in cold blood and wounding an innocent bystander,” stated United States Attorney Donoghue. “Today’s verdict sends the message loud and clear that wanton violence will not be tolerated in our community. This Office and our law enforcement partners will continue working tirelessly to eradicate violent street gangs and bring to justice those criminals who value murder and mayhem over human life.”
“Gang members have shown they will do whatever necessary to maintain control over their turf and retaliate against those who they see as a threat,” stated FBI Assistant Director-in-Charge Sweeney. “As proven in court, Larry Pagett demonstrated this when he shot and killed someone in a crowded nightclub without regard for the lives of his victim or the myriad others who could have been hurt or killed by Pagett’s violent actions. With today’s verdict, justice has been served, and Pagett faces the prospect of spending the rest of his life in prison.”
As proven at trial, the Eight Trey Crips were based in and around the Flatbush Gardens housing complex. The Crips and the Folk Nation, a rival street gang, had been engaged in a deadly feud over territory in Brooklyn for years. On August 28, 2015, Pagett encountered Chrispine Philip, also known as “Droppa,” inside a crowded nightclub called the Buda Hookah Lounge located at 589 Flatbush Avenue. Pagett believed Philip was a member of the rival Folk Nation and blamed him for the murder of an Eight Trey Crips gang member in Trinidad in the Spring of 2015. Pagett pulled out a gun and shot Philip multiple times including with a final bullet to the back of his head. An innocent bystander in the nightclub was also shot in the stomach and arm, but survived. The murder was recorded on video surveillance cameras inside the club.
The government’s case is being handled by the Office’s Organized Crime and Gangs Section. Assistant United States Attorneys Patrick T. Hein and Mathew S. Miller are in charge of the prosecution.
The Defendant:
LARRY PAGETT (also known as “Biz,” Biz Loc” and “Molotovbizzz”)
Age: 39
Brooklyn, New YorkE.D.N.Y. Docket No. 17-CR-306 (WFK)
Former Federal Correctional Officer Sentenced to 10 Years in Prison for Sexual Abuse, Bribery and Narcotics ChargesRead the Press Release
Earlier today, in federal court in Brooklyn, Armando Moronta, who previously served as a federal correctional officer employed by the United States Bureau of Prisons (BOP) at the Metropolitan Detention Center (MDC), was sentenced by United States District Judge Roslynn R. Mauskopf to 10 years’ imprisonment for four counts of sexual abuse of a ward, one count of soliciting bribes as a public official and one count of conspiring to distribute narcotics. The charges stemmed from two separate indictments. As part of his sentence, Moronta is also required to forfeit $15,000 in bribe payments and to register as a sex offender. Moronta was suspended by the BOP in January 2017 after his initial arrest, and he pleaded guilty in November 2017. Moronta resigned from the BOP in December 2017.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Guido Modano, Special Agent-in-Charge, United States Department of Justice, Office of the Inspector General (DOJ-OIG), and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the sentence.
“Over a period of months, Moronta flagrantly violated his sworn duty as a law enforcement officer, sexually abused inmates entrusted to his supervision and undermined the safety of his fellow officers and others in exchange for bribes,” stated United States Attorney Donoghue. “Today’s sentence reflects the seriousness of the defendant’s crimes and demonstrates our steadfast commitment to holding accountable correctional officers who abuse their power and the inmates they are responsible for.”
“Moronta engaged in an egregious abuse of power and breach of the public’s trust. Today’s sentence demonstrates that such corruption will not be tolerated in our federal prisons or our law enforcement community,” stated DOJ-OIG Special Agent-in-Charge Modano. “The DOJ-OIG will work tirelessly to hold individuals who engage in such conduct accountable to the fullest extent of the law.”
“Corrections officers are in place to maintain order, not flagrantly abuse their power. Mr. Moronta not only accepted money for smuggling in contraband, he sexually abused female inmates,” stated FBI Assistant Director-in-Charge Sweeney. “The abuse of power by officers sworn to protect is one of the FBI’s priorities because no one is above the law, especially those who took an oath to uphold it.”
Between March and December 2016, on approximately 12 occasions, Moronta smuggled cellular telephones and narcotics, including the synthetic narcotic “K2” and Suboxone, into the MDC for use and distribution by male inmates in exchange for thousands of dollars in bribe payments. Separately, between May and June 2016, Moronta engaged in criminal sexual acts with three female inmates in his custody while he was assigned to guard their unit. He committed these criminal sexual acts inside the Guard’s Office located within a female housing unit.
The government’s case is being handled by the Office’s Public Integrity Section. Assistant United States Attorney Nadia Shihata is in charge of the prosecution.
The Defendant:
ARMANDO MORONTA
Age: 40
Brooklyn, New YorkE.D.N.Y. Docket Nos. 17-CR-036 (RRM) and 17-CR-279 (RRM)
Former Brooklyn Assemblywoman Sentenced to Prison for Multiple Fraud Schemes and Witness TamperingRead the Press Release
Former New York State Assemblywoman Pamela Harris was sentenced today by United States District Judge Jack B. Weinstein in federal court in Brooklyn to six months in prison and 400 hours of community service following her conviction for two counts of wire fraud, one count of disaster relief fraud and one count of witness tampering. As part of the sentence, the Court imposed restitution of $70,400 and forfeiture of $10,000. Harris was arrested on January 9, 2018, resigned from the New York State Assembly on April 2, 2018 and pleaded guilty on June 12, 2018.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Mark G. Peters, Commissioner, New York City Department of Investigation (DOI), announced the sentence.
“With today’s sentence, Pamela Harris has been held responsible for stealing tens of thousands of dollars in government funds set aside for underserved children and funds allocated for victims of Hurricane Sandy, as well as lying and presenting fraudulent documents to the FBI when her crimes were uncovered,” stated United States Attorney Donoghue. “She committed these fraudulent acts both before and while she served as a New York State Assemblywoman in Brooklyn, betraying the trust placed in her by her constituents. This Office, together with our law enforcement partners, will continue to hold accountable corrupt public officials who act as if they are above the law.”
“Today, this onetime state Assemblywoman, convicted of using the disaster of Superstorm Sandy for personal profit, was held to account for her crimes with a decisive price – prison,” stated DOI Commissioner Peters. “Her illegal conduct exemplifies the term, ‘corrupt politician,’ claiming to be a public servant while she stole from disaster relief funds intended to assist victims of Hurricane Sandy, some of whom were constituents in her district trying to recover from the storm. This type of corruption is what saps public confidence in government. Today’s sentencing offers a measure of justice. DOI is gratified to have worked with the United States Attorney for the Eastern District of New York and the FBI on this successful investigation and prosecution.”
According to the indictment, court filings and facts presented during the sentencing hearing, between 2012 and 2017, Harris defrauded the Federal Emergency Management Agency (FEMA) and the New York City Council (NYC Council), among other entities, of tens of thousands of dollars, and then pressured witnesses to lie to FBI agents who were conducting the grand jury investigation into her fraud schemes.
Between 2012 and 2014, Harris defrauded FEMA out of nearly $25,000 in temporary relocation funds by falsely claiming that she had been forced out of her Coney Island residence because of damage caused by Hurricane Sandy. In furtherance of the scheme, she claimed that she was paying rent in Staten Island and submitted fake lease agreements and fraudulent rent payment receipts to FEMA. In reality, Harris continued to live at her Coney Island residence and pocketed the FEMA payments for her own benefit. Harris subsequently made similar misrepresentations to other organizations providing hurricane relief funds, including New York City’s Build it Back Agency.
Between August 2014 and January 2017—both before and while she served as a New York State Assemblywoman—Harris defrauded the New York City Council of $45,600 in discretionary funding allocated to Coney Island Generation Gap (CIGG), a not-for-profit organization that she controlled. Harris falsely represented that she intended to use the funds to pay for rental space and to provide cash stipends to adolescents who participated in CIGG programs. In support of these claims, she submitted fraudulent lease agreements containing forged signatures and fraudulent sign-in sheets with forged signatures of the adolescents. When CIGG received the funds, Harris diverted them to her own bank account and used them to pay her personal expenses. Harris also misappropriated CIGG’s money from its bank accounts to fund her purchase of a sauna and a hot tub and to make mortgage payments on her residence.
Between March 2017 and September 2017, as the investigation into her fraudulent conduct progressed, Harris obstructed the investigation, including by pressuring close family members and a CIGG associate to lie to the FBI and destroy evidence.
The government’s case is being handled by the Office’s Public Integrity Section. Assistant United States Attorneys Erik Paulsen and Robert Polemeni are in charge of the prosecution.
The Defendant:
PAMELA HARRIS
Age: 57
Brooklyn New YorkE.D.N.Y. Docket No. 18-CR-11 (JBW)
Brooklyn Resident Sentenced to Prison for Defrauding the IRS and Stealing Government FundsRead the Press Release
A Brooklyn, New York, man was sentenced to 48 months in prison for conspiring to defraud the government and theft of public funds, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.
According to documents filed with the court, Akim Martin, also known as Akim Davis, conspired with others to file fraudulent tax returns for companies and individual taxpayers. As part of the scheme, from March 2009 through March 2013, Martin and his co-conspirators filed false tax returns in the names of businesses they purportedly owned and operated, claiming phony deductions for wages paid to employees that purportedly worked for the fake companies. Martin negotiated fraudulently obtained federal refund checks and spent the money on his personal expenses. Martin’s conduct resulted in a tax loss of over $550,000.
In addition to the term of imprisonment imposed, U.S. District Judge Carol Bagley Amon ordered Martin to serve 3 years of supervised release, forfeit $82,600, and to pay restitution of $544,325 to the IRS.
Principal Deputy Assistant Attorney General Zuckerman commended special agents of IRS-Criminal Investigation, who conducted the investigation, and Trial Attorneys Jason Scheff and Ann M. Cherry of the Tax Division, who prosecuted the case.
Two Brothers Extradited to the United States from Mexico to Face Sex Trafficking ChargesRead the Press Release
Jose Osvaldo Melendez-Rojas and Rosalio Melendez-Rojas were extradited to the United States yesterday and arraigned today before United States Magistrate Judge Cheryl L. Pollak at the federal courthouse in Brooklyn on an 18-count indictment charging them variously with sex trafficking conspiracy, sex trafficking of minors, interstate prostitution, alien smuggling and related offenses. Judge Pollak entered a permanent order of detention with leave for the defendants to present bail packages at a later date. The defendants were arrested in February 2018 in Mexico following a joint investigation by U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) Mexico City, HSI New York and the Mexican Federal Police. The defendants are charged together with three co-defendants who were previously arrested in the United States.
The extradition and charges were announced by Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Angel M. Melendez, Special Agent-in-Charge, HSI New York.
“With this successful extradition, we demonstrate our resolve to prosecute those who profit from the forced sexual servitude of vulnerable women and girls, such as the Melendez-Rojas sex-trafficking network,” stated United States Attorney Donoghue.
“These brothers were flown thousands of miles to faces charges for their role in the ‘family business’ of exploiting and trafficking young women purely for profit, using intimidation and abuse to force their victims to participate in sexual acts against their will,” stated HSI Special Agent-in-Charge Melendez. “The number of times women were victimized to support their criminal empire is reprehensible. The safety and well-being of the victim comes first and we will continue to work with our law enforcement partners in ensuring these criminal organizations cease to victimize for revenue.”
As alleged in the second superseding indictment and other court filings, between 2006 and July 2017, Jose Osvaldo Melendez-Rojas and his brother Rosalio Melendez-Rojas, together with other relatives, illegally smuggled young women and girls from Mexico into the United States, where they were forced to work as prostitutes in New York City and elsewhere. The victims of this sex trafficking organization are identified in the indictment as Jane Does #1 through 6. The defendants are also charged with conspiring to launder money in connection with the illicit proceeds of their sex-trafficking and prostitution enterprise.
The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted of the sex-trafficking related charges, the defendants face a maximum sentence of life in prison.
Mr. Donoghue commended HSI New York’s Trafficking in Persons Unit for leading the investigation of the Melendez-Rojas Trafficking Organization; thanked the HSI Mexico City Attaché Office, the Department of Justice’s Office of International Affairs, the State Department, Interpol, and the New York City Police Department (NYPD) for their assistance; and praised the government of Mexico for its role in advancing bilateral anti-trafficking enforcement efforts. Mr. Donoghue also acknowledged the non-governmental victim service providers and advocates for their dedicated efforts to restore and improve the lives of survivors of trafficking and their families.
The investigation, prosecution, bilateral enforcement action and extradition of the defendants apprehended in Mexico were coordinated through the U.S.-Mexico Bilateral Human Trafficking Enforcement Initiative. Since 2009, the Departments of Justice and Homeland Security have collaborated with Mexican law enforcement counterparts in a Bilateral Human Trafficking Enforcement Initiative to more effectively dismantle human trafficking networks operating across the U.S.-Mexico border, bring human traffickers to justice, restore the rights and dignity of human trafficking victims and reunite victims with their children. These efforts have resulted in successful prosecutions in both Mexico and the United States, including U.S. federal prosecutions of over 170 defendants in multiple cases in Georgia, New York, Florida and Texas, in addition to numerous Mexican federal and state prosecutions of associated sex traffickers. The extraditions in this case are also the latest development in the Eastern District of New York’s comprehensive anti-trafficking program, which has to date indicted more than 80 defendants for sex trafficking; assisted more than 150 victims, including over 40 minors, reunited 19 victims’ children with their mothers, and secured restitution orders of over $4 million on behalf of trafficking victims.
The government’s case is being handled by the Office’s Civil Rights Unit. Assistant United States Attorneys Taryn A. Merkl, Erin E. Argo and Monica K. Castro are in charge of the prosecution.
The New Defendants:
JOSE OSVALDO MELENDEZ-ROJAS
Age: 42
MexicoROSALIO MELENDEZ-ROJAS (also known as “Leonel, “Wacho” and “El Guacho”)
Age: 37
MexicoDefendants Previously Arrested:
FRANCISCO MELENDEZ-PEREZ (also known as “Paco” and “el Mojarra”)
Age: 24
MexicoFABIAN REYES-ROJAS
Age: 38
MexicoABEL ROMERO-MELENDEZ (also known as “La Borrega” and “Borrego”)
Age: 32
MexicoE.D.N.Y. Docket No. 17-CR-434 (ARR)
Smithtown, New York, Resident Arrested for Threatening Two United States SenatorsRead the Press Release
A criminal complaint was unsealed today in federal court in the Eastern District of New York charging Ronald DeRisi with threatening to murder and assault two United States Senators in retaliation for their support of the confirmation of Judge Brett Kavanaugh to the United States Supreme Court. DeRisi was arrested earlier today in Smithtown, Long Island, and his initial appearance is scheduled for this afternoon before United States Magistrate Judge Gary R. Brown at the United States Courthouse, 100 Federal Plaza, Central Islip, New York.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Matthew R. Verderosa, Chief, United States Capitol Police (USCP), announced the charges.
“Representative democracy cannot work if elected officials are threatened with death for simply doing their job,” stated United States Attorney Donoghue. “The First Amendment - the pinnacle of American achievement - protects debate, disagreement and dissent, not death threats. We and all those dedicated to the rule of law will not tolerate the use violence and threats of violence in attempts to prevail in political disputes.” Mr. Donoghue extended his grateful appreciation to the United States Capitol Police, the agency responsible for leading the investigation.
“I greatly appreciate the hard work of our investigators for addressing these threats so quickly, and that of the U.S. Attorney’s staff for prosecuting this case,” stated USCP Chief Verderosa.
As alleged in the complaint, beginning on September 27, 2018, DeRisi left more than 10 threatening voice-messages at the offices of two United States Senators (identified in the complaint as Senator-1 and Senator-2) regarding the nomination and confirmation of Judge Kavanaugh to the high court. The threats in the voice-messages were apparently made to discourage Senator-1 and Senator-2 from supporting Judge Kavanaugh’s nomination and/or as retaliation for having voted to confirm Judge Kavanaugh to the Supreme Court. The complaint details the content of some of the expletive-laced recorded voice-messages.
For example, in the first of two voice-messages left for Senator-1 on September 27, 2018, DeRisi said that he had a “present” for Senator-1, stating, in part, “It’s a nine millimeter. Side of your … skull ….” DeRisi concluded with “Yeah, Kavanaugh – I don’t think so.”
In a voice-message left for Senator-2 on October 6, 2018, DeRisi stated, in part, “… you better pray this guy don’t get in….” Less than an hour and a half later, DeRisi called Senator-2 again and left a message stating, in part, “I’m gonna get you.”
According to the complaint, DeRisi was identified through telephone records as well as by voice exemplars.
Following DeRisi’s arrest, USCP executed a search warrant and seized the cellular telephone used to leave the voice-messages detailed in the complaint.
The charges in the complaint are allegations, and the defendant is presumed innocent unless and until proven guilty.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorney Justina L. Geraci is in charge of the prosecution.
The Defendant:
RONALD DERISI
Age: 74
Smithtown, New YorkE.D.N.Y. Docket No. 18-MJ-998
Nomura Agrees to Pay $480 Million in Civil Penalties for Misleading Investors in Sale of Residential Mortgage-Backed SecuritiesRead the Press Release
The United States has reached an agreement with Nomura Holding America Inc. and several of its affiliates (“Nomura”), which will pay a $480 million penalty to resolve federal civil claims that Nomura misled investors in connection with the marketing, sale and issuance of residential mortgage-backed securities (“RMBS”) between 2006 and 2007. Nomura’s investors, which included university endowments, retirement funds and federally insured financial institutions, suffered significant losses due to Nomura’s misconduct.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Jennifer Byrne, Associate Inspector General, Federal Housing Finance Agency-Office of Inspector General (FHFA-OIG), announced the settlement.
“This settlement holds Nomura accountable for its fraudulent conduct in connection with its Residential Mortgage-Backed Securities offerings, which caused substantial harm to investors and contributed to the financial crisis of 2008,” stated United States Attorney Donoghue. “The Department of Justice, this Office and our partners will continue to aggressively pursue wrongdoing in our financial markets, including, as appropriate, financial crisis-era misconduct.”
“The actions of Nomura resulted in significant losses to investors, including Fannie Mae and Freddie Mac, which purchased Nomura Residential Mortgage-Backed Securities backed by defective loans,” stated FHFA-OIG Associate Inspector General Byrne. “We are proud to have partnered with the U.S. Attorney’s Office for the Eastern District of New York on this matter.”
The settlement stems from allegations that Nomura knowingly securitized defective mortgage loans in its RMBS and misled investors regarding the quality and characteristics of those loans. For example, the United States alleged that:
- In presentations regarding its RMBS program, Nomura claimed that its due diligence process was “extensive,” “disciplined” and “carefully developed.” Nomura also told investors that it only worked with “hand-picked industry leading” due diligence vendors, and that, as a result of its superior standards and due diligence processes, “Nomura’s loan performance should surpass industry standards.” These claims were false. Nomura knew, based on its due diligence, that thousands of loans that it securitized in its RMBS did not comply with applicable underwriting guidelines or were supported by inflated and potentially fraudulent appraisals. Nomura concealed these deficiencies from investors, securitizing many of these defective loans as “favors” to loan originators—including, for example, loans that one originator openly described to Nomura as “dogsh[*]t.” As stated by a member of Nomura’s RMBS due diligence group: “There is no such thing as a bad loan . . . just a bad price.”
- Nomura also knew that a significant number of loans that it securitized in its RMBS had not gone through Nomura’s stated due diligence process, and, more broadly, that its process had been compromised. Nomura’s head of RMBS due diligence (in the context of proposed changes to Nomura’s loan-by-loan buying program) stated that Nomura was “turning into the lemming of the mortgage business,” “following the herd” and compromising its standards “to comply with the masses in p[u]rsuit of volume.” Additionally, a member of Nomura’s RMBS group’s origination sales team, in an email to the entire RMBS group, remarked that “advertising will be a great career when all these loans finally blow up . . . . (I will be selling vacuum cleaners door to door when the market goes by the way).”
- Despite this knowledge, Nomura failed to address the weaknesses in its due diligence processes, and continued to do business with originators that, according to its own due diligence personnel, were “extremely dysfunctional,” had “systemic” underwriting issues and employed “questionable” origination practices. Indeed, Nomura’s securitization of defective loans in the subject deals—in spite of numerous red flags—reflected a conscious decision by senior Nomura personnel to compete for market share in a highly competitive RMBS market. As stated by one member of Nomura’s RMBS team, Nomura could not just “buck the entire marketplace when [it was] hammered to grow.”
- Likewise, despite knowing that its due diligence was ineffective and did not remove large numbers of defective loans from its RMBS, in mid-2006, Nomura announced new, “more liberal” underwriting guidelines for its loan-by-loan purchase program. Although Nomura’s head of RMBS due diligence warned that Nomura had already “loosened guidelines in so many areas” and that it was “at risk of giving away the proverbial store,” the prevailing view, as characterized by Nomura’s RMBS trading desk, was that Nomura’s “box [was] too restrictive.” Nomura’s new guidelines allowed for the purchase of loans that Nomura’s due diligence personnel previously described as “sheer lunacy.”
These are allegations only, which Nomura disputes, and there has been no trial or adjudication or judicial finding of any issue of fact or law.
The settlement was the result of a multi-year investigation by the Civil Division of the U.S. Attorney’s Office for the Eastern District of New York, pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Assistant U.S. Attorney Clayton P. Solomon and former Assistant U.S. Attorney Morgan J. Brennan led the government’s investigation.
Defendant Pleads Guilty in Multimillion Dollar Prize-Promotion Scam Affecting Elderly VictimsRead the Press Release
An individual who defied court orders by operating a multimillion mass-mailing fraud scheme pleaded guilty on Friday, October 12, 2018, in federal court on Long Island before a magistrate judge, the Department of Justice announced.
Tully Lovisa, 55, of Huntington Station, New York, pleaded guilty to conspiracy to commit mail fraud for sending prize-promotion mailings that led recipients, many of whom were elderly and vulnerable, to believe that they could claim a large cash prize in exchange for a modest fee. This was false; victims who submitted fees, which in total exceeded $30 million, did not receive large sums of money. Lovisa operated the prize-promotion mailing scheme in violation of court orders that resulted from a lawsuit against him by the Federal Trade Commission (FTC).
Lovisa also pleaded guilty to wire fraud in connection with a related scheme to defraud the FTC. Specifically, as part of his resolution of the FTC lawsuit’s against him, Lovisa was ordered by a court to sell a home he owned in Las Vegas, Nevada, and to turn over the proceeds of the sale to the FTC. Lovisa, however, failed to comply with this order by arranged a sham sale of the house in September 2012 for $155,500 (which he reported to the FTC), and then actually selling the house in April 2015 for $540,000 (which he did not report to the FTC).
“As the Attorney General has made clear, the Department of Justice is determined to bring to justice those who exploit elderly consumers in violation of federal law,” said Assistant Attorney General Joseph Hunt of the Department of Justice’s Civil Division. “We will work with our law enforcement partners at the U.S. Postal Inspection Service to stop and punish schemes harming the elderly wherever we find them.”
When sentenced, Lovisa faces up to 20 years in prison on each charge, forfeiture, and a fine of up to $250,000 or twice the gross gain or gross loss from each offense.
Friday’s plea took place before Magistrate Judge Gary R. Brown, who recommended that it be accepted by the district judge. The United States Postal Inspection Service investigated the case. The case is being prosecuted by Trial Attorneys Daniel Zytnick and Timothy Finley of the Department of Justice’s Consumer Protection Branch and Assistant U.S. Attorney Charles P. Kelly of the Eastern District of New York.
For more information about the Consumer Protection Branch, visit its website at http://www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the Eastern District of New York, visit its website at https://www.justice.gov/usao-edny.
Long Island Resident Pleads Guilty to Multimillion Dollar Elder Fraud Scheme and to Defrauding the Federal Trade CommissionRead the Press Release
Earlier today, in federal court in Central Islip, Tully Lovisa pleaded guilty before United States Magistrate Judge Gary R. Brown to conspiracy to commit mail fraud by sending prize-promotion mailings that led recipients, many of whom were elderly and vulnerable, to believe that they could claim large cash prizes in exchange for a modest fee. Lovisa also pleaded guilty to wire fraud in connection with a related scheme to defraud the Federal Trade Commission (FTC).
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Joseph H. Hunt, Assistant Attorney General for the Justice Department’s Civil Division, and Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the guilty pleas.
As he admitted at his guilty plea, Lovisa’s prize promotion mailings were fraudulent. None of the victims who submitted fees, which in total exceeded $30 million, received a substantial cash prize. Lovisa’s involvement in the scheme was also in violation of prior court orders that resulted from a lawsuit against him by the FTC. As part of his resolution the FTC lawsuit, Lovisa was ordered by a federal court to sell a home he owned in Las Vegas, Nevada, and turn over the proceeds to the FTC. Lovisa arranged for a sham sale of the house in September 2012 for $155,500, and then sold the house in April 2015 for $540,000 and kept the proceeds.
When sentenced, Lovisa faces up to 20 years in prison on each count, as well as forfeiture of at least $1 million and a fine of up to $250,000 or twice the gross gain or gross loss from each offense.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorney Charles P. Kelly, with Trial Attorneys Daniel Zytnick and Timothy Finley of the Justice Department’s Consumer Protection Branch, are in charge of the prosecution. Assistant United States Attorney Tanisha R. Payne is in charge of the forfeiture.
The Defendant:
TULLY LOVISA
Age: 55
Huntington Station, New YorkE.D.N.Y. Docket No. 18-CR-349
Staten Island Man Pleads Guilty to Million-Dollar Real Estate Investment Scam Targeting Elderly VictimsRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, Yevgeniy Braziler pleaded guilty to one count of securities fraud for orchestrating a scheme to target investors, including numerous elderly victims, by selling them partnerships in fraudulent real estate companies. The guilty plea took place before United States District Judge Anne M. Donnelly.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Philip R. Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the guilty plea.
Braziler and his associates promised potential investors that the real estate companies in Brooklyn that he managed would purchase, renovate, rent and re-sell residential real estate in the Buffalo and Niagara Falls, New York areas. In response to Braziler’s solicitations, investors sent him over $1.8 million. Instead of using the money for the promised purposes, Braziler stole most of the funds. For example, investors sent one of Braziler’s investment vehicles at least $978,000, but Braziler purchased only one property for at most $12,000, and took most of the remaining funds for himself and his associates. The investors lost nearly all of their money.
When Braziler is sentenced, he faces a maximum of 20 years’ imprisonment.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorney Matthew S. Amatruda is in charge of the prosecution.
The Defendant:
YEVGENIY BRAZILER
Age: 40
Residence: Staten Island, New YorkE.D.N.Y. Docket No. 17-CR-385 (AMD)
Brooklyn Man Charged with Nine Hobbs Act Robberies of Local Gas Stations and Convenience StoresRead the Press Release
An 11-count indictment was unsealed today in federal court in Brooklyn charging Benjamin Uzilov with conspiracy to commit Hobbs Act robbery, nine counts of Hobbs Act robbery, and brandishing a firearm during a crime of violence. Uzilov was previously arrested on a complaint that charged him with robbing three 7-Eleven stores on September 26, 2018. The indictment charges the defendant with a total of nine robberies in Brooklyn, adding three additional robberies on September 16, 2018 and three additional robberies on September 25, 2018. Uzilov will be arraigned at a later date.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Ashan M. Benedict, Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and James P. O’Neill, Commissioner, New York City Police Department (NYPD), announced the charges. Mr. Donoghue expressed his appreciation to the NYPD detectives and ATF special agents assigned to the Strategic Pattern Armed Robbery Technical Apprehension (SPARTA) Task Force for their work during the investigation.
“As alleged in the indictment, Uzilov carried out a crime wave, repeatedly targeting Brooklyn businesses where he robbed hard-working store clerks at gunpoint,” stated United States Attorney Donoghue. “This Office is committed to vigorously prosecuting those violent criminals who commit robberies, jeopardizing the safety of members of our community, in order to fill their own pockets with cash.”
“The defendant as alleged has committed numerous brazen acts of violence leaving innocent people traumatized and in a state of fear,” stated ATF Special Agent-in-Charge Benedict. “Thanks to the excellent investigative work of the ATF/NYPD Joint Robbery Task Force he will no longer prey on the innocent in his community. ATF remains steadfast in its commitment to protecting citizens from violence and the lasting effects it has on communities. I would also like to thank the United States Attorney’s Office for prosecuting this case.”
“There is no place in civil society for violent criminals who target innocent New Yorkers,” stated NYPD Police Commissioner O’Neill. “I commend the NYPD detectives and ATF investigators who comprise our Strategic Pattern Armed Robbery and Technical Apprehensions Task Force, or SPARTA – who so effectively pursue and strengthen high-profile armed robbery cases like this. And now, due to the nature of these crimes and the unparalleled cooperation between our agencies and the Eastern District of New York, I am very confident he will be successfully prosecuted and receive a lengthy federal prison sentence.”
As detailed in court pleadings and as captured on video surveillance, Uzilov entered each store, threatened employees with a gun and then stole money from his victims. On more than one occasion, Uzilov ordered his victims to get on the floor and count to 10 as he exited the store. Shortly after the final robbery on September 26, 2018, Uzilov was apprehended by NYPD officers at a gas station on Ocean Avenue in Brooklyn. The officers observed a black ski mask on the front seat of Uzilov’s car and recovered cash in the pocket of his hooded sweatshirt and a gun in the glove compartment.
The charges in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, Uzilov faces a minimum of seven years in prison.
The indictment charges Johnson with the following robberies, all in Brooklyn:
- Shell Gas Station on September 16, 2018;
- Mill Basin Convenience Store on September 16, 2018;
- Allegiance Gas Station on September 16, 2018;
- Verrazano Deli and Grocery on September 25, 2018;
- Stop and Smile Grocery on September 25, 2018;
- Sam’s Deli on September 25, 2018;
- 7-Eleven on September 26, 2018;
- 7-Eleven on September 26, 2018; and
- 7-Eleven on September 26, 2018.
The government’s case is being handled by the Office’s General Crimes Section. Assistant United States Attorney Megan E. Farrell is in charge of the prosecution.
The Defendant:
BENJAMIN UZILOV
Age: 37
Brooklyn, New YorkE.D.N.Y. Docket No. 18-CR-546
Queens Man Pleads Guilty to Armed Bank Robbery and Weapons PossessionRead the Press Release
Earlier today, Leroy Scott, a resident of Queens, pled guilty at the federal courthouse in Central Islip, New York, to armed bank robbery and a related firearms possession charge. When sentenced, Scott faces up to 25 years’ imprisonment for the bank robbery and a minimum of seven years’ imprisonment and up to life imprisonment for the firearms charge.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Patrick J. Ryder, Commissioner, Nassau County Police Department (NCPD), announced the guilty plea.
According to court filings and prior public proceedings in the case, on August 21, 2017, Scott acted as a lookout for a co-conspirator, Pedro Benitez, who entered the Bridgehampton Savings Bank in Hewlett, New York, ordered customers and employees to the floor at gunpoint and demanded money from bank employees. Another co-conspirator, Troy Tavares, waited outside in a vehicle. Benitez fled the bank with over $12,000 and Tavares drove Benitez to a nearby location where they met up with Scott and another co-conspirator to split the proceeds. At his guilty plea proceeding, Scott admitted that he had also participated in two additional robberies that the crew committed during the summer of 2017, both in Nassau County. In each of those robberies, Scott had assisted in the planning and acted as a lookout for Benitez. In total, the robbery crew stole over $70,000 from four banks between July and September of 2017.
Scott is the last of the co-defendants in this bank robbery crew to plead guilty in this case. The government’s case is being prosecuted by Assistant United States Attorney Michael Maffei.
The Defendant:
LEROY SCOTT
Age: 28
Far Rockaway, New YorkE.D.N.Y. Docket No. 17-CR-572 (S-1) (JS)