Eastern District of New York
Press releases recorded for this federal judicial district.
Long Island Bloods Gang Leader Sentenced to 30 Years in Prison for Trafficking Heroin and Crack, Shooting Rival Drug DealerRead the Press Release
Earlier today, in federal court in Central Islip, Andre Chandler, a Bloods street gang leader, also known as “Mac Dre,” was sentenced by United States District Judge Joan M. Azrack to 366 months’ imprisonment for conspiracy to distribute crack and heroin, discharging a firearm in connection with that conspiracy, illegal possession of three firearms, and possession with intent to distribute crack, heroin, oxycodone, and hydrocodone, and a related violation of the conditions of his supervised release. Chandler was convicted by a federal jury in October 2016 following a two-week trial.
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), Ashan M. Benedict, Special Agent in Charge, Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), New York Field Division, and Patrick J. Ryder, Commissioner, Nassau County Police Department (NCPD), announced the sentence.
“Any gang member who thinks they can sell drugs and commit acts of violence on Long Island without consequence should think about where Andre Chandler will spend the next 30 years,” stated United States Attorney Donoghue. “This Office and our partners are completely committed to relentlessly pursuing and prosecuting gang members to protect our community.” Mr. Donoghue thanked the FBI Long Island Gang Task Force, NCPD Gang Investigations Squad and Nassau County District Attorney’s Office Special Operations Bureau for their assistance in the investigation. The FBI Long Island Gang Task Force also includes the Nassau County Sheriff’s Department, Suffolk County Police Department, Suffolk County Sheriff’s Department, Rockville Center Police Department, Suffolk County Probation Department, the Bureau of Alcohol, Tobacco, Firearms and Explosives, Hempstead Police Department, New York State Police and U.S. Immigration and Customs Enforcement – Homeland Security Investigations.
“The belief these drug dealers and gang members have that they control territory, and have to defend their turf by shooting, and killing rivals defies comprehension,” stated FBI Assistant Director-in-Charge Sweeney. “While they’re playing at who is the nastier, meaner gangster, people are developing debilitating and deadly additions to their wares. The FBI Long Island Gang Task Force has proven with several of these gang investigations that we will do all we can to safeguard the community from more violence by going after the leadership, and keeping them from returning to their so-called turf.”
“Chandler as alleged showed no regard for life or the rule of law. Today’s sentence sends a strong message to those like him who choose that reckless and dangerous path,” stated ATF Special Agent-in-Charge Benedict. “I would like to thank our federal, state and local law enforcement partners that stand with ATF as one united front to protect our citizens from individuals who look to do harm to their fellow citizens. I would also like to extend my gratitude to the United States Attorney’s Office for their work in prosecuting the case.”
According to evidence presented at trial and court filings, Chandler began selling heroin and crack shortly after his release from prison in July 2014, declaring parts of Hempstead, New York, to be “my blocks, my streets.” On December 13, 2014, Chandler carried out a plan to hunt down a rival drug dealer, luring the dealer to his car and then shooting him repeatedly with a 9mm. semiautomatic handgun. Several weeks later, in January 2015, officers from the United States Probation Department searched Chandler’s residence and car, discovering heroin, cocaine base, oxycodone, hydrocodone, equipment for packaging narcotics for sale, and multiple firearms, including the same 9mm. semiautomatic pistol that Chandler had used to shoot the rival dealer. Law enforcement officers found that handgun hidden under the mattress in a young child’s bedroom.
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. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s renewed focus on targeting violent criminals, directing all U.S. Attorneys’ 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 government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Lara Treinis Gatz and David K. Kessler are in charge of the prosecution.
The Defendant:
ANDRE CHANDLER
Age: 34
Hempstead, New YorkE.D.N.Y. Docket No. 15-CR-131 (S-1)
Former Attorney Sentenced to 15 Years’ Imprisonment for Conspiring to Transport 1,500 Kilograms of Cocaine on Private JetRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, Todd Macaluso, a former attorney, was sentenced by United States District Judge I. Leo Glasser to 15 years’ imprisonment, following his November 2017 jury trial conviction for participating in an international cocaine distribution conspiracy. Macaluso was also ordered by the court to pay a $10,000 fine.
Richard P. Donoghue, United States Attorney for the Eastern District of New York; Robert F. Lasky, Special Agent-in-Charge, Federal Bureau of Investigation, Miami Field Office (FBI); Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York; James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division; James P. O’Neill, Commissioner, New York City Police Department (NYPD); and George P. Beach, Superintendent, New York State Police (NYSP), announced the sentence.
“Todd Macaluso orchestrated a scheme with drug cartel members to smuggle 1,500 kilograms of cocaine worth tens of millions of dollars from Ecuador to Honduras in his private jet for ultimate distribution here in the United States,” stated United States Attorney Donoghue. “Today’s sentence puts international drug traffickers and their associates on notice that we will bring the full weight of the law to bear on those that play any role in bringing dangerous drugs into our communities.”
“There is no doubt that Macaluso was driven by greed when he decided to transport 1,500 kilograms of cocaine in his private jet,” stated FBI Special Agent-in-Charge Lasky. “Instead of profiting from this poison, his illicit career was brought to an abrupt end through close cooperation with our law enforcement partners.”
“Macaluso’s illegal actions are indicative of his ignorance in knowing the law. And, this sentencing shows that there is no difference if you are a drug dealer, pilot or attorney when you have been arrested and convicted on federal drug charges,” stated DEA Special Agent-in-Charge Hunt. “This sentencing is a result of hard work by multiple law enforcement agencies at a local, federal and international level.”
“Macaluso’s crime is made even more egregious by the fact that he knew the law better than most as a former attorney, and yet chose to participate in an international conspiracy to distribute cocaine,” stated HSI Special Agent-in-Charge Melendez. “HSI used its multifaceted investigative authorities with its partners to pursue and dismantle this drug trafficking operation, in the process showing that no individual is above the law.”
“Today’s sentencing proves again that our multi-agency, multi-jurisdictional partnerships have a very long reach,” stated NYPD Police Commissioner O’Neill. “When a crime is committed, particularly one of this size and scope, we are relentless in bringing those responsible to justice.”
“This individual is someone who was sworn to uphold the law and conspired to break it,” stated NYSP Superintendent Beach. “I applaud our law enforcement officials at all levels for their strong police work in this case and for their continued dedication to preventing the trafficking of cocaine and other harmful narcotics within our communities. The culmination of this investigation and the disruption of this international illegal drug trafficking operation sends a clear message that we will find and punish the people who are responsible for putting these illegal substances in the hands of our youth and others.”
The evidence at trial established that in exchange for $200,000 Macaluso agreed with members of an international drug cartel to provide and pilot a private Falcon 10 airplane to transport 1,500 kilograms of cocaine worth tens of millions of dollars from Ecuador to Honduras, where the cocaine would be sold to Mexican drug traffickers and then imported into the United States. In furtherance of the scheme, Macaluso met repeatedly with drug traffickers in Tijuana, Mexico. On November 2016, Macaluso flew his jet to Haiti, met with the drug traffickers and agreed to transport the cocaine the following day. However, before Macaluso could transport the drugs, he was arrested and extradited to the United States for prosecution.
The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Ryan C. Harris, Hiral D. Mehta and Keith D. Edelman are in charge of the prosecution.
The Defendant:
TODD MACALUSO
Age: 55
Residence: San Diego, CaliforniaE.D.N.Y. Docket No. 16-CR-609
Three Defendants Arrested for Trafficking Firearms from Virginia to New YorkRead the Press Release
An indictment was unsealed today in federal court in Brooklyn charging Joseph Johnson, Brianna Glee and Tyshon Stevens as members of a gun trafficking conspiracy that used straw gun buyers to purchase more than 40 firearms from dealers in Virginia between April 2017 and May 2018. Johnson and Stevens were also charged with being felons in possession of a firearm. According to court filings, multiple firearms that were illegally acquired and distributed by the defendants were recovered by law enforcement officers in the New York area.
Johnson and Glee were arrested today and are scheduled to be arraigned this afternoon at the federal courthouse in Norfolk, Virginia. Stevens is currently in Virginia state custody, and will be presented in federal court in Brooklyn 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, New York Field Division (ATF), and James P. O’Neill, Commissioner, New York City Police Department (NYPD), announced the indictment.
“As alleged in the indictment, the defendants’ illegal trafficking of firearms put deadly weapons into the hands of criminals,” stated United States Attorney Donoghue. “This Office is working tirelessly with our partners to stop the flow of illegal firearms through the Interstate 95 corridor by individuals who traffic in firearms and the straw buyers who enable their business.” Mr. Donoghue thanked the ATF and the NYPD’s Brooklyn South Gang Squad for their outstanding efforts during this investigation.
“The defendants allegedly took part in a scheme to traffic illegal firearms thus endangering the lives of each and every citizen on the street,” stated ATF Special Agent-in-Charge Benedict. “ATF remains committed to combating violent crime by aggressively identifying, investigating, and arresting individuals who seek to put dangerous firearms into the hands of individuals that should not possess them. I would like to thank the personnel from our multiagency cooperative working group at ATF’s New York Field Division Crime Gun Intelligence Center, ATF’s Washington Field Division and our local partners at NYPD’s Brooklyn South Gang Squad. I would also like to extend my gratitude to the United States Attorney’s Office for their work in prosecuting the case.”
“This case underscores some disturbing truths: Illegal guns proliferate and circulate in higher-crime neighborhoods that still need our help,” stated NYPD Commissioner O’Neill. “In lockstep with our federal partners at the ATF and the Eastern District, the NYPD will continue to perform the incredibly dangerous work of preventing these firearms from getting into criminals’ hands.”
As set forth in the indictment and other filings by the government, the gun-trafficking operation was run by Johnson, who enlisted straw buyers including Glee to purchase multiple firearms. As part of the scheme, the straw buyers lied on ATF Forms 4473 by falsely certifying that they were not purchasing the firearms on behalf of others. Johnson then used Facebook to market those firearms to multiple individuals with gang ties in Brooklyn. In June 2017, Johnson contacted a potential buyer in Brooklyn on Facebook sending images of an array of firearms. Johnson also relied on Stevens and others to find buyers for the firearms in New York City. Stevens, using Facebook, communicated with Johnson about his inventory and prices. Two firearms obtained by Johnson’s straw purchasers were subsequently seized by the NYPD from previously convicted felons in New York.
If convicted, Johnson and Stevens face a maximum sentence of 20 years’ imprisonment. Glee faces up to five years’ imprisonment on each count. The charges in the indictment are merely 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. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s 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 government’s case is being prosecuted by Assistant United States Attorney Drew G. Rolle.
The Defendants:
Joseph Johnson
Age: 34
Virginia Beach, VirginiaBrianna Glee
Age: 25
Virginia Beach, VirginiaTyshon Stevens
Age: 34
Brooklyn, New YorkE.D.N.Y. Docket No. 18-CR-279 (MKB)
New York City Correction Officer Pleads Guilty to Bribery ConspiracyRead the Press Release
Earlier today, in federal court in Brooklyn, Christian Mizell, a correction officer employed by the New York City Department of Corrections (“DOC”), pleaded guilty to participating in a bribery conspiracy with other correction officers. As part of his guilty plea allocution, Mizell admitted that he smuggled contraband to inmates at the Manhattan Detention Center in exchange for thousands of dollars in cash payments. Today’s plea was held before United States District Judge Pamela K. Chen.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration, New York Division (DEA), and Mark G. Peters, Commissioner, New York City Department of Investigation (DOI), announced the guilty plea.
As alleged in the indictment and statements made in court, Mizell conspired with others, through text messages and phone calls, to arrange with co-conspirators to deliver marijuana covertly to Mizell and other correction officers.
When sentenced, Mizell faces up to five years in prison, as well as a fine of up to $250,000.
The government’s case is being handled by Assistant United States Attorney Erik Paulsen of the Office’s Public Integrity Section and Nomi Berenson of the Office’s International Narcotics and Money Laundering Section.
The Defendant:
Christian Mizell
Age: 48
Queens, New YorkE.D.N.Y. Docket No. 18-CR-60 (PKC)
Société Générale S.A. Agrees to Pay $860 Million in Criminal Penalties for Bribing Gaddafi-Era Libyan Officials and Manipulating Libor RateRead the Press Release
Société Générale S.A. (Société Générale), a global financial services institution based in Paris, France, and its wholly owned subsidiary, SGA Société Générale Acceptance N.V., have agreed to pay a combined total penalty of more than $860 million to resolve charges with law enforcement authorities in the United States and France, including $585 million relating to a multi-year scheme to pay bribes to officials in Libya and $275 million for violations arising from its manipulation of the London InterBank Offered Rate (LIBOR), one of the world’s leading benchmark interest rates. Together with approximately $475 million in regulatory penalties and disgorgement that Société Générale has agreed to pay to the Commodity Futures Trading Commission (CFTC) in connection with the LIBOR scheme, the total penalties to be paid by the bank exceed $1 billion.
In related proceedings, Société Générale reached a settlement with the Parquet National Financier (PNF) in Paris relating to the Libya corruption scheme. The United States will credit $292,776,444 that Société Générale will pay to the PNF under its agreement, equal to 50 percent of the total criminal penalty otherwise payable to the United States. This is the first coordinated resolution with French authorities in a foreign bribery case.
SGA Société Générale Acceptance N.V. is scheduled to plead guilty in connection with the resolution of the foreign bribery case and Société Générale will enter into a deferred prosecution agreement on Tuesday afternoon in federal court in Brooklyn before Chief United States District Judge Dora L. Irizarry. The plea agreement and the deferred prosecution agreement are subject to court approval by Chief Judge Irizarry.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, John P. Cronan, Acting Assistant Attorney General of the Justice Department’s Criminal Division, Matthew J. DeSarno, Special Agent-in-Charge, Federal Bureau of Investigation (FBI), Washington Field Office, Criminal Division, and Eric Hylton, Deputy Chief, Internal Revenue Service-Criminal Investigation (IRS-CI), made the announcement.
“The resolution announced today by the Department with Societe Generale and a subsidiary, which includes a guilty plea, admissions of wrongdoing, significant corrective measures and hundreds of millions of dollars in penalties, sends a powerful message to financial institutions that engage in corruption and manipulation in the financial markets that they will be held accountable,” stated United States Attorney Donoghue. “The United States will vigorously protect the integrity of financial markets by holding responsible to the full extent of the law those banks, corporations and individuals who seek to corrupt government officials to enrich themselves.”
“For years, Société Générale undermined the integrity of global markets and foreign institutions by issuing false financial data and by fraudulently securing contracts through bribery,” said Acting Assistant Attorney General Cronan. “Today’s resolution – which marks the first coordinated resolution with France in a foreign bribery case – sends a strong message that transnational corruption and manipulation of our markets will be met with a global and coordinated law enforcement response.”
“Today’s resolution demonstrates that fraudulently manipulating LIBOR and deceiving the financial market has severe consequences, and the FBI will not tolerate this type of criminal activity,” said FBI Special Agent-in-Charge DeSarno. “The FBI remains committed to holding institutions accountable for their actions in breaking the law and manipulating the global benchmark interest rate. The personnel of the FBI Washington Field Office have dedicated significant time and resources to investigating complex financial fraud schemes such as this one, and I want to thank them for their tireless efforts as well as our colleagues at the Department of Justice Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York for their hard work.”
“Today’s announcement resulted from the unraveling of international financial transactions orchestrated by Société Générale and its agents to facilitate illegal payments to foreign government officials in Libya,” said IRS-CI Deputy Chief Hylton. “IRS-CI is a trusted partner in pursuit of those who use pervasive bribery schemes to circumvent the law. We are committed to maintaining fair competition, free of corrupt practices, through global teamwork and our robust financial investigative talents.”
The FCPA Case
According to the companies’ admissions, between 2004 and 2009, Société Générale paid bribes through a Libyan “broker” in connection with 14 investments made by Libyan state-owned financial institutions. For each transaction, Société Générale paid the Libyan broker a commission of between one and a half and three percent of the nominal amount of the investments made by the Libyan state institutions. In total, Société Générale paid the Libyan broker over $90 million, portions of which the Libyan broker paid to high-level Libyan officials in order to secure the investments from various Libyan state institutions for Société Générale. As a result of the corrupt scheme, Société Générale obtained 13 investments and one restructuring from the Libyan state institutions worth a total of approximately $3.66 billion, and earned profits of approximately $523 million.
Société Générale will enter into a deferred prosecution agreement in connection with a criminal information charging the company with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of transmitting false commodities reports. Additionally, Société Générale’s subsidiary, SGA Société Générale Acceptance N.V., will plead guilty to a one-count criminal information filed today in federal court in Brooklyn charging the company with a conspiracy to violate the anti-bribery provisions of the FCPA. Pursuant to its agreement, Société Générale will pay a total criminal penalty of $860 million to the Department of Justice. Société Générale also agreed to continue to cooperate with the Department’s investigation and adopt and maintain enhanced compliance procedures.
The Department of Justice entered into this resolution in part due to Société Générale’s failure to voluntarily self-disclose the companies’ misconduct to the Department; the seriousness of the companies’ conduct, including the high value of the bribes paid to foreign officials; the company’s substantial, though not full, cooperation with the Department; and the company’s significant remediation which, together with the company’s risk profile and ongoing monitoring by L’Agence Française Anticorruption, resulted in the Department determining that a monitor was not necessary in this case.
The LIBOR Case
As admitted by the company, between May 2010 and at least October 2011, Société Générale promulgated falsely deflated U.S. Dollar (USD) LIBOR submissions to make it look as though Société Générale was able to borrow money at more favorable interest rates than it was actually able to do so. This downward manipulation allowed Société Générale to create the appearance that it was stronger and more creditworthy than it was.
The USD LIBOR manipulation scheme was ordered by senior executives of Société Générale, who tasked the managers of the company’s Treasury Department with overseeing the execution of the deflation effort. Several employees within Société Générale’s Treasury Department ensured that the company’s USD LIBOR submissions were altered in accordance with the deflation directive. Société Générale’s misconduct frequently altered the daily rate at which USD LIBOR was set, which affected financial products worldwide, including interest rate swaps, futures contracts and other derivative financial products.
Further, in 2006, certain Société Générale employees in London and Tokyo worked together to manipulate Société Générale’s Japan Yen (JPY) LIBOR submissions. These employees endeavored to manipulate JPY LIBOR in order to benefit the trading positions of a Société Générale employee. This employee had numerous deals tied to JPY LIBOR, and manipulation of JPY LIBOR improved the profitability of the employee’s trading book.
By the terms of the agreement, Société Générale will pay a fine of $275 million to resolve the LIBOR misconduct matter. Additionally, in August 2017, two individuals—former Société Générale Global Treasury Head Danielle Sindzingre and former Paris Treasury Head Muriel Bescond—were indicted for their roles in the scheme. Both individuals remain at large.
The FBI’s New York Field Office and IRS-Criminal Investigation’s New York office are investigating the case.
Assistant U.S. Attorneys David C. Pitluck and James P. McDonald of the Eastern District of New York, and Trial Attorneys Gerald M. Moody Jr. and Dennis R. Kihm of the Criminal Division’s Fraud Section are prosecuting the FCPA case. Assistant U.S. Attorney Matthew S. Amatruda of the Eastern District of New York and Assistant Chief Carol Sipperly, Trial Attorneys Timothy A. Duree and Gary A. Winters of the Criminal Division’s Fraud Section are prosecuting the LIBOR case. The Criminal Division’s Office of International Affairs provided significant assistance in this matter.
The Department appreciates the significant cooperation and assistance provided by the U.S. Securities and Exchange Commission and the CFTC in this matter. The PNF, the United Kingdom’s Serious Fraud Office, the Federal Office of Justice in Switzerland and the Office of the Attorney General in Switzerland also provided significant cooperation.
E.D.N.Y. Docket No. 18-CR-274 (DLI)
E.D.N.Y. Docket No. 18-CR-253 (DLI)
Société Générale S.A. Agrees to Pay $860 Million in Criminal Penalties for Bribing Gaddafi-Era Libyan Officials and Manipulating LIBOR RateRead the Press Release
Société Générale S.A. (Société Générale), a global financial services institution based in Paris, France, and its wholly owned subsidiary, SGA Société Générale Acceptance N.V., have agreed to pay a combined total penalty of more than $860 million to resolve charges with criminal authorities in the United States and France, including $585 million relating to a multi-year scheme to pay bribes to officials in Libya and $275 million for violations arising from its manipulation of the London InterBank Offered Rate (LIBOR), one of the world’s leading benchmark interest rates. SGA Société Générale Acceptance N.V. will plead guilty in the Eastern District of New York in connection with the resolution of the foreign bribery case. Together with approximately $475 million in regulatory penalties and disgorgement that Société Générale has agreed to pay to the Commodity Futures Trading Commission (CFTC) in connection with the LIBOR scheme, the total penalties to be paid by the bank exceed $1 billion.
In related proceedings, Société Générale reached a settlement with the Parquet National Financier (PNF) in Paris relating to the Libya corruption scheme. The United States will credit $292,776,444 that Société Générale will pay to the PNF under its agreement, equal to 50 percent of the total criminal penalty otherwise payable to the United States. This is the first coordinated resolution with French authorities in a foreign bribery case.
Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Richard P. Donoghue of the Eastern District of New York, Special Agent in Charge Matthew J. DeSarno of the FBI Washington Field Office's Criminal Division, Assistant Director in Charge William F. Sweeney Jr. of the FBI New York Field Office and Deputy Chief Eric Hylton of IRS Criminal Investigation made the announcement.
“For years, Société Générale undermined the integrity of global markets and foreign institutions by issuing false financial data and by fraudulently securing contracts through bribery,” said Acting Assistant Attorney General Cronan. “Today’s resolution – which marks the first coordinated resolution with France in a foreign bribery case – sends a strong message that transnational corruption and manipulation of our markets will be met with a global and coordinated law enforcement response.”
“The resolution announced today by the Department with Societe Generale and a subsidiary, which includes a guilty plea, admissions of wrongdoing, significant corrective measures and hundreds of millions of dollars in penalties, sends a powerful message to financial institutions that engage in corruption and manipulation in the financial markets that they will be held accountable,” said U.S. Attorney Donoghue. “The United States will vigorously protect the integrity of financial markets by holding responsible to the full extent of the law those banks, corporations and individuals who seek to corrupt government officials to enrich themselves.”
“Today’s resolution demonstrates that fraudulently manipulating LIBOR and deceiving the financial market has severe consequences, and the FBI will not tolerate this type of criminal activity,” said FBI Special Agent in Charge DeSarno. “The FBI remains committed to holding institutions accountable for their actions in breaking the law and manipulating the global benchmark interest rate. The personnel of the FBI Washington Field Office have dedicated significant time and resources to investigating complex financial fraud schemes such as this one, and I want to thank them for their tireless efforts as well as our colleagues at the Department of Justice Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York for their hard work.”
“When financial institutions convince foreign officials to accept bribes in return for lucrative business deals, their actions directly threaten the international free market system, not to mention our national security," said FBI Assistant Director in Charge Sweeney. "But being geographically out of sight doesn’t mean you’re out of reach from prosecution. No matter who you are, where you are, or how much money you have, the FBI will continue to use all resources at our disposal to find you, uncover your crimes, and reveal them for what they really are. Many thanks to the hardworking men and women of the FBI’s New York Field Office for leading the effort to expose this scheme and bring its perpetrators to justice.”
“Today’s announcement resulted from the unraveling of international financial transactions orchestrated by Société Générale and its agents to facilitate illegal payments to foreign government officials in Libya,” said IRS-CI Deputy Chief Hylton. “IRS-CI is a trusted partner in pursuit of those who use pervasive bribery schemes to circumvent the law. We are committed to maintaining fair competition, free of corrupt practices, through global teamwork and our robust financial investigative talents.”
The FCPA Case
According to the companies’ admissions, between 2004 and 2009, Société Générale paid bribes through a Libyan “broker” in connection with 14 investments made by Libyan state-owned financial institutions. For each transaction, Société Générale paid the Libyan broker a commission of between one and a half and three percent of the nominal amount of the investments made by the Libyan state institutions. In total, Société Générale paid the Libyan Intermediary over $90 million, portions of which the Libyan broker paid to high-level Libyan officials in order to secure the investments from various Libyan state institutions for Société Générale. As a result of the corrupt scheme, Société Générale obtained 13 investments and one restructuring from the Libyan state institutions worth a total of approximately $3.66 billion, and earned profits of approximately $523 million.
Société Générale will enter into a deferred prosecution agreement in connection with a criminal information charging the company with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of transmitting false commodities reports. Additionally, Société Générale’s subsidiary, SGA Société Générale Acceptance N.V., will plead guilty to a one-count criminal information filed today in the Eastern District of New York charging the company with a conspiracy to violate the anti-bribery provisions of the FCPA. Pursuant to its agreement with the Department, Société Générale agreed to pay a total criminal penalty of $585 million to the Department. Société Générale also agreed to continue to cooperate with the Department’s investigation and adopt and maintain enhanced compliance procedures. The guilty plea is scheduled to take place on Tuesday, June 5, before U.S. District Judge Dora L. Irizarry of the Eastern District of New York.
The Department entered into this resolution in part due to Société Générale’s failure to voluntarily self-disclose the companies’ misconduct to the Department; the seriousness of the companies’ conduct, including the high value of the bribes paid to foreign officials; the company’s substantial, though not full, cooperation with the Department; and the company’s significant remediation which, together with the company’s risk profile and ongoing monitoring by L’Agence Française Anticorruption, resulted in the Department determining that a monitor was not necessary in this case.
The LIBOR Case
As admitted by the company, between May 2010 and at least October 2011, Société Générale promulgated falsely deflated U.S. Dollar (USD) LIBOR submissions to make it look as though Société Générale was able to borrow money at more favorable interest rates than it was actually able to do. This downward manipulation allowed Société Générale to create the appearance that it was stronger and more creditworthy than it was.
The USD LIBOR manipulation scheme was ordered by senior executives of Société Générale, who tasked the managers of the company’s Treasury Department with overseeing the execution of the deflation effort. Several employees within Société Générale’s Treasury Department ensured that the company’s USD LIBOR submissions were altered in accordance with the deflation directive. Société Générale’s misconduct frequently altered the daily rate at which USD LIBOR was set, which affected financial products worldwide, including interest rate swaps, futures contracts and other derivative financial products.
Further, in 2006, certain Société Générale employees in London and Tokyo worked together to manipulate Société Générale’s Japan Yen (JPY) LIBOR submissions. These employees endeavored to manipulate JPY LIBOR in order to benefit the trading positions of a Société Générale employee. This employee had numerous deals tied to JPY LIBOR, and manipulation of JPY LIBOR improved the profitability of the employee’s trading book.
By the terms of the agreement, Société Générale will pay a fine of $275 million to resolve the LIBOR misconduct matter. Additionally, in August 2017, two individuals—former Société Générale Global Treasury Head Danielle Sindzingre and former Paris Treasury Head Muriel Bescond—were indicted for their roles in the scheme. Both individuals remain at large. An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
The deferred prosecution agreement and the plea agreement are subject to court approval.
The FBI’s Washington and New York Field Offices and IRS-Criminal Investigation’s New York office are investigating the case. Trial Attorneys Gerald M. Moody Jr. and Dennis R. Kihm of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys David C. Pitluck and James P. McDonald of the Eastern District of New York are prosecuting the FCPA case. Assistant Chief Carol Sipperly, Trial Attorneys Timothy A. Duree and Gary A. Winters of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Matthew S. Amatruda of the Eastern District of New York are prosecuting the LIBOR case. The Criminal Division’s Office of International Affairs provided significant assistance in this matter.
The Department appreciates the significant cooperation and assistance provided by the U.S. Securities and Exchange Commission and the CFTC in this matter. The PNF, the United Kingdom’s Serious Fraud Office, the Federal Office of Justice in Switzerland and the Office of the Attorney General in Switzerland also provided significant cooperation.
The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s Fraud Section FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Legg Mason, Inc. Agrees to Pay $64 Million in Criminal Penalties and Disgorgement to Resolve FCPA Charges Related to Bribery of Gaddafi-Era Libyan OfficialsRead the Press Release
Legg Mason, Inc. (Legg Mason), a Maryland-based investment management firm, has entered into a non-prosecution agreement with the Department of Justice and agreed to pay $64.2 million to resolve the Department’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) in connection with Legg Mason’s participation, through a subsidiary, in a Libyan bribery scheme.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, John P. Cronan, Acting Assistant Attorney General of the Justice Department’s Criminal Division, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Eric Hylton, Deputy Chief, Internal Revenue Service Criminal Investigation (IRS-CI), made the announcement.
According to Legg Mason’s admissions, between 2004 and 2010, a Legg Mason subsidiary, Permal Group Ltd. (Permal), partnered with Société Générale S.A. (Société Générale), a multinational bank headquartered in Paris, France, to solicit business from state-owned financial institutions in Libya. During this time, Société Générale paid bribes through a Libyan “broker” in connection with 14 investments made by Libyan state-owned financial institutions. For each transaction, Société Générale paid the Libyan broker a commission of between one and a half and three percent of the nominal amount of the investments made by the Libyan state institutions. In connection with seven of the transactions, Société Générale paid commissions to the Libyan broker to benefit Legg Mason, through its subsidiary Permal, which managed funds invested by the Libyan state institutions. In total, Société Générale paid the Libyan Intermediary over $90 million, portions of which the Libyan broker paid to high-level Libyan officials in order to secure the investments from various Libyan state institutions for Société Générale. As a result of the corrupt scheme, Société Générale obtained 13 investments and one restructuring from the Libyan state institutions worth a total of approximately $3.66 billion, and earned profits of approximately $523 million. Legg Mason, through Permal, managed seven of these investments and earned profits of approximately $31.6 million.
Legg Mason entered into a non-prosecution agreement and agreed to pay $64.2 million to resolve the matter. This payment includes a penalty of $32.625 million to be paid to the U.S. Treasury within five days of the agreement, and disgorgement of $31.617 million, which will be credited against disgorgement paid to other law enforcement authorities within the first year of the agreement. As part of the non-prosecution agreement, Legg Mason has agreed to continue to cooperate with the Department in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program and to report to the Department on the implementation of its enhanced compliance program.
The Department reached this resolution based on a number of factors, including that Legg Mason did not voluntarily and timely disclose the conduct at issue, but fully cooperated in the investigation and fully remediated. Moreover, Legg Mason’s misconduct involved only mid-to-lower level employees of Permal, a subsidiary company, and was not pervasive throughout Legg Mason or Permal; Société Générale – and not Legg Mason or Permal – maintained the relationship with the Libyan broker and was responsible for originating and leading the scheme; the profits earned by Legg Mason and Permal were less than one-tenth of the profits earned by Société Générale; and neither Legg Mason nor Permal has a history of similar misconduct.
The FBI’s New York Field Office and IRS-CI’s New York office are investigating the case.
Assistant U.S. Attorneys David C. Pitluck and James P. McDonald of the Eastern District of New York, and Trial Attorneys Dennis R. Kihm and Gerald M. Moody, Jr. of the Criminal Division’s Fraud Section are prosecuting the case. The Criminal Division’s Office of International Affairs provided significant assistance in this investigation.
The Department appreciates the significant cooperation and assistance provided by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission in this matter. France’s Parquet National Financier, the United Kingdom’s Serious Fraud Office, the Federal Office of Justice in Switzerland and the Office of the Attorney General in Switzerland also provided significant cooperation.
Legg Mason Inc. Agrees to Pay $64 Million in Criminal Penalties and Disgorgement to Resolve FCPA Charges Related to Bribery of Gaddafi-Era Libyan OfficialsRead the Press Release
Legg Mason Inc. (Legg Mason), a Maryland-based investment management firm, has entered into a non-prosecution agreement with the Department of Justice and agreed to pay $64.2 million to resolve the Department’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) in connection with Legg Mason’s participation, through a subsidiary, in a Libyan bribery scheme.
Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Richard P. Donoghue of the Eastern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI New York Field Office and Deputy Chief Eric Hylton of IRS Criminal Investigation made the announcement.
According to Legg Mason’s admissions, between 2004 and 2010, a Legg Mason subsidiary, Permal Group Ltd. (Permal), partnered with Société Générale S.A. (Société Générale), a multinational bank headquartered in Paris, France, to solicit business from state-owned financial institutions in Libya. During this time, Société Générale paid bribes through a Libyan “broker” in connection with 14 investments made by Libyan state-owned financial institutions. For each transaction, Société Générale paid the Libyan broker a commission of between one and a half and three percent of the nominal amount of the investments made by the Libyan state institutions. In connection with seven of the transactions, Société Générale paid commissions to the Libyan broker to benefit Legg Mason, through its subsidiary Permal, which managed funds invested by the Libyan state institutions. In total, Société Générale paid the Libyan Intermediary over $90 million, portions of which the Libyan broker paid to high-level Libyan officials in order to secure the investments from various Libyan state institutions for Société Générale. As a result of the corrupt scheme, Société Générale obtained 13 investments and one restructuring from the Libyan state institutions worth a total of approximately $3.66 billion, and earned profits of approximately $523 million. Legg Mason, through Permal, managed seven of these investments and earned profits of approximately $31.6 million.
Legg Mason entered into a non-prosecution agreement and agreed to pay $64.2 million to resolve the matter. This payment includes a penalty of $32.625 million to be paid to the U.S. Treasury within five days of the agreement, and disgorgement of $31.617 million, which will be credited against disgorgement paid to other law enforcement authorities within the first year of the agreement. As part of the non-prosecution agreement, Legg Mason has agreed to continue to cooperate with the Department in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program and to report to the Department on the implementation of its enhanced compliance program.
The Department reached this resolution based on a number of factors, including that Legg Mason did not voluntarily and timely disclose the conduct at issue, but fully cooperated in the investigation and fully remediated. Moreover, Legg Mason’s misconduct involved only mid-to-lower level employees of Permal, a subsidiary company, and was not pervasive throughout Legg Mason or Permal; Société Générale – and not Legg Mason or Permal – maintained the relationship with the Libyan broker and was responsible for originating and leading the scheme; the profits earned by Legg Mason and Permal were less than one-tenth of the profits earned by Société Générale; and neither Legg Mason nor Permal has a history of similar misconduct.
The FBI’s New York Field Office and IRS-CI’s New York office are investigating the case. Trial Attorneys Dennis R. Kihm and Gerald M. Moody Jr. of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys David C. Pitluck and James P. McDonald of the Eastern District of New York are prosecuting this matter. The Criminal Division’s Office of International Affairs provided significant assistance in this investigation.
The Department appreciates the significant cooperation and assistance provided by the U.S. Securities and Exchange Commission in this matter. France’s Parquet National Financier, the United Kingdom’s Serious Fraud Office, Switzerland’s Office of the Attorney General and Federal Office of Justice also provided significant cooperation.
The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s Fraud Section FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Brooklyn Gang Member Convicted of Racketeering and Two MurdersRead the Press Release
A federal jury in Brooklyn returned a guilty verdict today against Frank Smith, also known as “Fresh,” a member of a Coney Island-based street gang known as “Rival Impact,” on charges of racketeering and two counts each of murder-in-aid-of racketeering and causing a death through the use of a firearm. The verdict followed a three-week trial before United States District Judge Frederic Block. When sentenced, Smith faces two mandatory terms of life imprisonment for the murders of Terrance Serrano and Rashawn Washington.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the verdict.
“With today’s jury verdict, Frank Smith has been held accountable for murders and drug dealing arising out of his allegiance to a violent Brooklyn street gang,” stated United States Attorney Donoghue. “This Office and our law enforcement partners will continue to work tirelessly to dismantle violent street gangs and to eradicate the menace they pose to our communities.” Mr. Donoghue thanked the agents and detectives from the Federal Bureau of Investigation, New York Field Office, and the New York City Police Department for their outstanding investigative work on the case.
Between January 2000 and January 2014, Smith was a member of the Rival Impact street gang, a racketeering enterprise based at the Mermaid Houses in Coney Island. For more than a decade, the gang engaged in heroin and crack distribution and violence, including murders, attempted murders, robberies and assaults. Rival Impact had been at war for some time with members of “Thirty-O,” a street gang based in and around the Coney Island Houses. After a Rival Impact gang member Vincent Carmona was slain by “Thirty-O” crew members, Smith plotted killing members of Thirty-O, specifically Terrance Serrano and Rashawn Washington, whom he believed shot Carmona. On October 4, 2010, Smith and a Rival Impact gang member drove to East 19th Street in Manhattan where they found a parked car belonging to Serrano and Washington. After Serrano and Washington approached and entered the car, Smith ran to the car and opened fire, killing both men sitting inside.
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. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s 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 government’s case is being handled by the Office’s Organized Crime & Gangs Section. Assistant United States Attorneys Maria Cruz Melendez, Jennifer M. Sasso and Josh Hafetz are in charge of the prosecution.
The Defendant:
FRANK SMITH (also known as “Fresh”)
Age: 33
Brooklyn, New YorkE.D.N.Y. Docket No. 16-CR-346 (FB)
Attorney General Sessions Announces 311 New Assistant United States Attorney PositionsRead the Press Release
Attorney General Jeff Sessions and Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced today that the Department of Justice is taking a dramatic step to increase resources to combat violent crime, enforce our immigration laws, and help roll back the devastating opioid crisis.
In the largest increase in decades, the Department of Justice is allocating 311 new Assistant United States Attorneys (AUSAs) to assist in priority areas. Those allocations are as follows: 190 violent crime prosecutors, 86 civil enforcement prosecutors, and 35 additional immigration prosecutors. Many of the civil enforcement AUSAs will support the newly created Prescription Interdiction & Litigation Task Force that targets the opioid crisis at every level of the distribution system.
“Under President Trump's strong leadership, the Department of Justice is going on offense against violent crime, illegal immigration, and the opioid crisis—and today we are sending in reinforcements,” said Attorney General Jeff Sessions. “We have a saying in my office that a new federal prosecutor is ‘the coin of the realm.’ When we can eliminate wasteful spending, one of my first questions to my staff is if we can deploy more prosecutors to where they are needed. I have personally worked to re-purpose existing funds to support this critical mission, and as a former federal prosecutor myself, my expectations could not be higher. These exceptional and talented prosecutors are key leaders in our crime fighting partnership. This addition of new Assistant U.S. Attorney positions represents the largest increase in decades.”
In the Eastern District of New York, five of these AUSAs will focus on violent crime, two on civil enforcement, and two on prosecuting immigration cases.
“The addition of nine new Assistant U.S. Attorneys in the Eastern District of New York will accelerate our Office’s efforts to bring prosecutions against the most violent criminals in our communities, including gang members, international narcotic traffickers and terrorists; secure our ports of entry and communities against illegal immigration and immigration fraud and increase our civil enforcement efforts against opioid abuse, elder fraud, health care fraud and other financial crimes,” stated United States Attorney Donoghue. “Today’s announcement underscores the Department of Justice’s commitment to make the Eastern District of New York a safer place by providing new resources to address the unique and complex challenges we face.”
Long-Time Gambino Crime Family Member Pleads Guilty to Racketeering ConspiracyRead the Press Release
Earlier today, in federal court in Central Islip, New York, John Ambrosio, also known as “Johnny Boy,” a member of the Gambino organized crime family of La Cosa Nostra, pleaded guilty to racketeering conspiracy, admitting his involvement in acts of loansharking and illegal gambling.
Ambrosio, an acting captain in the Gambino family, is the last defendant to plead guilty in a superseding indictment that charged him and six members and associates of the Gambino family and a member of the Bonanno organized crime family of La Cosa Nostra. Co-conspirators Frank Salerno, also known as “Frankie Boy,” a soldier in the Bonanno family, as well as Thomas Anzalone, Alessandro Damelio, also known as “Sandro,” Joseph Durso, Anthony Rodolico and Anthony Saladino, associates of the Gambino family, have previously entered pleas of guilty to racketeering conspiracy. Today’s proceeding was held 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 Division; Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement, Homeland Security Investigations, New York; Geraldine Hart, Commissioner, Suffolk County Police Department; and James P. O’Neill, Commissioner, New York City Police Department, announced the guilty pleas.
As detailed in the superseding indictment and other court filings, between January 2014 and December 2017, Ambrosio and his co-conspirators engaged in a racketeering conspiracy, which included predicate crimes of loansharking, operating illegal gambling businesses, narcotics distribution conspiracy and obstruction of justice conspiracy. At his guilty plea, Ambrosio admitted to participating in the affairs of the Gambino family by collecting an extortionate loan from one victim, and supervising a gambling business involving poker games, electronic gaming machines and sports betting. As part of his plea agreement with the government, Ambrosio will forfeit $100,000, including $66,116 in cash that was seized from his home in Huntington, New York, at the time of his arrest.
When Ambrosio and his co-conspirators were arrested on December 12, 2017, law enforcement agents executed numerous search warrants at various locations, including a storage facility in Nassau County, and recovered gambling and loan sharking records, electronic gaming machines, narcotics and narcotics paraphernalia, and numerous firearms, including an AR-15, a .38 caliber revolver and a sawed-off shotgun. Law enforcement agents also recovered letters addressed to Ambrosio from Bonanno family boss Michael “The Nose” Mancuso and former Gambino family boss John Gotti.
When sentenced, Ambrosio, Anzalone, Damelio, Durso and Rodolico each face a maximum sentence of 20 years’ imprisonment. Saladino and Salerno each face a mandatory minimum of five years’ imprisonment and up to 40 years’ imprisonment for cocaine distribution conspiracy offenses.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorney Artie McConnell is in charge of the prosecution.
Defendant Who Pleaded Guilty Today:
JOHN AMBROSIO (also known as “Johnny Boy”)
Age: 74
Huntington, New YorkDefendants Who Have Previously Pleaded Guilty:
THOMAS ANZALONE
Age: 44
Queens, New YorkALESSANDRO DAMELIO (also known as “Sandro”)
Age: 49
Queens, New YorkJOSEPH DURSO
Age: 26
Glen Cove, New YorkANTHONY RODOLICO
Age: 46
Huntington, New YorkANTHONY SALADINO
Age: 67
Glen Cove, New YorkFRANK SALERNO (also known as “Frankie Boy”)
Age: 43
Queens, New YorkE.D.N.Y. Docket No. 17-CR-522 (S-1)(SJF)
Doctor Employed by FDNY at World Trade Center Monitoring Clinics Charged with Stealing $156,757 in Unearned SalaryRead the Press Release
Earlier today, a complaint was unsealed in federal court in Brooklyn charging Michael Poyin Chang, a medical doctor, with engaging in a scheme to steal wages in connection with his employment by the New York City Fire Department (FDNY) at World Trade Center Monitoring Clinics in Orange County, New York, and Queens, New York. Dr. Chang was arrested today and is scheduled to make his initial appearance this afternoon before United States Magistrate Judge Sanket J. Bulsara.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Mark G. Peters, Commissioner, New York City Department of Investigation (DOI), announced the arrest.
“Dr. Chang allegedly stole taxpayer money designated for the medical care of FDNY first responders who put their lives and health at risk in order to save others endangered by the World Trade Center terrorist attack,” stated United States Attorney Donoghue. “This Office will continue to root out fraud such as this, to ensure that these funds are spent on addressing the health needs of those who answered the call without hesitation on 9/11.”
“Physicians take an oath to do no harm, but this Fire Department physician violated that code by collecting more than $150,000 in public funds for nearly a year's worth of work he didn't perform, according to the charges,” stated DOI Commissioner Peters. “Instead of providing care to FDNY first responders involved in World Trade Center rescue and recovery efforts, this defendant allegedly manipulated City timekeeping records, including taking undocumented vacation days. Stealing time is fraud, and DOI will continue to pursue City employees who alter these payroll records for their own personal gain.”
According to the complaint, from June 2010 through December 16, 2016, Dr. Chang was a part-time employee of the FDNY. Dr. Chang’s duties included performing physical examinations of active FDNY members and retirees, as well as follow-up treatments including the prescribing of medication to patients. Dr. Chang was paid based upon the entries he made reporting his work hours in the CityTime electronic database. Dr. Chang falsely represented that he had worked 81 days between January 2011 and October 2016, when he was scheduled to be on vacation and the World Trade Center Orange County Annex was closed. Dr. Chang’s travel records, obtained from the United States Customs and Border Protection Service, show that he was travelling outside the United States on at least 34 of those 81 days. Dr. Chang reported via CityTime that he had worked an additional 220 days when his prearranged work schedules maintained by the FDNY Deputy Chief Medical Officer showed that he was neither scheduled to work nor see patients. In total, Dr. Chang received $156,757 for work that he did not perform. The World Trade Center Monitoring Clinic and its annexes were partially funded by the federal Center for Disease Control in each of the years Dr. Chang was employed by the FDNY.
The charges in the complaint are merely allegations, and the defendant is presumed to be innocent unless and until proven guilty. If convicted, Dr. Chang faces up to 10 years’ imprisonment.
The government’s case is being handled by the Office’s Public Integrity Section. Assistant United States Attorney Michael H. Warren is in charge of the prosecution.
The Defendant:
MICHAEL POYIN CHANG
Age: 59
Residence: Paramus, New JerseyE.D.N.Y. Docket No. 18-MJ-470
Gerard Terry, Former Chairman of the North Hempstead Democratic Party and Nassau County Board of Elections, Sentenced to Three Years in Prison for Tax EvasionRead the Press Release
Earlier today, in federal court in Central Islip, Gerard Terry, former Chairman of the Democratic Party in North Hempstead and head of the Nassau County Board of Elections, was sentenced to three years’ imprisonment, to be followed by three years’ supervised release, $992,057 in restitution and $31,000 in forfeiture, following his guilty plea on October 12, 2017 to tax evasion. The sentencing proceeding was held before United States District Judge Joanna Seybert.
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 sentence.
“Gerard Terry lived by a different standard than the taxpayers he served, taking money from them in payment for the numerous governmental and quasi-governmental jobs he held, while failing to pay the taxes he owed on those jobs,” stated United States Attorney Donoghue. “Together with our law enforcement partners, we will continue to work to ensure that there is one standard and one standard only — that taxpayers, regardless of who they are, will have to pay their fair share or be held to account.”
“While reaping the benefits of a salary funded by taxpayer dollars, Gerard Terry rendered himself exempt from paying taxes on this earned income,” stated FBI Assistant Director-in-Charge Sweeney. “It seems today he has learned his lesson—the time to pay up has come.”
“Our politicians and county officials hold positions of trust in the eyes of the public,” stated IRS-CI Special Agent-in-Charge Robnett.” “Mr. Terry, a licensed attorney, went to great lengths to evade his tax obligations with the United States, but he ultimately hurt all American citizens who work for a living and pay their fair share for the government services and protections we enjoy.”
Terry, an attorney licensed to practice in New York State, willfully evaded substantial income tax owed by him, having earned income from numerous government and quasi-government positions in Nassau County, including the Democratic Party in the Town of North Hempstead, the Nassau County Board of Elections, the Town of North Hempstead, the Long Beach Housing Authority, the North Hempstead Housing Authority, the Freeport Community Development Agency, the Roosevelt Public Library, the Village of Port Washington, and the Village of Manorhaven. Since January 2000, Terry has failed to pay a federal tax debt of almost $1.4 million, despite earning over $250,000 per year.
According to court documents, during the period charged in the indictment, Terry failed to file personal Form 1040 tax returns, filing years later and only after vigorous pursuit by the IRS. Even then, Terry filed Forms 1040 that contained false information and failed to report income. Terry has still failed to file returns for tax years 2009 and 2010.
Terry also evaded the IRS’s attempts at levy collection, cashing hundreds of wage and compensation checks worth over $500,000, rather than depositing them into checking or savings accounts where they could be seized. When he did deposit checks into his checking account, he did so in the minimum amounts necessary to cover checks and payments for his own personal expenses, making sure there were not sufficient funds upon which the IRS could levy. Terry also created and utilized a checking account in the name of a corporate shell and had one of his employers make direct payments to his credit card rather than issuing him a paycheck. He also pressured colleagues at his various government and publicly funded jobs not to report wages paid to him and not to comply with IRS notices of levy.
The government’s 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:
GERARD TERRY
Age: 62
Roslyn, New YorkE.D.N.Y. Docket No. 17-CR-37 (JS)
Attorney Convicted of Obstructing Federal Grand Jury Investigation of His Client by Altering RecordsRead the Press Release
John Servider, an attorney admitted to practice law in the State of New York since 1988, was convicted today by a federal jury in Brooklyn of two counts of an indictment charging him with conspiracy to alter, and alteration of, records for use in a grand jury investigation in the Eastern District of New York. The verdict followed a seven-day trial before United States District Judge Eric N. Vitaliano. When sentenced, Servider faces up to 20 years’ imprisonment as to each count of the indictment.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the verdict.
“Servider served as the fixer in a corrupt attorney-client scheme to obstruct a federal grand jury investigation by falsifying evidence,” stated United States Attorney Donoghue. “This Office, together with our law enforcement partners, will hold accountable attorneys who violate their oaths and the law by obstructing justice.”
Mr. Donoghue expressed his thanks to the agents and investigators of the Internal Revenue Service-Criminal Investigation, New York Field Office; the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud; the Federal Bureau of Investigation, New York Field Office; and the Port Authority of New York and New Jersey, Office of Inspector General, for their outstanding investigative work in the case.
The evidence at trial established that between March 2013 and April 2015, Servider learned that his client Vincent Vertuccio, who secretly controlled the activities of a construction company called Crimson Corp. (Crimson), was the subject of a grand jury investigation. Several law enforcement agencies, including the IRS, were investigating the flow of funds from Crimson to businesses that had supplied goods and services to Vertuccio. Vertuccio had not reported those goods and services as taxable income on his federal personal income tax return. After a grand jury subpoena was served on the jewelry store where Vertuccio purchased jewelry with Crimson funds, Servider and Vertuccio agreed to falsify the jewelry store receipts and invoices by removing any mention of Vertuccio’s name.
In April 2017, Vertuccio pleaded guilty to filing a false tax return and conspiracy to obstruct justice. He is awaiting sentencing.
The government’s case is being handled by the Office’s Organized Crime & Gangs Section. Assistant United States Attorneys Tanya Hajjar and Jonathan P. Lax are in charge of the prosecution.
The Defendant:
JOHN SERVIDER
Age: 56
Residence: Patterson, New YorkE.D.N.Y. Docket No. 15-CR-174 (ENV)
Stock Promoter Sentenced to 44 Months’ Imprisonment for $131 Million Market Manipulation SchemeRead the Press Release
Earlier today, in federal court in Brooklyn, Louis Petrossi, a former registered broker, was sentenced by United States District Court Judge Brian M. Cogan to 44 months’ imprisonment, to be followed by three years’ supervised release, for his role in the fraudulent market manipulation of ForceField Energy Inc. (ForceField), a publicly-traded company previously listed on the NASDAQ under the ticker symbol “FNRG.” The Court also ordered Petrossi to pay $8 million in restitution and $335,748.78 in forfeiture. On May 2, 2017, following a two-week trial, a federal jury convicted Petrossi of conspiracy to commit securities fraud, conspiracy to commit wire fraud, money laundering conspiracy and securities fraud.
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.
Between 2009 and 2015, Petrossi and others engaged in a scheme to defraud investors in ForceField, a purported worldwide distributor and provider of LED lighting products and solutions, by artificially controlling the price and volume of traded shares of ForceField through, among other means: (1) using nominees to purchase and sell ForceField stock without disclosing this information to investors and potential investors, (2) orchestrating the trading of ForceField stock to create the misleading appearance of genuine trading volume and interest in the stock, and (3) concealing secret payments to stock promoters and broker dealers who promoted and sold ForceField stock to investors and potential investors while falsely claiming to be independent of the company. The fraudulent scheme caused a loss of approximately $131 million to the investing public.
Specifically, between December 2009 and April 2015, Petrossi received secret cash payments from a ForceField executive in exchange for promoting the sale of ForceField stock to investors while representing himself to investors as the CEO of an investment research firm, “Wealth Research Institute.” He did not disclose these payments. Petrossi also engaged in manipulative trading of ForceField stock at the direction of the same ForceField executive.
On March 9, 2018, Petrossi was convicted in the United States District Court for the Middle District of Pennsylvania of committing a separate fraud scheme, in which he participated from January 2015 through January 2017. This scheme, which involved the misappropriation of over $1 million in investor funds, continued after Petrossi was arrested and placed on pretrial release in the ForceField case.
Today’s proceeding is the eighth sentencing to take place in connection with the fraud in ForceField securities. One remaining defendant awaits sentencing.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Mark E. Bini and Lauren H. Elbert are in charge of the prosecution.The Defendant:
LOUIS PETROSSI
Age: 77
Residence: Reno, NevadaE.D.N.Y. Docket No. 16-CR-234 (BMC)
Long Island Doctor Convicted of Causing the Overdose Deaths of Two Patients and Illegally Distributing OxycodoneRead the Press Release
A federal jury in Central Islip today, following five weeks of trial, convicted Dr. Michael Belfiore of two counts of illegal distribution of oxycodone causing the deaths of two patients and 26 counts of illegal distribution of oxycodone. After the verdict, Dr. Belfiore was remanded to custody pending sentencing by United States District Judge Joseph F. Bianco. The defendant faces a mandatory minimum sentence of 20 years’ imprisonment, a $10 million fine and forfeiture in an amount to be determined by the Court.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division, and Patrick J. Ryder, Commissioner, Nassau County Police Department (NCPD), announced the verdict.
“Dr. Belfiore was acting not as a healer, but as a drug dealer with a prescription pad,” stated United States Attorney Donoghue. “The defendant lined his pockets with cash from patients in exchange for illegally prescribing oxycodone, a particularly dangerous and addictive drug, with lethal results. The Department of Justice recognizes the importance of holding corrupt medical professionals like Dr. Belfiore accountable for their role in fueling the opioid epidemic.” The 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.
“From the time he was arrested, to today’s conviction, it was abundantly clear that Dr. Belfiore’s actions were not those of a medical doctor, but those of a drug dealer,” stated DEA Special Agent-in-Charge Hunt. “Lives were lost at the hands of Dr. Belfiore whose practice enabled addiction and overdose – both of which contribute to the current opioid crisis our nation is facing. I commend the diligent work of the DEA Tactical Diversion Squad in Long Island and the U.S. Attorney’s Office, Eastern District of New York, on this investigation and trial.”
“The conviction of defendant Dr. Michael Belfiore is a clear example of our zero tolerance approach toward dealing with the illegal prescribing of Oxycodone,” stated NCPD Commissioner Ryder. “We have seen all too often how these prescriptions have had serious and fatal effects on our communities and residents. I would like to congratulate all of the investigative agencies for their hard work and dedication during this investigation.”
The evidence at trial established that Dr. Belfiore, a doctor of osteopathic medicine who primarily operated out of an office in Merrick, illegally distributed oxycodone outside the usual course of professional practice and not for a legitimate medical purpose. Oxycodone is a powerful and highly addictive drug that is increasingly abused because of its potency when crushed into a powder and ingested. It is a scheduled controlled substance that may be dispensed by medical professionals only to patients suffering from significant pain that is documented through medical exams, diagnostic testing—such as x-rays and MRIs—and other objective proof. Although oxycodone is commonly prescribed in five milligram tablets, the trial evidence showed that Dr. Belfiore wrote thousands of 30 milligram prescriptions for oxycodone in quantities of up to 180 pills per month. Specifically, as proved at the trial:
On February 28, 2013, Dr. Belfiore gave an illegal prescription for 120 30 mg oxycodone pills to 42-year-old Edward Martin. On March 5, Mr. Martin overdosed and died in his bed after snorting the oxycodone obtained from Dr. Belfiore’s prescription.
On or about April 12, 2013, Dr. Belfiore gave an illegal prescription for 150 30 mg oxycodone to 32-year-old John Ubaghs, a veteran of the United States Marine Corps who served in the infantry during the war in Iraq. On April 13, 2013, Mr. Ubaghs was found unresponsive after overdosing on oxycodone prescribed by Dr. Belfiore, and was pronounced dead at the hospital.
Between March 2013 and August 2013, Dr. Belfiore intentionally dispensed six prescriptions of oxycodone without a legitimate medical purpose to an undercover detective with the NCPD’s Narcotics Vice Squad. Undercover surveillance videos demonstrated that Dr. Belfiore created fake medical charts to justify those prescriptions and that during office meetings with the detective, Dr. Belfiore’s “treatment” consisted of a discussion of the doctor’s $175,000 Porsche, a recent trip to San Diego and his interest in helicopters, yachts and cigarette boats.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Charles N. Rose and Bradley T. King are in charge of the prosecution. Assistant United States Attorney Madeline O’Connor is in charge of the forfeiture.
The Defendant:
MICHAEL BELFIORE
Age: 52
Residence: Westbury, New YorkE.D.N.Y. Docket No. 15-CR-242 (JFB)
United States Files Complaint against Food Distributors Alleging Unsanitary Conditions at Staten Island FacilityRead the Press Release
The United States has filed a civil complaint in federal court in Brooklyn seeking to permanently enjoin two companies that own and operate a Staten Island facility from manufacturing and distributing adulterated food, the Department of Justice announced today.
According to the complaint filed at the request of the U.S. Food and Drug Administration (FDA), the United States alleges that Euroline Foods, LLC, and Royal Seafood Baza, Inc., violated the Federal Food, Drug and Cosmetic Act (FDCA) by processing and distributing ready-to-eat fish and fishery products, vegetable salads, and cheese products in a facility with chronic insanitary conditions. Inspectors from the FDA found Listeria monocytogenes (L. mono) at the companies’ facility, and that the defendants failed to put in place adequate measures to reduce the risk of health hazards such as L. mono, Clostridium botulinum, and scombrotoxin. The complaint also named as defendants the companies’ owner/operators Eduard Shnayder, Syoma Shnayder and Albert Niyazov, and operator Oleg Polischouk.“Food processors and distributors must identify and eliminate food safety hazards and develop meaningful plans for preventing such hazards in order to protect consumers,” stated United States Attorney Donoghue. “Those who fail to do so must come into compliance or be shut down. We have, and will continue, to use all means at our disposal to protect the public from the dangers of harmful pathogenic bacteria, including bacteria that cause listeriosis and other serious illnesses.”
“L. mono presents a significant danger to public health and can prove fatal to vulnerable individuals,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “The food consumers purchase must be safe to eat, and we will continue to work with FDA to take action against companies that refuse to improve dangerously substandard practices.”
According to the complaint, the defendants failed to adequately implement effective sanitation controls that complied with current Good Manufacturing Practices (cGMP) requirements. In addition, the complaint alleges that the defendants failed to comply with seafood Hazard Analysis and Critical Control Point (HACCP) regulations that are designed to mitigate food safety hazards associated with the processing of fish and fishery products.
Three FDA inspections of the defendants’ facility in March 2015, February to March 2016, and November to December 2016, as well as a follow-up investigation in November 2017, all uncovered cGMP and HACCP violations. The FDA issued a Warning Letter to Royal Seafood in 2015, and FDA inspections in 2016 detected listeria contamination in several areas of the facility.
The complaint seeks an order by the Court to permanently enjoin the defendants from violating the FDCA and to prevent them from manufacturing or distributing food unless they comply with specific remedial measures including developing and executing an effective sanitation program.
A complaint is merely a set of allegations that, if the case were to proceed to trial, the government would need to prove by a preponderance of the evidence.
This matter is being handled by Assistant U.S. Attorney Gail A. Matthews of the United States Attorney’s Office for the Eastern District of New York, Trial Attorney James T. Nelson of the Civil Division’s Consumer Protection Branch, with the assistance of Associate General Counsel for Enforcement Jennifer C. Argabright of the FDA’s Office of the Chief Counsel.
Additional information about the Consumer Protection Branch and its enforcement efforts may be found 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.
United States Files Complaint Against New York Food Distributors Alleging Insanitary Conditions at Staten Island FacilityRead the Press Release
The United States filed a complaint seeking to permanently enjoin two companies that own and operate a Staten Island facility from manufacturing and distributing adulterated food, the Department of Justice announced today.
In a complaint filed today, at the request of the U.S. Food and Drug Administration (FDA), the United States alleged that Euroline Foods, LLC, and Royal Seafood Baza, Inc., violated the Federal Food, Drug and Cosmetic Act (FDCA) by processing and distributing ready-to-eat fish and fishery products, vegetable salads, and cheese products in a facility with chronic insanitary conditions. The complaint alleges that FDA inspections found Listeria monocytogenes (L. mono) at the companies’ facility, and that the defendants failed to put in place adequate measures to reduce the risk of health hazards such as L. mono, Clostridium botulinum, and scombrotoxin. The complaint, filed in U.S. District Court for the Eastern District of New York, also named as defendants the company’s owner/operators Eduard Shnayder, Syoma Shnayder and Albert Niyazov, and operator Oleg Polischouk.
“L. mono presents a significant danger to public health and can prove fatal to vulnerable individuals,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “The food consumers purchase must be safe to eat, and we will continue to work with FDA to take action against companies that refuse to improve dangerously substandard practices.”
According to the complaint, the defendants failed to adequately implement effective sanitation controls that complied with current Good Manufacturing Practices (cGMP) requirements. In addition, the complaint alleges that the defendants failed to comply with seafood Hazard Analysis and Critical Control Point (HACCP) regulations, which are designed to mitigate food safety hazards associated with the processing of fish and fishery products.
Three FDA inspections of the defendants’ facility in March 2015, February to March 2016, and November to December 2016, as well as a follow-up investigation in November 2017, all uncovered cGMP and HACCP violations. The FDA issued a Warning Letter to Royal Seafood in 2015, and FDA inspections in 2016 detected listeria contamination in several areas of the facility.
“Food processors and distributors must identify and eliminate food safety hazards and develop meaningful plans for preventing such hazards in order to protect consumers,” stated United States Attorney Richard P. Donoghue for the Eastern District of New York. “Those who fail to do so must come into compliance or be shut down. We have, and will continue, to use all means at our disposal to protect the public from the dangers of harmful pathogenic bacteria, including bacteria that cause listeriosis and other serious illnesses.”
The complaint seeks an order by the court to permanently enjoin the defendants from violating the FDCA and to prevent them from manufacturing or distributing food unless they comply with specific remedial measures including developing and executing an effective sanitation program.
A complaint is merely a set of allegations that, if the case were to proceed to trial, the government would need to prove by a preponderance of the evidence.
This matter is being handled by Trial Attorney James T. Nelson of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Gail A. Matthews of the U.S. Attorney’s Office for the Eastern District of New York, with the assistance of Associate General Counsel for Enforcement Jennifer C. Argabright of the FDA’s Office of the Chief Counsel.
Additional information about the Consumer Protection Branch and its enforcement efforts may be found 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.
Getaway Driver for Opioid Bandits in Brooklyn Sentenced to 10 Years’ ImprisonmentRead the Press Release
Earlier today, in federal court in Brooklyn, Jeff Roselien was sentenced to 10 years’ imprisonment by Chief United States District Judge Dora L. Irizarry for his role in four gunpoint robberies of pharmacies. Roselien had previously pleaded guilty on November 15, 2017 to Hobbs Act robbery conspiracy and brandishing a firearm during the conspiracy. On August 4, 2017, co-conspirator Wensley Paul was sentenced to 108 months’ imprisonment; on January 25, 2018, Gregory St. Juste was sentenced to 100 months’ imprisonment; and on April 12, 2018, Max Narcisse, Jr. was sentenced to 117 months’ imprisonment following their guilty pleas to the same charges.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the sentences and guilty pleas.
“In a matter of weeks, the defendants committed numerous gunpoint robberies of pharmacies in Brooklyn, terrorizing the employees and stealing powerful opioids to resell them on the street,” stated United States Attorney Donoghue. “The defendants have now been held accountable for contributing to the deadly opioid epidemic and endangering the community. This Office, together with our law enforcement partners, will continue to vigorously prosecute those who seek to profit from this epidemic.” Mr. Donoghue thanked the Special Agents of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and New York City Police Department Detectives assigned to the ATF Joint Robbery Task Force for their outstanding work on the case.
According to court filings and statements, in August and September 2016, the defendants and their co-conspirators conducted a series of gunpoint robberies of pharmacies in Brooklyn. On August 16, 2016, two co-conspirators entered the Mill Basin Pharmacy on Avenue T. While inside, the perpetrators held the store employees, one of whom was pregnant, at gunpoint in a back room. The robbers made off with over $4,000 in prescription pills and merchandise and escaped in a car driven by Roselien. On September 8, 2016, St. Juste and a co-conspirator entered This Way Pharmacy on Quintin Road. Inside the store, the robbers brandished a firearm, stole oxycodone pills and cash and fled in a getaway car driven by Roselien. On September 13, 2016, St. Juste and two co-conspirators entered the Living Word Pharmacy located on Utica Avenue. The robbers made off with oxycodone pills, employees’ cell phones and cash, and left in a getaway car driven by Roselien.
On September 26, 2016, St. Juste, Paul and Naricisse robbed the Mill Park Pharmacy on Avenue U. Upon entering the pharmacy, St. Juste pulled out a firearm and forced a store clerk to go behind a counter, demanding to know where the “oxy” was and threatening to shoot the clerk. The three men fled in a car driven by Roselien. Shortly after the perpetrators left the scene, NYPD officers recognized Roselien’s car from the prior robberies and pulled it over, arresting the four defendants. Upon searching the car, officers recovered a loaded, stolen .45 caliber pistol, as well as cash and the stolen merchandise.
The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorney Keith D. Edelman is in charge of the prosecution.
Defendant Sentenced Today:
JEFF ROSELIEN
Age: 31
Brooklyn, New YorkDefendants Previously Sentenced:
MAX NARICSSE, JR.
Age: 25
Brooklyn, New YorkGREGORY ST. JUSTE
Age: 21
Brooklyn, New YorkWENSLEY PAUL
Age: 25
Brooklyn, New YorkE.D.N.Y. Docket No. 16-CR-554 (DLI)
Alleged Mafia Soldier Pleads Guilty to Attempted Tax EvasionRead the Press Release
Earlier today, Salvatore Demeo, an alleged member of the Genovese organized crime family of La Cosa Nostra, pled guilty at the federal courthouse in Brooklyn to attempted tax evasion. At the guilty plea proceeding, Demeo admitted that he attempted to evade paying taxes on more than $1.6 million he earned in capital gains through a real estate transaction in 2014. As part of his guilty plea, Demeo agreed to pay the Internal Revenue Service $367,673, which represents the tax he owed for the 2014 real estate transaction and another one in 2013. Today’s plea took place before United States Magistrate Judge Vera M. Scanlon.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and James Robnett, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York (IRS-CI), announced the guilty plea.
As detailed in the indictment and other court filings, in two separate real estate transactions in 2013 and 2014, Demeo sold his shares in valuable real estate in Brooklyn, earning him more than $2 million in capital gains. Rather than report this income as he was required to do, Demeo took a series of measures designed to conceal the proceeds from the IRS. For example, he instructed his attorney to issue his shares to him in eight separate bank checks: three checks for the first transaction and five checks for the second transaction. In addition, the defendant enlisted the assistance of others to help conceal the funds. First, he endorsed two checks, amounting to $1 million, to a plumbing business, despite the fact that he has no apparent ownership interest in it, or other business relationship with it. Demeo endorsed another of the checks, in the amount of approximately $355,944, to an individual who operated an unlicensed check-cashing business, and withdrew approximately five cashier’s checks in smaller amounts, which were then cashed at licensed check-cashing establishments in exchange for a fee. As a result of Demeo’s fraud, the defendant avoided payment of federal taxes in excess of $365,000.
When sentenced, Demeo faces up to five years in prison, as well as a fine of up to $250,000.
The government’s case is being handled by the Office’s Organized Crime and Gangs Section. Assistant United States Attorney Elizabeth Geddes is in charge of the prosecution.
The Defendant:
SALVATORE DEMEO
Age: 78
Brooklyn, New YorkE.D.N.Y. Docket No. 17-CR-545 (KAM)
Long Island Man Pleads Guilty to Conspiracy to Distribute OxycodoneRead the Press Release
Earlier today, at the federal courthouse in Central Islip, Terrance Belford pleaded guilty 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 and elsewhere in 2016. The guilty plea was entered before United States District Judge Joanna Seybert. When sentenced, Belford faces up to 30 years in prison and a fine of up to $2 million.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division, announced the guilty plea.
“Using stolen prescription forms to acquire his drug supply, Belford distributed opioids in our community and beyond, fueling the opioid crisis to his financial benefit,” stated United States Attorney Donoghue. “This Office will continue to vigorously prosecute opioid dealers like the defendant who are motivated by greed and have no respect for the lives of others.” Mr. Donoghue expressed his gratitude to all the alert and responsible pharmacists nationwide, including those in Enterprise, Alabama, whose reports of the suspicious prescription forms presented by Belford and his co-conspirators were integral to the success of this prosecution.
“Belford didn’t have too much to hide since he boldly posted his drug trafficking activities on social media,” stated DEA Special Agent-in-Charge Hunt. “Too often, criminal organizations try to hide behind new communication platforms with false bravado that no one is watching, but in this case, law enforcement was watching. Today’s plea is a result of drug law enforcement’s commitment to investigating those who enable drug addiction and misuse.”
According to court filings and facts presented during the plea proceeding, beginning in late 2016 and continuing into early 2017, the DEA learned of a large number of New York State prescription forms that had been stolen and later filled at various pharmacies located within the Eastern District of New York, as well as in North Carolina, South Carolina and Alabama, among other locations. Belford and his co-conspirators filled out the stolen prescription forms and used them to obtain controlled substances, typically 30 milligram oxycodone tablets. They then sold the fraudulently acquired opioids 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. Further investigation revealed that, via his Facebook account, Belford boasted of his ability to obtain multiple controlled substances unlawfully, including oxycodone, Percocet and powder cocaine. Belford stated on Facebook that, if he had not been intercepted in Alabama, he would have made up to $2,000 for each forged prescription through the resale of oxycodone.
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)
Local Union Official Sentenced to Five Years’ Imprisonment for Extorting Business Owner into Hiring Union MembersRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, Roland Bedwell, the business manager of United Plant and Production Workers Local 175, was sentenced by United States District Judge Nicholas G. Garaufis to five years’ imprisonment and three years’ supervised release, following his guilty plea to extorting a construction business owner. Bedwell was arrested on the charges in December 2016 and pleaded guilty in August 2017.
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 Michael C. Mikulka, Special Agent-in-Charge, New York Region, U.S. Department of Labor, Office of Inspector General (DOL OIG), announced the sentence.
“Unions exist to protect workers, not to serve as vehicles for extortion. This sentence ends Bedwell’s career of extorting business owners and sends a clear message that others who attempt do so will suffer the same fate,” stated United States Attorney Donoghue. “This Office, working closely with our law enforcement partners, is committed to protecting hard-working business owners and ensuring that unions are not turned into criminal organizations.”
“For many of the cases investigated by our FBI New York Joint Organized Crime Task Force, the general public doesn’t see the real life impact of organized crime groups and their criminal acts,” stated FBI Assistant Director-in-Charge Sweeney. “But this case illustrates how extortion and threats stopped progress at a public works project at one of the busiest airports in our region. The subject boasted about how he didn’t understand why he wasn’t in jail. After an outstanding investigation with our law enforcement partners, that’s exactly where he is going.”
“As the top union official of United Plant and Production Workers Local 175, Business Manager Roland Bedwell abused his position by threatening business owners with physical harm if they did not sign collective bargaining agreements with Local 175,” stated DOL OIG Special Agent-in-Charge Mikulka. “The U.S. Department of Labor Office of Inspector General will continue to work with our law enforcement partners to ensure that union officials lawfully represent the interests of their members and that businesses can operate in a fair and just environment, free from illegal extortionate demands.”
According to court filings and statements made in court, the extortion for which Bedwell was sentenced today was partly captured during a recorded conversation the defendant had at a restaurant in Queens with an individual who owned a construction business (the “victim’). Bedwell explained to the victim the financial pain he had previously inflicted on others when, for example, a delivery truck transporting trees was blocked causing the trees to die. Bedwell then warned the victim that if he did not employ Local 175 members, Bedwell would use a crew of 15 “ex-military” men, who were unafraid to serve time in prison, to interfere with the victim’s business, resulting in the loss of a “tremendous amount of money.” Bedwell added, “Honestly, whatever they do or don’t do – pretty much up to them . . . either you’re gonna sign the contract . . . or these boys are gonna do it again.” The business owner relented, making his workers sign with Local 175.
In connection with his guilty plea, Bedwell also admitted that he attempted to extort another construction business owner, telling him that he would not get asphalt delivered to a LaGuardia Airport job site if he did not agree to employ Local 175 members. When the owner refused to sign an agreement with Local 175, Bedwell and his co-conspirators stopped the asphalt-delivery trucks, harassed the drivers and slashed their tires.
The extortion and attempted extortion were part of a pattern in which Bedwell referred to his ties to a member and then-associate of the Gambino organized crime family of La Cosa Nostra, as well as his own reputation as a “muscle man,” to intimidate businesses into signing labor contracts with Local 175. Bedwell’s co-conspirators also physically assaulted workers associated with contractors who refused to sign with Local 175.
The government’s case is being handled by the Office’s Organized Crime and Gangs Section. Assistant United States Attorneys Nadia Shihata, Andrey Spektor and Nicholas J. Moscow are in charge of the prosecution.
The Defendant:
ROLAND BEDWELL
Age: 57
Residence: Freeport, New YorkE.D.N.Y. Docket No. 16-CR-608 (S-2) (NGG)
Former New York City Department of Correction Investigator Sentenced to 10 Years’ Imprisonment for Transporting, Receiving and Possessing Child PornographyRead the Press Release
Earlier today, at the federal courthouse in Central Islip, Fernando Clarke, a former investigator with the New York City Department of Correction, was sentenced by United States District Judge Arthur D. Spatt to 10 years’ imprisonment, following his March 2018 jury trial conviction on seven counts of transportation, receipt and possession of child pornography. Clarke was also sentenced to pay a $13,682.43 fine, a special assessment of $5,600 and five years’ supervised release to follow his prison sentence, during which time he must register as a sex offender and will not be allowed unsupervised contact with minors. A restitution request from one of the victims depicted in child pornography images Clarke collected will be determined by the Court on or before June 1, 2018.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, and Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York, announced the sentence.
“As the trial established, Clarke collected child pornography at his home for years, using a peer-to-peer file sharing system that allowed others to download child pornography from him,” stated United States Attorney Donoghue. “When his crimes came to light, Clarke lied and attempted to hide behind his badge, claiming that he had accessed child pornography for his job as an investigator for the New York City Department of Correction. This Office is committed to aggressively investigating and prosecuting consumers of child pornography.” Mr. Donoghue extended his grateful appreciation to the New York City Department of Investigation, Inspector General, Board of Correction, and the Department of Justice Criminal Division’s Child Exploitation and Obscenity Section and High Technology Investigative Unit for their assistance in this case.
“For years, and while entrusted to serve and protect society, Fernando Clarke compiled and shared thousands of images and videos of children being sexually abused and exploited,” said Acting Assistant Attorney General Cronan. “With every horrific file Clarke downloaded or shared with others, he compounded the unspeakable harm endured by these vulnerable victims. Thanks to the outstanding efforts of our dedicated law enforcement partners and federal prosecutors, Clarke is now being held accountable for his crimes.”
“Individuals who take pleasure in watching videos and photos of children being sexually exploited should learn from the outcome of this case that we will find you and prosecute you to the fullest extent of the law, no matter who you are,” stated HSI Special Agent-in-Charge Melendez. “The fact that this individual used his law enforcement status to try to shield his crimes is particularly heinous, and a betrayal of all we stand for in protecting the children in our communities. But his knowledge of online sharing systems and assumption he could go undetected was undone by the excellent investigative team in this case.”
According to court filings and evidence introduced at trial, Clarke downloaded thousands of video files of the sexual abuse of pre-teen children, which he kept on computer equipment in his home. During a court-ordered search of his home on July 28, 2015, Clarke initially claimed that he was downloading child pornography in connection with his employment as a Department of Correction investigator. Clarke subsequently admitted during the search that he was not authorized to access or download child pornography for his employment. Clarke was fired from the Department of Correction after his conviction.
The government’s case is being prosecuted by Assistant United States Attorney Allen L. Bode of the Office’s Long Island Criminal Division and Department of Justice Trial Attorney Lauren Kupersmith.
The Defendant:
FERNANDO CLARKE
Age: 64
East Meadow, New YorkE.D.N.Y. Docket No. 15-CR-426(S-1) (ADS)(AKT)
Former New York City Correction Department Investigator Sentenced to 10 Years in Prison for Transporting, Receiving and Possessing Child PornographyRead the Press Release
Earlier today, an investigator with the New York City Correction Department was sentenced to 120 months in prison at the federal courthouse in Central Islip, New York following his March 5 jury trial conviction on seven counts of transportation, receipt and possession of child pornography involving conduct at his East Meadow, New York residence.
Acting 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 and Special Agent-in-Charge Angel M. Melendez of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) New York, made the announcement.
Fernando Clarke, 64, of East Meadow, New York, was sentenced by U.S. District Judge Arthur D. Spatt, who also ordered him to pay a $13, 682.43 fine and serve a five year term of supervised release to follow his prison sentence, during which time he must register as a sex offender and will not be allowed unsupervised contact with minors.
“For years, and while entrusted to serve and protect society, Fernando Clarke compiled and shared thousands of images and videos of children being sexually abused and exploited,” said Acting Assistant Attorney General Cronan. “With every horrific file Clarke downloaded or shared with others, he compounded the unspeakable harm endured by these vulnerable victims. Thanks to the outstanding efforts of our dedicated law enforcement partners and federal prosecutors, Clarke is now being held accountable for his crimes.”
“As the trial established, Clarke collected child pornography at his home for years, using a peer-to-peer file sharing system that allowed others to download child pornography from him,” said U.S. Attorney Donoghue. “When his crimes came to light, Clarke lied and attempted to hide behind his badge, claiming that he had accessed child pornography for his job as an investigator for the New York City Department of Correction. This Office is committed to aggressively investigating and prosecuting consumers of child pornography.”
“Individuals who take pleasure in watching videos and photos of children being sexually exploited should learn from the outcome of this case that we will find you and prosecute you to the fullest extent of the law, no matter who you are,” said Angel Melendez, Special Agent in Charge, Homeland Security Investigations (HSI), New York. “The fact that this individual used his law enforcement status to try to shield his crimes is particularly heinous, and a betrayal of all we stand for in protecting the children in our communities. But his knowledge of online sharing systems and assumption he could go undetected was undone by the excellent investigative team in this case.”
According to court filings and evidence introduced at trial, over several years Clarke downloaded thousands of video files of the sexual abuse of pre-teen children, including sadistic material, which he kept on computer equipment in his home. Clarke knew that these video files, some of which he watched repeatedly, also were available on his computers for others to download. During a court-ordered search of his home on July 28, 2015, Clarke initially claimed that he was downloading child pornography in connection with his employment as a Correction Department investigator. Clarke admitted at the time of the search that he was not authorized to access or download child pornography for his employment. Clarke was arrested at the time of the search and subsequently fired from the Department of Correction after his conviction.
The New York City Department of Investigation, Inspector General, Board of Correction, and the Criminal Division’s Child Exploitation and Obscenity Section (CEOS) and High Technology Investigative Unit assisted in the investigation. The government’s case is being prosecuted by Trial Attorney Lauren Kupersmith of the Criminal Division’s CEOS and Assistant U.S. Attorney Allen L. Bode of the U.S. Attorney’s Office’s Long Island Criminal Division.
Crips Gang Member Pleads Guilty to a Murder in BrooklynRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, Tyvon Bannister, also known as “Turtle,” a member of the Crips-affiliated Cypress Gangsta Crips (CGC) street gang, pleaded guilty to a firearms-related murder charge in connection with his July 2014 fatal shooting of Rayvon Henriques. The guilty plea was entered before United States District Judge Brian M. Cogan.
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 guilty plea.
As set forth in prior court filings and statements in court, Bannister is a member of the CGC, which is comprised of individuals residing in and around the Cypress Hills Houses (“Cypress”), a large New York City Housing Authority complex in East New York, Brooklyn. Cypress has been plagued by gang and drug-related violence arising largely from a long-standing feud between the CGC, who hail from the “Backside” (buildings on Linden Boulevard) and “Teamside” (buildings on the western end of Sutter Avenue and the northern end of Fountain Avenue), and the Bloods-affiliated gang members who reside in the “Frontside” (buildings on the eastern end of Sutter Avenue). This feud dates to at least 2010, when a person from the Frontside was believed to have killed a member of the Backside.
On July 8, 2014, Bannister and another gang member shot and killed Henriques in front of a nightclub in East New York. Henriques, who was 26-years-old at the time of his death, was targeted because of his association with the CGC’s chief rivals, the Bloods-affiliated gang members from the “Frontside” section of Cypress.
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. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s 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 government’s case is being handled by the Office’s Organized Crime and Gangs Section. Assistant United States Attorneys Margaret E. Gandy and Andrey Spektor are in charge of the prosecution.
The Defendant:
TYVON BANNISTER
Age: 25
Brooklyn, New YorkE.D.N.Y. Docket No. 17-CR-116 (BMC)
Two Brooklyn Men Convicted of Kidnapping and Torture of VictimRead the Press Release
Earlier today, following six days of trial, a federal jury in Brooklyn returned guilty verdicts against Michael Crumble and Ramell Markus on charges of kidnapping conspiracy, kidnapping and committing physical violence in furtherance of an extortion. The charges are contained in an indictment arising from an abduction, assault and extortion committed by the defendants on December 18, 2017. When sentenced by United States District Judge Allyne R. Ross, the defendants face a maximum of life imprisonment.
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 verdict.
“As the jury found, Crumble and Markus abducted the victim and took him to a location in Brooklyn that became a torture chamber, where he was beaten and burned with a hot iron in an attempt to extract drugs, money and information to settle a drug dispute,” stated United States Attorney Donoghue. “The defendants will now be held responsible for their ruthless conduct. I commend our partners in the New York City Safe Streets Task Force, which is comprised of agents of the FBI and detectives from the NYPD, for their outstanding investigative work.”
The evidence presented at trial established that Crumble, Markus, and a co-conspirator kidnapped the victim outside his home in Queens, forcing him into a vehicle. Markus pistol-whipped the victim, seeking a package of narcotics believed to be in his home. The defendants and the co-conspirator drove the victim to a residence in Brooklyn, and demanded that he give them narcotics, money, and the address of a location that the perpetrators believed contained additional money, as well as jewelry. To force the victim to comply, Markus broke a glass on his face, and the co-conspirator repeatedly burned both of the victim’s arms with a hot clothing iron. After the victim’s fiancée provided the defendants with money and drugs, the defendants and the co-conspirator transported the victim to a hotel in Brooklyn where he was held captive while the defendants waited for another individual to provide the address they were seeking. The defendants held the victim captive for more than eight hours.
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. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s 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 government’s case is being handled by the Office’s Organized Crime and Gangs Section. Assistant United States Attorneys Keith D. Edelman and Lindsay K. Gerdes are in charge of the prosecution.
The Defendants:
MICHAEL CRUMBLE
Age: 34
Residence: Brooklyn, New York,RAMELL MARKUS (also known as “Rah,” “Dollah” and “Smooth”)
Age: 35
Residence: Brooklyn, New YorkE.D.N.Y. Docket No. 18-CR-32 (ARR)
Owner of Queens Medical Employment Agency Indicted for Visa Fraud ConspiracyRead the Press Release
A federal grand jury in Brooklyn has returned an indictment against Rena Beduya Avendula, the owner and managing executive of Professional Placement & Recruitment, Inc. (PPRI), charging her with a visa fraud scheme that brought Filipino citizens into the United States for financial profit. Avendula is charged with five counts of visa fraud and with conspiring to defraud the United States, commit visa fraud and illegally bring aliens into the United States. Avendula was arrested Friday, arraigned before United States Magistrate Judge Ramon E. Reyes, Jr., and released on a $75,000 bond.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and William B. Gannon, Special Agent-in-Charge, United States Department of State, Diplomatic Security Service (DSS), Boston Field Office, announced the charges.
“As alleged in the indictment, Avendula engineered a fraud scheme for personal profit by creating fake job positions to deceive a government program that allows a limited number of foreign nationals to enter the United States temporarily to fill highly specialized positions,” stated United States Attorney Donoghue. “We will continue to protect the integrity of our immigration process by ensuring that only qualified people receive these visas.”
“The Diplomatic Security Service is firmly committed to working with the U.S. Attorney’s Office and our other law enforcement partners to investigate allegations of crime related to passport and visa fraud and to bring those who commit these crimes to justice,” stated DSS Special Agent-in-Charge Gannon. Mr. Gannon also praised the efforts of the DSS New York Field Office, which provided outstanding investigative assistance during this case.
As alleged in the indictment, Avendula engaged in a scheme from October 2009 to February 2015 to bring Filipino citizens into the United States illegally by fraudulently claiming to the United States Citizenship and Immigration Services (USCIS) that the foreign nationals would be employed in “specialty occupations,” thereby qualifying for H-1B visas. The H-1B nonimmigrant visa classification allows foreign nationals to enter the United States temporarily for the specific purpose of working for the employer in a “specialty occupation.” A “specialty occupation” requires certain specialized knowledge and a bachelor’s or higher level degree for entry into the occupation within the United States labor market. General registered nurses (RNs) typically do not qualify as beneficiaries for H-1B visas. A sponsoring U.S. employer must submit a USCIS Form I-129 Petition for a Nonimmigrant Worker, along with supporting documentation, attesting that the visa beneficiary will be employed in a specialty occupation and paid at least the local prevailing wage paid to similarly qualified U.S. citizens and legal permanent residents working in the area. A limited number of H-1B visas are issued each year.
As alleged in the indictment, Avendula used PPRI, based in Woodside, New York, to further her visa fraud scheme. PPRI specialized in providing nursing care to elderly patients. Avendula, in an effort to secure some of the limited number of H-1B visas that are available each year, falsely stated that foreign nurses would be working in specialized nursing at prevailing wage rates. In fact, they were going to work as licensed practical nurses or RNs at significantly lower rates of pay, mostly at nursing homes and rehabilitation centers. The defendant sponsored dozens of fraudulent applications and profited from the filing fees she collected from the nurses and from the health care facilities that paid PPRI.
The charges announced today are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, the defendant faces a statutory maximum of 10 years’ imprisonment for the visa fraud charges, and 10 years’ imprisonment for each foreign national she induced to reside in the United States in connection with the visa fraud conspiracy.
The government’s case is being handled by the Office’s General Crimes Section. Assistant United States Attorney Elizabeth Losey Macchiaverna is in charge of the prosecution.
The Defendant:
RENA BEDUYA AVENDULA
Age: 50
Woodside, New YorkE.D.N.Y. Docket No. 18-CR-246 (DLI)
Bureau of Prisons Lieutenant Convicted of Sexually Abusing Female Inmates at Metropolitan Detention Center in BrooklynRead the Press Release
Earlier today, a federal jury in Brooklyn returned a guilty verdict against Eugenio Perez, a federal correctional officer employed by the United States Bureau of Prisons, on charges of deprivation of civil rights, aggravated sexual abuse, sexual abuse, sexual abuse of a ward, attempted sexual abuse of a ward and abusive sexual contact. The 23-count indictment covered sexual abuse by Perez of five women who were inmates at the Metropolitan Detention Center (MDC) where the defendant was a lieutenant. The verdict followed a two-week trial before United States District Judge Kiyo A. Matsumoto. When sentenced, Perez faces a maximum sentence of up to life in prison.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Ronald G. Gardella, Special Agent-in-Charge, United States Department of Justice, Office of the Inspector General, New York Field Office (OIG), and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the verdict.
“Perez was a calculating predator who brazenly abused the authority of his position and betrayed his oath as a correctional officer when he sexually abused women under his control and entrusted to his care,” stated United States Attorney Donoghue. “Today’s verdict sends a strong message that this Office, together with our law enforcement partners in the Department of Justice, will aggressively investigate corrupt officers like Perez who commit sex crimes in correctional institutions, using fear and intimidation to try to silence their victims. We hope that today’s verdict brings some measure of closure and justice to the victims of Perez’s crimes.”
“Today’s verdict is a testament to the courage of the victims who came forward to ensure that justice was served,” stated OIG Special Agent-in-Charge Gardella. “It sends a powerful message that no correctional officer is above the law. The OIG takes allegations of abuse and civil rights violations seriously and we will continue to vigorously investigate those who, like Perez, abuse their power.”
“Perez violated the civil rights of several women who reasonably believed he could adversely exercise disciplinary authority over them should they not obey his demands,” stated FBI Assistant Director-in-Charge Sweeney. “Sexual abuse—in any form or fashion—is an inexcusable crime, especially when it involves such disgraceful behavior committed by a federal employee.”
The evidence at trial established that over a three-year period between January 2013 and September 2016, Perez used his position as a lieutenant at the MDC to engage in sexual acts and contact with five female inmates under his supervisory and disciplinary authority. The victims, identified in the indictment as “Jane Doe #1” through “Jane Doe #5,” testified that Perez lured them into isolated situations by arranging for them to clean the lieutenants’ office area at night. Their testimony and other evidence at trial proved that Perez used physical force and intimidation to compel the victims to engage in various sexual acts with him, including oral sex, and used his authority over them to ensure that they did not report the abuse.
The government’s case is being handled by the Office’s Public Integrity Section. Assistant United States Attorneys Nadia I. Shihata and Taryn A. Merkl are in charge of the prosecution.
The Defendant:
EUGENIO PEREZ
Age: 47
Residence: Brooklyn, New YorkE.D.N.Y. Docket No. 17-CR-280 (KAM)
Leader of Brooklyn-Based Drug Crew Pleads Guilty to Conspiracy to Rob a Stash House in QueensRead the Press Release
Earlier today, Joshua Padmore pleaded guilty at the federal courthouse in Brooklyn to a conspiracy to distribute crack, heroin and fentanyl, robbery conspiracy and possessing a handgun as a convicted felon for his role in an armed robbery of a drug stash house. Today’s plea took place before United States District Judge Edward R. Korman. When sentenced, Padmore faces a mandatory minimum sentence of five years’ imprisonment and a maximum of 40 years’ imprisonment for the drug conspiracy charge, up to 20 years’ imprisonment for the robbery charge, and up to 10 years’ imprisonment for possessing a handgun as a convicted felon. Padmore is the final of six defendants to plead guilty in the case.
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, New York Field Division (ATF), and James P. O’Neill, Commissioner, New York City Police Department (NYPD), announced the guilty plea.
According to court documents, on February 7, 2016, Padmore, Andre Shanks, Carlos Welch, Jr., and Qualese Welch planned to rob a drug stash house located in Flushing. Carlos Welch, Jr., first went to the stash house posing as a marijuana buyer. After leaving the stash house, Carlos Welch, Jr., called Padmore, whose phone was being monitored pursuant to a court order, and reported that he had observed “pounds” of marijuana inside the house. Law enforcement agents intercepted Padmore, Shanks and Carlos Welch, Jr., discussing their plans for carrying out the robbery. While monitoring Padmore’s phone and surveilling the stash house, law enforcement agents observed a car previously used by Padmore circling the stash house. Agents stopped the car, arrested Padmore, Shanks and Qualese Welch, and recovered a loaded revolver from under Padmore’s seat. Carlos Welch, Jr., who had been in a second car, was arrested several days later in Easton, Pennsylvania.
Padmore, along with Barrington Diles, were the leaders of a crew that sold crack cocaine, heroin and fentanyl in Brooklyn. Shanks and Joseph Bergman also conspired with Padmore to sell cocaine base. Diles and Bergman previously pleaded guilty to drug trafficking charges. Shanks previously pleaded guilty to robbery and drug trafficking charges. Carlos Welch, Jr., and Qualese Welch previously pleaded guilty to robbery-related charges.
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. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s 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 government’s case is being prosecuted by Assistant United States Attorneys Mathew S. Miller and Moira Kim Penza.
Defendant Who Pleaded Guilty Today:
JOSHUA PADMORE (also known as “JJ” and “Kutty”)
Age: 35
Brooklyn, New YorkDefendants Who Previously Pleaded Guilty:
ANDREW SHANKS
Age: 24
Brooklyn, New YorkCARLOS WELCH, JR.
Age: 25
Queens, New YorkQUALESE WELCH
Age: 25
Gainesville, GeorgiaBARRINGTON DILES
Age: 35
Brooklyn, New YorkJOSEPH BERGMAN
Age: Not Available
Brooklyn, New YorkE.D.N.Y. Docket No. 17-CR-126 (S-1) (ERK)
Corporate Executive Convicted in $300 Million Market Manipulation SchemeRead the Press Release
Abraxas J. Discala, also known as “AJ Discala,” the Chief Executive Officer of OmniView Capital Advisors LLC, was convicted today of eight counts in the indictment by a federal jury in Brooklyn. Discala was convicted of conspiracy to commit securities fraud, conspiracy to commit mail fraud and wire fraud, and two securities fraud counts related to the publicly-traded companies CodeSmart Holdings, Inc. and Cubed, Inc., and four counts of wire fraud related to Cubed and the publicly-traded company StarStream Entertainment Inc. The verdicts followed a five-week trial before United States District Judge Eric N. Vitaliano. When sentenced, Discala faces a maximum of 20 years’ imprisonment.
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 verdict.
“Discala and his network of company insiders, brokers and others executed a scheme designed to dupe investors into believing that companies with little in the way of assets were worth hundreds of millions of dollars by manipulating trading activity. At the end of the day, the defendant’s criminal game of musical shares cost unsuspecting investors millions,” stated United States Attorney Donoghue. “Today’s verdict sends a powerful message that this Office, together with our law enforcement partners, will hold corporate executives accountable when they use their expertise to facilitate the commission of crimes.” Mr. Donoghue expressed his appreciation to the Securities and Exchange Commission, New York Regional Office, and the Financial Industry Regulatory Authority, Inc., Criminal Prosecution Assistance Group, for their assistance in this case.
“Investors know they’re taking a chance when purchasing stock and other securities, but they don’t anticipate the odds being stacked against them from the start,” stated FBI Assistant Director-in-Charge Sweeney. “In so many cases, we see criminals in the white collar world autonomously controlling other people’s money and diverting it for their own benefit. Stealing is stealing, in whatever form or fashion, and today’s conviction proves just that.”
The evidence at trial established that in May 2013, Discala, along with separately charged co-conspirators, engineered a reverse merger of CodeSmart, a private company, with a public shell company. After gaining control of CodeSmart’s three million purportedly unrestricted shares, Discala and his co-conspirators on two occasions fraudulently inflated share price and trading volume of CodeSmart, which traded under the ticker symbol ITEN, and then sold their shares at a profit when the price reached desirable levels — a scheme commonly referred to as a “pump and dump.”
The first pump and dump occurred between May 13, 2013 and August 21, 2013. During this period, the co-conspirators manipulated CodeSmart’s stock price causing it to rise from $1.77 to a high of $6.94, before “dumping” their shares thereby causing it to drop to $2.19.
The second pump and dump occurred between August 21, 2013 and September 20, 2013. During this period, the defendant and his co-conspirators manipulated CodeSmart’s stock price causing it to rise from $2.19 to a high of $4.60, before selling, or “dumping,” their shares causing it drop to $2.13. During the entire period, Discala and his co-conspirators coordinated their trading activity to artificially control CodeSmart’s stock price. Evidence at trial established that Discala made more than $2.8 million in trading profits from the CodeSmart pump and dumps, while investors lost millions of dollars.
CodeSmart’s market capitalization at its highest closing price of $6.94 per share on July 12, 2013 was $86,347,800. That same day, CodeSmart filed with the U.S. Securities and Exchange Commission an amended Form 10-K, in which it listed only $6,000 in total assets, $7,600 in revenue and a net loss of $103,141. By December 30, 2013, CodeSmart’s stock was trading at $0.66 per share, and on July 9, 2014, its stock closed at $0.01 per share.
The evidence at trial also established that in early 2014, Discala and his co-conspirators defrauded investors and potential investors in Cubed, which traded under the ticker symbol CRPT. Discala and his co-conspirators gradually increased the price of Cubed’s stock to give it the appearance of a legitimate company with genuine and steady market demand for the security. The conspirators used an “escrow account” to successfully control the price and trading volume of Cubed’s stock, and to conceal the defendant’s and their co-conspirators’ ownership interests. In a telephone call intercepted pursuant to a judicially authorized wiretap, Discala boasted to a co-conspirator about his control over Cubed’s stock price through the use of the escrow account, stating, “I’m the [expletive] brake and the gas . . . . If I take my foot off the brake it’s 55 [dollars] tomorrow.” At the same time the defendant and their co-conspirators were touting Cubed to prospective investors, Discala stated on an intercepted call that, “We’ll be out before [expletive] company will even see if the Cube works, ok?”
On June 23, 2014, Cubed reached its highest closing price of $6.75 per share, resulting in a market capitalization of approximately $200 million. Previously, Cubed filed with the SEC a Form 10-Q that reported less than $1,500 in cash holdings, zero revenue, negative stockholders’ equity, a net loss of $15,000 and accrued professional fees of $131,824.
The evidence at trial also established that, in addition to manipulating the stock of CodeSmart and Cubed, between October 2013 and July 2014, Discala also fraudulently manipulated the stock of StarStream Entertainment Inc. and The Staffing Group, Ltd. StarStream was a Nevada corporation with its principal place of business in Monterey, California. It was promoted as a company that produced, promoted, supported and developed motion pictures, and it traded under the ticker symbol SSET. The Staffing Group was a Nevada corporation with its principal place of business in New Orleans, Louisiana. It was promoted as a company that recruited, hired, employed and managed skilled workers for clients, and it traded under the ticker symbol TSGL.
The jury also acquitted Discala of two wire fraud counts. Separately charged defendant Kyleen Cane was acquitted of the three counts against her.
The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Shannon C. Jones, Patrick T. Hein and Mark E. Bini are in charge of the prosecution with assistance provided by Assistant United States Attorney Claire Kedeshian of the Office’s Civil Division which is responsible for the forfeiture of assets.
The Defendant:
ABRAXAS J. DISCALA (also known “AJ Discala”)
Age: 47
Scarsdale, New YorkE.D.N.Y. Docket No. 14-CR-399 (ENV)
Statement of United States Attorney Richard P. Donoghue on Appointment by the District CourtRead the Press Release
“Chief Judge Dora L. Irizarry has notified me that the Court, pursuant to 28 U.S.C. § 546(d), has appointed me to serve as the United States Attorney for the Eastern District of New York. I am deeply grateful to the Court for the opportunity to continue to serve as the U.S. Attorney. I am equally grateful to the women and men of the Eastern District who have created and maintained a tradition of honor, integrity and excellence. Together, we will pursue justice, protect the people of this great nation and be faithful to the rule of law.”
United States Returns Thousands of Ancient Artifacts to IraqRead the Press Release
Today, the United States will return approximately 3,800 Iraqi artifacts to the Republic of Iraq at a repatriation ceremony at the residence of the Republic of Iraq’s Ambassador to the United States in Washington, D.C. The artifacts were smuggled into the United States for delivery to Hobby Lobby Stores, Inc. (“Hobby Lobby”), a nationwide arts-and-crafts retailer based in Oklahoma City, Oklahoma, and two of its corporate affiliates. Hobby Lobby agreed to forfeit these artifacts and $3 million to resolve a civil forfeiture complaint and multi-year investigation by the United States Attorney’s Office for the Eastern District of New York and U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI).
U.S. Immigration and Customs Enforcement (ICE) Acting Director Thomas D. Homan and Iraq’s Ambassador to the United States Fareed Yasseen will sign the ceremonial certificates transferring ownership of the artifacts from the United States to Iraq. Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Ian Saunders, Acting Assistant Commissioner, Office of International Affairs, U.S. Customs and Border Protection will also participate in the repatriation ceremony.
“The Republic of Iraq, standing on the land that was once home to the storied city-states and kingdoms of Mesopotamia, has a celebrated heritage as a cradle of civilization,” stated U.S. Attorney Donoghue. “We are proud to have played a role in removing these pieces of Iraq’s history from the black market of illegally obtained antiquities and restoring them to the Iraqi people.” U.S. Attorney Donoghue thanked Dr. Eckart Frahm of Yale University and Dr. Elizabeth C. Stone from Stony Brook University (SUNY) for their assistance.
“On behalf of U.S. Immigration and Customs Enforcement (ICE), and thanks to the hard work of the Office of the Special Agent in Charge in New York, it is a great honor for me to return so many priceless cultural artifacts to the people of Iraq,” stated ICE Acting Director Homan. “I would like to thank my colleagues at U.S. Customs and Border Protection and the U.S. Attorney’s Office for the Eastern District of New York for making this repatriation possible,” Homan added. “We will continue to work together to prevent the looting of antiquities and ensure that those who would attempt to profit from this crime are held accountable. This ceremony should serve as a powerful reminder that nobody is above the law.”
Background
In July 2010, Hobby Lobby’s president and a consultant traveled to the United Arab Emirates (UAE) to inspect a large number of cuneiform tablets and other antiquities being offered for sale. Following this trip, an expert on cultural property law warned Hobby Lobby that cuneiform tablets and cylinder seals were particularly likely to have been looted from Iraqi archaeological sites. Hobby Lobby proceeded to purchase a set of 5,548 artifacts in late 2010. Two-thirds of these artifacts were shipped in 2010 and 2011 by foreign antiquities dealers who made false statements on shipping labels, failed to file formal entry papers with U.S. Customs and Border Protection, and supplied fabricated provenances and sham invoices.
In July 2017, the government filed a civil forfeiture complaint and a stipulation of settlement in which Hobby Lobby consented to the forfeiture of approximately 3,500 ancient cuneiform and bullae that comprised part of the 2010 purchase, plus 144 cylinder seals and $3 million. Hobby Lobby also agreed to identify, turn over to the United States and forfeit any additional artifacts from the 2010 purchase that came to light. Hobby Lobby further agreed to adopt internal policies and procedures governing its importation and purchase of cultural property, provide appropriate training to its personnel, hire qualified outside customs counsel and customs brokers, and submit quarterly reports to the U.S. Attorney’s Office on any cultural property acquisitions for 18 months. In addition, Hobby Lobby stipulated to a statement of facts that related the history of its purchase of thousands of Iraqi artifacts in 2010, the red flags surrounding that acquisition, and the improper shipments of these artifacts.
In September 2017, pursuant to its obligations under the stipulation with the government, Hobby Lobby advised the government that it was in possession of 245 additional cylinder seals that were part of the 2010 purchase. In October 2017, Hobby Lobby shipped these cylinder seals to the United States and subsequently entered into a stipulation with the United States consenting to their forfeiture.
The Repatriated Antiquities
The antiquities being repatriated to Iraq at today’s ceremony consist of approximately:
- 450 cuneiform tablets
- 3,000 clay bullae
- 371 cylinder seals[1]
Cuneiform is an ancient system of writing on clay tablets that was used in ancient Mesopotamia thousands of years ago. The names of people, places and months used on a number of the cuneiform tablets confirm that they originated in the area of modern-day Iraq. Clay bullae are balls of clay on which seals have been imprinted. Cylinder seals are small engraved stone cylinders. When rolled on wet clay, they create raised images in the clay that can include pictures and cuneiform writing.
All of the artifacts were civilly forfeited in the Eastern District of New York. Iraq’s petitions for their return were approved by the chief of the Money Laundering and Asset Recovery Section of the Department of Justice.
The government’s case was handled by Assistant United States Attorneys Karin Orenstein and Ameet Kabrawala.
E.D.N.Y. Docket No. 17-CV-3980 (LDH) (VMS)
[1] In February 2018, 18 of the 144 cylinder seals that Hobby Lobby delivered to the government in connection with the July 2017 settlement were determined to be Egyptian Scarabs and are not included in this repatriation.
Colombian Veterinarian Extradited to the United States to Face Charges of Using Dogs to Transport HeroinRead the Press Release
Andres Lopez Elorez was arraigned this afternoon in federal court in Brooklyn before United States Magistrate Judge Marilyn Go on an indictment charging him with conspiring to import and distribute heroin into the United States. The defendant was arrested in Spain on a provisional arrest warrant issued from the Eastern District of New York and subsequently extradited from Spain to the United States on April 30, 2018. Judge Go ordered Elorez detained pending trial.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division, announced the extradition.
“As alleged in the indictment, Elorez is not only a drug trafficker, he also betrayed a veterinarian’s pledge to prevent animal suffering when he used his surgical skills in a cruel scheme to smuggle heroin in the abdomens of puppies,” stated United States Attorney Donoghue. “Dogs are mans’ best friend and, as the defendant is about to learn, we are drug dealers’ worst enemy.” Mr. Donoghue expressed his appreciation to the United States Marshals Service, the DEA’s New York Division, Miami Division, Bogota Country Office and Madrid Country Office; The Colombian National Police; the Government of Spain and the Spanish Guardia Civil.
“Twelve years ago, our investigation unmasked drug traffickers’ inhumane callousness,” stated DEA Special Agent-in-Charge Hunt. “Over time, drug organizations’ unquenchable thirst for profit leads them to do unthinkable crimes like using innocent puppies for drug concealment, or nowadays pushing lethal amounts of fentanyl onto our streets. This week, the veterinarian allegedly responsible has been brought to New York to face the charges against him. I applaud the United States Marshal Service, the U.S. Attorney’s Office Eastern District of New York and our international law enforcement partners for their commitment to this investigation.”
According to the superseding indictment and facts presented in court, between September 2004 and January 2005, Elorez was a member of a conspiracy, based in Colombia, that smuggled heroin into the United States using various methods to conceal the narcotics from detection by law enforcement. In addition to human couriers transporting the heroin, Elorez and his coconspirators used animal couriers. Elorez, utilizing his skill as a veterinarian, surgically implanted packets of liquid heroin in the bellies of puppies in order to conceal the narcotics from authorities. When the dogs arrived in the United States from Colombia, the heroin was surgically removed from their bodies.
The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted of the crimes charged, the defendant faces a mandatory minimum sentence of 10 years’ imprisonment, and up to life imprisonment.
The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section. The Justice Department’s Office of International Affairs handled the extradition in this matter. Assistant United States Attorneys Nathan D. Reilly and Alicia N. Washington are in charge of the prosecution.
The Defendant:
ANDRES LOPEZ ELOREZ
Age: 38
Country of Birth: ColombiaE.D.N.Y. Docket No. 5-CR-835 (S-1) (SJ)
18th Street Gang Members Indicted for Murder Conspiracy and Murder of Ms-13 Gang Rival in QueensRead the Press Release
A superseding indictment was unsealed today in federal court in Brooklyn, charging 18th Street gang members and associates Yanki Misael Cruz-Mateo, Yoni Alexander Sierra, Jose Jimenez Chacon and Saudi Levy Ramirez, with the February 2, 2018 murder and murder conspiracy of a member of the rival MS-13 gang. Cruz-Mateo also faces firearms-related charges. The defendants were arraigned this afternoon before United States District Judge LaShaan DeArcy Hall.
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), Richard A. Brown, District Attorney of Queens County, and James P. O’Neil, Commissioner, New York City Police Department (NYPD), announced the superseding indictment.
“As alleged in the superseding indictment, the defendants are charged with murdering a suspected rival MS-13 member. We will continue to work with our state and local partners to break this senseless cycle of violence by eradicating all violent street gangs that threaten our communities,” stated United States Attorney Donoghue.
“Our outstanding partnerships with local, state and federal law enforcement agencies are again showing results, and proving we are all in this together to rid communities of all criminal gangs,” stated FBI Assistant Director-in-Charge Sweeney. “The investigators have shown their dedication to each and every case they discover, because no one deserves to die at the hands of these violent groups. The FBI New York Metro Safe Streets Task Force won’t let these rival gangs use our neighborhoods for their turf war.”
“This indictment is another example of law enforcement working together to eliminate gang violence. The defendants in this case are accused of carrying out the merciless execution of a rival gang member,” stated Queens District Attorney Brown. “Gang warfare in our City streets puts every man, woman and child in danger. We will not tolerate violent street gangs turning our neighborhoods into killing fields. My office will continue to work diligently with our law enforcement partners to rid our communities of this kind of violence and brutality.”
“The magnitude of violence exhibited in this case will not be tolerated,” said NYPD Police Commissioner O’Neill. “These individuals would not be facing arraignment today without the collaboration between law enforcement and the public to stop and prevent violence.”
As alleged in the superseding indictment and detailed in court filings, the defendants are members and associates of the Jamaica, Queens and Kingston, New York chapters of the violent street gang 18th Street. On the night of February 2, 2018, a victim, known to the grand jury as John Doe 2, was discovered in the vicinity of 160th Street and 85th Avenue in the Jamaica Hills section of Queens. The victim had been shot multiple times in the head and torso. Several days after the murder, Cruz-Mateo admitted in text messages to shooting the victim because he believed the victim was a member of the rival MS-13 gang. Sierra, Chacon and Ramirez are charged with the murder conspiracy of John Doe 2, along with Cruz-Mateo.
The charges in the indictment are merely 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. Attorney General Jeff Sessions reinvigorated PSN in 2017 as part of the Department’s renewed focus on targeting violent criminals, directing all U.S. Attorneys’ 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 government’s case is being handled by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Jonathan P. Lax and Soumya Dayananda are in charge of the prosecution.
The Defendants:
YANKI MISAEL CRUZ-MATEO (also known as “Yankee Mateo,” “Doggy” and “Wino”)
Age: 19
Jamaica, New YorkYONI ALEXANDER SIERRA (also known as “Arca,” “Arca Angel” and “Wasson”)
Age: 20
Queens, New YorkJOSE JIMENEZ CHACON (also known as “Little One”)
Age: 20
New Brunswick, NJSAUDI LEVY RAMIREZ (also known as “El Malo” and “Little Bad”)
Age: 25
Queens, New YorkE.D.N.Y. Docket No. 18-139 (S-1) (LDH)
Staten Island Man Sentenced to 17 Years’ Imprisonment for Attempted Murder of A Federal OfficerRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, Fareed Mumuni was sentenced to 17 years’ imprisonment by United States District Judge Margo K. Brodie. Mumuni pleaded guilty on February 9, 2017 to all counts of an indictment charging him with conspiring and attempting to provide material support to the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization, assaulting and conspiring to assault federal officers, and attempted murder of federal officers.
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 sentence.
“Heroic American law enforcement officers remain locked in a life-and-death struggle with terrorists like Fareed Mumuni,” stated United States Attorney Donoghue. “We will do everything in our power to work with the FBI, the NYPD and all our Joint Terrorism Task Force partners to incapacitate terrorists and protect the American people. I commend the FBI Special Agents and Task Force Officers for doing an outstanding job in this case.”
“The women and men of law enforcement put their lives on the line to keep us safe every day. We will not tolerate attacks on them or plots to kill Americans,” said Assistant Attorney General Demers. “I applaud the tireless efforts of the agents and prosecutors that led to the defendant’s arrest and conviction. The National Security Division remains committed to defending our country and taking action against those who would harm it.”
“Mumuni now follows a familiar path of like-minded individuals before him - to federal prison. His intent was clear, but our resolve to thwart individuals like this is even more resolute,” stated FBI Assistant Director-in-Charge Sweeney. “I would like to thank the many JTTF agents and task force personnel, surveillance teams and FBI SWAT agents who interdicted Mumuni and his associates, often at great personal risk. Thank you for keeping our city safe.”
As alleged in the indictment and in other court filings, Mumuni pledged allegiance to ISIS, and he and co-conspirator Munther Omar Saleh discussed and worked to raise money to travel to ISIS-controlled territories. Mumuni stated that if he were unable to travel to join ISIS, then he would fight in the United States.
Saleh informed ISIS attack facilitator Junaid Hussain that Saleh, Mumuni, and three other co-conspirators located in New York and New Jersey had confronted law enforcement officers who were surveilling them continuously. Saleh sought and received authorization from Junaid Hussain permitting Mumuni to conduct a suicide “martyrdom” attack by using a pressure-cooker bomb against law enforcement officers who were following the co-conspirators and thus preventing them from traveling to join ISIS.
On June 17, 2015, during the execution of a search warrant at his residence in Staten Island, Mumuni charged at an FBI agent with a kitchen knife as the agents attempted to clear the house. Mumuni stabbed the FBI agent multiple times in the torso, using sufficient force to break off the tip of the knife. The agent was saved from serious injury or death only by his magazine carrier, which deflected and chipped the point of Mumuni’s knife while Mumuni was thrusting it into the agent’s side. Fortunately, the agent sustained only minor injuries.
Saleh was sentenced on February 6, 2018 to 18 years’ imprisonment for conspiring and attempting to provide material support to ISIS, and assaulting and conspiring to assault federal officers.
The case was prosecuted by Assistant United States Attorneys Alexander A. Solomon, Douglas M. Pravda and Ian C. Richardson, of the Office’s National Security and Cybercrime Section, with assistance provided by Trial Attorneys Robert Sander and Justin Sher of the National Security Division’s Counterterrorism Section.
The Defendant:
FAREED MUMUNI
Age: 23
Staten Island, New YorkE.D.N.Y. Docket No. 15-CR-393 (MKB)
New York Man Sentenced to 17 Years in Prison for Attempted Murder of a Federal OfficerRead the Press Release
Fareed Mumuni, 23, of Staten Island, New York, was sentenced today to 17 years in prison, to be followed by 10 years of supervised release. Mumuni pleaded guilty on Feb. 9, 2017 to all counts in an indictment charging him with conspiring and attempting to provide material support to the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization, assaulting and conspiring to assault federal officers, and attempted murder of federal officers.
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. of the FBI’s New York Field Office, and Commissioner James P. O’Neill of the NYPD announced the sentence. The sentenced was issued by U.S. District Judge Margo K. Brodie.
“The women and men of law enforcement put their lives on the line to keep us safe every day. We will not tolerate attacks on them or plots to kill Americans,” said Assistant Attorney General Demers. “I applaud the tireless efforts of the agents and prosecutors that led to the defendant’s arrest and conviction. The National Security Division remains committed to defending our country and taking action against those who would harm it.”
“Heroic American law enforcement officers remain locked in a life-and-death struggle with terrorists like Fareed Mumuni,” said U.S. Attorney Donoghue. “We will do everything in our power to work with the FBI, the NYPD and all our Joint Terrorism Task Force partners to incapacitate terrorists and protect the American people. I commend the FBI Special Agents and Task Force Officers for doing an outstanding job in this case.”
“Mumuni now follows a familiar path of like-minded individuals before him – to federal prison. His intent was clear, but our resolve to thwart individuals like this is even more resolute,” said Assistant Director in Charge Sweeney. “I would like to thank the many JTTF agents and task force personnel, surveillance teams and FBI SWAT agents who interdicted Mumuni and his associates, often at great personal risk. Thank you for keeping our city safe.”
As alleged in the indictment and in other court filings, Mumuni pledged allegiance to ISIS, and he and co-conspirator Munther Omar Saleh discussed and worked to raise money to travel to ISIS-controlled territories. Mumuni stated that if he were unable to travel to join ISIS, then he would fight in the United States.
Saleh informed ISIS attack facilitator Junaid Hussain that Saleh, Mumuni and three other coconspirators located in New York and New Jersey had confronted law enforcement officers who were surveilling them continuously. Saleh sought and received authorization from Junaid Hussain permitting Mumuni to conduct a suicide “martyrdom” attack by using a pressure-cooker bomb against law enforcement officers who were following the coconspirators and thus preventing them from traveling to join ISIS.
On June 17, 2015, during the execution of a search warrant at his residence in Staten Island, Mumuni charged at an FBI agent with a kitchen knife as the agents attempted to clear the house. Mumuni stabbed the FBI agent multiple times in the torso, using sufficient force to break off the tip of the knife. The agent was saved from serious injury or death only by his metal magazine carrier, which deflected and chipped the point of Mumuni’s knife while Mumuni was thrusting it into the agent’s side. Fortunately, the agent sustained only minor injuries.
This case was prosecuted by Assistant U.S. Attorneys Alexander A. Solomon, Douglas M. Pravda, and Ian C. Richardson, with assistance provided by Trial Attorneys Robert Sander and Justin Sher of the National Security Division’s Counterterrorism Section.
Former Head of HSBC’s Global Foreign Exchange Cash-Trading Sentenced to Prison for Multimillion-Dollar Front-Running SchemeRead the Press Release
The former head of global foreign exchange cash trading at HSBC Bank plc, a subsidiary of HSBC Holdings plc (collectively HSBC), was sentenced to prison today for his role defrauding an HSBC client through a scheme commonly referred to as “front running.” The Court remanded Johnson to the custody of the Bureau of Prisons.
Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Richard P. Donoghue of the Eastern District of New York, Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation (FDIC) and Assistant Director in Charge Nancy McNamara of the FBI’s Washington Field Office made the announcement.
Mark Johnson, 51, a United Kingdom citizen, was sentenced to serve 24 months in prison by U.S. Distict Judge Nicholas Garaufis of the Eastern District of New York. In addition, Judge Garaufis ordered that the defendant pay a fine of $300,000. A federal jury convicted the defendant on Oct. 23, 2017, following a four-week trial, of one count of wire fraud conspiracy and eight counts of wire fraud.
“Mark Johnson, an executive at one of the world’s largest financial institutions, cheated his client out of millions and now he’s going to prison for it,” said Acting Assistant Attorney General Cronan. “This sentencing should serve as a warning to those who engage in crooked financial schemes: The Justice Department’s Criminal Division and our law enforcement partners are watching. We are committed to protecting our financial system from harm and we will hold corporate executives accountable for their crimes.”
“Mark Johnson exploited confidential information and betrayed a client in order to generate profits for HSBC and enrich himself,” stated United States Attorney Donoghue. “Johnson has been held accountable for his crimes and today’s sentence should serve as a deterrent to fraudsters seeking to cheat their victims by manipulating important benchmarks, such as the FX spot fixings. This Office, together with our law enforcement partners, is committed to bringing to justice those who undermine public confidence in the operation of the financial markets through such schemes.”
“Today’s sentencing holds Mr. Johnson accountable for his egregious conduct to improperly manipulate the foreign currency market, misuse his position, and breach the customers’ trust,” said FDIC Inspector General Lerner. “We are dedicated to working with our law enforcement partners in order to combat crimes that undermine the integrity of financial institutions and bring culpable bank insiders to justice.”
“Leaders of financial service organizations such as HSBC are held to the utmost standard of integrity, which Mark Johnson failed to uphold,” said Assistant Director in Charge McNamara. “The FBI will not falter in assuring that justice will be brought to those that use company finances for their own personal gain.”
According to the evidence presented at trial, in November and December 2011, Johnson cheated an HSBC client out of millions of dollars by misusing information provided to him by that client, which had hired HSBC to execute a foreign exchange transaction related to a planned sale of one of the client’s foreign subsidiaries. HSBC was selected to execute the foreign exchange transaction – which was going to require converting approximately $3.5 billion in sales proceeds into British Pound Sterling – in October 2011. HSBC’s agreement with the client required the bank to keep the details of the client’s planned transaction confidential. Instead, Johnson misused confidential information he received about the client’s transaction to cheat the client out of millions of dollars, the evidence showed.
Shortly before the transaction, Johnson and other traders acting under his direction purchased Pounds Sterling for their own benefit in their HSBC “proprietary” accounts. Johnson then caused the $3.5 billion foreign exchange transaction to be executed in a manner that was designed to “ramp,” or drive up, the price of the Pound Sterling, benefiting their proprietary positions and HSBC at the expense of their client. As part of the scheme, Johnson and his co-conspirators also made misrepresentations to the client about the transaction that concealed the self-serving nature of their actions. The evidence showed that in total, Johnson and the traders he supervised generated HSBC profits of roughly $7.3 million from the execution of the transaction, including profits generated from the front-running conduct.
The investigation was conducted by the FDIC’s Office of Inspector General and the FBI’s Washington Field Office. Assistant Chiefs Carol L. Sipperly and Brian R. Young and Trial Attorney Blake Goebel of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Lauren Elbert of the Eastern District of New York’s Business and Securities Fraud Section are prosecuting the case.
The Fraud Section plays a pivotal role in the Department of Justice’s fight against white collar crime around the country, focusing on cases of national significance and international scope. Fraud Section prosecutors have vast experience in investigating and prosecuting securities and financial fraud, health care fraud and foreign corruption. The Section is routinely the national leader in large, sophisticated white collar investigations and prosecutions, frequently in partnership with U.S. Attorneys’ Offices and in coordination with foreign law enforcement agencies. Learn more about the Criminal Division’s Fraud Section at: https://www.justice.gov/criminal-fraud.
Former Head of HSBC’s Global Foreign Exchange Cash Trading Sentenced to 24 Months’ Imprisonment for Front-Running SchemeRead the Press Release
Earlier today, in federal court in Brooklyn, Mark Johnson, the former head of global foreign exchange cash trading at HSBC Bank plc, a subsidiary of HSBC Holdings plc (collectively HSBC), was sentenced by United States District Judge Nicholas G. Garaufis to 24 months’ imprisonment for committing wire fraud and wire fraud conspiracy, to be followed by five years’ supervised release. The Court also ordered Johnson to pay a $300,000 fine. Johnson was convicted by a federal jury in October 2017, following a four-week trial, of one count of wire fraud conspiracy and eight counts of wire fraud. The Court remanded Johnson to the custody of the Bureau of Prisons.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation (FDIC) and Assistant Director-in-Charge Nancy McNamara, Federal Bureau of Investigation, Washington Field Office (FBI), announced the sentence.
“Mark Johnson exploited confidential information and betrayed a client in order to generate profits for HSBC and enrich himself,” stated United States Attorney Donoghue. “Johnson has been held accountable for his crimes and today’s sentence should serve as a deterrent to fraudsters seeking to cheat their victims by manipulating important benchmarks, such as the FX spot fixings. This Office, together with our law enforcement partners, is committed to bringing to justice those who undermine public confidence in the operation of the financial markets through such schemes.”
“Mark Johnson, an executive at one of the world’s largest financial institutions, cheated his client out of millions and now he’s going to prison for it,” stated Acting Assistant Attorney General Cronan. “This sentencing should serve as a warning to those who engage in crooked financial schemes: The Justice Department’s Criminal Division and our law enforcement partners are watching. We are committed to protecting our financial system from harm and we will hold corporate executives accountable for their crimes.”
“Today’s sentencing holds Mr. Johnson accountable for his egregious conduct to improperly manipulate the foreign currency market, misuse his position, and breach the customers’ trust,” stated FDIC Inspector General Lerner. “We are dedicated to working with our law enforcement partners in order to combat crimes that undermine the integrity of financial institutions and bring culpable bank insiders to justice.”
“Leaders of financial service organizations such as HSBC are held to the utmost standard of integrity, which Mark Johnson failed to uphold,” stated FBI Assistant Director-in-Charge McNamara. “The FBI will not falter in assuring that justice will be brought to those that use company finances for their own personal gain.”
As established at trial, HSBC was selected in 2011 to execute a foreign exchange transaction on behalf of a client, which would require converting approximately $3.5 billion into British Pounds Sterling. HSBC’s agreement with the client required the bank to keep the details of the planned transaction confidential. Instead, Johnson misused that confidential information, defrauding the client.
Shortly before the transaction, which occurred in December 2011, Johnson and other traders acting under his direction purchased Pounds Sterling for HSBC’s benefit in their HSBC “proprietary” accounts. Johnson then caused the $3.5 billion foreign exchange transaction to be executed in a manner designed to “ramp,” or drive up, the price of the Pounds Sterling, benefiting their proprietary positions and HSBC at the expense of their client.
As part of their scheme, Johnson and his co-conspirators made misrepresentations to the client about the transaction that concealed the self-serving nature of their actions. In total, Johnson and the traders he supervised generated profits for HSBC of roughly $7.3 million from the execution of the transaction.
The investigation was conducted by the FDIC’s Office of Inspector General and the FBI’s Washington Field Office. Assistant Chiefs Carol Sipperly and Brian Young and Trial Attorney Blake Goebel of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Lauren Elbert of the Eastern District of New York’s Business and Securities Fraud Section are prosecuting the case.
The Defendant:
Mark Johnson
Age: 51
Residence: United KingdomE.D.N.Y. Docket No. 16-CR-457
Long Island Pediatrics Practice Agrees to Pay $750,000 to Settle False Claims Act Suit Alleging Improper Billing PracticesRead the Press Release
Long Island-based pediatrics practice Freed, Kleinberg, Nussbaum, Festa & Kronberg M.D., LLP, doing business as Pediatrics and Adolescent Medicine (the “Practice”), as well as current and former partner physicians of the Practice, including Arnold W. Scherz, M.D., Mitchell Kleinberg, M.D., Michael Nussbaum, M.D., Robert Festa, M.D., and Jason Kronberg, D.O. (“Partners”), have agreed to pay $750,000 to resolve allegations that they billed the Medicaid Program for services provided by physicians who were not enrolled in the program. The settlement, which resolved government claims under the federal False Claims Act and the New York State False Claims Act, was approved by United States District Judge Joanna Seybert.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the settlement.
“Providers serving Medicaid beneficiaries must be properly credentialed and thoroughly vetted to ensure that proper care is provided and to preserve the integrity of the Medicaid Program, which serves our neediest citizens,” stated United States Attorney Donoghue. “Today’s settlement reflects this Office’s commitment to safeguarding taxpayer programs like Medicaid by vigorously investigating allegations of fraud in False Claims Act cases.”
Mr. Donoghue thanked the Medicaid Fraud Control Unit of the Office of the New York State Attorney General for its assistance in the investigation.
The government’s investigation revealed that, from July 1, 2004 through December 31, 2010, the Practice and Partners employed a number of physicians who were not enrolled in the Medicaid Program who provided care to Medicaid patients. Because the physicians were not enrolled in the program, the Practice and Partners could not seek reimbursement from Medicaid for the services provided by these physicians. The defendants nonetheless did so by submitting requests for payment under the Partners’ Medicaid provider identification numbers, thereby misrepresenting the identities of the individuals who were actually providing treatment to the Practice’s pediatric Medicaid beneficiaries. This improper billing practice occurred at many of the Practice’s Long Island locations, including facilities in Holbrook, Port Jefferson, Shirley and Wading River.
The allegations were brought to the government’s attention through the filing of a complaint pursuant to the qui tam provisions of the False Claims Act. Under the Act, private citizens can bring suit on behalf of the United States and share in any recovery.
The government’s case was handled by Assistant United States Attorney Jolie Apicella of the Office’s Civil Division.
E.D.N.Y. Docket No. 14-CV-3943 (JS)
Colombian Drug Kingpin Extradited to the United States to Face Charges of Operating a Continuing Criminal EnterpriseRead the Press Release
Daniel Rendon-Herrera, also known as “Don Mario,” will be arraigned this afternoon before United States Magistrate Judge Viktor V. Pohorelsky at the federal courthouse in Brooklyn on charges of leading a continuing criminal enterprise. In May 2009, the U.S. Department of the Treasury’s Office of Foreign Assets Control designated Rendon-Herrera as a “Special Designated Narcotics Trafficker,” pursuant to the Foreign Narcotics Kingpin Designation Act. The defendant was arrested in Colombia on a provisional arrest warrant issued from the Eastern District of New York and subsequently extradited from Colombia to the United States on April 23, 2018.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division, Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York, James P. O’Neill, Commissioner, New York City Police Department (NYPD), and George P. Beach II, Superintendent, New York State Police (NYSP), announced the extradition. The case resulted from a long-term investigation by the DEA’s New York Organized Crime Drug Enforcement Task Force, which is comprised of agents and officers of the DEA, NYPD and NYSP.
“As alleged in the indictment, Rendon-Herrera led a major Colombian drug trafficking enterprise that imported tons of cocaine into the United States and employed hitmen who carried out acts of violence across North and South America in furtherance of the organization,” stated United States Attorney Richard P. Donoghue. “The United States is committed to cooperating with our international partners to dismantle illicit organizations like Clan Usuga and stem the destructive effects wrought by this violent armed criminal group.” Mr. Donoghue extended his grateful appreciation to the DEA’s offices in Miami and Bogota, HSI’s El Dorado Task Force, the United States Department of State, the Department of Justice’s Office of International Affairs and the Colombian National Police.
“Don Mario was the most feared narco-terrorist in Colombia. He is known as the old man who ignited Clan Usaga’s reign of terror while besieging the United States with hundreds of tons of cocaine,” stated DEA Special Agent-in-Charge Hunt. “This extradition stems from his arrest in the jungles of Colombia nine years ago and was made possible by local, state, federal and international law enforcement efforts.”
“This case demonstrates that those involved in the distribution of narcotics will be vigorously investigated and prosecuted across international lines,” stated HSI New York Special Agent-in-charge Melendez. “Rendon-Herrera and his criminal organization destroyed many lives across two continents through mass distribution and sale of cocaine and targeted murders. Drug trafficking organizations must be dismantled at every level, from the street dealer to the international supplier and right up to drug kingpins like Rendon-Herrera. This extradition is significant for U.S. law enforcement efforts and will disrupt the flow of substantial quantities of drugs from entering our country.”
“Don Mario is one of the most significant drug traffickers of our time, recognized for moving multi-ton shipments of cocaine to the United States at a moment’s notice,” stated NYPD Police Commissioner O’Neill. “The defendant also founded the most influential drug trafficking organization in Columbia ever, responsible for the death of untold numbers by overdose and many more from kidnappings and targeted assassinations, all to protect their illicit trade. Today our country—and the nation of Columbia—will be safer because of relentless and persistent work from all those involved in bringing this kingpin to an American courtroom.”
“I commend the dedicated teamwork of the New York Organized Crime Drug Enforcement Strike Force which was instrumental in the takedown of this dangerous drug trafficker and bringing him to justice,” stated NYSP Superintendent Beach. “Because of the task force’s aggressive strategy to stop this type of criminal behavior, they are preventing the infiltration of dangerous narcotics into our communities and helping to remove the violent criminals who profit at the expense of our communities. We will continue to be vigilant in working together with our law enforcement partners to keep these harmful narcotics off our streets and our neighborhoods safe.”
According to the indictment, Rendon-Herrera was the founder and one of the principal leaders of Clan Usuga (formerly referred to as Los Urabenos), the largest and most influential BACRIM (banda criminal or criminal group) in Colombia. Between approximately June 2003 and December 2014, Clan Usuga was involved in multi-ton shipments of cocaine from Colombia to Mexico and Central America for ultimate importation into the United States. Under Rendon-Herrera’s leadership, Clan Usuga coordinated the production, purchase and transfer of shipments of cocaine, as well as the receipt of shipments of cocaine in Mexico and Central America. Clan Usuga also controlled territory in various areas in Colombia and imposed a “tax” on any drug traffickers operating in regions under Clan Usuga’s control. Specifically, Clan Usuga charged a set fee for every kilogram of cocaine that was manufactured, stored or transported through areas controlled by Clan Usuga.
Clan Usuga also employed “sicarios,” or hitmen, who committed murders, assaults, kidnappings and assassinations. Clan Usuga utilized these acts of violence to collect drug debts, maintain discipline, control and expand drug territory and to promote and enhance the prestige, reputation and position of the organization.
The extradition of Rendon-Herrera is the result of an ongoing Organized Crime Drug Enforcement Task Forces (OCDETF) investigation led by the United States Attorney’s Office for the Eastern District of New York, DEA and HSI. The principal mission of the OCDETF program is to identify, disrupt and dismantle the most serious drug trafficking, weapons trafficking and money laundering organizations, and those primarily responsible for the nation’s illegal drug supply.
The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Gina M. Parlovecchio, Margaret Lee and Marcia M. Henry are in charge of the prosecution. The Justice Department’s Office of International Affairs handled the extradition in this matter.
The Defendant:
DANIEL RENDON-HERRERA (also known as “Don Mario”)
Age: 54
Antioquia, ColombiaE.D.N.Y. Docket No. 14-CR-625 (S-3) (DLI)
Former Procurement Director of Staten Island District Attorney’s Office Pleads Guilty to Embezzling Government FundsRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, William Nelson, former Director of Procurement at the Richmond County District Attorney’s Office (RCDA), pleaded guilty to theft of government funds relating to his embezzlement of over $440,000 from the RCDA. The plea was entered before United States Magistrate Judge Cheryl L. Pollak.
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, and Mark G. Peters, Commissioner, New York City Department of Investigation, announced the guilty plea.
According to the indictment and facts presented during the guilty plea, for approximately 10 years between 2006 and 2016, Nelson stole over $440,000 from the RCDA as part of a long-term scheme to defraud the RCDA of funds. Specifically, Nelson used two RCDA American Express credit cards to purchase items such as jewelry, clothing, toys, sporting goods and memorabilia, alcohol, video games and movies, electronics, knives, handbags, collectibles, event tickets, meals, lodging, airfare, excursions, and online services that he then used for his own benefit and the benefit of others. Nelson also used the online payment system PayPal to directly transfer thousands of dollars from the RCDA credit cards to his own personal bank account. In furtherance of his scheme, Nelson took steps to hide his embezzlement, which included concealing the itemized credit card statements, mischaracterizing the nature of the purchases, and using his authority as Director of Procurement to approve payments of his fraudulent personal expenditures.
As part of his plea agreement, Nelson is required to pay forfeiture in the amount of $441,262.30, as well as restitution in the same amount to the RCDA. When sentenced, the defendant faces up to 10 years’ imprisonment.
The government’s case is being handled by the Office’s Public Integrity Section. Assistant United States Attorney Maria Cruz Melendez is in charge of the prosecution.
The Defendant:
WILLIAM NELSON
Age: 44
Staten Island, New YorkE.D.N.Y. Docket No. 17-CR-394 (RJD)
Founder of “NXIVM,” a Purported Self-Help Organization, and Actor Indicted for Sex Trafficking and Forced Labor ConspiracyRead the Press Release
Actor Allison Mack was arrested this morning on an indictment unsealed today in federal court in Brooklyn charging her and Keith Raniere, also known as “Vanguard,” with sex trafficking, sex trafficking conspiracy and forced labor conspiracy. Mack will be arraigned on the indictment this afternoon before United States Magistrate Judge Cheryl L. Pollak. Raniere was previously arrested on a complaint and ordered detained. Raniere will be arraigned on a date to be determined.
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, Allison Mack recruited women to join what was purported to be a female mentorship group that was, in fact, created and led by Keith Raniere,” stated United States Attorney Donoghue. “The victims were then exploited, both sexually and for their labor, to the defendants’ benefit. This Office and our law enforcement partners are committed to prosecuting predators who victimize others through sex trafficking and forced labor.” Mr. Donoghue expressed his grateful appreciation to the FBI for leading the investigation, and thanked the New York State Police, the FBI Albany Field Office, the New York State Office of the Attorney General, the New York State Department of Health and the United States Attorney’s Office for the Northern District of New York for their assistance.
“Today we announce an additional arrest, and an indictment, in a case that brought to light an inconceivable crime,” stated FBI Assistant Director-in-Charge Sweeney. “As this pyramid scheme continues to unravel, we ask anyone who might have been a victim to reach out to us with information that may further our investigation.”
Nxivm and The Source
According to court filings, during the past 20 years, Raniere established a series of purported self-help programs within his umbrella organization “Nxivm” (pronounced NEX-i-um). Nxivm is based in Albany, New York and has operated centers in the United States, Mexico, Canada and South America. Nxivm maintains features of a pyramid scheme, as its courses cost thousands of dollars each and participants (“Nxians”) are encouraged to pay for additional classes and to recruit others to take classes in order to rise within the ranks of Nxivm. A number of Nxians were residents of the Eastern District of New York when they were recruited, and Nxivm has held promotional recruiting events in Brooklyn. Mack is credited in publicly available materials with co-creating a Nxivm program, called The Source, which recruited actors.
As detailed in court filings, in 2015, Raniere created a secret society within Nxivm called “DOS,” an acronym that stands for a Latin phrase that loosely translates to “Lord/Master of the Obedient Female Companions,” or “The Vow.” DOS operated with levels of women “slaves” headed by “masters.” Slaves were expected to recruit slaves of their own (thus becoming masters themselves), who in turn owed service not only to their own masters but also to masters above them in the DOS pyramid. Raniere stood alone at the top of the pyramid. Other than Raniere, all members of DOS were women. Mack is one of the women in the first level of the pyramid immediately below Raniere.
Mack and other DOS masters recruited DOS slaves by telling them that they were joining a women-only organization that would empower them and eradicate purported weaknesses that the Nxivm curriculum taught were common in women. Mack and other DOS masters concealed Raniere’s status at the top of the pyramid from new recruits.
As a pre-condition to joining DOS, women were required to provide “collateral,” which included highly damaging information about friends and family members, nude photographs and/or rights to the recruit’s assets. DOS slaves were told that their collateral could be released for any number of reasons, including telling anyone about DOS’s existence or leaving DOS. Many DOS slaves were branded on their pelvic areas using a cauterizing pen with a symbol which, unbeknownst to them, incorporated Raniere’s initials. During the branding ceremonies, slaves were required to be fully naked, and a master would order one slave to film the branding while the others restrained the slave being branded.
According to court filings, Mack directly or implicitly required her slaves, including Jane Does 1 and 2, as identified in the Indictment, to engage in sexual activity with Raniere. In exchange for this, Mack received financial and other benefits from Raniere. Jane Doe 1 and Jane Doe 2 believed that if they did not participate in those activities with Raniere, their collateral would be released.
The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
If convicted of the crimes charged, Raniere and Mack each face mandatory minimum sentences of 15 years’ imprisonment, and up to life imprisonment.
The government’s case is being handled by the Office’s Organized Crime and Gangs Section. Assistant United States Attorneys Moira Kim Penza and Tanya Hajjar are in charge of the prosecution. Assistant United States Attorney Karin Orenstein is in charge of the forfeiture portion of the case.
The Defendants:
KEITH RANIERE (also known as “Vanguard”)
Age: 57
Residence: Waterford, New YorkALLISON MACK
Age: 35
Residence: Brooklyn, New YorkE.D.N.Y. Docket No. 18-CR-204 (NGG)
If you have information regarding this case, or you believe you or a family member may have been a victim, please contact the FBI at 212-384-1000.
Cyber Criminal Sentenced to 36 Months in Prison for Attempting to Steal More Than $3 Million from a Financial Institution and Government AgenciesRead the Press Release
Earlier today, in federal court in Brooklyn, Dwayne C. Hans, was sentenced by United States District Court Judge Sterling Johnson to 36 months’ imprisonment and ordered to pay $134,000.00 in restitution for orchestrating a series of frauds between July 2015 and October 2016, including by masquerading as an authorized representative of a U.S. financial institution and as a defense contractor. Hans previously pleaded guilty to one count of wire fraud and one count of computer intrusion.
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 (FBI), New York Field Office, and Robert A. Westbrooks, Inspector General, Pension Benefit Guaranty Corporation (PBGC), announced the sentence.
“Hans has been held accountable for engaging in brazen fraud schemes intended to steal millions of dollars by using U.S. government websites,” stated United States Attorney Donoghue. “Investigating and prosecuting cyber criminals is a priority of this Office, in order to protect the integrity of computer systems that help our government and the private sector operate.”
“Hans advanced his own interests at the expense of various government entities responsible for distributing taxpayer dollars,” stated FBI Assistant Director-in-Charge Sweeney. “We have a responsibility to uphold the public’s confidence in the security of both government and private sector computer networks. Today’s sentencing brings us one step closer to achieving this goal.”
“We want to thank our law enforcement partners and the U.S. Attorney’s Office for bringing to justice those who attempt to steal from the Pension Benefit Guaranty Corporation,” stated PBGC Inspector General Westbrooks. “The PBGC protects the retirement benefits of more than 40 million American workers and retirees. The Corporation does not receive tax dollars and relies upon premium income. Our office will remain vigilant in safeguarding PBGC insurance programs and the integrity of its web applications.”
Between July 2015 and December 2015, Hans submitted bids to the Defense Logistics Agency (DLA), an agency within the United States Department of Defense, for contracts in the names of two different companies he created. The contracts on which Hans bid related to the provision of various items to the DLA, including electrical measurement equipment. Hans falsely claimed that those companies had numerous employees and were capable of filling the contracts. In reality, the companies had no employees and no ability to service the contracts. The DLA awarded at least 52 contracts, worth approximately $533,209.70, to Hans’s companies and sent at least $11,999.32 to those companies.
In early 2016, Hans created numerous bank accounts in the name of a U.S. financial institution (Financial Institution 1). In April 2016, Hans accessed a website maintained by the United States General Services Administration that allowed companies that worked with the U.S. government to provide information about how the government should disburse money to those companies. Hans modified payment information in an entry associated with Financial Institution 1 in order to redirect payments to accounts he controlled. As a result, a U.S. government agency transferred approximately $1.521 million to Hans instead of to Financial Institution 1. Those transfers were ultimately detected and disrupted before Hans withdrew or transferred the money.
In addition, between April 2016 and June 2016, Hans used a computer to initiate electronic transfers of approximately $134,000 from two corporate bank accounts held by Financial Institution 1. Hans directed the fund transfers to purchase publicly traded stock, invest in real estate in Brooklyn and to pay utility bills.
Finally, between June 2016 and October 2016, Hans accessed a website maintained by the PBGC, a U.S. government agency that insures certain pension plans, through which the administrators of pension plans can submit claims for reimbursements. Hans, who was not the administrator of any pension plan, created an account on the PBGC website and then submitted requests to be reimbursed a total of $1.633 million for expenses related to three pension plans. The three plans for which Hans requested reimbursements did not exist, and he had incurred no such expenses. The PBGC detected the fraud before any payments were issued.
The government’s case is being handled by the Office’s National Security and Cybercrime Section. Assistant United States Attorney David K. Kessler is in charge of the prosecution with assistance from the DLA and PBGC Office of Inspector General.
The Defendant:
DWAYNE C. HANS
Age: 28
Residence: Richland, WashingtonE.D.N.Y. Docket No. 17-CR-256 (SJ)
Twelve Members and Associates of the Mac Baller Brims Set of the Bloods Gang Indicted for Drug TraffickingRead the Press Release
An indictment was unsealed today in federal court in Brooklyn, charging 12 members and associates of the Mac Baller Brims, a subgroup or “set” of the nationwide Bloods street gang (the “Mac Ballers”), with conspiracy to distribute and possess with intent to distribute crack cocaine and heroin. The alleged crimes were committed in and around the Louis H. Pink Houses in the East New York neighborhood of Brooklyn (the “Pink Houses”), as well as in the Claremont and University Heights neighborhoods of the Bronx and locations in the state of Maine. A second indictment, charging Hassen Ford with distributing crack cocaine in the Pink Houses, was also unsealed today. This morning, during the execution of search warrants at locations tied to the Mac Ballers in Brooklyn and the Bronx, members of law enforcement seized two firearms, quantities of heroin and crack cocaine, and drug paraphernalia. A starter pistol was also seized from Ford’s residence. The defendants’ arraignments are scheduled this afternoon before United States Magistrate Judge Cheryl L. Pollak.
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 indictments.
“As alleged in court filings, the defendants are members of a Bloods set that has endangered communities by supplying illicit drugs and protecting their trafficking operation with firearms,” stated United States Attorney Donoghue. “Today’s arrests mark a milestone in dismantling the Mac Baller Brims and the threat they have posed to law abiding citizens in our District and beyond.”
“There is an odd glamorization of dealing drugs, firing guns and killing people in gang culture that defies comprehension. Someone allegedly bragging about almost going to jail because he was going to shoot someone shouldn’t be an accepted form of conversation or behavior,” said FBI Assistant Director-in-Charge Sweeney. “The FBI NY Metro Safe Streets Gang Task Force investigates gangs and arrests members because they pose a significant danger to the people in their communities. We are fully invested in the pursuit of these violent offenders who think it’s cool to threaten someone’s life.”
“Today’s arrests bring a dangerous set of blood gang members off our streets,” stated NYPD Police Commissioner O’Neill. “My thanks to the detectives, agents, and prosecutors whose work made today’s arrests and charges possible.”
As alleged in the indictments and other court filings, the defendant Kevin St. Hill was responsible for drug and gun-related crimes in the Pink Houses and is also a ranking member of the Mac Ballers. St. Hill received his drug supply, in part, from the defendant Mario Rabb, a Mac Baller member who sold crack cocaine and heroin on Webster Avenue in the Bronx. Rabb also supplied Mac Baller members Felix Collazo and Malcolm Hogue with quantities of drugs. The drug-trafficking operation was responsible for the distribution of significant amounts of crack cocaine and heroin in Brooklyn and the Bronx, as well as heroin in Maine.
Court-authorized wiretaps on phones used by several defendants confirmed that Lavon Barrett holds the highest-ranking position among non-incarcerated Mac Ballers, having been appointed as the “Don,” or leader, for “the whole t[o]wn” in late December 2017, and that St. Hill was appointed to oversee the Mac Ballers’ operations in Brooklyn. In other intercepted conversations, members of the gang related accounts of their using firearms and violence to protect their interests. For example, in a series of calls in November 2017, St. Hill threatened a group of individuals with a firearm (referred to as a “hammer”) in the Pink Houses: Barrett called codefendant Shatavia Walls and asked her to “bring the hammer downstairs.” Subsequently, Barrett recounted how close he came to actually shooting: “I was about to be in jail because I was about to fire.” In yet another intercepted call, Barrett and Collazo discussed Collazo’s need to get ammunition for his firearm “ASAP” because he had to “take care of something.” After offering Collazo bullets from Barrett’s firearm, Collazo promised he was going to “make a statement” and bragged about the resolve of the gang’s members to protect their turf: “Can’t f*** with the Macs” because Mac Ballers will “die for this sh**, ride for this sh**, and let it fly” – or shoot – “for this sh**.”
The charges in the indictments are allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted of the most serious charges, the defendants Barrett, Berthely, Collazo, Gethers, Rabb, Kevin St. Hill and Shawn St. Hill each face a mandatory minimum sentence of 10 years’ imprisonment and a maximum of life imprisonment.
The government’s case is being handled by the Office’s Organized Crime and Gangs Section. Assistant United States Attorneys Margaret Gandy and Andrey Spektor are in charge of the prosecution.
The Defendants:
LAVON BARRETT
Age: 31
Hempstead, New YorkMATTEW BERTHELY
Age: 32
Brooklyn, New YorkFELIX COLLAZO
Age: 37
Bronx, New YorkDWAYNE DAVIS
Age: 29
Brooklyn, New YorkSTEVEN GETHERS
Age: 31
Bronx, New YorkTERRY HEARD
Age: 50
Bronx, New YorkMALCOLM HOGUE
Age: 25
Bronx, New YorkMARIO RABB
Age: 45
Bronx, New YorkKEVIN ST. HILL
Age: 32
Brooklyn, New YorkSHAWN ST. HILL
Age: 32
Brooklyn, New YorkSHATAVIA WALLS
Age: 30
Brooklyn, New YorkCHARLES WARD
Age: 41
Bronx, New YorkE.D.N.Y. Docket Nos. 18-CR-185 (FB)
HASSEN FORD
Age: 43
Brooklyn, New YorkE.D.N.Y. Docket Nos. 18-CR-183 (AMD)
Long Island Bloods Gang Member Indicted for Murder and RacketeeringRead the Press Release
A seven-count indictment was unsealed today in federal court in Central Islip charging Bloods gang member Lawrence Lewis, also known as “L Boogs,” with the July 29, 2017 murder of John Birt, firearms offenses, and narcotics possession and distribution. Lewis was arrested yesterday and is scheduled to be arraigned this afternoon before United States District Judge Joanna Seybert.
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), Angel M. Melendez, Special Agent-in-Charge, United States Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York, Timothy D. Sini, District Attorney for Suffolk County, and Geraldine Hart, Acting Commissioner, Suffolk County Police Department (SCPD), announced the charges.
“As alleged, this Bloods member committed a senseless murder in furtherance of his violent gang,” stated United States Attorney Donoghue. “The defendant’s arrest should send a loud and clear message that this Office, working collaboratively with our federal and local law enforcement partners, is committed to eradicating gang violence on Long Island and throughout our district, to make our communities safer.”
“The simple act of taking a photo ended in a man losing his life, all because a gang member was allegedly offended and decided to retaliate,” stated FBI Assistant Director-in-Charge Sweeney. “It’s hard to fathom how the suspect in this case weighed exposing his illegal drug trade, and his illegal weapons because he wanted to prove how tough he is to his rivals. The FBI Long Island Gang Task Force is committed to rooting out the violent gangs and their destructive behavior in our communities.”
“Once murder is added to the list of allegations against Lewis, it is evident that the alleged distribution of large amounts of cocaine and heroin in Long Island neighborhoods was only the tip of his criminal activity,” stated HSI Special Agent-in-Charge Melendez. “We will not stand by while violent gang members roam free in our communities. Lewis had little regard for the life he took or the lives he affected by dealing drugs, and he will now need to face the consequences of his crimes.”
“It is a top priority of the Suffolk County District Attorney’s Office to prosecute members of dangerous, violent street gangs to the fullest extent of the law,” stated Suffolk County District Attorney Sini. “This individual showed a total disregard for human life and for the law, which will not be tolerated. Today’s indictment is a reinforcement of our Office’s commitment to combating gang violence in our communities and our dedication to working collaboratively with our law enforcement partners to keep Suffolk County residents safe.”
“The Suffolk County Police Department will continue working with our law enforcement partners to bring criminal gang members and their associates to justice,” stated SCPD Acting Commissioner Hart. “The arrest of this murderer will send yet another powerful message to gangs across Long Island that illegal activities will not be tolerated.”
According to the indictment and statements made during the arraignment, between January 2016 and March 2018, Lewis utilized his membership in the Bloods street gang to distribute large quantities of cocaine base and heroin in Suffolk County. In order to protect his supply of narcotics and secure his ability to distribute his narcotics, Lewis possessed a number of firearms, including a Mossberg .22 caliber rifle and a Ruger .45 caliber semi-automatic pistol.
On July 29, 2017, Birt and several friends were posing for a photo at the Illusions Gentlemen’s Club in Deer Park when they were approached by an associate of Lewis who was also a member of the Bloods. The associate attempted to display a Bloods gang hand signal in the photo and a dispute ensued. Lewis pulled out a handgun and fatally shot Birt.
If convicted, Lewis faces a maximum term of life imprisonment.
The charges in the indictment are merely allegations, and the defendant is presumed to be innocent unless and until proven guilty.
The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Christopher C. Caffarone, Mark E. Misorek and Special Assistant United States Attorney Kathleen A. Kearon are in charge of the prosecution.
The Defendant
LAWRENCE LEWIS
Age: 36
Residence: Calverton, New YorkE.D.N.Y. Docket No. 18-CR-187 (JS)
Defendant Indicted for Swindling Investors in Binary Options and Cryptocurrency SchemeRead the Press Release
A three-count indictment was unsealed today in federal court in Central Islip, New York, charging Blake Kantor, also known as “Bill Gordon,” with conspiracy to commit wire fraud, obstruction of an official proceeding and making false statements to Special Agents of the Federal Bureau of Investigation. Kantor was arrested by federal authorities today and is scheduled to be arraigned this afternoon before United States Magistrate Judge Gary R. Brown.
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), 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 charges.
As alleged in the indictment, in March 2014, Kantor established a company known as Blue Bit Banc or Blue Bit Analytics, Ltd. (“BBB”) that sold binary options, a type of investment in which investors are promised an opportunity to be paid predetermined amounts based upon the particular price of securities, commodities or other investments at particular points in time. To establish Blue Bit Banc, Kantor used approximately $10,000 drawn from a bank account established at a TD Bank branch located in Suffolk County within the Eastern District of New York. From approximately 2014 to 2017, Kantor and others solicited and took in approximately $2.1 million from approximately 713 investors in BBB’s binary options. Kantor did not inform those investors, however, that a computer software used by BBB allowed BBB to fraudulently alter data associated with binary options investments so that the probability of investors earning a profit favored BBB and disadvantaged investors. To further the scheme, Kantor directed the opening of bank accounts—including one in the island nation of St. Kitts and Nevis—using aliases and the identifying information of other people. Kantor further converted monies that investors invested into ATM Coin, a worthless cryptocurrency that Kantor misleadingly told investors was worth substantial sums of money.
As also alleged in the Indictment, in October 2017, Kantor directed a co-conspirator to alter lists of BBB customers after FBI agents informed Kantor that they were investigating his involvement in binary options. Thereafter, Kantor met with FBI agents and falsely stated in substance that he had not been involved in binary options since August 2013 when, in reality, he had established BBB around March 2014 and was employed there until around October 2017.
“As alleged, Kantor used a computer program to generate manipulated data to cheat hundreds of investors out of their hard-earned savings,” stated United States Attorney Donoghue. “To cover-up his fraudulent scheme, Kantor then lied to the FBI and ordered the alteration of documents that would assist agents in identifying his victims. We will continue to work closely with our law enforcement partners to vigorously prosecute individuals who defraud the investing public and obstruct law enforcement’s ability to detect and prosecute financial crimes.”
“The all-or-nothing option Kantor’s victims were offered at the onset of their investment had a predetermined ending, one in which they stood to face significant financial losses, as alleged,” stated FBI Assistant Director-in-Charge Sweeney. “The odds were stacked against them from the beginning, while Kantor had everything to gain. The FBI will continue to be a major force in confronting those who think they can evade the law and make an easy profit off the misfortune of others.”
“In addition to enforcing the nation’s tax laws, the Special Agents of IRS-Criminal Investigation take particular interest in cases where our expertise is warranted to uncover allegations of financial fraud,” stated IRS-CI Special Agent-in-Charge Robnett. “The allegations outlined in this indictment detail acts of deceit and offshore money movement in the evolving world of cryptocurrency, which impacts the trust investors have with our financial system.”
“The CFTC is committed to working in parallel with our law enforcement partners to ensure that fraudsters in our markets are brought to justice and customers are protected,” stated CFTC Division of Enforcement Director McDonald. “This type of coordination is particularly important in cases like this one, where the alleged scheme stretched across multiple markets, including the market for virtual currencies.”
If convicted, Kantor faces a maximum term of imprisonment of 20 years on each of the conspiracy to commit wire fraud and obstruction of an official proceeding charges and five years on the false statements charge.
The charges contained in the indictment are merely 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 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
Residence: Manhattan, New YorkE.D.N.Y. Docket No. 18-CR-177 (SJF)
Long Island Investment Portfolio Manager Sentenced to 28 Months in Prison for Scheme to Steal More Than $440,000 from ClientsRead the Press Release
Earlier today, in federal court in Brooklyn, Patrick Morgan Schiro, a resident of Rockville Centre, New York, and the founder of Black Rock Morgan LLC (BRM), was sentenced by United States District Court Judge LeShann DeArcy Hall to 28 months’ imprisonment, with restitution amount to be determined, for orchestrating a wire fraud scheme that defrauded five investors of approximately $440,000. Schiro previously pleaded guilty to wire fraud pursuant to a plea agreement with the government.
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, announced the sentence.
According to court filings and facts presented at the plea hearing, Schiro incorporated BRM, a purported investment management business, in February 2014. From approximately July 2014 to October 2015, Schiro used false and misleading statements to induce five individuals to invest approximately $440,000 with BRM, and he concealed his prior federal conviction for securities fraud from at least four of them. For example, Schiro falsely told one investor that BRM had many clients, managed millions of dollars in assets, and had “a team of investment professionals with significant sector-specific expertise.” Once he had the funds, Schiro also deceived his investors by telling them that their investments were performing well. For example, Schiro told one investor that his investment of approximately $242,000 was valued at $711,000.
Contrary to these representations, Schiro invested only a small amount of the funds and used a significant amount of the money for his personal expenses, including approximately $190,000 to pay one of his children’s university tuition. When investors asked for their money back, Schiro often ignored their requests or provided false or misleading excuses. For example, when one investor asked to redeem $250,000 from his account, Schiro caused an email to be sent to that investor stating that the request had been denied because: “Consistent with our AML [anti-money laundering] responsibilities and U.S. patriot act regulations wire transfer withdrawals and redemptions MUST and will ONLY be sent to the bank account associated with your BRM Account.” In fact, no such policies were in place to prevent the transfer requested by the investor.
The government’s case is being handled by the Office’s General Crimes Section. Assistant United States Attorney David K. Kessler is in charge of the prosecution.
The Defendant:
PATRICK MORGAN SCHIRO
Age: 46
Rockville Centre, New YorkE.D.N.Y. Docket No. 17-CR-130 (LDH)
Former Long Island Investment Adviser Sentenced to 57 Months in Prison for Stealing $3 Million from InvestorsRead the Press Release
Earlier today, in federal court in Central Islip, New York, Eric Erb, a former investment adviser and hedge fund manager, was sentenced by United States District Judge Arthur D. Spatt to 57 months’ imprisonment to be followed by 3 years’ supervised release. In August 2017, Erb pleaded guilty to wire fraud in connection with a scheme to defraud investors in a hedge fund and other investment vehicles that Erb managed from an office in Babylon, New York. As part of the sentence, Erb was ordered to pay $5.3 million in restitution to victims of his crime, a $5.3 million forfeiture judgment and to forfeit $215,000 in proceeds that he earned from the sale of his former residence in Bay Shore, New York.
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.
“Erb blatantly lied to investors who entrusted him with their hard-earned retirement savings, stealing from them to finance his own lifestyle of country club dues, home renovations and private school tuition,” stated United States Attorney Donoghue. “This Office and our law enforcement partners are committed to holding accountable criminals like Erb who defraud the investing public.”
“Erb’s scheme had a devastating impact on his victims, leaving them to suffer financial losses directly and personal losses indirectly,” stated FBI Assistant Director-in-Charge Sweeney. “The FBI is committed to working with our law enforcement partners to ensure this type of behavior ceases to exist.”
According to court filings and facts presented at the plea hearing, between approximately January 2016 and February 2017, Erb solicited approximately $5.4 million from investors under the promise that he would follow investors’ instructions when making various investments, including in Individual Retirement Accounts, annuities, real estate investment trusts, hedge funds and an initial public offering. The victims were led to believe that their investments with Erb were earning profits, when, in fact, they were suffering losses and their investments were financing the defendant’s lifestyle of home renovations, country club dues and private school tuition. When these investments began to fail, Erb emailed investors false earnings statements showing that their investments were earning profits when, in fact, they were generating losses; made wire transfers between banks in Long Island and Florida to fund investments that investors did not authorize him to make; and falsified payee information on checks that investors wrote to fund investments so that Erb could use investors’ monies to benefit himself and his companies. During his plea allocution, Erb admitted to stealing approximately $3 million from 38 investors.
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:
ERIC ERB
Age: 40
Residence: Levittown, New YorkE.D.N.Y. Docket No. 17-CR-413 (ADS)
Two Defendants Indicted in Brooklyn Federal Court for Foreign Exchange Trading ScamsRead the Press Release
Earlier today, in federal court in Brooklyn, an indictment was unsealed charging Tae Hung Kang, also known as “Kevin Kang,” and John Won with conspiring to commit wire and securities fraud, securities fraud, and conspiring to commit money laundering, in connection with schemes involving foreign exchange trading that targeted members of the Korean-American community. Kang was also charged with substantive wire fraud. The defendants were arrested today and are scheduled to be arraigned this afternoon before United States Magistrate Judge Sanket J. Bulsara.
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, Kang and Won lured investors with false promises of great profits to be made in the foreign exchange market, and then stole their money,” stated United States Attorney Donoghue. “This Office, together with our law enforcement partners, is committed to investigating and prosecuting fraudsters who prey upon the investing public.” Mr. Donoghue expressed his appreciation to the United States Commodities and Futures Trading Commission and the FBI Field Office in Atlanta for their assistance during the investigation.
“As alleged, Kang and Won pursued victims with specific placement of advertisements in Korean-language newspapers, preying upon the kinship of their target group and exploiting their affiliation with this particular community,” stated FBI Assistant Director-in-Charge Sweeney. “In addition, they falsely represented their trading credentials while persuading investors to contribute additional money in stock—money that was eventually misappropriated. The FBI will continue to dedicate resources to uncovering financial crimes of all kinds, especially those that seek to capitalize on the trust and affinity of innocent victims.”
As alleged in court documents, dozens of investors in the Eastern District of New York were defrauded in connection with the two charged schemes, both of which involved foreign exchange trading. Foreign exchange trading refers to trading one currency for another in an effort to profit from fluctuating exchange rates. In connection with the first alleged scheme, investors were enticed by advertisements placed by the defendants in Korean-language newspapers and other promotional materials to open foreign exchange trading accounts that would be managed by Kang, Won and others at their company FOREXNPOWER. Kang and Won promised investors double-digit returns, claiming to have a secret algorithmic trading method that would generate large profits with minimal risk. In fact, Kang and Won had minimal trading experience, their algorithmic trading method never performed as promised, and investors suffered substantial losses.
In the second scheme, investors were persuaded by the defendants to invest their money into stock issued by Safety Capital Management, Inc. (“Safety Capital”), which did business as FOREXNPOWER. These investors were told their investments would be pooled by Kang and others to conduct foreign exchange trading, or to expand the FOREXNPOWER business, and, again, promised a large return on their investment. Ultimately, nearly all of the money that was invested in Safety Capital stock, totaling at least $700,000, was misappropriated by the defendants. The defendants used the stolen money to pay for advertisements targeting investors and promoting FOREXNPOWER.
If convicted of wire fraud conspiracy, the defendants each face up to 20 years’ imprisonment.
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 handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorney Lauren Howard Elbert is in charge of the prosecution.
The Defendants:
TAE HUNG KANG (also known as “Kevin Kang”)
Age: 55
Bayside, New YorkJOHN WON
Age: 49
Flushing, New YorkE.D.N.Y. Docket No. 18-CR-184 (WFK)
Leader of Guadalajara and Sinaloa Cartels Charged with Conspiring to Murder a DEA Agent as Part of Continuing Criminal EnterpriseRead the Press Release
Earlier today, an indictment was unsealed in federal court in Brooklyn charging Rafael Caro Quintero with leading a continuing criminal enterprise and other drug-related crimes through his leadership of the Caro Quintero drug trafficking organization, a faction of the Mexican organized crime syndicate known as the Sinaloa Cartel. The indictment was returned under seal by a federal grand jury the Eastern District of New York on January 20, 2017, and relates to Caro Quintero’s criminal activities from January 1980 to January 2017.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, and James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division, announced the indictment.
The DEA and Federal Bureau of Investigation also announced today that the FBI has added Caro Quintero to the FBI’s Ten Most Wanted List and that a $20 million reward provided by the United States Department of State is being offered for information leading to his capture.
“As alleged in the indictment, Caro Quintero is drug kingpin responsible for a murder conspiracy targeting those who posed a threat to his drug trafficking organization, including DEA Special Agent Enrique Camarena who bravely worked to stop traffickers like the defendant from flooding our country with dangerous narcotics,” stated United States Attorney Donoghue. “The passage of time will not stop us from holding Caro Quintero accountable for the murder of one of one of our law enforcement partners.” Mr. Donoghue extended his grateful appreciation to the DEA Offices in Long Island and Mexico City, the United States Department of State, the Homeland Security Investigations Office in Tucson, Arizona,
“Caro Quintero’s stronghold in the Sinaloa Cartel has lasted for over thirty years, following the kidnapping and brutal murder of Special Agent Camarena,” stated DEA Special Agent-in-Charge Hunt. “DEA will never forget. This indictment is a result of tremendous collaboration amongst law enforcement to bring Caro Quintero to justice and sends a message to the Cartel that time makes no difference in our efforts to stop their drug trafficking and related violence.”
According to the indictment, between January 1980 and January 2017, Caro Quintero led a continuing criminal enterprise responsible for importing into the United States and distributing massive amounts of illegal narcotics and conspiring to murder persons who posed a threat to his narcotics enterprise. The murder conspiracy includes Caro Quintero’s kidnapping and murder of DEA Special Agent Enrique “Kiki” Camarena in Guadalajara, Jalisco, Mexico in February 1985.
Caro Quintero is also charged with participating in an international heroin, methamphetamine and cocaine distribution conspiracy from February 2015 through January 2017 and an international marijuana distribution conspiracy from January 1980 through January 2017, as well as using firearms in relation to his drug trafficking enterprise. The millions of dollars generated from these drug sales were then transported back to Mexico.
As the leader of the criminal enterprise, Caro Quintero employed numerous individuals, each of whom played a role to ensure the success of the organization, including “sicarios” or hit men who carried out acts of violence in Mexico such as murder and kidnappings to silence potential witnesses and retaliate against anyone who provided information to law enforcement; security personnel for the leadership of the enterprise; “plaza bosses” who controlled the enterprise’ territories; transporters of narcotics and money launderers.
The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Gina M. Parlovecchio, Michael P. Robotti, Andrew C. Gilman and G. Karthik Srinivasan are in charge of the prosecution.
The Defendant:
RAFAEL CARO QUINTERO
Age: 63
Country of Origin: MexicoE.D.N.Y. Docket No. 15-CR-208(S-2)