Eastern District of New York
Press releases recorded for this federal judicial district.
Two New York City Residents Plead Guilty to All Charges in Terrorism CaseRead the Press Release
Earlier today, Munther Omar Saleh of Queens, New York, pleaded guilty at the federal courthouse in Brooklyn, New York, to all charges in an indictment charging him with conspiring and attempting to provide material support to the Islamic State of Iraq and the Levant (ISIL), and with assaulting and conspiring to assault federal officers. Saleh’s co-defendant, Fareed Mumuni, of Staten Island, New York, pleaded guilty yesterday, on Thursday, February 9, 2017, to conspiring and attempting to provide material support to ISIL, assaulting and conspiring to assault federal officers, and attempted murder of federal officers. Saleh faces up to 53 years of imprisonment at sentencing, while Mumuni faces up to 85 years of imprisonment at sentencing. Saleh’s and Mumuni’s guilty pleas were accepted by United States District Judge Margo K. Brodie, who has scheduled both sentencing hearings for May 16, 2017.
The pleas were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, Acting Assistant Attorney General for National Security Mary B. McCord, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Commissioner James P. O’Neill of the New York City Police Department (NYPD).
As alleged in the indictment and in other court filings, Saleh and Mumuni conspired to support ISIL by helping their coconspirators attempt to travel to ISIL-controlled territory in order to join ISIL, and by plotting to use a pressure-cooker bomb to conduct a terrorist attack in the New York metropolitan area on behalf of ISIL. As part of their support for ISIL, Saleh and Mumuni, together with other coconspirators, assisted New Jersey resident Nader Saadeh’s planned travel to ISIL-controlled territory. Saleh personally accompanied Saadeh to John F. Kennedy International Airport where Saadeh departed on a flight for Jordan in the first leg of a planned trip to ISIL-controlled territory. Saadeh was subsequently apprehended and pleaded guilty in the United States District Court for the District of New Jersey to conspiring to provide material support to ISIL. Working with ISIL fighters located overseas, Saleh and Mumuni also coordinated their plot to conduct a terrorist attack in New York City. Saleh sought and received instructions from an ISIL attack facilitator to create a pressure-cooker bomb and discussed with the same ISIL attack facilitator potential targets for a terrorist attack in New York City.
As detailed in court documents, Saleh informed ISIL fighters that his coconspirators—five individuals located in New York and New Jersey—had confronted law enforcement officers who were surveilling them continuously. Saleh also sought and received religious authorization from an ISIL fighter 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 ISIL.
On June 13, 2015, Saleh and another individual were arrested in Queens after they charged at a federal officer who was performing physical surveillance of Saleh. Saleh and the other individual were armed with knives. Following his arrest, Saleh admitted to agents that he had discussed with Mumuni physically attacking the law enforcement officers who were surveilling Mumuni. On June 17, 2015, during the execution of a search warrant at his residence in Staten Island, Mumuni was arrested after he repeatedly stabbed an FBI agent in the torso with a large kitchen knife. Fortunately, the knife did not penetrate the agent’s protective body armor, and he sustained only minor injuries. During a search of the vehicle used by Mumuni, investigators recovered a second large knife. In his post-arrest interview, Mumuni admitted that Saleh had informed him that an ISIL member had sanctioned Mumuni’s planned suicide attack on law enforcement and that Saleh and Mumuni had discussed using a pressure-cooker bomb to carry out the attack. Mumuni further admitted that he had kept the knife he used to attack the agent wrapped in a t-shirt in his bed, as well as the knife recovered from the vehicle, specifically for use in an anticipated confrontation with law enforcement officers.
“In the name of ISIL’s false and hateful ideology, these defendants attacked the law enforcement officers who work tirelessly to preserve the safety of our communities,” stated United States Attorney Capers. “We are especially grateful that an FBI Special Agent survived the violent attack perpetrated by Fareed Mumuni, who repeatedly stabbed the agent in the chest during the execution of a search warrant in a terrorism investigation. We and our partners on the Joint Terrorism Task Force remain ever-vigilant in our efforts to protect our citizens and allies by bringing terrorists to justice. These convictions will help incapacitate these defendants and send a strong message to those who would follow in their footsteps.” Mr. Capers thanked the West Midlands Police Counterterrorism Unit in the United Kingdom for their assistance with regard to foreign coconspirators.
“Munther Omar Saleh and Fareed Mumuni conspired to provide material support to ISIL and devised a plan to conduct an attack in New York. During his arrest, Mumuni stabbed an FBI agent numerous times, but thankfully the agent’s body armor protected him from the defendant’s attack and the defendant was safely apprehended by law enforcement,” said Acting Assistant Attorney General McCord. “Counterterrorism is the National Security Division’s highest priority. We will continue to seek justice against any individuals who conspire to provide material support to designated foreign terrorist organizations, and those who attempt to harm the brave law enforcement officials who risk their lives to protect us.”
“Today’s guilty pleas show just how close the threat of homegrown terrorism exists for New York City. From their respective homes in Queens and Staten Island, Saleh and Mumuni conspired to place a pressure cooker bomb in the New York metro area on behalf of ISIL. Mumuni even attacked an FBI agent when a court-authorized search was being conducted by the Joint Terrorism Task Force at his home in Staten Island. Threats like this are exactly why protecting the United States from a terrorist attack remains the FBI’s number one priority,” stated Assistant Director-in-Charge Sweeney.
“Saleh and Mumumi engaged in plotting attacks against New York City in the name of ISIL. They received instructions from senior ISIL leaders in Syria. They were committed to violence. When the arrests were made the defendants were armed. One attacked an FBI agent with a large knife. The detection and disruption of these plots is a credit to the partnership between the FBI-NYPD Joint Terrorism Task Force and the NYPD’s Intelligence Bureau,” said Police Commissioner O'Neill.
The government’s case is being prosecuted by the Office’s National Security & Cybercrime Section. Assistant United States Attorneys Alexander A. Solomon, Douglas M. Pravda, and Ian C. Richardson are in charge of the prosecution, with assistance provided by Trial Attorneys Justin Sher and Robert Sander of the National Security Division’s Counterterrorism Section.
The Defendants:
MUNTHER OMAR SALEH
Age: 21
Queens, New York
FAREED MUMUNI
Age: 22
Staten Island, New York
E.D.N.Y. Docket No. 15-CR-393 (MKB)
Leader of Three Worldwide Cyberattacks Sentenced to 8 Years for Computer Intrusion and Access Device Fraud ConspiraciesRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, New York, Ercan Findikoglu, a Turkish citizen also known by the online nicknames “Segate,” “Predator,” and “Oreon,” was sentenced to eight years for his leadership role in organizing and carrying out three cyberattacks on the global financial system between 2011 and 2013 that caused more than $55 million in losses. Findikoglu pleaded guilty on March 1, 2016, to computer intrusion conspiracy, access device fraud conspiracy, and effecting transactions with unauthorized access devices. In addition, as part of the sentence, the Court ordered Findikoglu to pay $55,080,226.14 in restitution. Today’s proceeding was held before United States District Judge Kiyo A. Matsumoto.
The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and David E. Beach, Special Agent in Charge, United States Secret Service, New York Field Office.
“Findikoglu was a skilled hacker who chose to use his considerable computer talents for criminal financial gain and to wreak economic havoc, rather than for legitimate pursuits. The defendant was responsible for hacking into computer networks of financial institutions across the globe and causing tens of millions of dollars in losses. Today’s sentence effectively neutralizes Findikoglu for years, and also should serve as a strong warning to those who seek to abuse their technical skills to breach the networks of trusted financial institutions,” stated United States Attorney Capers. Mr. Capers praised the extraordinary efforts of the Secret Service in investigating these complex network intrusions.
“Today’s sentencing brings one of the world’s most prolific cyber-criminals to justice,” stated Special Agent in Charge David Beach of the New York Field Office. “The relentless pursuit by the Secret Service and our international partners to identify and apprehend such criminals demonstrates the success of the law enforcement community to safeguard our nation’s financial infrastructure.”
According to public court filings, Findikoglu and his co-conspirators used sophisticated intrusion techniques to hack into the systems of credit and debit card processing companies, manipulated network administrator privileges at the victim card processing companies, manipulated account balances of prepaid debit cards to eliminate withdrawal limits on those cards, and stole the personal identification numbers (PINs) associated with the compromised debit cards. Findikoglu and his co-conspirators then disseminated the stolen card numbers and PINs worldwide to trusted associates who encoded magnetic stripe cards with the compromised debit card data. The associates then distributed these cards to teams of cashing crews, who used the cards to make fraudulent ATM withdrawals on a massive scale across the globe. As a result of the effective elimination of withdrawal limits, these cyber-attacks were known as “unlimited operations.”
Findikoglu organized and carried out three such unlimited operations. In the first operation on February 27 and 28, 2011, Findikoglu’s cashing crews withdrew approximately $10 million through approximately 15,000 fraudulent ATM withdrawals in 18 countries. In a second operation on December 21 and 22, 2012, Findikoglu’s cashing crews withdrew approximately $5 million through approximately 5,000 fraudulent ATM withdrawals in 20 countries. During this second operation, in New York alone, cashers conducted more than 700 fraudulent ATM withdrawals, totaling nearly $400,000 in losses, at more than 140 different ATM locations over the course of just two and a half hours. In a third operation on February 19 and 20, 2013, Findikoglu’s cashing crews withdrew approximately $40 million through approximately 36,000 fraudulent ATM withdrawals in 24 countries. During this third operation, in New York alone, cashers conducted nearly 3,000 fraudulent ATM withdrawals, totaling approximately $2.4 million in losses, over the course of approximately 10 hours.
Findikoglu was paid a significant portion of the illegal proceeds from these unlimited operations.
The government’s case is being handled by the Office’s National Security & Cybercrime Section. Assistant United States Attorneys Douglas M. Pravda, Richard M. Tucker, and Saritha Komatireddy are in charge of the prosecution. Assistant United States Attorney Brian Morris of the Office’s Civil Division is responsible for the forfeiture of assets. The Justice Department’s Office of International Affairs provided assistance.
The Defendant:
ERCAN FINDIKOGLU
Aliases: Segate, Predator, Oreon
Age: 35
Nationality: Turkish
E.D.N.Y. Docket No. 13-CR-440 (KAM)
Long Island Man Charged with Distributing Heroin That Caused the Death of A 20-Year-Old College StudentRead the Press Release
A three-count indictment was unsealed today in United States District Court for the Eastern District of New York charging Richard Jacobellis with distributing heroin that caused the death of 20-year-old Nicholas Weber, and conspiring with others to distribute heroin. Jacobellis was arrested earlier today in Ridge, New York, and his arraignment will be this afternoon before United States District Judge Joanna Seybert at the United States Courthouse in Central Islip, NY. If convicted, the defendant faces a statutory mandatory minimum sentence of 20 years’ imprisonment and a maximum sentence of life.
The charges were announced by Robert L. Capers, 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 Timothy D. Sini, Police Commissioner, Suffolk County Police Department (SCPD).
“As alleged, the defendant is a drug dealer who for years peddled poisonous heroin to Long Islanders,” stated United States Attorney Capers. “The heroin epidemic on Long Island has cut short far too many young lives, like Nicholas.’ To those heroin dealers who flood our streets with this highly addictive narcotic, be forewarned: if you sell heroin, my Office and our law enforcement partners will prosecute you.”
DEA Special Agent-in-Charge Hunt stated, “A life lost too soon paved law enforcement’s trail to a drug dealer’s door. investigates sources of supply worldwide as well as the local sources responsible for pushing heroin and fentanyl into our communities. Two months ago, DEA quickly turned an online tip into a high priority, joint investigation with the Suffolk County Police Department and the Eastern District of New York that identified the alleged drug dealer who caused the death of twenty-year-old Nicholas Weber. This arrest serves as a reminder to drug dealers that they will eventually face the consequences of their actions.”
Police Commissioner Sini stated, “As I’ve made clear on numerous occasions, we will stop at nothing to hold drug dealers accountable for their depraved indifference to human life. This prosecution is the culmination of a multi-jurisdictional investigation, which sends a clear message to dealers in Suffolk County: every time you sell heroin in this County, you risk spending the rest of your life in prison.”
As detailed in the indictment and court filings, Jacobellis distributed heroin on Long Island from 2012 to the present. Jacobellis’s heroin has caused the death of one young man and nearly killed another. Indeed, in March 2015, one of Jacobellis’s drug customers overdosed after using heroin that Jacobellis sold to him; fortunately, SCPD officers were able to quickly administer Naloxone, a nasal spray that reverses the effect of an opioid overdose, and save that young man’s life.
Undeterred, Jacobellis continued selling heroin to Long Island residents, according to the indictment. As charged, on May 17, 2016, Jacobellis drove from his home in Ridge to Kings Park and sold $100 of heroin to Weber. Weber used that heroin and died shortly thereafter. Nicholas Weber was a graduate of Kings Park High School. While in high school, he was the Suffolk County wrestling champion for his weight class, and upon graduation, he was attending Suffolk County Community College and had been accepted to Stony Brook University where he was going to study physics starting in the fall of 2016.
According to the indictment and court filings, despite learning that his heroin killed Weber, the defendant continued to sell heroin up until a few weeks ago. Indeed, in mid-January 2017, a confidential informant who was working with law enforcement contacted the defendant for the purpose of arranging a heroin transaction. The defendant agreed to sell heroin to the confidential informant. Shortly thereafter, the defendant met the confidential informant and consummated the transaction.
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 prosecuted by the Office’s Long Island Criminal Section. Assistant United States Attorney Christopher C. Caffarone is in charge of the prosecution.
The Defendant:
RICHARD JACOBELLIS
Age: 23
Ridge, New York
E.D.N.Y. Docket No. 17-CR-052 (JS)
United States Resolves Civil Fraud Suit Against Melville-Based Mortgage LenderRead the Press Release
Robert L. Capers, United States Attorney for the Eastern District of New York, Christina D. Scaringi, Special Agent in Charge, North East Region, Office of the Inspector General for the Department of Housing and Urban Development, and Jay N. Lerner, Inspector General for the Federal Deposit Insurance Corporation announced the settlement of claims against Franklin First Financial, Ltd., its Chief Executive Officer, Frederick Assini, its Chief Operating Officer, Christopher Bertman, and Andrew Dauro, a manager of the company. The case, United States v. Rainy Day Holdings, LLC. et al., Civil Action No. CV-15-5576 is pending in federal court in Central Islip, NY before United States District Judge Joseph F. Bianco.
Franklin First, Assini, Bertman, and Dauro participated in the Direct Endorsement Program, a United States Department of Housing and Urban Development (HUD) program that allowed Franklin First to make mortgage loans which were insured by the Federal Housing Administration (FHA) in the event of default. If the FHA determined that Franklin First’s mortgages defaulted within the first two years at a rate 100% or higher than other lenders within the same geographic region, the FHA could have audited, immediately suspended, or sought to permanently remove Franklin First from the Direct Endorsement Program. As alleged in the government’s complaint, the defendants made surreptitious mortgage payments for borrowers on at least one hundred eleven FHA-insured loans that otherwise would have become delinquent or gone into default within two years of origination by Franklin First. As a result, the defendants deprived HUD of critical loan performance information needed to determine whether Franklin First should remain eligible for participation in the Direct Endorsement Program.
In addition, the defendants concealed from HUD the fact that Franklin First was making the loan payments by funneling the payments through a purported charitable organization, the Rainy Day Foundation. In the stipulated consent decree, Franklin First, Assini, Bertman, and Dauro admitted to making the improper payments and that the payments altered the company’s delinquency and default rates. Franklin First, Assini, Bertman, and Dauro agreed to pay one million, two hundred fifty-thousand dollars ($1,250,000) to resolve the United States’ claims. With the resolution of the claims against Franklin First, Assini, Bertman, and Dauro, the total settlements arising out of the Rainy Day Foundation matter are $2.399 million.
“This resolution demonstrates our Office’s vigorous pursuit of those who would abuse federal mortgage programs, whether they be companies or individuals. The significant penalty and defendants’ admissions to wrongdoing help to restore the integrity of the FHA mortgage insurance program,” stated United States Attorney Capers. “We would like to thank HUD’s Office of the Inspector General, HUD’s Office of Program Enforcement, and the FDIC Office of the Inspector General for their outstanding work and continued support in investigating this matter.”
Special Agent in Charge Scaringi stated, “This settlement is the latest example of our continued commitment to hold mortgage industry professionals accountable for their actions and should prove to the public that the HUD OIG and the U.S. Attorney's Office remain steadfast in our efforts to root out deceptive practices that victimize the FHA.”
FDIC Inspector General Lerner said, “The FDIC OIG is pleased to support the Department of Justice and the Department of Housing and Urban Development in bringing about today’s settlement. By working together, we broaden the government's efforts to pursue damages resulting from misconduct. The civil penalties imposed today send a strong message that fraudulent practices like those committed by the principals of Franklin First will not be tolerated.”
The United States’ case in this matter is being litigated by Assistant United States Attorneys Edward Newman, John Vagelatos, and Robert Schumacher.
Franklin Settlement AgreementLatin King Gang Member Indicted for 2005 Murder of C.W. Post StudentRead the Press Release
A two-count indictment was unsealed today in the United States District Court in Central Islip, New York, charging defendant Jaime Rivera, a member of the Almighty Latin King and Queen Nation street gang, with the 2005 murder of C.W. Post student and basketball star Tafare Berryman, as well as a related firearms charge. The defendant is scheduled to be arraigned this afternoon before United States Magistrate Judge Steven I. Locke.
The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office (FBI), James J. Hunt, Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (DEA), and Thomas Krumpter, Acting Commissioner, Nassau County Police Department (NCPD).
“Gang violence has taken the lives of too many innocent young people with bright futures,” stated United States Attorney Capers. “This case should serve as a message to all gang members, if you engage in violent gang activity, our law enforcement partners will not stop pursuing you until you are held accountable for your actions.” Mr. Capers expressed his grateful appreciation to the FBI, DEA, and NCPD.
“The mentality that an innocent person is some sort of threat to a gang member or a gang defies logic. A student who was out having a good time, ended up in the middle of a dangerous situation and was killed for absolutely no reason. No one deserves to die because they found themselves in the wrong place at the wrong time. The FBI Long Island Safe Streets Task Force and our law enforcement partners never gave up and continued to work this case to charge the shooter and now he will be held accountable,” stated Assistant Director-in-Charge Sweeney.
DEA Special Agent in Charge James Hunt stated, “Our job in law enforcement is to bring criminals to justice. By joining forces with the U.S. Attorney’s Office for the Eastern District of New York, Nassau County Police Department and Federal Bureau of Investigation, we identified and arrested the person allegedly responsible for murdering Tafare Berryman, who was tragically taken away from his family and friends 12 years ago. Drug-related violence is just one more casualty of drug trafficking that shatters families and ends lives.”
“Today's announcement is the culmination of an extensive investigation that was worked on collaboratively by numerous law enforcement investigative agencies. Protecting the public is our number one priority and today’s indictment of defendant Rivera was of the utmost importance,” stated Acting Commissioner of Police Krumpter.
As detailed in the indictment and the government’s detention letter filed earlier today, on April 2, 2005, Rivera and other Latin King gang members were present at La Mansion bar and nightclub located at 3942 Long Beach Road, N. Long Beach. Also present at the club were numerous C.W. Post students, including Tafare Berryman and some of his friends, who were celebrating the successful presentation of a fashion show that had taken place at Post earlier that evening. At least one incident occurred inside of the club between some gang members and one of the Post students, which later spilled out into a parking lot across from the club.
At approximately 5:00 a.m. on April 3, 2005, Berryman and a friend exited the club and observed several fights occurring in the parking lot. While walking to their car, Berryman’s friend was hit in the head with a bottle causing a laceration. Berryman and his friend then entered a car and drove away. Several blocks from the club, Berryman’s friend, who was driving, pulled the car over to the side of the road to tend to the laceration on his head which was bleeding profusely. At that point, Rivera pulled up alongside of the parked car and shot Berryman once, killing him because Rivera mistakenly believed that Berryman and his friend were involved in the prior altercation in the parking lot and were a threat to the Latin Kings.
The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted of the charges in the indictment, Rivera faces mandatory life in prison and is eligible for the death penalty.
The government’s case is being handled by the Office’s Long Island Criminal Section. Assistant United States Attorney Lara Treinis Gatz is in charge of the prosecution.
The Defendant:
Jaime Rivera
Age: 32Freeport, New York
E.D.N.Y. Docket No. 17-50 (SJF)(SIL)
Architect of Offshore Fraud Haven and Orchestrator of More Than 40 Pump and Dump Schemes Sentenced to 6 and 12 Years in Prison, Respectively, for Executing A $250 Million Money Laundering SchemeRead the Press Release
BROOKLYN, N.Y. – Earlier today, Robert Bandfield, a U.S. citizen and resident of Belize, and Gregg R. Mulholland, a dual U.S. and Canadian citizen, were sentenced to 6 and 12 years in prison, respectively. In May 2016, Bandfield pleaded guilty to money laundering conspiracy for setting up an elaborate and fraudulent structure of shell companies and brokerage firms in Belize and the West Indies that enabled his clients to fraudulently manipulate the stocks of dozens of U.S. publicly-traded companies. That same month, Mulholland, the secret owner of Legacy Global Markets S.A. (Legacy), an offshore broker-dealer and investment management company based in Panama City, Panama and Belize City, Belize, pleaded guilty to money laundering conspiracy for fraudulently manipulating the stocks of more than 40 U.S. publicly-traded companies and then laundering more than $250 million in fraudulent proceeds through at least five offshore law firms. As part of the sentences, Bandfield was ordered to forfeit, among other things, $1 million and all his rights and interests in three corporate entities -- IPC Management Services LLC, IPC Corporate Services Inc. and IPC Corporate Services LLC (collectively, “IPC Corp”) -- that he founded and controlled in Belize, whereas Mulholland was ordered to forfeit, among other things, a Dassault-Breguet Falcon 50 aircraft, a Range Rover Defender vehicle, two real estate properties in British Columbia, and funds and securities on deposit at more than 25 bank and brokerage accounts.
The sentences were announced by Robert L. Capers, 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); Kathy A. Enstrom, Acting Special Agent-in-Charge, United States Internal Revenue Service, Criminal Investigation, New York (IRS-CI); and Angel M. Melendez, Special Agent-in-Charge, New York, Homeland Security Investigations (HSI).
In addition to the agencies that led the investigation, Mr. Capers thanked the Securities and Exchange Commission (SEC), the Department of Justice’s Office of International Affairs (OIA), the Department of State’s Diplomatic Security Service (DSS) and the Financial Industry Regulatory Authority, Inc., Criminal Prosecution Assistance Group (FINRA CPAG) for their cooperation and assistance in the investigation.
According to the court filings and facts presented at the plea and sentencing hearings, between January 2009 and September 2014, Bandfield, Mulholland and their co-conspirators engaged in three interrelated schemes: (1) to induce U.S. investors to purchase stock in various thinly-traded U.S. public companies through fraudulent promotion of the stock, concealment of their ownership interests in the companies, and fraudulent manipulation of artificial price movements and trading volume in the stocks of those companies; (2) to circumvent the payment of capital gains taxes and the IRS’s reporting requirements under the Foreign Account Tax Compliance Act (FATCA); and (3) to launder the fraudulent proceeds from the stock manipulation schemes to and from the United States through debit cards and attorney escrow accounts. Between 2010 and 2014, Mulholland controlled a group of individuals (the Mulholland Group). Through these schemes, Bandfield helped his corrupt clients -- who included Mulholland and more than 100 others -- launder more than $250 million in fraudulent proceeds.
To facilitate these interrelated schemes, Bandfield and his co-conspirators created shell companies in Belize and the West Indies for the corrupt clients and placed nominees at the helm of these companies. This structure was designed to conceal the clients’ ownership interest in the stock of U.S. public companies, in violation of U.S. securities laws, and enable the corrupt investors to engage in trading under the nominee’s names through brokerage firms also set up in Belize. For example, this structure enabled the Mulholland Group to manipulate the stock of Cynk Technology Corp, which traded on the U.S. OTC markets under the ticker symbol CYNK. Using aliases such as “Stamps” and “Charlie Wolf,” Mulholland was intercepted on a court-authorized wiretap on May 15, 2014, admitting to his ownership of “all the free trading” or unrestricted shares of CYNK. Prior to this conversation between Mulholland and his trader at Legacy, there had been no trading in CYNK stock for 24 trading days. Over the next two months, the stock of CYNK rose from $0.06 per share to $13.90 per share, a more than $4 billion stock market valuation for a company that had no revenue and no assets.
Mulholland used the services of a U.S.-based lawyer to launder the more than $250 million generated through his stock manipulation of CYNK and other U.S. companies – directing the fraud proceeds to five law firm accounts and transmitting them back to members of the Mulholland Group and its co-conspirators. Other clients used unidentifiable debit cards to freely transfer their fraudulent proceeds back into the United States.
Bandfield’s scheme also enabled the U.S. corrupt clients evade reporting requirements to the IRS by concealing the proceeds generated by the manipulated stock transactions through the shell companies and their nominees. For example, in response to a request received by a U.S. corrupt client from a U.S. transfer agent who had to determine whether the proceeds from manipulative stock trading transaction were taxable under U.S. law, Bandfield forwarded an IRS Form signed by co-defendant Andrew Godfrey as the nominee for the shell company which had been set up at the request of the client. At one point during the government’s investigation, Bandfield boasted to an undercover law enforcement agent that he had specifically designed this “slick” corporate structure to counter then-President Barack Obama’s new laws, a reference to FATCA.
* * *
Today’s proceeding took place before United States District Judge I. Leo Glasser.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Jacquelyn Kasulis, Winston Paes and Michael Keilty are in charge of the prosecution, with assistance from Assistant United States Attorney Brian Morris of the Office’s Civil Division, who is responsible for the forfeiture of assets.
The Defendants:
ROBERT BANDFIELD
Age: 72
Belize City, Belize
GREGG R. MULHOLLAND
Age: 47
San Juan Capistrano, California
Vancouver, Canada
EDNY Docket No. 14-CR-476 (S-2) (ILG)
Long Island Investment Adviser Sentenced to 42 Months in PrisonRead the Press Release
CENTRAL ISLIP, N.Y. – Earlier today, Daniel Winston LaMarco, a Huntington, New York investment adviser, was sentenced to 42 months in prison and three years of supervised release following his August 2016 guilty plea to wire fraud and commodities fraud. As part of the sentence, LaMarco was also ordered to pay $872,600 in restitution to the investors in a commodity pool he ran which invested in the Foreign Exchange Market. The sentencing proceeding was held before United States District Judge Arthur D. Spatt.
The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York. Mr. Capers thanked the criminal investigators in the United States Attorney’s Office for their excellent work on this investigation.
Beginning in approximately January 2011, LaMarco began to solicit investors to fund a commodity pool he ran which invested in the Foreign Exchange Market. LaMarco made false claims regarding his investment performance, and touted the safety of his investment strategy. Among his victims, LaMarco encouraged two individuals to invest proceeds from a home equity loan with him. As part of his fraud scheme, LaMarco sent false monthly statements to investors representing that their investments were growing, inducing new investments from the investors, and discouraging them from withdrawing their investments with him. The monthly statements claimed the investments had more than doubled in value and were worth as much as $1,796,126.22. In truth, LaMarco had lost almost all of the investors’ money, which totaled more than $872,000, in the Foreign Exchange Market.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorney Mark E. Bini is in charge of the prosecution.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
The Defendant:
DANIEL WINSTON LAMARCO
Age: 51
Huntington, New York
E.D.N.Y. Docket No. 16-CR-433 (ADS)
Brooklyn Man Pleads Guilty in Connection with International Cybercrime SchemeRead the Press Release
Earlier today, Vyacheslav Khaimov pled guilty at the federal courthouse in Brooklyn, New York, to the operation of an unlicensed money transmitting business in connection with his role in an international cybercrime operation.
The plea was announced by Robert L. Capers, 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).
According to court filings, the scheme involved sophisticated malware, which co-conspirators used to obtain unlawful access to victims’ bank accounts – most of which were in U.S. banks. The illegally obtained funds were then transferred via wire to the bank accounts of a network of individuals within the United States who, in turn, further transmitted the money, or portions of the money, either to additional U.S.-based intermediaries or directly overseas. As part of this scheme, Brooklyn-based Khaimov received over $230,000 in funds fraudulently withdrawn from the bank accounts of at least eight bank account takeover victims via wire transfers and cashier’s checks from a network of intermediary “mules.” To date, the FBI has identified over $1.2 million in losses attributable to the malware scheme and more than $6 million in attempted losses.
“The proliferation of malicious software is a scourge on our society. Cybercriminal networks like the network that the defendant allegedly was a part of are responsible for pillaging innocent victims’ bank accounts and wreaking havoc on our financial institutions through the use of malware. They will be pursued and prosecuted to the full extent of the law,” stated United States Attorney Capers.
“Modern-day bank robbers no longer need a gunman and a getaway driver. Today, they just need a malware operator and money mules to carry out their crime from anywhere in the world. Brooklyn-based Vyacheslav Khaimov, pleaded guilty for his role as a money mule in a multi-million dollar malware scheme where he moved funds from victim accounts into other accounts. This is an ongoing investigation conducted by the FBI’s Cyber Task Force. We will continue to investigate all co-conspirators and bring them to justice,” stated FBI Assistant Director-in-Charge Sweeney.
The government’s case is being prosecuted by Assistant United States Attorneys Una A. Dean, Tiana Demas, and Margaret Lee.
The Defendant:
VYACHESLAV KHAIMOV
Age: 55
Brooklyn, New York
E.D.N.Y. Docket No. 17-CR-25 (ERK)
Washington D.C.-Based Internal Revenue Service Attorney Charged with Conspiracy to Distribute MethamphetamineRead the Press Release
A criminal complaint was unsealed today in federal court in the Eastern District of New York charging Jack Vitayanon with conspiring with others to distribute 500 grams or more of methamphetamine. Vitayanon, an attorney with the Internal Revenue Service, Office of Professional Responsibility in Washington, D.C, was arrested earlier today in Washington D.C.
The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement(ICE), Homeland Security Investigations (HSI), New York.
As detailed in the complaint, Vitayanon conspired with others in Arizona and on Long Island to distribute methamphetamine for several years and recently negotiated and consummated the sales of distribution quantities of methamphetamine to undercover HSI special agents on Long Island. The negotiations occurred via recorded internet-based video chats and text messages, and the defendant shipped the methamphetamine from his apartment in Washington D.C. to Long Island via Federal Express.
The recipient of the package, acting at the direction of law enforcement, recorded a video chat with Vitayanon over the internet on Dec. 15, 2016 and during the recorded conversation Vitayanon was observed in his residence smoking what appeared to be methamphetamine from a glass pipe, according to the complaint.
A search of the defendant’s Washington D.C. apartment executed pursuant to a court-authorized search warrant led to the seizure of additional quantities of suspected methamphetamine, drug paraphernalia, packaging materials and drug ledgers.
“As alleged, the defendant – a federal attorney working for the IRS’s Office of Professional Responsibility – broke bad and supplemented his income by selling distribution quantities of methamphetamine,” stated United States Attorney Capers. “The defendant will now be held to account for his alleged criminal conduct.” Mr. Capers expressed his grateful appreciation to the United States Treasury Department Inspector General, HSI’s High Intensity Drug Trafficking Area group in Washington D.C. and the United States Attorney’s Office for the District of Columbia.
HSI Special Agent-in-Charge Melendez stated, “Selling methamphetamine is a serious crime which is made more egregious when it is committed by a U.S. government attorney assigned to the Office of Professional Responsibility of the IRS.” “People that sell this highly addictive and destructive drug must be brought to justice before more lives are lost to this epidemic.”
The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by the Office’s Long Island Criminal Section. Assistant United States Attorney Charles N. Rose is in charge of the prosecution.
The Defendant:
JACK VITAYANON
Age: 41
Washington, DC
E.D.N.Y. Docket No. 17-MJ-80
Human Trafficking Fugitive on ICE’s Top 10 List Extradited to United States from MexicoRead the Press Release
Raul Granados-Rendon, who had been on ICE’s most wanted list since 2010, was arrested in September 2016 in Mexico, following a joint investigation between ICE’s Homeland Security Investigations (HSI) Mexico City, HSI New York and the Mexican Federal Police. He was extradited to the United States on Friday and he was arraigned Saturday, at the federal courthouse in Brooklyn, on a 21-count indictment charging him with racketeering and racketeering conspiracy involving predicate acts of sex trafficking by force, fraud and coercion; sex trafficking of minors; interstate prostitution; alien smuggling and related offenses. Granados-Rendon was ordered detained by U.S. Magistrate Judge Arlene Lindsay.
The extradition and indictment was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York.
The extradition, the latest chapter in our multi-year case against the Granados sex trafficking organization, again demonstrates our resolve to seek justice for victims of modern day slavery. We will not rest until those who seek to profit from the forced slavery of others are brought to justice,” stated United States Attorney Capers.
“We at HSI can think of no better way to end Human Trafficking Awareness month than with the extradition of Raul Granados-Rendon, who has been on our most wanted list for numerous crimes including sex trafficking,” said Special Agent-in-Charge Melendez of HSI New York. “This individual is just one of many who allegedly helped run a sex trafficking organization that was responsible for smuggling numerous women into the United States where they were forced to work as prostitutes against their will. We will not rest until all of these individuals face the justice they deserve.”
As set forth in extradition affidavits and other court papers, between October 1998 and June 2011, members of the Granados sex trafficking organization, including Raul Granados-Rendon and others, illegally smuggled young women into the United States where they were forced to work as prostitutes in New York City and elsewhere in the United States. The organization collected profits from the victims’ activities. When victims refused to work or resisted, members of the organization beat and sexually assaulted them, and threatened the victims’ family members in Mexico, including the victims’ children.
HSI special agents have identified and rescued over 20 additional victims – all Mexican nationals – and arrested over a dozen additional traffickers or smugglers, all members or associates of the Granados family. Several victims were sexually assaulted by their traffickers, while others were physically assaulted. All the victims said the traffickers threatened to harm their family members.
To date, 13 members of the Granados organization have been indicted in the Eastern District of New York on sex trafficking charges. Raul Granados-Rendon was the last fugitive to be arrested and extradited to face the charges.
In announcing the extradition and arraignment, U.S. Attorney Capers commended the HSI’s New York Office, the HSI Mexico Attaché Office and the Department of Justice’s Office of International Affairs, the State Department, and the New York City Police Department for their assistance and praised the government of Mexico for its role in advancing bilateral anti-trafficking enforcement efforts.
The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, he faces a maximum sentence of life in prison.
Since 2009, the Department of Justice and HSI have collaborated with Mexican law enforcement counterparts in a Bilateral Human Trafficking Enforcement Initiative aimed at strengthening high-impact prosecutions under both U.S. and Mexican law. The initiative is aimed at dismantling human trafficking networks operating across the U.S.-Mexico border, bringing human traffickers to justice, reuniting victims with their children and restoring the rights and dignity of human trafficking victims held under the trafficking networks’ control. These efforts have resulted in successful prosecutions in both Mexico and the United States, including U.S. federal prosecutions of more than 50 defendants in multiple cases in New York, Georgia, Florida, and Texas since 2009, and numerous Mexican federal and state prosecutions of associated sex traffickers. The extraditions in this case are the latest development in the Eastern District of New York’s comprehensive anti-trafficking program, which has to date indicted more than 70 defendants in sex trafficking cases and provided assistance to more than 135 victims, including 39 minors. In addition, through the Eastern District of New York’s anti-trafficking program, 18 children have been reunited with their victim-mothers.
The government’s case is being handled by the Office’s Civil Rights Section. Assistant United States Attorneys Taryn Merkl and Jennifer M. Sasso are in charge of the prosecution.
The Defendant:
RAUL GRANADOS RENDON
Age: 30
Tenancingo, Mexico
E.D.N.Y. Docket No. 11-CR-557
Three Individuals Plead Guilty in $55 Million Health Care Fraud Scheme at Two Brooklyn Medical ClinicsRead the Press Release
Three individuals pleaded guilty this week in connection with a health care fraud scheme involving two Brooklyn, New York clinics that caused approximately $55 million in false and fraudulent claims to Medicare and Medicaid.
Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Special Agent in Charge Scott J. Lampert of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) New York Regional Office, Acting Special Agent in Charge Kathy A. Enstrom of Internal Revenue Service Criminal Investigation’s (IRS-CI) New York Office and Medicaid Inspector General Dennis Rosen of New York State Office of Medicaid Inspector General (OMIG), made the announcement.
Olga Proskurovsky, 49, and Yuriy Omelchenko, 49, both of Brooklyn, New York, each pleaded guilty to one count of conspiracy to commit health care fraud. Pursuant to their plea agreements, the defendants agreed to forfeiture money judgments in the amount of $17,216,687. Isak Aharanov, 42, of Brooklyn, New York, also pleaded guilty to two counts of conspiracy to commit money laundering and one count of conspiracy to defraud the United States. The defendants pleaded guilty before U.S. District Judge Roslynn R. Mauskopf of the Eastern District of New York.
According to the defendants’ admissions made as part of the plea agreements, Proskurovsky served as a medical biller and Omelchenko worked as a therapist manager at Prime Care on the Bay LLC (Prime Care) and Bensonhurst Mega Medical Care P.C. (Bensonhurst). The defendants admitted that they assisted in a scheme to defraud the Medicare and Medicaid programs in which patients subjected themselves to medically unnecessary health services, including physical and occupational therapy, provided by unlicensed staff. To conceal the scheme, Proskurovsky and Omelchenko admitted that occupational and physical therapists falsified patient charts and medical billing documents.
As part of his plea agreement, Aharanov admitted that he and co-conspirators paid patients in order to induce them to come to Prime Care, Bensonhurst and Total Rehab and Physical Therapy P.C. Aharanov further admitted that he used a bank account opened in the name of one of his companies to launder funds and generate the cash needed to make these illegal kickback payments.
Fifteen other individuals have pleaded guilty in connection with the scheme.
HHS-OIG, IRS-CI and the New York State OMIG investigated the case, which was brought as part of the Medicare Fraud Strike Force, under the supervision by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York. Trial Attorneys A. Brendan Stewart and Richard A. Powers of the Fraud Section and Assistant U.S. Attorney F. Turner Buford of the Eastern District of New York, formerly a Fraud Section trial attorney, prosecuted the case.
The Criminal Division’s Fraud Section leads the Medicare Fraud Strike Force. Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 3,000 defendants who have collectively billed the Medicare program for more than $11 billion. In addition, HHS Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.
Leader of A Violent Brooklyn Robbery Crew and an Underling Sentenced to Life in Prison for Murder in Aid of RacketeeringRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, New York, Christian John, the leader of the “Hull Street Crew,” a violent criminal gang that operated in the Bushwick, Bedford-Stuyvesant, and East New York areas of Brooklyn for more than a decade, was sentenced to life imprisonment, following his conviction after trial in December 2014 on charges of racketeering, murder, attempted murder, murder-for-hire, armed robbery, murder-for-hire, narcotics distribution and gambling on dog fighting. Marvin Johnson, a member of John’s crew, was also sentenced to life imprisonment, following his conviction after trial on murder, robbery and narcotics distribution charges.
The sentences were announced by Robert L. Capers, 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.
U.S. Attorney Capers stated, “Today’s sentence marks a day of closure for the six families whose loved ones were senselessly murdered and for the Brooklyn communities where John and his violent crew wreaked havoc from more than a decade. These life sentences also provide notice to gang members and violent offenders that this Office and our law enforcement partners will be relentless in our efforts to make communities safe for their residents.” Mr. Capers extended his grateful appreciation to the FBI and the New York City Police Department for their outstanding assistance in this case.
As proven at trial, Christian John was found guilty of the 2000 murder of Charlemagne Lormand, the 2008 murder of Barry Haynes, the 2008 murder of Daquane Shelton and the 2011 murders of Jason Bostic and Aaron Formey. Both defendants were found guilty of the 2006 murder of Earle Kevin Obermuller. During the Obermuller murder, the defendants lured the victim to an abandoned building where they duct taped his entire head and watched him suffocate to death. The defendants then set his body on fire. During the 2011 murders of Jason Bostic and Aaron Formey, John ordered his crew members to bind the victims with duct tape and to kill them. Among his many other crimes, John was also found guilty of assaulting a crew member by tying him up and pouring scalding water over his body as retaliation for the crew member being disloyal to John.
The government’s case is being prosecuted by Assistant United States Attorneys Soumya Dayananda and Robert T. Polemeni.
The sentencing proceeding took place before United States District Judge Frederic Block.
The Defendants:
CHRISTIAN KESTON JOHN
Age: 32
Brooklyn, N.Y.
MARVIN JOHNSON
Age: 32
Brooklyn, N.Y.
E.D.N.Y. Docket No. 11-CR-00405
Brooklyn Man Charged with Hobbs Act Robbery of Convenience Store in BrownsvilleRead the Press Release
Denzell Oglesby was arrested today on a criminal complaint filed in federal court in the Eastern District of New York, charging him with the armed robbery of a convenience store in Brooklyn. Oglesby was arrested earlier today while being held in state custody, and his initial appearance is scheduled for this afternoon before United States Magistrate Judge Vera M. Scanlon at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, Ashan M. Benedict, Special Agent in Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and James P. O’Neill, Commissioner, New York City Police Department (NYPD).
As detailed in the complaint and as captured on the store’s surveillance camera, Oglesby entered the convenience store with a co-conspirator, who remains at-large. Oglesby pointed a firearm at the convenience store clerk, jumped over the store counter, and forced the store clerk to the floor. Oglesby’s co-conspirator struck and wrestled with the store clerk, while Oglesby stole cash proceeds and other items from the store. As the store clerk continued to resist the robbery, Oglesby repeatedly struck the store clerk in the head with the firearm before he and his co-conspirator fled.
“As alleged, the defendant engaged in a violent gun-point robbery and brutally beat the store clerk. Such wanton violence will not be tolerated,” stated United States Attorney Capers. “The defendant will now be held to account for his crime.” Mr. Capers expressed his grateful appreciation to the ATF and NYPD who are responsible for leading the investigation.
“Oglesby is alleged to have engaged in a brutal act of violence which undermines the safety and security of the people working and residing in the Brownsville section of Brooklyn,” stated ATF Special Agent in Charge Benedict. “The ATF Special Agents and NYPD
Detectives assigned to the SPARTA Task Force are targeting the most violent offenders for prosecution in Federal court. Today’s arrest should serve as a clear warning to those who would engage in an armed robbery that the full force of law enforcement resources may be brought to bear against you.”
“This crime was as brazen as it was brutal. We have no tolerance for this type of violence in our city. I want to thank the detectives, agents, and prosecutors for their thoroughness in ensuring that the defendant is held account for his actions, as alleged in the complaint,” stated NYPD Commissioner O’Neill.
The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, the defendant faces a minimum of seven years in prison.
The government’s case is being prosecuted by the Office’s Narcotics and Money Laundering Section. Assistant United States Attorney Andrew C. Gilman is in charge of the prosecution.
The Defendant:
DENZELL OGLESBY
Age: 23
Brooklyn, New York
Société Générale Agrees to Pay $50 Million Penalty to Settle RMBS Fraud ClaimsRead the Press Release
United States Attorney Robert L. Capers announced today that Société Générale, S.A. will pay a $50 million civil penalty to resolve claims related to its activities, which were conducted through several affiliates (together, “SocGen”), in connection with the marketing, sale, and issuance of a residential mortgage-backed security (“RMBS”) named SG Mortgage Securities Trust 2006-OPT2 (“SG 2006-OPT2”). As part of the agreement, SocGen has acknowledged in writing that it made false representations to prospective investors in SG 2006-OPT2. Investors, including federally insured financial institutions, suffered significant losses on their investments in SG 2006-OPT2.
The settlement includes a statement of facts agreed to by SocGen, whereby SocGen acknowledges responsibility for its conduct. For example, SocGen acknowledges that it falsely represented to investors that the loans underlying SG 2006-OPT2 were originated generally in accordance with the loan originator’s underwriting guidelines. Indeed, as detailed in the statement of facts, SocGen’s third-party due diligence vendor for SG 2006-OPT2 determined that almost 40% of the loans it reviewed were underwritten outside of guidelines and lacked adequate compensating factors to make the loans eligible for securitization. SocGen acknowledges that it did not disclose these results to investors.
Likewise, SocGen represented to investors that, at the time of origination, no loan in SG 2006-OPT2 had a loan-to-value or combined loan-to-value ratio of more than 100% (in other words, that the value of any mortgage on a property did not exceed the value of the property itself) – a representation that SocGen now acknowledges was false. Moreover, SocGen knew that there were industry-wide problems with subprime loan origination practices. As described by a senior member of SocGen’s Contract Finance group, “The whole process [was] a joke.”
“SocGen’s acknowledgement of its misconduct in the securitization of SG 2006-OPT2 was a critical component of this resolution. It severely impacted investors and institutions across the United States, including in this district. Most emphatically, it was not a ‘joke’”, stated United States Attorney Capers. “We will not tolerate investment banks making false representations to investors – if and when they do so, they will be held accountable.” Mr. Capers extended his grateful appreciation to the Office of the Inspector General for the Federal Housing Finance Agency for its assistance in conducting the investigation in this matter.
The $50 million civil monetary penalty resolves claims under the Financial Institutions Reform Recovery and Enforcement Act of 1989, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. As part of the settlement, SocGen has agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.
Assistant U.S. Attorneys Clayton P. Solomon, Morgan J. Clark, and Katharine E.G. Brooker led the government’s investigation.
About the RMBS Working Group: The RMBS Working Group, part of the Financial Fraud Enforcement Task Force, was established by the Attorney General in late January 2012. The Working Group has been dedicated to initiating, organizing, and advancing new and existing investigations by federal and state authorities into fraud and abuse in the RMBS market that helped precipitate the 2008 Financial Crisis. The Working Group’s efforts to date have resulted in settlements providing for tens of billions of dollars in civil penalties and consumer relief from banks and other entities that are alleged to have committed fraud in connection with the issuance of RMBS.
To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html
Riverhead Physician Assistant Sentenced to Five Years in Prison for Conspiring to Illegally Prescribe OxycodoneRead the Press Release
Earlier today in Central Islip, NY, Michael Troyan, a physician assistant who operated two urgent care clinics on the east end of Long Island, was sentenced to five years’ imprisonment, three years’ supervised release, and $710,290 forfeiture, following his guilty plea on June 17, 2016, to conspiring to illegally distribute oxycodone. The sentencing proceedings were held before U.S. District Judge Denis R. Hurley.
The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York.
Between November 2011 and October 2015, Troyan, who was authorized to prescribe controlled substances, issued prescriptions for thousands of oxycodone pills to co-conspirators for the purpose of illegally re-selling the pills. During the government’s investigation, Troyan was captured on video in an undercover operation writing phony prescriptions at his Riverhead medical office for oxycodone and receiving large quantities of cash – half the profit from prior illegal sales. As part of his guilty plea, Troyan agreed to forfeit $710,290 attributable to illegal prescription sales.
One of Troyan’s co-conspirators was Southampton Town Councilman Bradley Bender, who was sentenced on June 24, 2016, to 24 months in prison for his role in the conspiracy. Bender’s resignation as a Councilman was accepted by the Southampton Town Board on the day of his guilty plea, November 24, 2015.
“For years, Troyan supplied Bender and others with phony prescriptions for huge quantities of oxycodone pills, which Bender filled and illegally exchanged for cash and steroids with another co-conspirator. The oxycodone pills were then re-sold to drug abusers, sustaining the destructive abuse of opioid analgesics in our communities,” stated United States Attorney Capers. “This sentence serves as a stern warning to all medical professionals entrusted with authority to prescribe controlled substances that there is a price to pay for such criminal conduct.” Mr. Capers expressed his grateful appreciation to the DEA’s Long Island Tactical Diversion Squad, which led the government’s investigation in this case.
This case is part of a series of federal prosecutions by the United States Attorney’s Office as part of the Prescription Drug Initiative. In January 2012, this Office and the DEA, in conjunction with the five District Attorneys in the Eastern District of New York, the Nassau and Suffolk County Police Departments, the New York City Police Department, and New York State Police, along with other key federal, state, and local government partners, launched the Initiative to mount a comprehensive response to what the United States Department of Health and Human Services Center for Disease Control and Prevention has called an epidemic increase in the abuse of opioid analgesics. To date, the Initiative has brought over 160 federal and local criminal prosecutions, including the prosecution of 20 health care professionals, taken civil enforcement actions against a hospital, a pharmacy, and a pharmacy chain, removed prescription authority from numerous rogue doctors and physician assistants, and expanded information-sharing among enforcement agencies to better target and pursue drug traffickers. The Initiative also is involved in an extensive community outreach program to address the abuse of pharmaceuticals.
The government’s case was handled by the Central Islip Office. Assistant United States Attorneys Allen Bode and James Knapp are in charge of the prosecution.
The Defendant:
Name: MICHAEL TROYAN
Age: 38
Residence: Riverhead, New York
Queens Man Convicted for Defrauding Financial InstitutionsRead the Press Release
BROOKLYN, N.Y. – James Bayfield, a self-described mortgage specialist, was convicted late yesterday by a federal jury in Brooklyn on all four counts charging bank fraud and conspiracy to commit wire fraud and bank fraud for his role in defrauding mortgage lending institutions and large financial institutions, including Amtrust Bank (Amtrust), Bank of America N.A. (BOA) and J.P. Morgan Chase & Co. (Chase), in a multi-million-dollar mortgage fraud scheme. The jury’s verdict followed a two-week trial before United States District Judge Eric N. Vitaliano. Bayfield is the sixth and final defendant convicted in this case.
The guilty verdict was announced by Robert L. Capers, United States Attorney for the Eastern District of New York. Mr. Capers thanked the Federal Bureau of Investigation (FBI); the Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG); the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD-OIG); the Federal Deposit Insurance Corporation, Office of Inspector General (FDIC-OIG); and the New York State Department of Financial Services (DFS) for their hard work and dedication over the course of this multi-year investigation and prosecution.
The evidence at trial established that Bayfield, together with others, caused mortgage loan applications with false information to be submitted to lending institutions in connection with the purchase of residential properties located within the Eastern District of New York. These applications contained fraudulently inflated purchase prices, as well as false information about the assets and income of the purchasers of the properties, many of whom were being compensated as part of the scheme to act as straw purchasers. The defendant and his co-conspirators also provided false down payment checks to make it appear as if the straw purchasers and the other borrowers had made down payments in connection with the purchase of the properties, which was a condition of the lending institutions for issuing the mortgage loans.
To carry out their scheme, the defendant conducted simultaneous purchases and sales of the properties, sometimes called “flips,” in an effort to conceal their criminal involvement and to inflate the value of the properties. For example, a conspirator would purchase a property from a homeowner. That same day, the conspirator would sell the property to a straw purchaser at an inflated value. The defendant and his conspirators, through the use of backdated and falsified documents, concealed from the lending institutions the fact that the purchase and sale had occurred on the same day and made it appear as if the transaction between the homeowner and the conspirator had occurred over 60 days prior to the sale from the conspirator to the straw purchaser.
As a result of the false applications and appraisals, the lending institutions were fraudulently induced to issue millions of dollars of mortgage loans secured by properties that had inflated appraisal values to individuals who had insufficient income and assets to qualify for the mortgage loan. In many instances, the straw purchasers and the other borrowers failed to make required mortgage payments to the lending institutions, which caused the mortgage loans to be placed into default status.
When sentenced by United States District Judge Eric N. Vitaliano, Bayfield faces a sentence of up to 20 years in prison.
The government’s case was prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys David Pitluck, Mark Bini and Michael Keilty are in charge of the prosecution.
* * *
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
The Defendant:
JAMES BAYFIELD
Age: 44
Queens, New York
E.D.N.Y. Docket No. 14-CR-356 (S-1) (ENV)
Former United States Merchant Marine Academy Employee Pleads Guilty to Receiving BribesRead the Press Release
Earlier today in federal court in Central Islip, New York, John McCormick, a former Planner/Estimator for the Department of Public Works of the United States Merchant Marine Academy, located in Kings Point, New York, pleaded guilty to Receiving a Bribe as a Public Official in connection with his participation in a scheme to defraud the United States by steering maintenance and repair contracts to favored contractors. Today’s plea proceeding took place before United States Magistrate Judge Anne Y. Shields.
The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Douglas Shoemaker, Regional Special Agent in Charge, United States Department of Transportation – Office of the Inspector General (DOT-OIG), and Kathy A. Enstrom, Acting Special Agent in Charge, Internal Revenue Service-Criminal Investigation, New York Field Office (IRS).
According to previous court filings, between 2000 and 2014 while McCormick was employed in the Department of Public Works for the United States Merchant Marine Academy, he solicited and submitted fake bids on contracts he supervised in order to steer the awarding of maintenance and repair contracts to favored contractors who paid him bribes.
In October 2014, federal agents surveilled and recorded McCormick accepting a bribe from a contractor on the grounds of the United States Merchant Marine Academy. McCormick was arrested shortly thereafter. This plea is the result of a continuing investigation in which the government has previously filed charges against other Academy employees and a number of contractors.
“The receipt of bribes on government contracts threatens the quality of the work being performed and the integrity of the contracting process. Such brazen conduct will never be tolerated and the defendant will now be held accountable for his crimes,” stated United States Attorney Capers.
“The guilty plea entered into today by John McCormick for Receiving a Bribe as a Public Official, demonstrates that those entrusted with the stewardship of taxpayer dollars will be held responsible for maintaining the highest level of integrity,” said Regional Special Agent in Charge, DOT-OIG, Shoemaker. “Our agents will continue to work with the Secretary of Transportation, and other federal, state, and local law enforcement and prosecutorial colleagues to expose and shut down fraud schemes that adversely affect public trust and DOT-assisted transportation programs.”
“Government employees are hired to serve the best interests of the public, not to illegally enrich themselves. Today’s plea by Mr. McCormick underscores our commitment to work in a collaborative effort to promote honest and ethical government at all levels and to prosecute those who violate the public trust,” stated Acting Special Agent in Charge, Enstrom, IRS-Criminal Investigation, New York Field Office.
At sentencing, the defendant faces a maximum of 15 years’ imprisonment. The defendant has also agreed to forfeit $60,000 illegally received by him as part of the scheme. Sentencing is scheduled for May 19, 2017, before United State District Court Judge Arthur D. Spatt, at which time the Court determines restitution.
The government's case is being prosecuted by Assistant United States Attorney Burton T. Ryan, Jr.
The Defendant:
JOHN C. McCORMICK
Age: 60
Atlantic Beach, New York
E.D.N.Y. Docket No. 15-CR-490
New York Man Pleads Guilty to Conspiring to Provide Material Support to ISILRead the Press Release
Akhror Saidakhmetov, 21, a citizen of Kazakhstan and a resident of Brooklyn, New York, pleaded guilty to conspiring to provide material support to the Islamic State in Iraq and the Levant (ISIL), a designated foreign terrorist organization.
The guilty plea was announced by Acting Assistant Attorney General for National Security Mary B. McCord, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director-in-Charge William F. Sweeney, Jr. of the FBI’s New York Field Office, Special Agent-in-Charge Angel M. Melendez of Homeland Security Investigations (HSI) New York Field Office and Commissioner James P. O’Neill of the New York City Police Department. The plea took place before U.S. District Judge William F. Kuntz, II.
“Akhror Saidakhmetov admitted that he conspired to provide material support to ISIL and that he was prepared to commit violence overseas or here in the United States,” said Acting Assistant Attorney General McCord. “The National Security Division’s highest priority is counterterrorism. This case reflects our commitment to disrupting and holding accountable those who wish to wage violence on behalf of ISIL, either at home or abroad.”
“The defendant was committed to traveling to Syria to join ISIL or to conducting a domestic terror attack if unable to travel to Syria,” said U.S. Attorney Capers. “Thanks to the efforts of FBI’s Joint Terrorism Task Force in New York, we have prevented two local residents – Saidakhmetov and his codefendant Abdurasul Juraboev – from becoming foreign fighters in Syria or attacking victims here in the United States.”
“As we presented in our case, Akhror Saidakhmetov clearly expressed the desire to commit violence, either domestically or abroad, on behalf of a terrorist organization. His failure to carry out this desire is a testament to the tireless efforts of FBI New York’s Joint Terrorism Task Force. Today’s guilty plea is further testament to the dedicated work on this case by agents and officers who encompass that task force,” said Assistant Director-in-Charge Sweeney.
“Saidakhmetov made threats towards American law enforcement and attempted to join ISIL in its caustic jihad. Terrorism, and its threat to the homeland, is why HSI continues to be a leading contributor to the Joint Terrorism Task Force here in New York and across the country,” said Special-Agent-in-Charge Melendez. “We cannot allow extremists to terrorize our neighborhoods or make threats towards our men and women in blue.”
“This defendant pledged allegiance to ISIL, which has called on its followers to attack the United States and specifically New York City. The defendant also attempted to travel to Syria,” said Commissioner O’Neill. “This guilty plea is another example of the collaborative work of the members of the FBI-NYPD Joint Terrorism Task Force and the prosecutors of the U.S. Attorney for the Eastern District of New York.”
According to previous court filings, Saidakhmetov became keenly interested in traveling to ISIL-controlled territories in order to wage violent jihad. In August 2014, he made the following online posting referencing a video containing footage of multiple individuals pledging allegiance to ISIL and showing mass executions by ISIL of Iraqi forces captured during ISIL’s takeover of Mosul, Iraq: “Allohu Akbar I was very happy after reading this, my eyes joyful so much victory.”
During the fall and winter of 2014-2015, Saidakhmetov and codefendant Abdurasul Juraboev made plans to travel to Syria to fight on behalf of ISIL. In one recorded conversation, Saidakhmetov remarked that if he was unable to travel to Syria, he would purchase a machine gun and shoot police officers in the U.S. The defendants’ efforts to travel culminated in Saidakhmetov’s arrest on Feb, 25, 2015 at John F. Kennedy International Airport in Queens, New York, while attempting to board a flight for Turkey. Juraboev was also arrested on the same day. At the time of Juraboev’s arrest, he had already purchased a ticket for a flight to Turkey. Juraboev pleaded guilty in August 2016 to conspiring to provide material support to a designated foreign terrorist organization, and is awaiting sentencing.
At sentencing, Saidakhmetov faces up to 15 years in prison.
The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes. If convicted of any offense, the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.
The government’s case is being prosecuted by the National Security & Cybercrime Section of the U.S. Attorney’s Office for the Eastern District of New York. Assistant U.S. Attorneys Alexander Solomon, Douglas M. Pravda, Peter W. Baldwin and David K. Kessler of the Eastern District of New York are in charge of the prosecution, with assistance from Trial Attorney Steven Ward of the National Security Division’s Counterterrorism Section.
Brooklyn Resident Pleads Guilty to Conspiring to Provide Material Support to TerroristsRead the Press Release
Earlier today, Akhror Saidakhmetov, a citizen of Kazakhstan and a resident of Brooklyn, New York, pleaded guilty to conspiring to provide material support to a designated foreign terrorist organization, the Islamic State in Iraq and the Levant (ISIL). Today’s plea took place before United States District Judge William F. Kuntz, II. At sentencing, Saidakhmetov faces up to 15 years in prison and presumptive removal to his country of origin, Kazakhstan.
The guilty plea was announced by U.S. Attorney Robert L. Capers of the Eastern District of New York, Acting Assistant Attorney General for National Security Mary B. McCord, of the U.S. Department of Justice, Assistant Director in Charge William F. Sweeney, Jr. of the New York Field Office of the Federal Bureau of Investigation (FBI), Angel M. Melendez, Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) and New York and Commissioner James P. O’Neill of the New York City Police Department.
According to previous court filings, Saidakhmetov became keenly interested in traveling to ISIL-controlled territories in order to wage violent jihad. In August 2014, he made the following online posting referencing a video containing footage of multiple individuals pledging allegiance to ISIL and showing mass executions by ISIL of Iraqi forces captured during ISIL’s takeover of Mosul, Iraq: “Allohu Akbar I was very happy after reading this, my eyes joyful so much victory.” During the fall and winter of 2014-2015, Saidakhmetov and codefendant Abdurasul Juraboev made plans to travel to Syria to fight on behalf of ISIL. The defendants’ efforts to travel culminated in Saidakhmetov’s arrest on February 25, 2015 at John F. Kennedy International Airport in Queens while attempting to board a flight for Turkey. Juraboev was also arrested on the same day; at the time of his arrest, he had already purchased a ticket for a flight to Turkey. Juraboev pled guilty in August 2015 to conspiring to provide material support to a designated foreign terrorist organization and is awaiting sentencing.
“The defendant was committed to traveling to Syria to join ISIL or to conducting a domestic terror attack if unable to travel to Syria,” said U.S. Attorney Capers. “Thanks to the efforts of FBI’s Joint Terrorism Task Force in New York, we have prevented two local residents – Saidakhmetov and his codefendant Abdurasul Juraboev – from becoming foreign fighters in Syria or attacking victims here in the United States.”
“Akhror Saidakhmetov admitted that he conspired to provide material support to ISIL and that he was prepared to commit violence overseas or here in the United States,” said Acting Assistant Attorney General McCord. “The National Security Division’s highest priority is counterterrorism. This case reflects our commitment to disrupting and holding accountable those who wish to wage violence on behalf of ISIL, either at home or abroad.”
“As we presented in our case, Akhror Saidakhmetov clearly expressed the desire to commit violence, either domestically or abroad, on behalf of a terrorist organization. His failure to carry out this desire is a testament to the tireless efforts of FBI New York’s Joint Terrorism Task Force (JTTF). I would like to thank the men and women on the JTTF who work together every day to keep the region safe,” said Assistant Director-in-Charge Sweeney.
“Saidakhmetov attempted to join ISIL in its violent jihad. Terrorism, and its threat to the homeland, is why HSI continues to be a leading contributor to the Joint Terrorism Task Force here in New York and across the country,” said Special-Agent-in-Charge Melendez, of HSI New York.
“This defendant pledged allegiance to ISIL, which has called on its followers to attack the United States and specifically New York City. The defendant also attempted to travel to Syria,” said NYPD Police Commissioner O’Neill. “This guilty plea is another example of the collaborative work of the members of the FBI-NYPD Joint Terrorism Task Force and the prosecutors of the U.S. Attorney for the Eastern District of New York.”
The government’s case was prosecuted by the office’s National Security & Cybercrime Section. Assistant U.S. Attorneys Alexander Solomon, Douglas M. Pravda, Peter W. Baldwin, and David K. Kessler of the Eastern District of New York are in charge of the prosecution, with assistance provided by Trial Attorney Steven Ward of the National Security Division’s Counterterrorism Section.
The Defendant:
AKHROR SAIDAKHMETOV
Age: 21
E.D.N.Y. Docket No. 15 CR 95 (WFK) # # #
Former New York State Senator John L. Sampson Sentenced to 5 Years for Obstruction of Justice and Making False Statements to the FBIRead the Press Release
Earlier today in federal court in Brooklyn, former New York State Senator John Sampson was sentenced to five years of incarceration following his conviction at trial of obstruction of justice in connection with his efforts to interfere with a federal criminal case against a close associate who had given Sampson an undisclosed $188,500 loan that Sampson never repaid. Sampson was also convicted of two counts of making false statements to agents of the Federal Bureau Investigation. As part of the sentence, the court also imposed a fine of $75,000. Today’s proceeding was held before United States Chief District Judge Dora L. Irizarry.
The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, FBI, New York Field Office.
“John Sampson abused his position as a member of the State Senate and as a member of the bar,” said United States Attorney Capers. “He repeatedly broke the law and then compounded those offenses by obstructing a federal criminal investigation. By his actions, Sampson showed that he was not fit to hold office as a state legislator or practice law. He has now been held to account for his criminal conduct.” Mr. Capers commended the FBI for its outstanding work and expressed his grateful appreciation to the Federal Deposit Insurance Corporation, Office of the Inspector General; the Public Integrity Section of the Department of Justice; and the Office of the Inspector General of the Department of Justice for their assistance in this case.
“Corrupt activity on behalf of our elected officials leaves the public feeling betrayed. Those responsible for upholding the law shouldn’t be the ones breaking it. Although this chapter ends today, the FBI will continue the very important work of investigating public corruption in all its many forms,” said FBI Assistant Director-in-Charge Sweeney.
From 1997 until his conviction by a jury on July 24, 2015, Sampson served in the New York State Senate representing the 19th Senate District in southeastern Brooklyn. From June 2009 to December 2012, Sampson was the leader of the Democratic Conference of the Senate, and from June 2009 to December 2010 he was effectively the leader of the Senate. From January 2011 to December 2012, he was the Senate Minority Leader. Sampson has also served as the chairman of the Senate Ethics Committee and the Senate Judiciary Committee.
Obstruction of Justice
As established at trial, Sampson obstructed justice by using a personal friend who was a supervisory paralegal at the U.S. Attorney’s Office in an attempt to obtain confidential law enforcement information. Specifically, Sampson requested the identity of cooperating witnesses and their statements to the government to improperly help a Queens businessman, Edul Ahmad, fight a mortgage fraud case brought by the Office against Ahmad. Sampson’s motive was to prevent the possibility of Ahmad cooperating with the government and disclosing that Sampson borrowed $188,500 from Ahmad to replenish escrow accounts from which Sampson, an attorney, had embezzled hundreds of thousands of dollars to fund his unsuccessful 2005 campaign for Kings County District Attorney. Sampson never repaid the loan to Ahmad, failed to report it on his Senate financial disclosure forms as required by law, and used his Senate office in various ways to help Ahmad. At the time of his indictment, Sampson had failed to repay over $160,000 of the embezzled funds. At present, over $80,000 of the embezzled funds remains unpaid.
Sampson also endeavored to obstruct the government’s case against Ahmad by arranging for compromised counsel to represent Ahmad’s co-conspirators and by hiring a retired FBI agent to use his connections with law enforcement to obtain confidential law enforcement information.
False Statements
In February 2012, when Ahmad showed Sampson a document related to the $188,500 loan and told Sampson that the U.S. Attorney’s Office had subpoenaed it, Sampson instructed Ahmad not to give the government the document and to lie to investigators about the document and the loan. He then took the document from Ahmad and kept it. As Chief Judge Irizarry found at today’s sentencing hearing, this conduct constituted witness tampering and evidence tampering. In July 2012, when FBI agents interviewed Sampson and showed him a copy of the document, Sampson falsely claimed he did not recall it.
During the same July 2012 interview, Sampson falsely stated to the FBI that he had never asked a Senate staff member to intervene with the New York State Department of Taxation and Finance in an effort to resolve a sales tax liability of a liquor store he owned, in violation of the New York Public Officers law.
The government’s case is being prosecuted by the Office’s Public Integrity Section. Assistant United States Attorneys Paul Tuchmann, Alexander A. Solomon, and Marisa Megur Seifan are in charge of the prosecution.
The Defendant:
JOHN L. SAMPSON.
Age: 51
Brooklyn, New York
E.D.N.Y. Docket No. 13-CR-269 (DLI)
Historic Case Involving the Civil Rights of Psychiatric Patients at Kings County Hospital Center Comes to A CloseRead the Press Release
Robert L. Capers, United States Attorney for the Eastern District of New York, today announced the closing of its case against New York City over conditions of patient care and treatment in NYC Health + Hospitals/Kings County, also known as Kings County Hospital Center’s Behavioral Health Service (“BHS”). In a letter dated January 10, 2017 to the Honorable Kiyo A. Matsumoto, Mr. Capers requested that Judge Matsumoto close the case because the BHS is in substantial compliance with the requirements of a January 2010 Consent Judgment between the United States and the City of New York. The Court granted that motion today.
The Consent Judgment was entered after the United States conducted an investigation of the BHS in 2008 and 2009 and concluded that it was failing to properly assess, diagnose, supervise, monitor, and treat its patients. The investigation also revealed violations of patients’ rights, including the improper use of chemical and physical restraints. Hospital Police assaulted patients and handcuffed them to beds and radiators. In a tragic incident in 2008, a patient, Esmin Green, was left unattended and died on the floor as clinical staff and hospital police ignored her. BHS also discharged patients to the community without adequate plans for their care. As a result, large numbers of patients returned to the facility. In addition, the facility was dilapidated and filthy.
In January 2010, the United States and the City entered into the Consent Judgment for the purpose of bringing about a complete overhaul of the BHS, including its initial triage procedures, its assessment and diagnostic procedures, and its treatment planning, as well as its medication management, nursing, discharge planning, and fire and life safety planning. Significantly, the Consent Judgment also included provisions for the reform of KCHC’s Hospital Police force.
In the seven years since the parties signed the Consent Judgment, the BHS has become a model acute care psychiatric facility. The BHS now addresses the critical needs of the vulnerable, mentally ill population that it serves. Its treatment plans and mental health care are individualized, person-centered, and recovery oriented. It has also developed clinical approaches to identify and address potential patient aggression and self-harm. As a result, suicide attempts and self-harm have dropped significantly. Nurses are more attentive and play a significant and assistive role in helping patients get better. Medication is used only for the purpose of treating patients and not for the purpose of controlling their behavior. In addition, the rate of recidivism has dropped sharply as a result of robust discharge planning. And, the BHS is now housed in a new building, which is well-lit, sanitary, and safe.
“This Office takes great pride in the transformation of the Kings County Hospital Center’s Behavioral Health Service and the dramatic improvements in patient care that have resulted from our collaboration with the City,” said U.S. Attorney Capers. “The remarkable changes at the BHS should ensure that tragedies like the death of Esmin Green never occur again.”
The case was handled by Michael J. Goldberger, Chief of Civil Rights in the Office’s Civil Division.
Deutsche Bank Agrees to Pay $7.2 Billion for Misleading Investors in its Sale of Residential Mortgage-Backed SecuritiesRead the Press Release
The Justice Department, along with federal partners, announced today a $7.2 billion settlement with Deutsche Bank resolving federal civil claims that Deutsche Bank misled investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2006 and 2007. This $7.2 billion agreement represents the single largest RMBS resolution for the conduct of a single entity. The settlement requires Deutsche Bank to pay a $3.1 billion civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). Under the settlement, Deutsche Bank will also provide $4.1 billion in relief to underwater homeowners, distressed borrowers and affected communities.
“This resolution holds Deutsche Bank accountable for its illegal conduct and irresponsible lending practices, which caused serious and lasting damage to investors and the American public,” said Attorney General Loretta E. Lynch. “Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis. The cost of this misconduct is significant: Deutsche Bank will pay a $3.1 billion civil penalty, and provide an additional $4.1 billion in relief to homeowners, borrowers, and communities harmed by its practices. Our settlement today makes clear that institutions like Deutsche Bank cannot evade responsibility for the great cost exacted by their conduct.”
“This $7.2 billion resolution – the largest of its kind – recognizes the immense breadth of Deutsche Bank’s unlawful scheme by demanding a painful penalty from the bank, along with billions of dollars of relief to the communities and homeowners that continue to struggle because of Wall Street’s greed,” said Principal Deputy Associate Attorney General Bill Baer. “The Department will remain relentless in holding financial institutions accountable for the harm their misconduct inflicted on investors, our economy and American consumers.”
“In the Statement of Facts accompanying this settlement, Deutsche Bank admits making false representations and omitting material information from disclosures to investors about the loans included in RMBS securities sold by the Bank. This misconduct, combined with that of the other banks we have already settled with, hurt our economy and threatened the banking system,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “To make matters worse, the Bank’s conduct encouraged shoddy mortgage underwriting and improvident lending that caused borrowers to lose their homes because they couldn’t pay their loans. Today’s settlement shows once again that the Department will aggressively pursue misconduct that hurts the American public.”
“Investors who bought RMBS from Deutsche Bank, and who suffered catastrophic losses as a result, included individuals and institutions that form the backbone of our community,” said U.S. Attorney Robert L. Capers for the Eastern District of New York. “Deutsche Bank repeatedly assured investors that its RMBS were safe investments. Instead of ensuring that its representations to investors were accurate and transparent, so that investors could make properly informed investment decisions, Deutsche Bank repeatedly misled investors and withheld critical information about the loans it securitized. Time and again, the bank put investors at risk in pursuit of profit. Deutsche Bank has now been held accountable.”
“Deutsche Bank knowingly securitized billions of dollars of defective mortgages and subsequently made false representations to investors about the quality of the underlying loans,” said Special Agent In Charge Steven Perez of the Federal Housing Finance Agency, Office of the Inspector General. “Its actions resulted in enormous losses to investors to whom Deutsche Bank sold these defective Residential Mortgage-Backed Securities. Today’s announcement reaffirms our commitment to working with our law enforcement partners to hold accountable those who deceived investors in pursuit of profits, and contributed to our nation’s financial crisis. We are proud to have worked with the U.S. Department of Justice and the U.S Attorney’s Office for the Eastern District of New York.”
As part of the settlement, Deutsche Bank agreed to a detailed Statement of Facts. That statement describes how Deutsche Bank knowingly made false and misleading representations to investors about the characteristics of the mortgage loans it securitized in RMBS worth billions of dollars issued by the bank between 2006 and 2007. For example:
- Deutsche Bank represented to investors that loans securitized in its RMBS were originated generally in accordance with mortgage loan originators’ underwriting guidelines. But as Deutsche Bank now acknowledges, the bank’s own reviews confirmed that “aggressive” revisions to the loan originators’ underwriting guidelines allowed for loans to be underwritten to anyone with “half a pulse.” More generally, Deutsche Bank knew, based on the results of due diligence, that for some securitized loan pools, more than 50 percent of the loans subjected to due diligence did not meet loan originators’ guidelines.
- Deutsche Bank also knowingly misrepresented that loans had been reviewed to ensure the ability of borrowers to repay their loans. As Deutsche Bank acknowledges, the bank’s own employees recognized that Deutsche Bank would “tolerate misrepresentation” with “misdirected lending practices” as to borrower ability to pay, accepting even blocked-out borrower pay stubs that concealed borrowers’ actual incomes. As a Deutsche Bank employee stated, “What goes around will eventually come around; when performance (default) begins affecting profits and/or the investors who purchase the securities, only then will Wall St. take notice. For now, the buying continues.”
- Deutsche Bank concealed from investors that significant numbers of borrowers had second liens on their properties. In one instance, a supervisory Deutsche Bank trader specifically instructed his team that if investors asked about second liens, “‘[t]ell them verbally . . . [b]ut don’t put in the prospectus.’” Deutsche Bank knew that these second liens increased the likelihood that a borrower would default on his or her loan.
- Deutsche Bank purchased and securitized loans with substantial defects to provide “flexibility” to the mortgage originators on whom Deutsche Bank’s RMBS program depended for a continued supply of loans. Indeed, after the president of a large mortgage originator told Deutsche Bank he was “very upset with the rejection percentage,” Deutsche Bank’s diligence team was instructed, on three separate occasions, to clear loans it previously determined should be rejected.
- While Deutsche Bank conducted due diligence on samples of loans it securitized in RMBS, Deutsche Bank knew that the size and composition of these loan samples frequently failed to capture loans that did not meet its representations to investors. In fact, Deutsche Bank knew “the more you sample, the more you reject.”
- Deutsche Bank knowingly and intentionally securitized loans originated based on unsupported and fraudulent appraisals. Deutsche Bank knew that mortgage originators were “‘giving’ appraisers the value they want[ed]” and expecting the resulting appraisals to meet the originators’ desired value, regardless of the actual value of the property. Deutsche Bank concealed its knowledge of pervasive and consistent appraisal fraud, instead representing to investors home valuation metrics based on appraisals it knew to be fraudulent. Deutsche Bank misrepresented to investors the value of the properties securing the loans securitized in its RMBS and concealed from investors that it knew that the value of the properties securing the loans was far below the value reflected by the originator’s appraisal.
- By May 2007, Deutsche Bank knew that there was an increasing trend of overvalued properties being sold to Deutsche Bank for securitization. As one employee noted, “We are finding ourselves going back quite often and clearing large numbers of loans [with inflated appraisals] to bring down the deletion percentages.” Deutsche Bank nonetheless purchased and securitized such loans because it received favorable prices on the fraudulent loans. Ultimately, Deutsche Bank enriched itself by paying reduced prices for risky loans while representing to investors valuation metrics based on appraisals the Bank knew to be inflated.
- Deutsche Bank represented to investors that disclosed borrower FICO scores were accurate as of the “cut-off date” of the RMBS issuance. However, Deutsche Bank knowingly represented borrowers’ FICO scores as of the time of the origination of their loans despite the bank’s knowledge that these scores had often declined materially by the cut-off date.
Assistant U.S. Attorneys Edward K. Newman, Matthew R. Belz, Jeremy Turk, and Ryan M. Wilson of the U.S. Attorney’s Office for the Eastern District of New York investigated Deutsche Bank’s conduct in connection with the issuance and sale of RMBS between 2006 and 2007. The investigation was conducted with the Office of the Inspector General for the Federal Housing Finance Agency.
The $3.1 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. It is one of the largest FIRREA penalties ever paid. The settlement does not release any individuals from potential criminal or civil liability. As part of the settlement, Deutsche Bank has agreed to fully cooperate with investigations related to the conduct covered by the agreement.
Deutsche Bank will also provide $4.1 billion in the form of relief to aid consumers harmed by its unlawful conduct. Specifically, Deutsche Bank will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country. It will also provide financing for affordable rental and for-sale housing throughout the country. Deutsche Bank’s provision of consumer relief will be overseen by an independent monitor who will have authority to approve the selection of any third party used by Deutsche Bank to provide consumer relief.
To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html.
About the RMBS Working Group:
The RMBS Working Group, part of the Financial Fraud Enforcement Task Force, was established by the Attorney General in late January 2012. The Working Group has been dedicated to initiating, organizing, and advancing new and existing investigations by federal and state authorities into fraud and abuse in the RMBS market that helped precipitate the 2008 Financial Crisis. The Working Group’s efforts to date have resulted in settlements providing for tens of billions of dollars in civil penalties and consumer relief from banks and other entities that are alleged to have committed fraud in connection with the issuance of RMBS.
# # #
- Deutsche Bank represented to investors that loans securitized in its RMBS were originated generally in accordance with mortgage loan originators’ underwriting guidelines. But as Deutsche Bank now acknowledges, the bank’s own reviews confirmed that “aggressive” revisions to the loan originators’ underwriting guidelines allowed for loans to be underwritten to anyone with “half a pulse.” More generally, Deutsche Bank knew, based on the results of due diligence, that for some securitized loan pools, more than 50 percent of the loans subjected to due diligence did not meet loan originators’ guidelines.
Deutsche Bank Agrees to Pay $7.2 Billion for Misleading Investors in Its Sale of Residential Mortgage-Backed SecuritiesRead the Press Release
WASHINGTON --The Justice Department, along with federal partners, announced today a $7.2 billion settlement with Deutsche Bank resolving federal civil claims that Deutsche Bank misled investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2006 and 2007. This $7.2 billion agreement represents the single largest RMBS resolution for the conduct of a single entity. The settlement requires Deutsche Bank to pay a $3.1 billion civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). Under the settlement, Deutsche Bank will also provide $4.1 billion in relief to underwater homeowners, distressed borrowers and affected communities.
“This resolution holds Deutsche Bank accountable for its illegal conduct and irresponsible lending practices, which caused serious and lasting damage to investors and the American public,” said Attorney General Loretta E. Lynch. “Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis. The cost of this misconduct is significant: Deutsche Bank will pay a $3.1 billion civil penalty, and provide an additional $4.1 billion in relief to homeowners, borrowers, and communities harmed by its practices. Our settlement today makes clear that institutions like Deutsche Bank cannot evade responsibility for the great cost exacted by their conduct.”
“This $7.2 billion resolution – the largest of its kind – recognizes the immense breadth of Deutsche Bank’s unlawful scheme by demanding a painful penalty from the bank, along with billions of dollars of relief to the communities and homeowners that continue to struggle because of Wall Street’s greed,” said Principal Deputy Associate Attorney General Bill Baer. “The Department will remain relentless in holding financial institutions accountable for the harm their misconduct inflicted on investors, our economy and American consumers.”
“In the Statement of Facts accompanying this settlement, Deutsche Bank admits making false representations and omitting material information from disclosures to investors about the loans included in RMBS securities sold by the Bank. This misconduct, combined with that of the other banks we have already settled with, hurt our economy and threatened the banking system,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “To make matters worse, the Bank’s conduct encouraged shoddy mortgage underwriting and improvident lending that caused borrowers to lose their homes because they couldn’t pay their loans. Today’s settlement shows once again that the Department will aggressively pursue misconduct that hurts the American public.”
“Investors who bought RMBS from Deutsche Bank, and who suffered catastrophic losses as a result, included individuals and institutions that form the backbone of our community,” said U.S. Attorney Robert L. Capers for the Eastern District of New York. “Deutsche Bank repeatedly assured investors that its RMBS were safe investments. Instead of ensuring that its representations to investors were accurate and transparent, so that investors could make properly informed investment decisions, Deutsche Bank repeatedly misled investors and withheld critical information about the loans it securitized. Time and again, the bank put investors at risk in pursuit of profit. Deutsche Bank has now been held accountable.”
“Deutsche Bank knowingly securitized billions of dollars of defective mortgages and subsequently made false representations to investors about the quality of the underlying loans,” said Special Agent In Charge Steven Perez of the Federal Housing Finance Agency, Office of the Inspector General. “Its actions resulted in enormous losses to investors to whom Deutsche Bank sold these defective Residential Mortgage-Backed Securities. Today’s announcement reaffirms our commitment to working with our law enforcement partners to hold accountable those who deceived investors in pursuit of profits, and contributed to our nation’s financial crisis. We are proud to have worked with the U.S. Department of Justice and the U.S Attorney’s Office for the Eastern District of New York.”
As part of the settlement, Deutsche Bank agreed to a detailed Statement of Facts. That statement describes how Deutsche Bank knowingly made false and misleading representations to investors about the characteristics of the mortgage loans it securitized in RMBS worth billions of dollars issued by the bank between 2006 and 2007. For example:
-
Deutsche Bank represented to investors that loans securitized in its RMBS were originated generally in accordance with mortgage loan originators’ underwriting guidelines. But as Deutsche Bank now acknowledges, the bank’s own reviews confirmed that “aggressive” revisions to the loan originators’ underwriting guidelines allowed for loans to be underwritten to anyone with “half a pulse.” More generally, Deutsche Bank knew, based on the results of due diligence, that for some securitized loan pools, more than 50 percent of the loans subjected to due diligence did not meet loan originators’ guidelines.
-
Deutsche Bank also knowingly misrepresented that loans had been reviewed to ensure the ability of borrowers to repay their loans. As Deutsche Bank acknowledges, the bank’s own employees recognized that Deutsche Bank would “tolerate misrepresentation” with “misdirected lending practices” as to borrower ability to pay, accepting even blocked-out borrower pay stubs that concealed borrowers’ actual incomes. As a Deutsche Bank employee stated, “What goes around will eventually come around; when performance (default) begins affecting profits and/or the investors who purchase the securities, only then will Wall St. take notice. For now, the buying continues.”
-
Deutsche Bank concealed from investors that significant numbers of borrowers had second liens on their properties. In one instance, a supervisory Deutsche Bank trader specifically instructed his team that if investors asked about second liens, “‘[t]ell them verbally . . . [b]ut don’t put in the prospectus.’” Deutsche Bank knew that these second liens increased the likelihood that a borrower would default on his or her loan.
-
Deutsche Bank purchased and securitized loans with substantial defects to provide “flexibility” to the mortgage originators on whom Deutsche Bank’s RMBS program depended for a continued supply of loans. Indeed, after the president of a large mortgage originator told Deutsche Bank he was “very upset with the rejection percentage,” Deutsche Bank’s diligence team was instructed, on three separate occasions, to clear loans it previously determined should be rejected.
-
While Deutsche Bank conducted due diligence on samples of loans it securitized in RMBS, Deutsche Bank knew that the size and composition of these loan samples frequently failed to capture loans that did not meet its representations to investors. In fact, Deutsche Bank knew “the more you sample, the more you reject.”
-
Deutsche Bank knowingly and intentionally securitized loans originated based on unsupported and fraudulent appraisals. Deutsche Bank knew that mortgage originators were “‘giving’ appraisers the value they want[ed]” and expecting the resulting appraisals to meet the originators’ desired value, regardless of the actual value of the property. Deutsche Bank concealed its knowledge of pervasive and consistent appraisal fraud, instead representing to investors home valuation metrics based on appraisals it knew to be fraudulent. Deutsche Bank misrepresented to investors the value of the properties securing the loans securitized in its RMBS and concealed from investors that it knew that the value of the properties securing the loans was far below the value reflected by the originator’s appraisal.
-
By May 2007, Deutsche Bank knew that there was an increasing trend of overvalued properties being sold to Deutsche Bank for securitization. As one employee noted, “We are finding ourselves going back quite often and clearing large numbers of loans [with inflated appraisals] to bring down the deletion percentages.” Deutsche Bank nonetheless purchased and securitized such loans because it received favorable prices on the fraudulent loans. Ultimately, Deutsche Bank enriched itself by paying reduced prices for risky loans while representing to investors valuation metrics based on appraisals the Bank knew to be inflated.
-
Deutsche Bank represented to investors that disclosed borrower FICO scores were accurate as of the “cut-off date” of the RMBS issuance. However, Deutsche Bank knowingly represented borrowers’ FICO scores as of the time of the origination of their loans despite the bank’s knowledge that these scores had often declined materially by the cut-off date.
Assistant U.S. Attorneys Edward K. Newman, Matthew R. Belz, Jeremy Turk, and Ryan M. Wilson of the U.S. Attorney’s Office for the Eastern District of New York investigated Deutsche Bank’s conduct in connection with the issuance and sale of RMBS between 2006 and 2007. The investigation was conducted with the Office of the Inspector General for the Federal Housing Finance Agency.
The $3.1 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. It is one of the largest FIRREA penalties ever paid. The settlement does not release any individuals from potential criminal or civil liability. As part of the settlement, Deutsche Bank has agreed to fully cooperate with investigations related to the conduct covered by the agreement.
Deutsche Bank will also provide $4.1 billion in the form of relief to aid consumers harmed by its unlawful conduct. Specifically, Deutsche Bank will provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country. It will also provide financing for affordable rental and for-sale housing throughout the country. Deutsche Bank’s provision of consumer relief will be overseen by an independent monitor who will have authority to approve the selection of any third party used by Deutsche Bank to provide consumer relief. To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html
About the RMBS Working Group:
The RMBS Working Group, part of the Financial Fraud Enforcement Task Force, was established by the Attorney General in late January 2012. The Working Group has been dedicated to initiating, organizing, and advancing new and existing investigations by federal and state authorities into fraud and abuse in the RMBS market that helped precipitate the 2008 Financial Crisis. The Working Group’s efforts to date have resulted in settlements providing for tens of billions of dollars in civil penalties and consumer relief from banks and other entities that are alleged to have committed fraud in connection with the issuance of RMBS.
Download Settlement Agreement
- Download Annex 1 -- Statement of Facts
- Download Annex 1A -- Statement of Facts Appendices A through D
- Download Annex 2 -- Consumer Relief
- Download Annex 3 -- RMBS Covered by the Settlement
-
Brooklyn Resident Sentenced to 42 Months in Prison for Firearms Trafficking and Illegally Possessing WeaponsRead the Press Release
Earlier today at the federal courthouse in Brooklyn, New York, Troy Barrow, a resident of Brooklyn, was sentenced to 42 months in prison and three years of supervised release, following his July 11, 2016 guilty plea to two counts of an indictment charging him with firearms trafficking, in violation of 18 U.S.C. § 922(a), and being a felon in possession of a firearm, in violation of 18 U.S.C. § 922(g).
The sentencing was announced by Robert L. Capers, United States Attorney for the Eastern District of New York, Ashan M. Benedict, Special Agent in Charge, Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) New York Field Division, and James P. O’Neill, Commissioner, New York City Police Department.
According to public court filings, Barrow was arrested after an undercover investigation by the ATF’s Joint Firearms Task Force between September 2014 and December 2015. During the investigation, Barrow sold fourteen firearms and ammunition to undercover law enforcement officers in twelve different sales. The firearms included a mix of semiautomatic pistols and revolvers. The defendant also offered to procure additional weapons, including an AK-47 assault rifle and a machine pistol with a high capacity magazine. During one conversation recorded by law enforcement using a hidden video camera, the defendant expressed an interest in getting a revolver for himself because it was less likely to leave behind shell casings that could be used to investigate a shooting. And during another recorded conversation, the defendant explained that, if arrested, he would not cooperate with the government against others and would instead “do a bid”—go to jail. The defendant then added: “I know what I’m getting myself in.”
“Criminals like the defendant who brazenly and illegally sell guns on our streets pose a great threat to the safety of our local communities,” stated U.S. Attorney Capers. “We will never cease in our efforts to disrupt such dangerous dealings through determined investigation and prosecution.”
Special Agent in Charge Benedict said, “Troy Barrow, acting with a wanton and callous disregard for how they might be used, trafficked firearms acquired outside New York into our communities in New York City. Through the efforts of the Joint Firearms Task Force and the United States Attorney’s Office, Barrow has earned a lengthy sentence in federal prison as a just reward for his actions.”
The sentence was imposed by United States District Judge Jack B. Weinstein.
Assistant United States Attorney David K. Kessler is in charge of the prosecution.
The Defendant:
TROY BARROW
Age: 48E.D.N.Y. Docket No. 16-CR-94 (JBW)
Crips Gang Leader Sentenced to Three Life Sentences Plus 145 Years in Prison Following His Conviction of Racketeering and Other CrimesRead the Press Release
Earlier today, at the federal courthouse in Central Islip, New York, Raphael Osborne, also known as “Gusto,” a Crips street gang leader from Roosevelt, New York, was sentenced to three consecutive life sentences plus 145 years in prison following his conviction after trial in April 2016. Osborne was convicted of racketeering, conspiracy, robbery, attempted murder, witness retaliation, assault with a dangerous weapon, drug conspiracy, and brandishing and discharging firearms during the commission of these offenses. These charges arose out of the defendant’s participation in, and leadership of the Rollin’ 60s set of the Crips that for many years engaged in criminal activity in Roosevelt, New York, an area victimized by a high rate of gang and drug-related violent crime.
The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York. Mr. Capers extended his grateful appreciation to each of the law enforcement agencies for their assistance, in particular the Gang Investigations Squad of the Nassau County Police Department and the FBI’s Long Island Gang Task Force.
Between 2003 and 2013, members of the gang followed an “on sight” rule established by Osborne that commanded gang members to attack rival Bloods in Roosevelt whenever possible and by whatever means available. In addition, numerous other shootings and murders were committed at Osborne’s direction. During the trial, the government elicited details of 15 shootings and three homicides that were committed by members of the Rollin’ 60s during Osborne’s reign and established that the gang financed its activities through firearms and narcotics trafficking. In one of those shootings, Osborne ordered the murder of a federal informant in October 2012. Beginning in the spring of 2012, law enforcement, with the aid of a Rollin’ 60s gang member informant, began purchasing firearms from the gang. After the informant attempted to purchase a firearm from Osborne, Osborne became suspicious and ordered other gang members to kill him. On October 13, 2012, a gang member lured the informant from his Hempstead home to a location where a fellow gang member was waiting. The informant was shot five times at close range, leaving him paralyzed.
Osborne was also responsible for distributing crack cocaine, heroin, marijuana, and methylone, commonly known as “molly,” and for bringing hundreds of illegal firearms to Long Island, including revolvers, semi-automatic handguns, assault rifles, and submachine guns.
The government’s investigation led to the arrest of 20 members and associates of Osborne’s gang. Of those defendants, 18 have been convicted, with the final two defendants pending trial. Osborne is the eighth defendant to be sentenced since the inception of this case:
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on June 21, 2016, Jahmani Hamilton was sentenced to a term of imprisonment of ten years;
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on August 4, 2016, Kurtis Philip was sentenced to a term of imprisonment of ten years;
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on August 5, 2016, Courtney Smith was sentenced to a term of imprisonment of ten years;
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on September 23, 2016, Merlyn Benitez was sentenced to a term of imprisonment of ten years;
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on October 13, 2016, Derick Hernandez was sentenced to a term of imprisonment of 20 years that will run consecutively to a four-year state sentence that he is presently serving;
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on October 19, 2016, Kwame Lake was sentenced to a term of imprisonment of five years that will run consecutively to an eight-year state sentence that he is presently serving; and
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on November 4, 2016, Tyshawn Gitto was sentenced to 13 years’ imprisonment.
The government’s case was prosecuted by Assistant United States Attorneys Nicole Boeckmann, Christopher Caffarone, and Michael Maffei.
The Defendant:
Raphael Osborne (a/k/a Gusto)
Age: 31E.D.N.Y. Docket No. 14-264 (S-5) (JS)
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Justice Department Seeks to Intervene in Lawsuit Against New York City Board of ElectionsRead the Press Release
The Justice Department announced today that it has filed a motion to intervene in Common Cause New York et al. v. Board of Elections in the City of New York et al, a private lawsuit alleging that the New York City Board of Elections failed to comply with Section 8 of the National Voter Registration Act of 1993 (NVRA). The lawsuit was filed by private plaintiffs on Nov. 3, 2016.
The department alleges that the New York City Board of Elections’ Brooklyn Borough Office violated the NVRA by improperly removing more than 117,000 registered voters from the voter registration rolls prior to the April 2016 primary election. According to the complaint in intervention, the Board of Elections purged these voters based solely on their failure to vote in past elections, which violates Section 8(b)(2) of the NVRA.
The department also alleges ongoing concerns with the oversight of voter list maintenance procedures by the New York City Board of Elections, in violation of federal law. Without intervention, these deficiencies could lead to the same or similar NVRA violations occurring again in the future.
“Federal law demands careful maintenance of the voter rolls to ensure lists are kept accurate, without unjustifiably and unlawfully purging eligible citizens,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “The department appreciates the continued cooperation of the New York City Board of Elections, including proactive steps taken to start remedying violations that have occurred – but more is necessary to reach full compliance with the law.”
“The right of citizens to vote is a critical part of democratic process,” said U.S. Attorney Robert L. Capers of the Eastern District of New York. “We will work tirelessly to ensure that, in the future, the New York City Board of Elections fulfills its statutory obligation to maintain the rolls properly, and provide appropriate notice to voters when it does so.”
Section 8 of the NVRA addresses voter registration list maintenance procedures in elections for federal office. Programs to maintain accurate and current voter registration lists must be uniform, nondiscriminatory and in compliance with the Voting Rights Act of 1965. Moreover, programs to maintain accurate and current voter registration lists may not remove voters solely by reason of a voter’s failure to vote.
More information about the NVRA and other federal voting laws is available on the division’s website at www.justice.gov/crt/voting. Complaints about voter registration practices may be reported to the Civil Rights Division’s Voting Section at 1-800-253-3931.
Brooklyn BOE Complaint in InterventionFederal Correctional Officer and the Girlfriend of an Inmate Charged with BriberyRead the Press Release
A criminal complaint was unsealed today in federal court in the Eastern District of New York charging Armando Moronta, a federal correctional officer employed by the United States Bureau of Prisons (BOP) at the Metropolitan Detention Center in Brooklyn, New York (MDC), and Alicia Alonso, the girlfriend of an inmate being held at the MDC, with carrying out a bribery scheme to bring contraband into the MDC for inmates.
The defendants’ initial appearances are scheduled for this afternoon before United States Magistrate Judge Marilyn D. Go at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Robert L. Capers, 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).
As set forth in the complaint, Alonso provided Moronta with contraband, including cellular telephones, the narcotic Suboxone, and the synthetic narcotic “K2,” together with thousands of dollars in bribe payments. Moronta, using his position as a federal correctional officer, then smuggled the contraband into the MDC on approximately twelve occasions between March 2016 and December 2016 and distributed it to inmates under his guard for their use and further distribution.
“As alleged in the complaint, Moronta abused his position of trust as a federal correctional officer thereby compromising a vital component of our criminal justice system and potentially endangering the safety and well-being of other MDC employees and inmates. Such reckless and illegal acts will not be tolerated. Those who commit, or assist others in committing, these crimes will be aggressively investigated and prosecuted to the full extent of the law,” stated United States Attorney Capers. Mr. Capers expressed his grateful appreciation to the OIG and FBI.
OIG Special Agent in Charge Gardella stated, “Whether you are a federal correctional officer, a police officer, or anyone else in a position of authority and public trust, you should know that we vigorously investigate all allegations of individuals betraying their oath of office, and we will bring you to justice.”
FBI Assistant Director in Charge Sweeney stated, “Smuggling drugs into a federal prison is not only illegal, it’s inherently dangerous and puts peoples’ lives at risk. The fact that a corrections officer is alleged to have done so in exchange for money violates the oath he swore to uphold. His badge does not allow him special privilege, or put him above the law.”
The charges in the complaint are allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted, the defendants each face a maximum sentence of fifteen years’ imprisonment.
The government’s case is being handled by the Office’s Public Integrity Section. Assistant United States Attorneys Kevin Trowel, Nadia Shihata, and Andrew C. Gilman are in charge of the prosecution.
The Defendants:
ARMANDO MORONTA
Age: 38
Brooklyn, New York
ALICIA ALONSO
Age: 31
Woodbridge, New Jersey
President of Office Equipment Leasing Company Sentenced to 4 Years in Prison for Multi-Million Dollar Fraud SchemeRead the Press Release
Earlier today, Michael Conway, the President of Choice Office Solutions LLC, was sentenced by United States District Judge William F. Kuntz to 4 years in prison. In February 2016, Conway had pleaded guilty to wire fraud in connection with a scheme where he forged numerous lease agreements to defraud an individual investor and De Lage Landen Financial Solutions Partner (DLLFSP) of more than $4.5 million. As part of the sentence, Conway was also ordered to pay $3,555,493.40 to the individual investor and $1,203,516 to DLLFSP in restitution.
The sentence was announced by Robert L. Capers, 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).
According to court filings and facts presented at the sentencing hearing, between March 2014 to August 2015, Conway forged lease agreements with various companies in the business of leasing office equipment, and then used these fraudulent agreements to obtain financing from private investors. As part of the scheme, he induced an individual investor to become partners with him in the leasing business. Conway would then purportedly secure a lease from a company, present the signed lease and invoices to the individual investor, who would provide funds to purchase the office equipment to be leased. In this manner, Conway presented the individual investor with leases from approximately 58 companies, including law firms, universities, hospitals, and hotels, and the individual investor paid Conway approximately $3.5 million to purchase office equipment. In reality, most of the leasing agreements that Conway provided to the individual investor were fraudulent, and Conway pocketed most of the individual investor’s money.
One of the fraudulent leasing agreements was purportedly with the New York Mets. Relying on it, the individual investor wire transferred approximately $500,000 to Conway’s bank account to purchase office equipment. Conway then used the same forged lease agreement, and a forged authorization letter from the New York Mets purportedly signed by Jeffrey Wilpon, the team’s Chief Operating Officer, to obtain financing from DLLFSP. Based on these fraudulent documents, DLLFSP wire transferred a total of approximately $313,000 to Conway’s bank account. Through this and other forgeries, Conway defrauded DLLFSP of more than $1 million.
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The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Winston Paes and David Pitluck are in charge of the prosecution.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit ww.StopFraud.gov.
The Defendant:
MICHAEL CONWAY
Age: 41
Verona, New Jersey
E.D.N.Y. Docket No. 16-CR-052 (WFK)
New York Man Sentenced to 13 Years in Prison for Attempting to Join Al-Qaeda in the Arabian PeninsulaRead the Press Release
Justin Kaliebe, 22, of Babylon and Bay Shore, New York, was sentenced to 13 years in prison and 20 years of supervised release with special conditions (including computer monitoring, a prohibition on contact with jihadists, search conditions, mental health treatment and a curfew, among others) following his guilty plea on Feb. 8, 2013. Kaliebe pleaded guilty to both counts of a felony information, which charged him with attempting to provide material support to terrorists, in violation of 18 U.S.C. § 2339A(a), and attempting to provide material support to a designated foreign terrorist organization, al-Qaeda in the Arabian Peninsula, also known as Ansar al-Sharia (collectively, AQAP), in violation of 18 U.S.C. § 2339B(a)(1).
The sentencing was announced by Acting Assistant Attorney General for National Security Mary B. McCord, U.S. Attorney Robert L. Capers 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 New York City Police Department (NYPD).
"With this sentence, Justin Kaliebe is being held accountable for his attempt to travel overseas to join Al-Qaeda in the Arab Peninsula and engage in violent jihad," said Acting Assistant Attorney General McCord. "One of our highest priorities is to protect our country by identifying, disrupting and holding accountable those who provide or attempt to provide material support to designated foreign terrorist organizations.”
“This case is a sobering reminder that the call to violent jihad can reach deep into our local communities. Even when given the opportunity to abandon his plan to join al-Qaeda, this defendant made clear his intentions to commit himself fully to terrorism,” stated U.S. Attorney Capers. “If not for the vigilance and commitment of our dedicated investigators, he might well have succeeded in empowering a dangerous enemy.” Mr. Capers expressed his sincere appreciation to all the members of the FBI’s Joint Terrorism Task Force (JTTF) and the NYPD Intelligence Division for their work on the investigation.
“Providing material support to terrorists is a serious crime that should have serious consequences. Today’s sentencing of Justin Kaliebe shows just that. Kaliebe set out to provide material support to Al-Qaeda in the Arabian Peninsula in 2013 by attempting to travel to Yemen, after making plans months in advance. He didn’t get past JFK thanks to the hard work of the FBI’s Joint Terrorism Task Force and the NYPD Intelligence Division,” stated Assistant Director-in-Charge Sweeney.
“Kaliebe’s commitment to join al-Qaeda in the Arabian Peninsula was as alarming as it was sinister. And early in 2013, Kaliebe was arrested at John F. Kennedy airport trying to fulfill his dream of joining the jihad in Yemen. Thankfully, Kaliebe was met at the airport by NYPD detectives and FBI agents investigating his support of this terrorist group’s agenda. Thanks, as always, to those on the FBI-NYPD Joint Terrorism Task Force and at the U.S. Attorney’s Office in the Eastern District for their investigation of this case and many others,” stated Commissioner O’Neill.
According to the court filings, including sentencing memoranda, and evidence introduced during a sentencing hearing, Kaliebe attempted to travel from the U.S. to Yemen for the purpose of joining AQAP and waging violent jihad. During numerous meetings and recorded conversations and email correspondence with undercover law enforcement officers, Kaliebe explained that he had been searching for an opportunity to travel abroad and fight jihad for two years – long before Kaliebe first approached the undercover officers about his plans to join a terrorist group. Kaliebe repeatedly expressed his desire to travel to Yemen in order to join AQAP and to help carry out its violent extremist agenda.
Kaliebe also demonstrated extensive knowledge of terrorist organizations, including AQAP and al-Qaeda, and current and former leaders of those terrorist organizations. For example, Kaliebe referenced, and at times quoted, Anwar al-Awlaki, the now-deceased former member and senior leader of AQAP, as well as Omar Abdel Rahman (the “Blind Sheik”), Ayman al-Zawahiri, the current leader of al-Qaeda, and Usama Bin Laden. Further, Kaliebe demonstrated detailed knowledge of various terrorist attacks that were carried out by AQAP in Yemen, as well as other attacks carried out by al-Qaeda around the world.
According to a June 4, 2012, recorded conversation, which was admitted into evidence during the sentencing hearing, Kaliebe observed that “the crime that they would charge people like us with” was conspiracy “to kill, maim and kidnap in foreign countries,” a reference to a federal criminal statute that has previously been used to charge other individuals who departed or attempted to depart the U.S. in order to fight jihad abroad. Later, during that same conversation, Kaliebe stated that, once he arrived in Yemen, he expected to fight the “Yemeni army” and “those who are fighting against the Sharia of Allah . . . whether it’s the U.S. drones or the, their puppets, in the Yemeni army . . . or, who knows, if American agents or whatever, U.S. Special Forces . . . who they got over there.” When asked if he was afraid to die, Kaliebe responded “I wanna . . . . It’s what anyone would want, any believer would want.” During another recorded conversation described in the government’s sentencing memorandum, which took place on July 9, 2012, Kaliebe stated that he had been inspired by several sheiks, including “Sheik Usama,” “who showed how he could bring an entire nation to its knees.”
Beginning in approximately July 2012, Kaliebe saved money to finance his travel to Yemen, which he then used to apply for and purchase a U.S. passport, and to purchase an airline ticket to Oman, from where he intended to travel by land to Yemen. During a recorded meeting on July 30, 2012, Kaliebe stated that he was saving money “as a means to go to Yemen to fight jihad.”
On Dec. 26, 2012, Kaliebe sent an email in which he swore his loyalty to the leaders of AQAP and al-Qaeda, respectively, writing, “I pledge my loyalty, allegiance and fidelity to the Mujahedeen of Al-Qaa'idah in the Arabian Peninsula and its leaders, Shaykh Abu Baseer Nasir Al-Wuhayshi and Shaykh Ayman Al-Zawahiri, hafidhahum Allah! May Allah accept this from me and may he allow me to fight in his cause til the day that I leave this dunya [this world].”
On Jan. 8, 2013, Kaliebe reaffirmed his commitment to jihad, telling an NYPD Intelligence Division undercover officer, in a recorded conversation, which was also admitted into evidence during the sentencing hearing, that he understood “there’s a way out, but for me, the only way out is [martyrdom].” Additionally, Kaliebe paid homage to several terrorist leaders, telling the undercover law enforcement officer that: “[My] standard is Abu Dujana. [M]y standard is Abu Mus’ab Al-Zarqawi. My standard is Sheik Anwar Al-Awlaki and Sheik Usama, both who bore witness to the truth with their blood.”
Finally, Kaliebe stated, “Oh Allah, please allow me, please allow me and my brother…to fight jihad in your cause oh Allah. Oh Allah, please give us one of the two victories, victory on the ground or victory through [martyrdom.]”
On Jan. 21, 2013, Kaliebe’s efforts culminated in an attempt to board a flight to Muscat, Oman at John F. Kennedy Airport in Queens, New York. He was arrested at the airport by members of the FBI’s JTTF and the NYPD Intelligence Division. On Feb. 8, 2013, Kaliebe waived indictment and pleaded guilty to attempting to provide material support to AQAP and to attempting to provide material support to terrorists. Kaliebe’s co-conspirator, Marcos Alonso Zea, who also attempted to travel to Yemen to join AQAP. Once Zea’s own attempt failed, he assisted Kaliebe’s efforts to join the terrorist group. Zea was previously convicted and sentenced to 25 years in prison by the Honorable Sandra J. Feuerstein.
The government’s case is being prosecuted jointly by the National Security and Cybercrime Section, and the Long Island Criminal Section of the U.S. Attorney’s Office for the Eastern District of New York. Assistant U.S. Attorneys Seth D. DuCharme and John J. Durham for the Eastern District of New York are in charge of the prosecution, with assistance provided by Trial Attorney Kelli Andrews of the National Security Division’s Counterterrorism Section.
Long Island Man Sentenced to 13 Years in Prison for Attempting to Join Al-Qaeda in the Arabian PeninsulaRead the Press Release
Earlier today at the federal courthouse in Central Islip, New York, Justin Kaliebe, an American citizen and resident of Babylon and Bay Shore, New York, was sentenced to 13 years in prison and 20 years of supervised release with special conditions (including computer monitoring, a prohibition on contact with jihadists, search conditions, mental health treatment and a curfew, among others) following his February 8, 2013, guilty plea to both counts of a felony information, which charged him with attempting to provide material support to terrorists, in violation of 18 U.S.C. § 2339A(a), and attempting to provide material support to a designated foreign terrorist organization, al-Qaeda in the Arabian Peninsula, also known as Ansar al-Sharia (collectively, AQAP), in violation of 18 U.S.C. § 2339B(a)(1).
The sentencing was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Acting Assistant Attorney General Mary B. McCord; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office; and James P. O’Neill, Commissioner, New York City Police Department (NYPD).
According to the court filings, including sentencing memoranda, and evidence introduced during a sentencing hearing, Kaliebe attempted to travel from the United States to Yemen for the purpose of joining AQAP and waging violent jihad. During numerous meetings and recorded conversations and email correspondence with undercover law enforcement officers, Kaliebe explained that he had been searching for an opportunity to travel abroad and fight jihad for two years – long before Kaliebe first approached the undercover officers about his plans to join a terrorist group. Kaliebe repeatedly expressed his desire to travel to Yemen in order to join AQAP and to help carry out its violent extremist agenda. Kaliebe also demonstrated extensive knowledge of terrorist organizations, including AQAP and al-Qaeda, and current and former leaders of those terrorist organizations. For example, Kaliebe referenced, and at times quoted, Anwar al-Awlaki, the now-deceased former member and senior leader of AQAP, as well as Omar Abdel Rahman (the “Blind Sheik”), Ayman al-Zawahiri, the current leader of al-Qaeda, and Usama Bin Laden. Further, Kaliebe demonstrated detailed knowledge of various terrorist attacks that were carried out by AQAP in Yemen, as well as other attacks carried out by al-Qaeda around the world.
According to a June 4, 2012 recorded conversation, which was admitted into evidence during the sentencing hearing, Kaliebe observed that “the crime that they would charge people like us with” was conspiracy “to kill, maim and kidnap in foreign countries,” a reference to a federal criminal statute that has previously been used to charge other individuals who departed or attempted to depart the United States in order to fight jihad abroad. Later, during that same conversation, Kaliebe stated that, once he arrived in Yemen, he expected to fight the “Yemeni army” and “those who are fighting against the Sharia of Allah . . . whether it’s the U.S. drones or the, their puppets, in the Yemeni army . . . or, who knows, if American agents or whatever, U.S. Special Forces . . . who they got over there.” When asked if he was afraid to die, Kaliebe responded “I wanna . . . . It’s what anyone would want, any believer would want.” During another recorded conversation described in the government’s sentencing memorandum, which took place on July 9, 2012, Kaliebe stated that he had been inspired by several sheiks, including “Sheik Usama,” “who showed how he could bring an entire nation to its knees.”
Beginning in approximately July 2012, Kaliebe saved money to finance his travel to Yemen, which he then used to apply for and purchase a United States passport, and to purchase an airline ticket to Oman, from where he intended to travel by land to Yemen. During a recorded meeting on July 30, 2012, Kaliebe stated that he was saving money “as a means to go to Yemen to fight jihad.”
On December 26, 2012, Kaliebe sent an email in which he swore his loyalty to the leaders of AQAP and al-Qaeda, respectively, writing, “I pledge my loyalty, allegiance and fidelity to the Mujahedeen of Al-Qaa'idah in the Arabian Peninsula and its leaders, Shaykh Abu Baseer Nasir Al-Wuhayshi and Shaykh Ayman Al-Zawahiri, hafidhahum Allah! May Allah accept this from me and may he allow me to fight in his cause til the day that I leave this dunya [this world].”
On January 18, 2013, Kaliebe reaffirmed his commitment to jihad, telling an NYPD Intelligence Division undercover officer, in a recorded conversation, which was also admitted into evidence during the sentencing hearing, that he understood “there’s a way out, but for me, the only way out is [martyrdom].” Additionally, Kaliebe paid homage to several terrorist leaders, telling the undercover law enforcement officer that:
[My] standard is Abu Dujana. [M]y standard is Abu Mus’ab Al-Zarqawi. My standard is Sheik Anwar Al-Awlaki and Sheik Usama, both who bore witness to the truth with their blood.
Finally, Kaliebe stated, “Oh Allah, please allow me, please allow me and my brother…to fight jihad in your cause oh Allah. Oh Allah, please give us one of the two victories, victory on the ground or victory through [martyrdom.]”
On January 21, 2013, Kaliebe’s efforts culminated in an attempt to board a flight to Muscat, Oman at John F. Kennedy Airport in Queens, New York. He was arrested at the airport by members of the FBI’s Joint Terrorism Task Force and the NYPD Intelligence Division. Thereafter, on February 8, 2013, Kaliebe waived indictment and pled guilty to attempting to provide material support to AQAP and attempting to provide material support to terrorists. Kaliebe’s co-conspirator, Marcos Alonso Zea, who also attempted to travel to Yemen to join AQAP and, once his own attempt failed, assisted Kaliebe’s efforts to join the terrorist group, previously was convicted and sentenced to 25 years in prison by the Honorable Sandra J. Feuerstein.
“This case is a sobering reminder that the call to violent jihad can reach deep into our local communities. Even when given the opportunity to abandon his plan to join al-Qaeda, this defendant made clear his intentions to commit himself fully to terrorism,” stated U.S. Attorney Capers. “If not for the vigilance and commitment of our dedicated investigators, he might well have succeeded in empowering a dangerous enemy.” Mr. Capers expressed his sincere appreciation to all the members of the FBI’s Joint Terrorism Task Force and the New York City Police Department, Intelligence Division, for their work on the investigation.
“With this sentence, Justin Kaliebe is being held accountable for his attempt to travel overseas to join Al-Qaeda in the Arab Peninsula and engage in violent jihad,” said Acting Assistant Attorney General McCord. “One of our highest priorities is to protect our country by identifying, disrupting, and holding accountable those who provide or attempt to provide material support to designated foreign terrorist organizations.”
“Providing material support to terrorists is a serious crime that should have serious consequences. Today’s sentencing of Justin Kaliebe shows just that. Kaliebe set out to provide material support to Al-Qaeda in the Arabian Peninsula in 2013 by attempting to travel to Yemen, after making plans months in advance. He didn’t get past JFK thanks to the hard work of the FBI’s Joint Terrorism Task Force and the NYPD Intelligence Division,” stated FBI Assistant Director-in-Charge Sweeney.
“Kaliebe’s commitment to join al-Qaeda in the Arabian Peninsula was as alarming as it was sinister. And early in 2013, Kaliebe was arrested at John F. Kennedy airport trying to fulfill his dream of joining the jihad in Yemen. Thankfully, Kaliebe was met at the airport by NYPD detectives and FBI agents investigating his support of this terrorist group’s agenda. Thanks, as always, to those on the FBI-NYPD Joint Terrorism Task Force and at the U.S. Attorney’s Office in the Eastern District for their investigation of this case and many others,” stated Police Commissioner O’Neill.
The government’s case is being prosecuted jointly by the Office’s National Security and Cybercrime Section and the Long Island Criminal Section. Assistant United States Attorneys Seth D. DuCharme and John J. Durham are in charge of the prosecution, with assistance provided by Trial Attorney Kelli Andrews of the National Security Division’s Counterterrorism Section.
The Defendant:
JUSTIN KALIEBE
Age: 22
Babylon and Bay Shore, New York
E.D.N.Y. Docket No. 13-072 (DRH)
United States Sues Barclays Bank to Recover Civil Penalties for Fraud in the Sale of Residential Mortgage-Backed SecuritiesRead the Press Release
The United States Department of Justice today filed a civil complaint in the Eastern District of New York against Barclays Bank PLC and several of its United States affiliates (together, Barclays), alleging that Barclays engaged in a fraudulent scheme to sell residential mortgage-backed securities (RMBS) supported by defective and misrepresented mortgage loans. As alleged in the complaint, from 2005 to 2007, Barclays personnel repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses as a result of the fraudulent scheme. The suit also names as defendants two former Barclays executives: Paul K. Menefee, of Austin, Texas, who served as Barclays’ head banker on its subprime RMBS securitizations, and John T. Carroll, of Port Washington, New York, who served as Barclays’ head trader for subprime loan acquisitions.
The detailed allegations in the complaint describe Barclays’, Menefee’s, and Carroll’s misconduct in connection with RMBS securitizations Barclays underwrote between 2005 and 2007. The complaint alleges violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), based on mail fraud, wire fraud, bank fraud, and other misconduct. FIRREA authorizes the Attorney General to seek civil penalties up to the amount of the gain to the violator or the losses suffered by persons other than the violator.
“Financial institutions like Barclays occupy a position of vital public trust,” said Attorney General Loretta E. Lynch. “Ordinary Americans depend on their assurances of transparency and legitimacy, and entrust these banks with their valuable savings. As alleged in this complaint, Barclays jeopardized billions of dollars of wealth through practices that were plainly irresponsible and dishonest. With this filing, we are sending a clear message that the Department of Justice will not tolerate the defrauding of investors and the American people.”
“The widespread fraud that investment banks like Barclays committed in the packaging and sale of residential mortgage-backed securities injured tens of thousands of investors and significantly contributed to the Financial Crisis of 2008,” said Principal Deputy Associate Attorney General Bill Baer. “Millions of homeowners were left with homes they could not afford, leaving entire neighborhoods devastated. The government’s complaint alleges that Barclays fraudulently sold investors RMBS full of mortgages it knew were likely to fail, all while telling investors that the mortgages backing the securities were sound. Today’s complaint makes clear that the Department of Justice will continue to hold financial institutions, and the individuals who work for them, fully accountable for harming investors and the American public.”
“What is now often referred to as the ‘Great Recession’ started with the bursting of the housing bubble, followed by an enormous drop in U.S. home values, hundreds of bank failures, significant turbulence in financial markets, trillions of dollars of losses to investors, and, most devastatingly, a huge wave of home foreclosures,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, the head of the Justice Department’s Civil Division. “All of these injuries, and more, were caused at least in part by the type of misconduct alleged in this lawsuit. We will continue holding both banks and their executives responsible for their role in contributing to this unfortunate period in our history.”
“Investors who bought RMBS from Barclays, and who suffered catastrophic losses as a result, included individuals and institutions that form the backbone of our community,” said Robert L. Capers, United States Attorney for the Eastern District of New York. “Credit unions, pension plans, charitable and religious organizations, university endowments, and financial institutions, among others, including many in this District, invested tens of billions of dollars in securities that Barclays repeatedly assured them were safe investments. Instead of ensuring that their representations to investors were accurate and transparent, so that investors could make properly informed investment decisions, Barclays and its employees repeatedly misled investors and kept to themselves critical information about the loans in the deals. Time and again, they knowingly chose to put investors at risk of harm in pursuit of additional profits. Barclays must be held accountable for its rampant fraud in marketing and selling these RMBS, and so must the individuals at the heart of the fraudulent scheme.”
“As the complaint alleges, Barclays knowingly sold investors RMBS backed by loans it knew were made to borrowers who were not creditworthy and which were supported by house appraisals it knew were inflated,” said Steven Perez, Special Agent in Charge at the Federal Housing Finance Agency Office of the Inspector General (FHFA-OIG). “The massive losses caused by the fraudulent behavior alleged in the complaint deeply affected not only banks and other financial institutions, including Federal Home Loan Banks, Fannie Mae, and Freddie Mac, but also the American taxpayer. We will continue to work with our law enforcement partners to hold those who have engaged in misconduct fully accountable for their actions.”
As alleged in the complaint, from 2005 through 2007, Barclays, through Menefee and Carroll among others, fraudulently sold tens of billions of dollars of RMBS, and repeatedly misled investors about the quality of the mortgages backing those deals. The alleged scheme involved no fewer than 36 RMBS deals, securitizing over $31 billion worth of subprime and Alt-A mortgage loans. The complaint alleges that in publicly-filed offering documents and in direct communications with investors and rating agencies, Barclays systematically and intentionally misrepresented key characteristics of the loans it included in these RMBS deals.
The United States alleges that in selling certificates in these deals, Barclays assured investors that it had excluded “unacceptable” loans and that the loans in the deals had been underwritten under loan origination guidelines intended to ensure the borrowers’ ability to pay. The complaint alleges Barclays represented to investors that property appraisals were reliable and that the properties were worth enough to avoid loss in the event of default. Barclays told investors that it conducted “robust,” “thorough,” and “comprehensive” due diligence on the loan pools it securitized, and that it did not securitize non-compliant, delinquent, or “scratch and dent” loans.
As alleged in the complaint, these statements were false. In reality, the complaint alleges, Barclays’ due diligence on these RMBS deals was a sham. When it did not skip due diligence altogether, Barclays routinely ignored or kept to itself due diligence results that showed the bank that a considerable percentage of the loans in the deals did not conform to the representations it made to investors. According to the complaint, Barclays sought to maximize the number of loans it securitized, regardless of how poor the quality of the loans.
The United States alleges that Barclays securitized thousands of loans (worth billions of dollars) that its due diligence vendors graded as materially defective, as well as hundreds more that were delinquent or in default at the time of securitization. Its vendors told it that large percentages of the loans they reviewed violated the lenders’ underwriting guidelines or the relevant law, or involved borrowers who lacked the ability to repay. Its vendors also told Barclays that the appraised values of significant percentages of the mortgaged properties were overstated and that thousands of those properties were underwater when they were securitized – meaning the properties were worth less than the loans on the properties. The complaint alleges that Barclays employees, including Menefee and Carroll, ignored or knowingly overrode these findings, waiving thousands of bad loans into the deals. On a number of occasions, Barclays even recycled into its deals defective loans it had kicked out of previous deals, without conducting any additional due diligence on the loans.
In general, the borrowers whose loans backed these deals were significantly less creditworthy than Barclays represented, and these loans defaulted at exceptionally high rates early in the life of the deals. In addition, as alleged in the complaint, mortgaged properties were systematically worth less than what Barclays represented to investors. The deals were dismal failures, as more than half of the underlying residential mortgages defaulted, resulting in billions of dollars in losses to investors. Even investors in AAA-rated tranches of these securities, which were rated as safe as investments in U.S. Treasury bonds, suffered or will suffer significant losses.
Menefee and Carroll were central to Barclays’ allegedly fraudulent scheme. Menefee was the head banker in charge of due diligence and securitization on all of Barclays’ subprime deals, and he decided which loans would be subject to due diligence, as well as which loans would be removed from loan pool purchases. Carroll was the head trader on all of Barclays’ principal subprime deals, and he determined which subprime loan pools Barclays would bid on, at what price, and on what terms. As alleged in the complaint, both men made representations about the characteristics of the loans backing the securities that they knew were false when they made them.
In charge of the case for the government are F. Franklin Amanat, Senior Counsel at the United States Attorney’s Office for the Eastern District of New York, along with Katharine E.G. Brooker, Evan P. Lestelle, and Josephine M. Vella, all Assistant United States Attorneys in Brooklyn.
To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html.
United States Sues Barclays Bank to Recover Civil Penalties for Fraud in the Sale of Residential Mortgage-Backed SecuritiesRead the Press Release
BROOKLYN, NY – Earlier today, this Office filed a civil complaint against Barclays Bank plc and several of its United States affiliates (together, Barclays), alleging that Barclays caused billions of dollars of losses to investors by engaging in a fraudulent scheme to sell residential mortgage-backed securities (RMBS) supported by defective and misrepresented mortgage loans. As alleged in the complaint, from 2005 to 2007, Barclays personnel repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses as a result of the fraudulent scheme. The suit also names as defendants two former Barclays executives: Paul K. Menefee, of Austin, Texas, who served as Barclays’ head banker on its subprime RMBS securitizations, and John T. Carroll, of Port Washington, New York, who served as Barclays’ head trader for subprime loan acquisitions.
The filing was announced by Attorney General Loretta E. Lynch, Robert L. Capers, United States Attorney for the Eastern District of New York, Bill Baer, Principal Deputy Associate Attorney General, Benjamin C. Mizer, Principal Deputy Assistant Attorney General for the Department of Justice’s Civil Division, and Steven Perez, Special Agent in Charge at the Federal Housing Finance Agency Office of the Inspector General (FHFA-OIG).
The detailed allegations in the complaint describe Barclays’, Menefee’s, and Carroll’s misconduct in connection with RMBS securitizations Barclays underwrote between 2005 and 2007. The complaint alleges violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), based on mail fraud, wire fraud, bank fraud, and other misconduct. FIRREA authorizes the Attorney General to seek civil penalties up to the amount of the gain to the violator or the losses suffered by persons other than the violator.
“Financial institutions like Barclays occupy a position of vital public trust,” said Attorney General Lynch. “Ordinary Americans depend on their assurances of transparency and legitimacy, and entrust these banks with their very livelihood. As alleged in this complaint, Barclays jeopardized billions of dollars of wealth through practices that were plainly irresponsible and dishonest. With this filing, we are sending a clear message that the Department of Justice will not tolerate the defrauding of investors and the American people.”
“Investors who bought RMBS from Barclays, and who suffered catastrophic losses as a result, included individuals and institutions that form the backbone of our communities,” said United States Attorney Capers. “Credit unions, pension plans, charitable and religious organizations, university endowments, and financial institutions, among others, including many in this district, invested tens of billions of dollars in securities that Barclays repeatedly assured them were safe investments. Instead of ensuring that their representations to investors were accurate and transparent, so that investors could make properly informed investment decisions, Barclays and its employees repeatedly misled investors and kept to themselves critical information about the loans in the deals. Time and again, they knowingly chose to put investors at risk of harm in pursuit of additional profits. Barclays must be held accountable for its rampant fraud in marketing and selling these RMBS, and so must the individuals at the heart of the fraudulent scheme.”
“The widespread fraud that investment banks like Barclays committed in the packaging and sale of residential mortgage-backed securities injured tens of thousands of investors and significantly contributed to the Financial Crisis of 2008,” said Principal Deputy Associate Attorney General Baer. “Millions of homeowners were left with homes they could not afford, leaving entire neighborhoods devastated. The government’s complaint alleges that Barclays fraudulently sold investors RMBS full of mortgages it knew were likely to fail, all while telling investors that the mortgages backing the securities were sound. Today’s complaint makes clear that the Department of Justice will continue to hold financial institutions, and the individuals who work for them, fully accountable for harming investors and the American public.”
“What is now often referred to as the ‘Great Recession’ started with the bursting of the housing bubble, followed by an enormous drop in U.S. home values, hundreds of bank failures, significant turbulence in financial markets, trillions of dollars of losses to investors, and, most devastatingly, a huge wave of home foreclosures,” said Principal Deputy Assistant Attorney General Mizer, the head of the Justice Department’s Civil Division. “All of these injuries, and more, were caused at least in part by the type of misconduct alleged in this lawsuit. We will continue holding both banks and their executives responsible for their role in contributing to this unfortunate period in our history.”
“As the complaint alleges, Barclays knowingly sold investors RMBS backed by loans it knew were made to borrowers who were not creditworthy and which were supported by house appraisals it knew were inflated,” said Special Agent in Charge Perez of FHFA-OIG. “The massive losses caused by the fraudulent behavior alleged in the complaint deeply affected not only banks and other financial institutions, including Federal Home Loan Banks, Fannie Mae, and Freddie Mac, but also the American taxpayer. We will continue to work with our law enforcement partners to hold those who have engaged in misconduct fully accountable for their actions.”
As alleged in the complaint, from 2005 through 2007, Barclays, through Menefee and Carroll among others, fraudulently sold tens of billions of dollars of RMBS, and repeatedly misled investors about the quality of the mortgages backing those deals. The alleged scheme involved no fewer than 36 RMBS deals, securitizing over $31 billion worth of subprime and Alt-A mortgage loans. The complaint alleges that in publicly-filed offering documents and in direct communications with investors and rating agencies, Barclays systematically and intentionally misrepresented key characteristics of the loans it included in these RMBS deals.
The United States alleges that in selling certificates in these deals, Barclays assured investors that it had excluded “unacceptable” loans and that the loans in the deals had been underwritten under loan origination guidelines intended to ensure the borrowers’ ability to pay. The complaint alleges Barclays represented to investors that property appraisals were reliable and that the properties were worth enough to avoid loss in the event of default. Barclays told investors that it conducted “robust,” “thorough,” and “comprehensive” due diligence on the loan pools it securitized, and that it did not securitize non-compliant, delinquent, or “scratch and dent” loans.
As alleged in the complaint, these statements were false. In reality, the complaint alleges, Barclays’ due diligence on these RMBS deals was a sham. When it did not skip due diligence altogether, Barclays routinely ignored or kept to itself due diligence results that showed the bank that a considerable percentage of the loans in the deals did not conform to the representations it made to investors. According to the complaint, Barclays sought to maximize the number of loans it securitized, regardless of how poor the quality of the loans.
The United States alleges that Barclays securitized thousands of loans (worth billions of dollars) that its due diligence vendors graded as materially defective, as well as hundreds more that were delinquent or in default at the time of securitization. Its vendors told it that large percentages of the loans they reviewed violated the lenders’ underwriting guidelines or the relevant law, or involved borrowers who lacked the ability to repay. Its vendors also told Barclays that the appraised values of significant percentages of the mortgaged properties were overstated and that thousands of those properties were underwater when they were securitized – meaning the properties were worth less than the loans on the properties. The complaint alleges that Barclays employees, including Menefee and Carroll, ignored or knowingly overrode these findings, waiving thousands of bad loans into the deals. On a number of occasions, Barclays even recycled into its deals defective loans it had kicked out of previous deals, without conducting any additional due diligence on the loans.
In general, the borrowers whose loans backed these deals were significantly less creditworthy than Barclays represented, and these loans defaulted at exceptionally high rates early in the life of the deals. In addition, as alleged in the complaint, mortgaged properties were systematically worth less than what Barclays represented to investors. The deals were dismal failures, as more than half of the underlying residential mortgages defaulted, resulting in billions of dollars in losses to investors. Even investors in AAA-rated tranches of these securities, which were rated as safe as investments in U.S. Treasury bonds, suffered or will suffer significant losses.
Menefee and Carroll were central to Barclays’ allegedly fraudulent scheme. Menefee was the head banker in charge of due diligence and securitization on all of Barclays’ subprime deals, and he decided which loans would be subject to due diligence, as well as which loans would be removed from loan pool purchases. Carroll was the head trader on all of Barclays’ principal subprime deals, and he determined which subprime loan pools Barclays would bid on, at what price, and on what terms. As alleged in the complaint, both men made representations about the characteristics of the loans backing the securities that they knew were false when they made them.
The government’s case is being handled by this Office’s Civil Division. Senior Counsel F. Franklin Amanat, and Assistant United States Attorneys Katharine E.G. Brooker, Evan P. Lestelle, and Josephine M. Vella are in charge of the prosecution. They are assisted by the Fraud Section of the Commercial Litigation Branch of the Justice Department’s Civil Division, as well as attorneys, analysts, and other individuals assigned to the Department of Justice’s RMBS Working Group, which also includes special agents from the FHFA-OIG. Mr. Capers thanks the FHFA-OIG for its assistance in conducting the investigation in this matter.
The complaint was filed under the auspices of the President’s Financial Fraud Enforcement Task Force, which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. Since its formation, the Task Force has made great strides in facilitating investigation and prosecution of financial crimes; in enhancing coordination and cooperation among federal, state, and local authorities; in addressing discrimination in the lending and financial markets; and in conducting outreach to the public, to victims, to financial institutions, and to other organizations.
The RMBS Working Group, part of the Task Force, was established by the Attorney General in late January 2012. The Working Group has been dedicated to initiating, organizing, and advancing new and existing investigations by federal and state authorities into fraud and abuse in the RMBS market that helped precipitate the 2008 Financial Crisis. The Working Group has to date recovered tens of billions of dollars in civil penalty settlements and consumer relief from banks and other entities that are alleged to have committed fraud in connection with the issuance of RMBS. To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html.
The Individual Defendants:
PAUL K. MENEFEE
Age: 47
Residence: Austin, TexasJOHN T. CARROLL
Age: 49
Residence: Port Washington, New YorkE.D.N.Y. Docket No. 16-CV-7057 (KAM/RLM)
Oklahoma Consultant Charged with Defrauding Real Estate Developers of More Than $1.5 MillionRead the Press Release
BROOKLYN, N.Y. – Stephen Holsey, a senior consultant to Strategic Development Corporation (SDC), an Oklahoma corporation, was arrested yesterday on charges of wire fraud conspiracy in connection with a more than $1.5 million “advance fee” scheme. Essentially, Holsey and his co-conspirators offered loans through SDC to developers who were looking to finance large-scale construction projects, in exchange for a ten-percent fee, even though SDC lacked the necessary funds to finance these projects. Holsey’s initial appearance for removal proceedings to the Eastern District of New York took place yesterday before United States Magistrate Judge Steven P. Shreder at the United States Courthouse, 101 North 5th Street, Muskogee, Oklahoma.
The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office (FBI).
“As alleged, the defendant and his co-conspirators used lies and deceit to induce unsuspecting real estate developers in need of financing for their projects to pay more than $1.5 million in fees in exchange for loans that conspirators knew they could never finance,” stated United States Attorney Capers. “We are committed to holding accountable fraudsters who seek to prey on businesses for personal gain.” Mr. Capers extended his appreciation to the Federal Bureau of Investigation, the agency responsible for leading the government’s investigation.
“In a time when new construction projects meant potential jobs and employment for many, the subjects in this case allegedly dangled that prospect in front of companies so they could finance their lavish lifestyles. Fraud and theft take on many forms, and the FBI and our partners are focused on finding these crimes wherever scammers try to hide them,” stated FBI Assistant Director-in-Charge Sweeney.
According to the complaint unsealed yesterday, between May 2010 and March 2012, Holsey and his co-conspirators offered loans through SDC to developers to finance large-scale construction projects. Specifically, Holsey and his co-conspirators told developers that: (i) SDC had funds available to provide financing for the developers’ projects in exchange for a fee, payable in advance, of ten percent of the loan amount; (ii) the ten-percent fee would be placed in an attorney escrow account until the loan closed; and (iii) the ten-percent fee would be refunded if SDC did not fund the project. Contrary to these representations: (i) SDC did not have the funds necessary to provide financing for the developers’ projects; (ii) the ten-perfect fees were transferred almost immediately, prior to the loan closings, from the attorney escrow account to accounts controlled by Holsey and his co-conspirators; and (iii) despite the lack of funding, the fees were not refunded to the developers and the developers’ associates when SDC did not fund the projects. In sum, Holsey and his co-conspirators collected approximately $1.5 million in the form of fees and investments from approximately 15 individuals and corporate entities and used those funds to, among other things, pay for personal living expenses and funnel money to other businesses owned or controlled by Holsey and his co-conspirators.
The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, Holsey faces a maximum sentence of 20 years’ imprisonment.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorney Tyler Smith is responsible for the prosecution.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
The Defendant:
STEPHEN HOLSEY
Age: 69
Beggs, OklahomaE.D.N.Y. Docket No. 16-M-1113
Leader of Brownsville, Brooklyn-Based Gang Sentenced to Life in Prison Following His Conviction of Racketeering, Murder in Aid of Racketeering, and Other ChargesRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, New York, Paul Rivera, a leader of a Brownsville-based gang, was sentenced to life in prison, plus a consecutive sentence of 20 years, following his conviction after trial in June 2015 on charges of racketeering, murder, sex trafficking, narcotics trafficking, money laundering, and witness tampering. These charges arose out of the defendant’s participation in and leadership of a gang known as “Together Forever” or the rap group “TF Mafia” (also referred to as “TF”) that for many years engaged in criminal activity in areas including the Brownsville neighborhood of Brooklyn, New York, an area victimized by a high rate of gang and drug related violent crime.
The sentence was announced by Robert L. Capers, 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).
“With this sentence, I hope that victims of Rivera’s crimes will have some sense of closure,” stated United States Attorney Capers. “The defendant’s involvement in violent gang activity, including drug trafficking, the prostitution of young women and girls, and a senseless murder, was a scourge on the community. This case again demonstrates our Office’s unwavering commitment to investigate and prosecute those who perpetrate such crimes.” Mr. Capers extended his thanks to the Internal Revenue Service – Criminal Investigation, New York City Police Department, the Pennsylvania State Police, the New Jersey State Police, and the United States Attorney’s Office for the Middle District of Pennsylvania, for their assistance in the investigation and prosecution of this case.
FBI Assistant Director-in-Charge Sweeney stated, “The sum of crimes the suspect committed in this investigation are proof of his complete disregard for obeying the laws governing everyone else. His goal was money and power, and he used intimidation, threats and even murder to assert his dominance over others. His victims and the communities he operated in can breathe a sigh of relief that he will spend the rest of his life in federal prison.”
As proven at trial, TF has operated in various neighborhoods of Brooklyn well as in other parts of New York and in Pennsylvania since the 1980s. In connection with his leadership of TF, Rivera killed Robert Barber in the summer of 2011 because he and others in the gang perceived Barber, who was a member of a rival gang, as a threat to TF’s control of narcotics sales in Brownsville. On the evening of August 22, 2011, Rivera observed Barber walking outside the tattoo shop run by Rivera, which was located at 361 Sutter Avenue in Brownsville. Rivera took a firearm that had been supplied by another member of TF, stood in the entrance to the tattoo shop, and shot Barber once, killing him. Rivera later was paid, in the form of money and heroin, for the murder by a fellow TF member.
The jury also found the defendant guilty of interstate prostitution and sex trafficking, including sex trafficking by force, fraud, or coercion, and sex trafficking of one or more minors, which activities were committed as part of TF’s illegal activities. At trial, two victims testified about their involvement with TF, including one victim who became involved with TF when she was 14 years old, and another who testified that she began working as a prostitute for the defendants when she was 15 years old.
The counts of conviction also included narcotics trafficking conspiracy, involving cocaine base, heroin, cocaine, and marijuana, and firearms offenses, including use of a firearm to cause the death of Robert Barber, as well as witness tampering and attempted obstruction of justice related to Rivera’s efforts to convince a witness to cease cooperating with the government.
The government’s case is being prosecuted by Assistant United States Attorneys Taryn Merkl, Alixandra Smith, and Michael Robotti.
The Defendants:
PAUL RIVERA
Age: 49
Brooklyn, NYE.D.N.Y. Docket No. 13-149 (KAM)
United States Announces Settlement of Safe Drinking Water Act Violations at New York State ParksRead the Press Release
Robert L. Capers, United States Attorney for the Eastern District of New York, and Judith A. Enck, Regional Administrator, United States Environmental Protection Agency (EPA) Region 2, announced today the filing of a complaint against the State of New York; New York State Office of Parks, Recreation and Historic Preservation (“OPRHP”); and the Palisades Interstate Park Commission (“Commission”). A Consent Judgment has been lodged to resolve the allegations in the complaint that Defendants failed to close Large Capacity Cesspools located in New York State parks in violation of the Safe Drinking Water Act.
The complaint alleges that the Defendants violated the Safe Drinking Water Act (“SDWA”) in their continued ownership and operation of 54 Large Capacity Cesspools (“Prohibited LCCs”) at various New York State parks for years beyond the SDWA regulatory deadline by which they were required to close them. LCCs are cesspools that receive untreated sanitary waste, including human excreta, which have an open bottom or perforated sides, and have the capacity to serve 20 or more persons a day. Such untreated waste is high in harmful nutrients, such as nitrogen, that can compromise ground and surface water quality. Nutrient pollution of the ground and surface waters in and surrounding Suffolk County is a longstanding problem that threatens the area’s water quality and ecosystem.
Congress enacted the SDWA to protect the nation’s drinking water sources, including the regulation of Large Capacity Cesspools to prevent them from contaminating underground sources of drinking water. Under the SDWA regulations, owners and operators of LCCs were required to close them by April 5, 2005. The Complaint alleges that Defendants failed to close the Prohibited LCCs by April 5, 2005, and that the Prohibited LCCs, primarily located at Defendants’ comfort stations, continued to operate after April 5, 2005. The majority of the Prohibited LCCs are located in Defendants’ parks on Long Island.
Many of our area’s public water systems rely on underground sources of water for their supply. Underground injection wells, including cesspools, pose a risk to the public because they can contaminate underground drinking water sources and the public water systems that use those sources. Thirty-six of the Prohibited LCCs are above the Nassau/Suffolk County Sole Source Aquifer, which supplies most of the drinking water for the population of Long Island. Nine of the Prohibited LCCs, which are located in Broome and Orange Counties, are above the Clinton Street-Ballpark and the Ramapo Sole Source Aquifers, which supply most of the drinking water for the populations of the Broome and Orange County areas.
Under the Consent Judgment, Defendants will close the Prohibited LCCs or convert them to lawful non-LCC uses by July 2019. The estimated cost of these measures is $8,800,000. Most of the Long Island Prohibited LCCs will be closed by September 2017 and the remaining Prohibited LCCs on Long Island will be closed by September 2018. Defendants have already implemented certain measures to achieve compliance with the SDWA, including closing six of the Prohibited LCCs and submitting closure plans for 29 of the remaining Prohibited LCCs. The Consent Judgment also requires Defendants to pay a $150,000 civil penalty.
In addition, under the terms of the settlement, Defendants will undertake Supplemental Environmental Projects with a total estimated value of $1,020,000 that are intended to reduce the quantity of nutrients harmful to water quality, including nitrogen, from entering the local groundwater at seven of Defendants’ Long Island parks. At Robert Moses State Park, Sunken Meadow State Park, Wildwood State Park, and Caumsett State Historic Park, Defendants will install urine separation systems that divert the collected urine to a wastewater treatment facility for treatment, rather than discharging it into the ground. At Connetquot River State Park Preserve and Hallock State Park, Defendants will install nitrogen reducing technology for sanitary waste. At Captree State Park, Defendants will: (1) install a constructed wetland for sanitary waste treatment to benefit the Main Comfort Station and Restaurant, (2) install green technology site improvements for stormwater treatment, and (3) retrofit the existing stormwater drainage facilities with a bioretention system.
“The United States brought this action to remedy long-standing violations of the Safe Drinking Water Act and to protect New York’s drinking water from harmful nutrient pollution that poses a risk both to public health and the natural environment,” said United States Attorney Capers. “This office will continue to vigorously enforce violations of the Safe Drinking Water Act to protect the public from contamination of its water supply.”
"Public parks and water pollution don't go together," said EPA Regional Administrator Judith A. Enck. "After years of being out of compliance with federal law, New York State will finally close the numerous cesspools found in state parks, helping protect groundwater from nitrogen and other pollutants."
The action is entitled United States v. State of New York, et al., Civil
Action No. 2:16-CV-6989 (Wexler, J.), (Shields, M.J.). Following a 30-day public comment period and review of any comments received, the United States will determine whether to move the Court to enter the consent judgment.
Assistant United States Attorney Matthew Silverman is in charge of the litigation, with assistance from Lauren Fischer, Assistant Regional Counsel, Water and General Law Branch, EPA Region 2, Nicole Kraft, Section Chief, Water Compliance Branch, EPA Region 2, and Lisa Kim Pelcyger, Environmental Engineer, Water Compliance Branch, EPA Region 2.
Odebrecht and Braskem Plead Guilty and Agree to Pay at Least $3.5 Billion in Global Penalties to Resolve Largest Foreign Bribery Case in HistoryRead the Press Release
Odebrecht S.A. (Odebrecht), a global construction conglomerate based in Brazil, and Braskem S.A. (Braskem), a Brazilian petrochemical company, pleaded guilty today and agreed to pay a combined total penalty of at least $3.5 billion to resolve charges with authorities in the United States, Brazil and Switzerland arising out of their schemes to pay hundreds of millions of dollars in bribes to government officials around the world.
Deputy Assistant Attorney General Sung-Hee Suh of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director Stephen Richardson of the FBI’s Criminal Investigative Division and Assistant Director in Charge William F. Sweeney of the FBI’s New York Field Office made the announcement.
“Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit—a ‘Department of Bribery,’ so to speak—that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents,” said Deputy Assistant Attorney General Suh. “Such brazen wrongdoing calls for a strong response from law enforcement, and through a strong effort with our colleagues in Brazil and Switzerland, we have seen just that. I hope that today’s action will serve as a model for future efforts.”
“These resolutions are the result of an extraordinary multinational effort to identify, investigate and prosecute a highly complex and long-lasting corruption scheme that resulted in the payment by the defendant companies of close to a billion dollars in bribes to officials at all levels of government in many countries,” said U.S. Attorney Capers. “In an attempt to conceal their crimes, the defendants used the global financial system – including the banking system in the United States – to disguise the source and disbursement of the bribe payments by passing funds through a series of shell companies. The message sent by this prosecution is that the United States, working with its law enforcement partners abroad, will not hesitate to hold responsible those corporations and individuals who seek to enrich themselves through the corruption of the legitimate functions of government, no matter how sophisticated the scheme.”
“This case illustrates the importance of our partnerships and the dedicated personnel who work to bring to justice those who are motivated by greed and act in their own best interest,” said Assistant Director Richardson. “The FBI will not stand by idly while corrupt individuals threaten a fair and competitive economic system or fuel criminal enterprises. Our commitment to work alongside our foreign partners to root out corruption across the globe is unwavering and we thank our Brazilian and Swiss partners for their tireless work in this effort.”
“No matter what the reason, when foreign officials receive bribes, they threaten our national security and the international free market system in which we trade,” said Assistant Director in Charge Sweeney. “Just because they’re out of our sight, doesn’t mean they’re beyond our reach. The FBI will use all available resources to put an end to this type of corrupt behavior.”
Odebrecht pleaded guilty to a one-count criminal information filed today by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office in the U.S. District Court for the Eastern District of New York, charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). Odebrecht agreed that the appropriate criminal fine is $4.5 billion, subject to further analysis of the company’s ability to pay the total global penalties. In related proceedings, Odebrecht also settled with the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland.
Under the plea agreement, the United States will credit the amount that Odebrecht pays to Brazil and Switzerland over the full term of their respective agreements, with the United States and Switzerland receiving 10 percent each of the principal of the total criminal fine and Brazil receiving the remaining 80 percent. The fine is subject to an inability to pay analysis to be completed by the Department of Justice and Brazilian authorities on or before March 31, 2017, because Odebrecht has represented it is only able to pay approximately $2.6 billion over the course of the respective agreements. Sentencing has been scheduled for April 17, 2017.
Braskem, whose American Depositary Receipts (ADRs) are publicly traded on the New York Stock Exchange, separately pleaded guilty to a one-count criminal information filed in the Eastern District of New York charging it with conspiracy to violate the anti-bribery provisions of the FCPA. Braskem agreed to pay a total criminal penalty of $632 million. Sentencing has not yet been scheduled. In related proceedings, Braskem also settled with the U.S. Securities and Exchange Commission (SEC), the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland. Under the terms of its resolution with the SEC, Braskem agreed to a total of $325 million in disgorgement of profits. Braskem agreed to pay Brazilian authorities 70 percent of the total criminal penalty and agreed to pay the Swiss authorities 15 percent. The department has agreed to credit the criminal penalties paid to Brazilian and Swiss authorities as part of its agreement with the company. The United States will receive $94.8 million, an amount equal to 15 percent of the total criminal fines paid by Braskem.
Under their respective plea agreements, Odebrecht and Braskem are required to continue their cooperation with law enforcement, including in connection with the investigations and prosecutions of individuals responsible for the criminal conduct. Odebrecht and Braskem also agreed to adopt enhanced compliance procedures and to retain independent compliance monitors for three years. The cases are assigned to U.S. District Judge Raymond J. Dearie of the Eastern District of New York.
The combined total amount of United States, Brazilian and Swiss criminal and regulatory penalties paid by Braskem will be approximately $957 million. The combined total amount of penalties imposed against Odebrecht will be at least $2.6 billion and up to $4.5 billion. With a combined total of at least $3.5 billion, today’s resolutions with Odebrecht and Braskem are the largest-ever global foreign bribery resolution.
The Bribery Schemes
According to its admissions, Odebrecht engaged in a massive and unparalleled bribery and bid-rigging scheme for more than a decade, beginning as early as 2001. During that time, Odebrecht paid approximately $788 million in bribes to government officials, their representatives and political parties in a number of countries in order to win business in those countries. The criminal conduct was directed by the highest levels of the company, with the bribes paid through a complex network of shell companies, off-book transactions and off-shore bank accounts.
As part of the scheme, Odebrecht and its co-conspirators created and funded an elaborate, secret financial structure within the company that operated to account for and disburse bribe payments to foreign government officials and political parties. By 2006, the development and operation of this secret financial structure had evolved such that Odebrecht established the “Division of Structured Operations,” which effectively functioned as a stand-alone bribe department within Odebrecht and its related entities. Until approximately 2009, the head of the Division of Structured Operations reported to the highest levels within Odebrecht, including to obtain authorization to approve bribe payments. After 2009, this responsibility was delegated to certain company business leaders in Brazil and the other jurisdictions. To conceal its activities, the Division of Structured Operations utilized an entirely separate and off-book communications system, which allowed members of the Division of Structured Operations to communicate with one another and with outside financial operators and other co-conspirators about the bribes via secure emails and instant messages, using codenames and passwords.
The Division of Structured Operations managed the “shadow” budget for the Odebrecht bribery operation via a separate computer system that was used to request and process bribe payments as well as to generate and populate spreadsheets that tracked and internally accounted for the shadow budget. These funds for the company’s sophisticated bribery operation were generated by the Odebrecht Finance Department through a variety of methods, as well as by certain Odebrecht subsidiaries, including Braskem. The funds were then funneled by the Division of Structured Operations to a series of off-shore entities that were not included on Odebrecht’s balance sheet as related entities. The Division of Structured Operations then directed the disbursement of the funds from the off-shore entities to the bribe recipient, through the use of wire transfers through one or more of the off-shore entities, as well as through cash payments both inside and outside Brazil, which were sometimes delivered using packages or suitcases left at predetermined locations.
Odebrecht, its employees and agents took a number of steps while in the United States to further the scheme. For instance, in 2014 and 2015, while located in Miami, two Odebrecht employees engaged in conduct related to certain projects in furtherance of the scheme, including meetings with other co-conspirators to plan actions to be taken in connection with the Division of Structured Operations, the movement of criminal proceeds and other criminal conduct. In addition, some of the off-shore entities used by the Division of Structured Operations to hold and disburse unrecorded funds were established, owned and/or operated by individuals located in the United States. In all, this conduct resulted in corrupt payments and/or profits totaling approximately $3.336 billion.
Braskem also admitted to engaging in a wide-ranging bribery scheme and acknowledged the pervasiveness of its conduct. Between 2006 and 2014, Braskem paid approximately $250 million into Odebrecht’s secret, off-book bribe payment system. Using the Odebrecht system, Braskem authorized the payment of bribes to politicians and political parties in Brazil, as well as to an official at Petróleo Brasileiro S.A. – Petrobras (Petrobras), the state-controlled oil company of Brazil. In exchange, Braskem received various benefits, including: preferential rates from Petrobras for the purchase of raw materials used by the company; contracts with Petrobras; and favorable legislation and government programs that reduced the company’s tax liabilities in Brazil. This conduct resulted in corrupt payments and/or profits totaling approximately $465 million.
The Corporate Resolutions
The department reached these resolutions with Odebrecht and Braskem based on a number of factors, including: the failure to voluntarily disclose the conduct that triggered the investigation; the nature and seriousness of the offense, which spanned many years, involved the highest levels of the companies, occurred in multiple countries and involved sophisticated schemes to bribe high-level government officials; the lack of an effective compliance and ethics program at the time of the conduct; and credit for each company’s respective cooperation. The companies also engaged in remedial measures, including terminating and disciplining individuals who participated in the misconduct, adopting heightened controls and anti-corruption compliance protocols and significantly increasing the resources devoted to compliance.
The criminal penalty for Odebrecht reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Odebrecht’s full cooperation with the government’s investigation, while the criminal penalty for Braskem reflects a 15 percent reduction off the bottom of the U.S. Sentencing Guidelines as a result of its partial cooperation.
Odebrecht has represented its ability to pay a maximum of $2.6 billion of the total fine amount. The department and Brazilian authorities are engaged in further analysis regarding the company’s claimed inability to pay, which will be completed on or before March 31, 2017.
* * *
The FBI’s New York Field Office is investigating the case. Chief Dan Kahn and Trial Attorneys Christopher Cestaro, Sarah Edwards, David Fuhr, Kevin R. Gingras, Lorinda Laryea and David Last of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Julia Nestor and Alixandra Smith of the Eastern District of New York are prosecuting the case.
The Criminal Division’s Office of International Affairs also provided substantial assistance. The SEC and the Ministerio Publico Federal in Brazil the Departamento de Polícia Federal and the Office of the Attorney General in Switzerland 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.
Odebrecht and Braskem Plead Guilty and Agree to Pay at Least $3.5 Billion in Global Criminal Penalties to Resolve Largest Foreign Bribery Case in HistoryRead the Press Release
BROOKLYN, N.Y. – Odebrecht S.A. (Odebrecht), a global construction conglomerate based in Brazil, and Braskem S.A. (Braskem), a Brazilian petrochemical company, pleaded guilty today and agreed to pay a combined total penalty of at least $3.5 billion to resolve charges with authorities in the United States, Brazil and Switzerland arising out of their schemes to pay hundreds of millions of dollars in bribes to government officials around the world.
U.S. Attorney Robert L. Capers of the Eastern District of New York, Deputy Assistant Attorney General Sung-Hee Suh of the Justice Department’s Criminal Division, Assistant Director Stephen Richardson of the FBI’s Criminal Investigative Division and Assistant Director in Charge William F. Sweeney of the FBI’s New York Field Office made the announcement.
"These resolutions are the result of an extraordinary multinational effort to identify, investigate and prosecute a highly complex and long-lasting corruption scheme that resulted in the payment by the defendant companies of close to a billion dollars in bribes to officials at all levels of government in many countries," said U.S. Attorney Capers. "In an attempt to conceal their crimes, the defendants used the global financial system – including the banking system in the United States – to disguise the source and disbursement of the bribe payments by passing funds through a series of shell companies. The message sent by this prosecution is that the United States, working with its law enforcement partners abroad, will not hesitate to hold responsible those corporations and individuals who seek to enrich themselves through the corruption of the legitimate functions of government, no matter how sophisticated the scheme."
"Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit—a ‘Department of Bribery,’ so to speak—that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents," said Deputy Assistant Attorney General Suh. "Such brazen wrongdoing calls for a strong response from law enforcement, and through a strong effort with our colleagues in Brazil and Switzerland, we have seen just that. I hope that today’s action will serve as a model for future efforts."
"This case illustrates the importance of our partnerships and the dedicated personnel who work to bring to justice those who are motivated by greed and act in their own best interest," said FBI Assistant Director Richardson. "The FBI will not stand by idly while corrupt individuals threaten a fair and competitive economic system or fuel criminal enterprises. Our commitment to work alongside our foreign partners to root out corruption across the globe is unwavering and we thank our Brazilian and Swiss partners for their tireless work in this effort."
"No matter what the reason, when foreign officials receive bribes, they threaten our national security and the international free market system in which we trade," said FBI Assistant Director in Charge Sweeney. "Just because they’re out of our sight, doesn’t mean they’re beyond our reach. The FBI will use all available resources to put an end to this type of corrupt behavior."
Odebrecht pleaded guilty to a one-count criminal information filed today by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office in the U.S. District Court for the Eastern District of New York, charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). Odebrecht agreed that the appropriate criminal fine is $4.5 billion, subject to further analysis of the company’s ability to pay the total global penalties. In related proceedings, Odebrecht also settled with the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland.
Under the plea agreement, the United States will credit the amount that Odebrecht pays to Brazil and Switzerland over the full term of their respective agreements, with the United States and Switzerland receiving 10 percent each of the principal of the total criminal fine and Brazil receiving the remaining 80 percent. The fine is subject to an inability to pay analysis to be completed by the Department of Justice and Brazilian authorities on or before March 31, 2017, because Odebrecht has represented it is only able to pay approximately $2.6 billion over the course of the respective agreements. Sentencing has been scheduled for April 17, 2017.
Braskem, whose American Depositary Receipts (ADRs) are publicly traded on the New York Stock Exchange, separately pleaded guilty to a one-count criminal information filed in the Eastern District of New York charging it with conspiracy to violate the anti-bribery provisions of the FCPA. Braskem agreed to pay a total criminal penalty of $632 million. Sentencing has been scheduled for January 2017. In related proceedings, Braskem also settled with the U.S. Securities and Exchange Commission (SEC), the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland. Under the terms of its resolution with the SEC, Braskem agreed to a total of $325 million in disgorgement of profits. Braskem agreed to pay Brazilian authorities 70 percent of the total criminal penalty and agreed to pay the Swiss authorities 15 percent. The department has agreed to credit the criminal penalties paid to Brazilian and Swiss authorities as part of its agreement with the company. The United States will receive $94.8 million, an amount equal to 15 percent of the total criminal fines paid by Braskem.
Under their respective plea agreements, Odebrecht and Braskem are required to continue their cooperation with law enforcement, including in connection with the investigations and prosecutions of individuals responsible for the criminal conduct. Odebrecht and Braskem also agreed to adopt enhanced compliance procedures and to retain independent compliance monitors for three years. The cases are assigned to U.S. District Judge Raymond J. Dearie of the Eastern District of New York.
The combined total amount of United States, Brazilian and Swiss criminal and regulatory penalties paid by Braskem will be approximately $957 million. The combined total amount of penalties imposed against Odebrecht will be at least $2.6 billion and up to $4.5 billion. With a combined total of at least $3.5 billion, today’s resolutions with Odebrecht and Braskem are the largest-ever global foreign bribery resolution.
The Bribery Schemes
According to its admissions, Odebrecht engaged in a massive and unparalleled bribery and bid-rigging scheme for more than a decade, beginning as early as 2001. During that time, Odebrecht paid approximately $788 million in bribes to government officials, their representatives and political parties in a number of countries in order to win business in those countries. The criminal conduct was directed by the highest levels of the company, with the bribes paid through a complex network of shell companies, off-book transactions and off-shore bank accounts.
As part of the scheme, Odebrecht and its co-conspirators created and funded an elaborate, secret financial structure within the company that operated to account for and disburse bribe payments to foreign government officials and political parties. By 2006, the development and operation of this secret financial structure had evolved such that Odebrecht established the "Division of Structured Operations," which effectively functioned as a stand-alone bribe department within Odebrecht and its related entities. Until approximately 2009, the head of the Division of Structured Operations reported to the highest levels within Odebrecht, including to obtain authorization to approve bribe payments. After 2009, this responsibility was delegated to certain company business leaders in Brazil and the other jurisdictions. To conceal its activities, the Division of Structured Operations utilized an entirely separate and off-book communications system, which allowed members of the Division of Structured Operations to communicate with one another and with outside financial operators and other co-conspirators about the bribes via secure emails and instant messages, using codenames and passwords.
The Division of Structured Operations managed the "shadow" budget for the Odebrecht bribery operation via a separate computer system that was used to request and process bribe payments as well as to generate and populate spreadsheets that tracked and internally accounted for the shadow budget. These funds for the company’s sophisticated bribery operation were generated by the Odebrecht Finance Department through a variety of methods, as well as by certain Odebrecht subsidiaries, including Braskem. The funds were then funneled by the Division of Structured Operations to a series of off-shore entities that were not included on Odebrecht’s balance sheet as related entities. The Division of Structured Operations then directed the disbursement of the funds from the off-shore entities to the bribe recipient, through the use of wire transfers through one or more of the off-shore entities, as well as through cash payments both inside and outside Brazil, which were sometimes delivered using packages or suitcases left at predetermined locations.
Odebrecht, its employees and agents took a number of steps while in the United States to further the scheme. For instance, in 2014 and 2015, while located in Miami, two Odebrecht employees engaged in conduct related to certain projects in furtherance of the scheme, including meetings with other co-conspirators to plan actions to be taken in connection with the Division of Structured Operations, the movement of criminal proceeds and other criminal conduct. In addition, some of the off-shore entities used by the Division of Structured Operations to hold and disburse unrecorded funds were established, owned and/or operated by individuals located in the United States. In all, this conduct resulted in corrupt payments and/or profits totaling approximately $3.336 billion.
Braskem also admitted to engaging in a wide-ranging bribery scheme and acknowledged the pervasiveness of its conduct. Between 2006 and 2014, Braskem paid approximately $250 million into Odebrecht’s secret, off-book bribe payment system. Using the Odebrecht system, Braskem authorized the payment of bribes to politicians and political parties in Brazil, as well as to an official at Petróleo Brasileiro S.A. – Petrobras (Petrobras), the state-controlled oil company of Brazil. In exchange, Braskem received various benefits, including: preferential rates from Petrobras for the purchase of raw materials used by the company; contracts with Petrobras; and favorable legislation and government programs that reduced the company’s tax liabilities in Brazil. This conduct resulted in corrupt payments and/or profits totaling approximately $465 million.
The Corporate Resolutions
The department reached these resolutions with Odebrecht and Braskem based on a number of factors, including: the failure to voluntarily disclose the conduct that triggered the investigation; the nature and seriousness of the offense, which spanned many years, involved the highest levels of the companies, occurred in multiple countries and involved sophisticated schemes to bribe high-level government officials; the lack of an effective compliance and ethics program at the time of the conduct; and credit for each company’s respective cooperation. The companies also engaged in remedial measures, including terminating and disciplining individuals who participated in the misconduct, adopting heightened controls and anti-corruption compliance protocols and significantly increasing the resources devoted to compliance.
The criminal penalty for Odebrecht reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Odebrecht’s full cooperation with the government’s investigation, while the criminal penalty for Braskem reflects a 15 percent reduction off the bottom of the U.S. Sentencing Guidelines as a result of its partial cooperation.
Odebrecht has represented its ability to pay a maximum of $2.6 billion of the total fine amount. The department and Brazilian authorities are engaged in further analysis regarding the company’s claimed inability to pay, which will be completed on or before March 31, 2017.
* * *
The case is being prosecuted by Assistant U.S. Attorneys Alixandra Smith and Julia Nestor of the Business and Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York, and FCPA Chief Dan Kahn and Trial Attorneys Christopher Cestaro, Sarah Edwards, David Fuhr, Kevin R. Gingras, Lorinda Laryea and David Last of the Criminal Division’s Fraud Section. The FBI’s International Corruption squad in New York investigated this case.
The Criminal Division’s Office of International Affairs also provided substantial assistance. The SEC and the Ministerio Publico Federal in Brazil the Departamento de Polícia Federal and the Office of the Attorney General in Switzerland provided significant cooperation.
Hempstead Man Admits to Committing 40 Armed RobberiesRead the Press Release
Today, at the federal courthouse in Central Islip, New York, Khalif House pleaded guilty to an indictment charging him with conspiracy to commit armed robberies in connection with 40 knife-point robberies that he and his co-conspirators committed between February 9, 2015 and June 7, 2016. The announcement of the guilty plea was made by Robert L. Capers, United States Attorney for the Eastern District of New York.
As part of the plea, House admitted his role in each of the robberies which occurred in Nassau, Queens and Suffolk Counties, including at Carvel, Dunkin Donuts, Subway and 7-Eleven stores (a complete list of the robberies that House allocuted to is attached hereto as Exhibit 1). On almost every occasion, House robbed stores wearing mismatched gloves, with his face covered, while brandishing a knife. During one of the robberies, House chased down a fleeing employee, dragging her back into the premises to prevent her escape. On another occasion, in order to avoid apprehension, House cut an employee, who attempted to disarm him during a robbery. House was ultimately apprehended in Floral Park, on June 8, 2016, following the attempted robbery of a Dollar Tree store located in Queens. When the Floral Park Police located House, he was hiding in a stranger’s van, and in possession of, among other things, mismatched gloves.
House’s arrest and conviction were the result of a joint investigation conducted by the Federal Bureau of Investigation’s Long Island Gang Task Force, the Nassau County Police Department, the New York City Police Department, and the Suffolk County Police Department. Additionally, a number of other law enforcement agencies assisted the investigation, including the Floral Park Police Department.
“The defendant engaged in a widespread and dangerous pattern of knife-point commercial robberies, which terrorized the communities and jeopardized the safety of the employees of more than three-dozen local businesses. As a result of the diligent work and collaboration of federal and local law enforcement authorities, the defendant will now be held accountable for his actions,” stated United States Attorney Capers. Mr. Capers extended his grateful appreciation to all of the participating law enforcement agencies for their invaluable assistance in this case.
House pleaded guilty before United States District Judge Joan M. Azrack. When sentenced, House will face a maximum of 20 years in federal prison.
The government’s case is being handled by the Office’s Long Island Criminal Section. Assistant United States Attorney Mark Misorek is in charge of the prosecution.
The Defendant:
Name: KHALIF HOUSE
Age: 24
Residence: Hempstead, New YorkE.D.N.Y. Docket No. 16-CR-370 (JMA)
Former Owner and President of Unregistered Broker-Dealer Indicted in A $9 Million Securities Fraud SchemeRead the Press Release
BROOKLYN, N.Y. – John Desantis, a New York resident, and Dwayne Malloy, a New Jersey resident, the former owner and president, respectively, of Premier Links, Inc. (Premier Links), a Staten Island-based company, were arrested today on charges of securities fraud and wire fraud. From approximately 2005 to 2012, Desantis and Malloy operated Premier Links as an unregistered broker-dealer, and through it stole more than $9 million from more than 300 investors in approximately 40 states.[1] The defendants are scheduled to be arraigned before United States Magistrate Judge Lois Bloom, at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office (FBI).
“As alleged, the defendants preyed on unsuspecting investors and stole their money after conning the investors into buying shares of worthless companies. Now, their day of reckoning has arrived,” stated United States Attorney Capers. “Today’s arrests demonstrate this Office’s continuing commitment to protecting the investing public from those who seek to swindle investors for personal gain.” Mr. Capers extended his appreciation to the Federal Bureau of Investigation, the agency responsible for leading the government’s investigation, and thanked the U.S. Securities and Exchange Commission (SEC) for its assistance and cooperation during the investigation.
“As alleged, John Desantis and Dwayne Malloy operated an unregistered broker-dealer operation that preyed on innocent investors who were targeted in a boiler-room style investment scheme to invest in securities and promised big returns. Instead, Desantis and Mallory used the investors’ money for their own pocketbook to the tune of $9.3 million. Ensuring that all investors have factual information and our markets are fair is exactly why the FBI continues to investigate and bring those to justice who perpetrate securities fraud schemes,” stated FBI Assistant Director-in-Charge Sweeney.
According to the superseding indictment unsealed this morning and other documents filed publicly in the case, Premier Links operated from a Staten Island office and purported to sell stock to investors. However, the defendants and others at Premier Links were never registered as broker-dealers with the SEC. Instead, Premier Links operated as a “boiler room,” using “cold callers” and other means to entice victims into investing their money in securities with promises of outsized returns. The defendants located their victims by using a printed list, which one of the defendants referred to as “the suckers list.” Once the victims wired or mailed money to Premier Links, the defendants and other co-conspirators typically stole the funds for their personal use. Bank records show that the defendants converted the investors’ money into cash through over 900 ATM and teller withdrawals. They also wrote checks to themselves and made personal purchases. To date, investigators have identified at least $9.3 million in investor losses from the scheme.
The criminal case has been assigned to United States District Judge Eric N. Vitaliano. If convicted, each defendant faces up to 20 years’ imprisonment, as well as a fine equal to double the investors’ losses, and mandatory restitution to the victims.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Jack Dennehy and Alexander Mindlin are responsible for the prosecution.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
The Defendants:
JOHN DESANTIS
Age: 40
Staten Island, New YorkDWAYNE MALLOY
Age: 41
Hazlet, New JerseyE.D.N.Y. Docket No. 15 CR 135 (S-1) (ENV)
[1] The charges announced today are allegations, and the defendants are presumed innocent unless and until proven guilty.
Platinum Partners’ Founder and Chief Investment Officer Among Five Indicted in A $1 Billion Investment FraudRead the Press Release
BROOKLYN, N.Y. – An eight-count indictment was unsealed this morning in federal court in Brooklyn, New York, charging seven defendants, all of whom are or were formerly affiliated with Platinum Partners L.P. (Platinum), a purportedly $1.7 billion hedge fund based in New York, New York. The indicted individuals are: Mark Nordlicht, the founder and Chief Investment Officer of Platinum; David Levy, the co-Chief Investment Officer of Platinum; Uri Landesman, the former Managing Partner and President of Platinum; Joseph SanFilippo, the Chief Financial Officer of Platinum’s signature hedge fund; Joseph Mann, a member of Platinum’s Investor Relations and Finance Departments; Daniel Small, a former Managing Director and co-Portfolio Manager of Platinum; and Jeffrey Shulse, the former Chief Executive Officer and Chief Financial Officer of Black Elk Energy Offshore Operations, LLC (Black Elk).[1]
Nordlicht, Levy, Landesman, SanFilippo and Mann are charged with securities fraud, investment adviser fraud, securities fraud conspiracy, investment adviser fraud conspiracy and wire fraud conspiracy for defrauding investors through, among other things, the overvaluation of their largest assets, the concealment of severe cash flow problems at Platinum’s signature fund, and the preferential payment of redemptions. Nordlicht, Levy, Small and Shulse are charged with securities fraud, securities fraud conspiracy and wire fraud conspiracy for defrauding Black Elk’s independent bondholders through a fraudulent offering document and diverting more than $95 million in proceeds to Platinum by falsely representing in the offering document that Platinum controlled approximately $18 million of the bonds when, in fact, Platinum controlled more than $98 million of the bonds.
Nordlicht, Levy, Landesman, SanFilippo, Mann, Small and Shulse will be arraigned later today before United States Magistrate Judge Lois Bloom at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York. Shulse’s initial appearance for removal proceedings to the Eastern District of New York is scheduled for this afternoon at the United States Courthouse, 515 Rusk Avenue, Houston, Texas.
The charges were announced by Robert L. Capers, 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 Philip Bartlett, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS).
“As alleged, Nordlicht and his cohorts engaged in one of the largest and most brazen investment frauds perpetrated on the investing public, earning Platinum more than $100 million in fees during the charged conspiracy. Platinum Partners purported to be a standard bearer in the hedge fund industry, reporting annual average returns of more than 17 percent since inception in 2003. In reality, their returns were the result of the overvaluation of their largest assets, which eventually led to Nordlicht and his co-conspirators operating Platinum like a Ponzi scheme, where they used loans and new investor funds to pay off existing investors,” stated United States Attorney Capers. “The charges and arrests announced today reflect our steadfast commitment to holding accountable hedge funds on Wall Street who rip off investors for personal gain.” Mr. Capers thanked the Securities and Exchange Commission, New York Regional Office (SEC) for their significant cooperation and assistance during the investigation.
“This case shows how several members of this firm allegedly manipulated and lied to investors about the health of the investments they were making, and then plotted ways to cover up their actions. The FBI and our law enforcement partners do all we can to stop these schemes and to keep fraudsters from stealing from investors, but we can’t do it alone. We need people to call us when they see things that don’t add up, or don’t make sense,” stated FBI Assistant Director-in-Charge Sweeney.
“These Platinum Partners employees devised a scheme to lure investors to funds they managed knowing the funds were insolvent and would not return the high yields they claimed. Postal Inspectors will never tolerate unfairness in the market and will vigorously pursue and bring to justice anyone who breaks the law, ensuring there is an honest and secure trading environment for investors,” stated USPIS Inspector-in-Charge Bartlett.
* * *
As detailed in the indictment, between 2011 and 2016, Nordlicht and Levy, together with their co-conspirators, orchestrated two separate schemes: (i) a scheme to defraud investors and prospective investors in funds managed by Platinum; and (ii) a scheme to defraud third-party holders of Black Elk’s bonds.
The Fraudulent Investment Scheme
Platinum was a hedge fund founded in 2003 and based in New York, New York. Since September 2011, Platinum was registered with the SEC as an investment adviser. Platinum managed several hedge funds, but the vast majority of its assets were invested through Platinum Partners Value Arbitrage Fund, L.P. (PPVA) and Platinum Partners Credit Opportunities Master Fund, L.P. (PPCO). Platinum charged its investors a two percent management fee and a 20 percent incentive or performance fees. In March 2016, Platinum reported to regulators, including the SEC, that it had $1.7 billion in assets under management (AUM), including approximately $1.1 billion in gross asset value in PPVA and more than $590 million in PPCO.
Between November 2012 and December 2016, Nordlicht, Levy, Landesman, SanFilippo and Mann, together with others, participated in a scheme to defraud investors and prospective investors in Platinum through lies and omissions relating to, among other things: (i) the performance of some of PPVA’s highly illiquid and privately-held assets; (ii) PPVA’s accessibility to cash or assets that could easily be converted into cash; (iii) the purpose of loans raised through investors and the use of those loan proceeds; and (iv) PPVA’s preferential redemption, or investor payment, process. Specifically, Platinum fraudulently overvalued some of PPVA’s highly illiquid and privately-held assets in order to, among other things, boost performance numbers, attract new investors, retain existing investors and extract high management and incentive fees. From 2012 through 2016, Platinum extracted more than $100 million in fees based, in large part, on their overvalued assets. Platinum’s overvaluation of some of their assets precipitated a severe cash crunch, which Platinum initially attempted to mitigate through high-interest loans between its various hedge funds and related entities. When the inter-fund loans proved insufficient to resolve PPVA’s cash crunch, Platinum began selectively paying some investors ahead of others, contrary to the terms of its governing documents.
As early as 2012, Nordlicht and his co-conspirators knew that PPVA was in trouble, but concealed that reality from investors and prospective investors. For example, on November 6, 2012, upon learning that PPVA’s investors had sought $27 million in redemptions, Nordlicht exchanged emails with Landesman that stated, in part: “If we don’t exceed [the $27 million in redemptions] in [subscriptions] . . . we are probably going to have to put black elk in side pocket . . . It’s just very daunting. It seems like we make some progress and then [redemptions] are relentless almost. It’s tough to get ahead in [subscriptions] if u have to replace 150-200 a year.”
By 2014, the defendants were relying almost exclusively on new investments and inter-fund loans to pay redemptions to PPVA’s investors. For example, on April 29, 2014, when faced with requests from investors who had not yet received their redemptions, Nordlicht sent an email to SanFilippo that stated, in part: “Start paying down [redemptions] as [you] can. Between [a new investor] and [a one-off loan] (additional 10 million), [should] have decent short term infusion. Hopefully some [M]ay 1 [new investments] show up as well. Have a few more outflows to discuss but this is obviously the priority.” Nordlicht and his co-defendants concealed PPVA’s cash crunch and selective redemption payments from investors. For example, in an investor call on January 14, 2015, Nordlicht stated, in part: “If we look historically, we’ve been very very fortunate . . . we’re running about a billion four between all our different entities . . . I think we’ve returned about double that in cash to investors, so that is really an indication of . . . being very very liquid and nimble . . . in terms of 2015 for PPVA, we are targeting much higher returns than normal.”
Nordlicht’s and Landesman’s knowledge of Platinum’s dire situation was perhaps best illustrated by an email exchange on December 13, 2015. When Nordlicht forwarded an email to Landesman where he had informed a co-conspirator that his wife was convincing him to get on a flight to Israel if he was unable to get a loan from his partners to save the fund, Landesman responded: “You should get on the flight if there is no bridge [loan], probably even if there is . . . We need to go through the mehalech of how we are going to share this with clients and employees, going to be very rough, big shame . . . it was nice seeing you, hopefully the girls will reacclimate [sic] quickly.” Notwithstanding the above email exchange, on February 7, 2016, Landesman sent an email to an investor that stated, in part: “Fund is sound, I believe, new structure ideal. Mark [Nordlicht] is really energized. Hope to be beyond liquidity concerns forever by end of May, we welcome your further investment.”
PPVA was heavily invested in oil and gas companies that performed significantly below expectations and the valuations that Platinum attributed to them. These valuations were further undermined by the plummeting price of oil, which dropped from approximately $105 per barrel in December 2013, to approximately $60 per barrel in December 2014, to approximately $36 per barrel in December 2015.
Despite the severe problems that PPVA was facing beginning in at least 2012, Platinum reported that PPVA’s AUM increased from approximately $727 million at the end of 2012, to approximately $757 million at the end of 2013, to approximately $770 million at the end of 2014, to approximately $910 million at the end of 2015. Platinum collected two percent management fees off these amounts and 20 percent incentive fees off the profits.
The Fraudulent Black Elk Bond Scheme
From approximately November 2011 to December 2016, Nordlicht, Levy, Small and Shulse, together with their co-conspirators, orchestrated a fraudulent scheme to defraud third-party holders of Black Elk’s publicly-traded bonds (the bondholders) by diverting the proceeds from the sale of the vast majority of Black Elk’s most lucrative assets to Platinum even though the bondholders had priority over Platinum’s equity interests. As early as November 2011, Nordlicht, Levy and Small were plotting to deceive the bondholders. For example, when Nordlicht learned about the relevant covenants associated with the bonds, he sent an email to Levy, Small and another that stated: “Seem like there are bond[s] to be had out there and an additional 60 million is 24 down . . . We [would] have to figure it out . . . I’m sure we can get them in friendly hands if the covenants are going to be an obstacle.”
By late 2013, faced with the fact that Black Elk was effectively insolvent but knowing that Black Elk still possessed certain valuable assets, the defendants pursued opportunities to sell Black Elk’s assets while simultaneously pursuing a fraudulent strategy to divert the proceeds from any such asset sale to the preferred equity stockholders, which were controlled by Platinum, instead of the bondholders. To execute this scheme, in early 2014, the defendants caused Platinum to purchase Black Elk bonds on the open market to gain control of a majority of the $150 million of outstanding bonds. Platinum purchased and then transferred the bonds through a number of related entities in an effort to conceal Platinum’s ownership and control of the bonds.
By approximately April 2014, Platinum owned and controlled approximately $98 million of the $150 million of outstanding bonds. Between March 2014 and April 2014, Platinum and its related parties also purchased the vast majority of the outstanding preferred equity that was owned by third parties to obtain nearly 100 percent ownership of the preferred equity. By approximately May 2014, when alternative approaches failed, the defendants, together with others, determined that the only path to getting the preferred equity paid ahead of the bondholders was through a cash tender offer and consent solicitation process. On July 2, 2014, Small forwarded an email from a Platinum trader to Nordlicht and Levy that set forth the following summary of the $98,631,000 of the bonds controlled by Platinum: (i) PPCO: $32,917,000; (ii) PPVA: $18,321,000; (iii) PPLO: $17,046,000; (iv) BAM [a related entity]: $13,360,000; and (v) BBIL [a related entity]: $16,987,000. Nevertheless, in response to a query from an attorney, on July 9, 2014, Small sent an email that stated, in part: “$18,321,000 bonds are controlled by PPVA and should be disclosed and excluded from the calculation. I believe this implies that $65,840,000 are required to obtain a majority consent.”
On July 16, 2014, Black Elk announced that it had commenced a public offer for the bonds (the Consent Solicitation). The Consent Solicitation and accompanying press release provided, among other things, that: (i) Black Elk had commenced a cash tender offer to purchase the outstanding bonds at par value; (ii) Black Elk was soliciting bondholders’ consents to modify certain of the restrictive covenants governing the bonds; (iii) the bondholders that tendered their bonds would be considered to have validly delivered their consent to the proposed amendments; (iv) the bondholders could also consent to the proposed amendments without tendering their bonds; (v) the Consent Solicitation was being made in connection with the sale of assets and the net proceeds of the sale would be used by Black Elk to purchase the tendered bonds; and (vi) the offer would expire at 5:00 p.m. New York time on August 13, 2014.
Notably, the Consent Solicitation prohibited “any person directly or indirectly controlling or controlled by or under direct or indirect common control with [Black Elk]” from voting in the Consent Solicitation process. Thus, the approximately $98 million of bonds controlled by Platinum should have been excluded from the voting process. Nonetheless, the defendants caused Black Elk to disclose in the Consent Solicitation that: “[PPVA] and its affiliates, which own approximately 85% of our outstanding voting membership interests, own[ed] approximately $18,321,000 principal amount of the outstanding Notes. Otherwise, neither we, nor any person directly or indirectly controlled by or under direct or indirect common control with us, nor, to our knowledge, any person directly or indirectly controlling us, held any Notes.”
The defendants then caused Platinum’s related parties to consent to the proposed amendments but not tender their bonds. As of the offer’s expiration on August 13, 2014, bondholders that held $11,333,000 of the BE Bonds validly had tendered and were paid. To the surprise of the remaining bondholders, who were unaware of Platinum’s control of $98,631,000 or approximately 65 percent of the BE Bonds, the trustee revealed that the holders of $110,565,000 or approximately 73.71 percent of the bonds had validly consented to the Consent Solicitation, thereby allowing the preferred equity to get paid from the proceeds of Black Elk’s sale of assets.
On or about August 11, 2015, Black Elk’s creditors filed a petition to place the company into an involuntary Chapter 7 bankruptcy, which was converted on or about September 1, 2015 to a voluntary Chapter 11 bankruptcy. As of December 2016, a number of bondholders who did not tender their BE Bonds have yet to receive the principal amount of their holdings.
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The criminal case has been assigned to Chief Judge Dora L. Irizarry of the United States District Court. If convicted, each of the defendants faces a maximum sentence of 20 years’ imprisonment.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Winston Paes, Alicyn Cooley, Lauren Elbert and Sarah Evans are in charge of the prosecution, with assistance provided by Assistant United States Attorney Brian Morris of the Office’s Civil Division.
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The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
The Defendants:
MARK NORDLICHT
Age: 48
Residence: New Rochelle, New YorkDAVID LEVY
Age: 31
Residence: New York, New YorkURI LANDESMAN
Age: 55
Residence: New Rochelle, New YorkJOSEPH SANFILIPPO
Age: 38
Residence: Freehold, New JerseyJOSEPH MANN
Age: 24
Residence: Brooklyn, New YorkDANIEL SMALL
Age: 47
Residence: New York, New YorkJEFFREY SHULSE
Age: 44
Residence: Houston, TexasE.D.N.Y. Docket No. 16-CR-640 (DLI)
[1] The charges announced today are allegations, and the defendants are presumed innocent unless and until proven guilty.
7-Eleven Employee Sentenced to 48 Months in Prison for Wire Fraud, Alien Harboring, and Identity Theft SchemeRead the Press Release
Earlier today at the federal courthouse in Central Islip, New York, Malik Yousaf was sentenced to 48 months in prison following his September 22, 2014, guilty plea to committing wire fraud and concealing and harboring illegal aliens employed at 7-Eleven, Inc. (7-Eleven) franchise stores located throughout Long Island and Virginia.
The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York. Mr. Capers expressed his grateful appreciation to Immigration and Customs Enforcement, Homeland Security Investigations, New York Field Office (HSI); New York State Police; Suffolk County Police; United States Department of Labor; and the New York Office of Inspector General for the Social Security Administration.
According to court filings and facts presented in court, the defendant acted as the chief manager of five 7-Eleven franchise stores during the course of the conspiracy, hired dozens of illegal aliens, equipped them with more than 20 identities stolen from United States citizens, housed them at residences his coconspirators owned, and stole substantial portions of his workers’ wages. During the scheme, the defendant generated over $182 million in proceeds from the 7-Eleven franchise stores.
In addition to the sentence of imprisonment, the court entered an order forfeiting the defendant’s rights to eight 7-Eleven stores in New York and ten 7-Eleven stores in Virginia, as well as a Long Island residence worth over $150,000. The court also ordered the defendant to pay $2.5 million in restitution for the back wages that he stole from his workers.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Matthew Amatruda is in charge of the prosecution. Assistant United States Attorneys Brian Morris and Elliot M. Schachner of the Office’s Civil Division are responsible for the forfeiture of assets.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
For questions or concerns about immigrant workers and job seekers, contact the New York State Department of Labor Division Policies and Affairs (DIPA) at its toll-free worker hotline (1-877-466-9757).
E.D.N.Y. Docket No. 14-CR-351(SJF)
The Defendant:
MALIK YOUSAF
Age: 55
South Setauket, New YorkArgentine Sports Marketing Company Admits to Role in International Soccer Bribery Conspiracy and Agrees to $112 Million in Forfeiture and Criminal PenaltiesRead the Press Release
Earlier today, the U.S. Attorney’s Office for the Eastern District of New York filed a criminal information in Brooklyn federal court charging Torneos y Competencias S.A. (Torneos), a South American sports marketing company, with wire fraud conspiracy in connection with the company’s long-running participation in a scheme to corrupt international soccer. Torneos entered into a deferred prosecution agreement with the government in which the company admitted to its role in the 15-year scheme, including its role in paying tens of millions of dollars in bribes and kickbacks to a high-ranking FIFA official to secure his support for, among other things, the acquisition of rights to broadcast the 2018, 2022, 2026, and 2030 editions of the FIFA World Cup. As part of the deferred prosecution agreement, Torneos agreed to over $112.8 million in forfeiture and criminal penalties, and further agreed to implement enhanced internal controls and a rigorous corporate compliance program and to cooperate fully with the government’s ongoing investigation.
The charge and resolution were announced by Robert L. Capers, U.S. Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director-in-Charge, FBI, New York Field Office; and Richard Weber, Chief, Internal Revenue Service (IRS) Criminal Investigation.
“Today’s announcement marks another important step in our continuing effort to root out corruption in international soccer and sends a clear message that corporate entities that rely on the U.S. financial system to enrich themselves through bribery will be held to account,” stated U.S. Attorney Capers. “Today, Torneos is being held to account for its conduct, but under new management it is also being given a chance to change the way the business of soccer is done in the future. This corporate resolution reflects the seriousness and sustained nature of Torneos’s criminal conduct as well as the prompt and decisive actions the company undertook to cooperate after the charges in this investigation were first unsealed last year. We are following the evidence where it leads and will continue to bring the individuals and entities who have corrupted soccer to justice.” Mr. Capers extended his thanks to the agents, analysts, and other investigative personnel with the FBI New York Eurasian Joint Organized Crime Squad and the IRS Criminal Investigation Los Angeles Field Office, as well as their colleagues abroad, for their continuing commitment and dedication over the course of this multi-year investigation.
“The only people who should be scoring in a soccer match are the players on the field, not the myriad of companies behind the scenes who see the game as an easy payday. As alleged in this case, we won’t allow businesses to use our financial systems for corrupt practices, and we will continue our search for those entities who are still doing so,” said FBI Assistant Director-in-Charge Sweeney.
“As today’s agreement reflects, Torneos y Competencias undermined the process of fair and open competition when they engaged in corrupt schemes to pay bribes in order to secure lucrative contracts,” said IRS Criminal Investigation Chief Weber. “The IRS is committed to aggressively investigating corporations that use a complex web of offshore entities and foreign and domestic bank accounts to enrich themselves through bribery.”
The Criminal Scheme
According to court documents, Torneos engaged in a 15-year scheme to corrupt international soccer through the payment of bribes and kickbacks to high-ranking officials of FIFA, the organization responsible for the regulation and promotion of soccer worldwide, as well as leading officials of the continental confederations and other soccer governing bodies that operate under the FIFA umbrella. Torneos conspired with others to systematically pay and agree to pay tens of millions of dollars in bribes and kickbacks to high-ranking officials of FIFA, two of FIFA’s confederations, CONCACAF and CONMEBOL, and several national member associations, including the Argentine national soccer federation (AFA), to obtain lucrative media and marketing rights to international soccer tournaments and matches. In addition to multiple editions of the FIFA World Cup, these tournaments and matches included the CONMEBOL Copa Libertadores, the CONMEBOL Copa América, the jointly organized CONMEBOL/CONCACAF Copa América Centenario, and international friendly matches played by the Argentinian national soccer team.
Torneos and its co-conspirators employed a variety of means to prevent the detection of their illegal activities and to conceal the location and ownership of proceeds of those activities, including the use of sham contracts and invoices, reliance on corrupt intermediaries and bankers, the creation and use of shell companies, and the use of cash. Torneos and its co-conspirators also relied on the integrity of the U.S. financial system and its banking institutions and wire facilities to facilitate their scheme, and on the growing U.S. market for soccer to generate profits from the scheme.
The following are three examples of the conduct encompassed in the wire fraud conspiracy charged in the information filed today and to which Torneos has admitted as part of its agreement with the government:
FIFA World Cup
Over the course of several years starting in approximately 2010, Torneos, at times with the assistance of an affiliate of a major broadcasting company headquartered in Latin America and one of its high-level executives, paid millions of dollars in bribes and kickbacks to a high-ranking and influential FIFA official in connection with the Latin American broadcasting company affiliate’s acquisition of rights to broadcast the 2018, 2022, 2026, and 2030 editions of the World Cup, and the subsequent purchase and exploitation by Torneos’s subsidiary TyC International B.V. (TyC International) of the rights to broadcast those editions of the World Cup to audiences in Argentina, Uruguay, and Paraguay. Among other things, the FIFA official – who was also a high-ranking official of CONMEBOL and AFA – used his enormous influence within the global governing body, in exchange for bribes, to push FIFA to sell lucrative rights to broadcast the 2026 and 2030 editions of the World Cup to the Latin American broadcasting company affiliate earlier than anticipated and long before the selection of host countries for those editions of the tournament.
CONMEBOL Copa Libertadores
Over the course of 15 years, Torneos executives and their co-conspirators systematically paid millions of dollars in annual bribe and kickback payments to high-ranking officials of CONMEBOL and its member associations in exchange for their support of Torneos affiliate T&T Sports Marketing Ltd. (T&T) as the holder of the broadcasting rights to the Copa Libertadores, South America’s premier club team tournament. T&T was owned by Torneos and, at various times and in part, by affiliates of a major broadcasting company headquartered in the United States. At times, Torneos paid the bribes and kickbacks with the agreement and support of the U.S. broadcasting company affiliates and their representatives, including three high-ranking executives. Torneos employed a variety of means to facilitate and disguise the annual bribe and kickback payments, including the use of intermediaries, shell companies created off the official books of Torneos, currency dealers, and cash.
CONMEBOL Copa América and CONMEBOL/CONCACAF Copa América Centenario
In 2013, Torneos and its co-conspirators formed a new company, Datisa S.A. (Datisa), which included as its three shareholders Torneos’s subsidiary Productora de Eventos S.A.; the Traffic Group, a multinational sports marketing conglomerate headquartered in Brazil; and another sports marketing company headquartered in Argentina. Datisa thereafter paid and agreed to pay tens of millions of dollars in bribe and kickback payments to high-ranking officials of CONMEBOL, CONMEBOL’s member associations, and the president of CONCACAF in connection with the companies’ acquisition of the media and marketing rights to the 2015, 2019, and 2023 editions of the Copa América and to the 2016 Copa América Centenario, a centennial edition of the tournament played earlier this year in stadiums across the United States. According to court documents, at least 17 soccer officials are implicated in this scheme alone.
Deferred Prosecution Agreement
Pursuant to the deferred prosecution agreement filed today, Torneos has waived federal indictment, agreed to the filing of the criminal information, and accepted responsibility for its criminal conduct and that of its senior executives and other employees. In addition, Torneos has agreed to forfeiture of $89,062,616, which represents profits it made from corrupt contracts, and to pay a criminal penalty of $23,760,000 to the government over the term of the agreement.[1] In consideration of Torneos’s remedial actions to date – which has included the termination of its entire senior management team and the hiring of a new General Manager, Chief Financial Officer, Legal Director and Chief Compliance Officer, and Compliance Manager – and its commitment to, among other things: (a) accept and acknowledge responsibility for its conduct; (b) continue its cooperation; (c) agree to forfeiture and make the payment of a financial penalty; and (d) implement enhanced internal controls and a rigorous corporate compliance program that includes policies and procedures designed to detect and deter violations of all applicable federal, state, and foreign anti-corruption laws, the government agreed to defer the prosecution for a period of 48 months and to obtain an exclusion of time under the Speedy Trial Act to allow Torneos to demonstrate good conduct and compliance with the terms of this agreement. The Honorable Pamela K. Chen approved the exclusion of time at a proceeding held in Brooklyn federal court earlier today. If Torneos complies with its obligations under the agreement, the government will move to dismiss the charge filed today after the conclusion of the 48-month period. If Torneos violates the agreement, it is subject to full criminal prosecution.
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The charge and resolution announced today are part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office of the Eastern District of New York, the FBI’s New York Field Office, and the IRS-CI Los Angeles Field Office. The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Asset Forfeiture and Money Laundering Section, and the Fraud Section, as well as from INTERPOL Washington. Assistant United States Attorneys Evan M. Norris, Samuel P. Nitze, Brian D. Morris, M. Kristin Mace, and Tanya Hajjar are in charge of today’s prosecution.
The government’s investigation is ongoing.
The Defendant:
TORNEOS Y COMPETENCIAS S.A.
Buenos Aires, ArgentinaE.D.N.Y. Docket No.: 16 CR 634 (PKC)
[1] As set forth in the agreement, all money forfeited by Torneos will be held in reserve to ensure its availability to satisfy any order of restitution entered at sentencing in United States v. Jeffrey Webb et al., 15 CR 252 (PKC), and related cases, for the benefit of any individuals or entities that qualify as victims under federal law.
Gabonese National Pleads Guilty to Foreign Bribery SchemeRead the Press Release
Defendant Bribed High-Ranking Government Officials in Multiple African Countries to Obtain Uranium Concessions and Other Mining Rights for Himself and Others
The son of a former Prime Minister of Gabon pleaded guilty earlier today in federal court to conspiring to make corrupt payments to government officials in Africa in violation of the Foreign Corrupt Practices Act (FCPA).
Deputy Assistant Attorney General Sung-Hee Suh of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office and Acting Special Agent in Charge Ronald L. Whitsett of the Internal Revenue Service-Criminal Investigation (IRS-CI), New York made the announcement.
Samuel Mebiame, 43, a Gabonese national, worked as a consultant to a mining company that was owned by a joint venture between Och-Ziff Capital Management Group LLC (Och-Ziff), a New York-based hedge fund management company, and an entity incorporated in Turks and Caicos. According to court documents, between at least 2007 and 2012, Mebiame worked as a “fixer” for the joint venture and conspired with others to pay bribes to high-level government officials in Chad and Niger in order to obtain business opportunities and mining rights for the joint venture in both of those countries. In addition, Mebiame paid bribes to high-level government officials in Guinea as an agent of the Turks and Caicos entity to obtain business opportunities and mining rights in that country.
In addition, according to court documents, the bribes paid by Mebiame to the high-ranking government officials were often masked through additional intermediaries or lawyers. In Niger, Mebiame paid more than $3 million in bribes to a high-ranking government official both directly and through intermediary agents, who were selected by the government official. Mebiame also made payments for luxury cars for that foreign official. In return, Mebiame obtained licenses for uranium concessions for the joint venture from the government of Niger. Similarly, in Chad, Mebiame bribed a high-ranking government official with cash payments and luxury foreign travel for the official and the official’s wife. In return, Mebiame obtained uranium concessions for the joint venture, including an asset which had been stripped from a French-owned company by the Chadian government at Mebiame’s urging. In Guinea, during a time when the conspirators were seeking to establish a state-owned mining company there, Mebiame made corrupt payments to gain special access to senior Guinean government officials. Mebiame provided the officials with cash and other benefits, including an S-Class Mercedes Benz vehicle and the use of private planes, in exchange for special access and confidential information.
On Sept. 29, 2016, in connection with the government’s investigation, Och-Ziff was charged pursuant to a criminal information with violations of the FCPA’s anti-bribery, books and records, and accounting controls violations for conduct in Libya and the Democratic Republic of Congo, and conduct in Chad and Niger connected to Mebiame’s conduct. Och-Ziff entered into a deferred prosecution agreement in connection with those charges. An Och-Ziff subsidiary company, OZ Africa Management GP LLC (OZ Africa), pleaded guilty to a one-count criminal information related to large-scale bribe payments in the Democratic Republic of Congo. OZ Africa is scheduled to be sentenced on March 29, 2017.
The FBI’s New York Field Office and IRS-CI New York are investigating the case. Assistant Chief Leo R. Tsao and Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys James P. Loonam, Jonathan P. Lax and David Pitluck of the Eastern District of New York are prosecuting the case. The Criminal Division’s Office of International Affairs provided significant assistance in this matter. The U.S. Securities and Exchange Commission’s Boston Regional Office 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 FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Mebiame Samuel Information Mebiame Samuel Plea AgreementGabonese National Pleads Guilty to Foreign Bribery SchemeRead the Press Release
Samuel Mebiame, a Gabonese national and the son of a former Prime Minister of Gabon, pleaded guilty earlier today in Brooklyn federal court, to conspiring to make corrupt payments to government officials in Africa, in violation of the Foreign Corrupt Practices Act (FCPA). Mebiame worked as a consultant to a joint venture between Och-Ziff Capital Management Group LLC, a New York-based hedge fund management company, and a Turks and Caicos incorporated entity. Mebiame paid bribes to high level government officials in Chad, Niger, and Guinea to obtain opportunities in the mining sectors in each of those countries. He faces up to five years’ imprisonment at the time of his sentencing.
The guilty plea was announced by U.S. Attorney Robert L. Capers of the Eastern District of New York; Principal Deputy Assistant Attorney General David Bitkower 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 Ronald L. Whitsett, Acting Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation (IRS-CI), New York.
According to court filings and facts presented during the plea proceeding, Mebiame worked as a “fixer” for the joint venture and conspired with others to pay bribes to foreign government officials to obtain rights to mineral concessions from government officials on behalf of the joint venture. Mebiame’s corrupt payments, made between at least 2007 and 2012, were directed to high-ranking government officials and were often masked through additional intermediaries or lawyers. In Niger, Mebiame paid more than $3 million in bribes to a high-ranking government official both directly and through the use of intermediary agents, who were selected by the government official. In addition, Mebiame made payments for luxury cars for the foreign official. In return, Mebiame obtained licenses for uranium concessions from the government of Niger for the joint venture. Similarly, in Chad, Mebiame paid cash bribes to a high-ranking government official and paid for luxury foreign travel for the official and the official’s wife. In return, Mebiame obtained uranium concessions for the joint venture, including an asset which had been stripped from a French-owned company by the Chadian government at Mebiame’s urging. In addition, during the conspirators’ efforts to establish a state-owned mining company in Guinea, Mebiame gained special access to government officials and confidential information by making corrupt payments and providing other benefits to senior government officials in Guinea, including an S-class Mercedes Benz sedan, the use of private planes, and cash. During the conspiracy, Mebiame repeatedly traveled to the United States, received payments to U.S. bank accounts, and sent e-mail communications from the United States to further the scheme. The communications included an e-mail between the conspirators which discussed a “bet” about what conduct would be sufficient to violate the FCPA.
Previously, on September 29, 2016, in connection with the government’s broader investigation, Och-Ziff was charged pursuant to a criminal information with violations of the FCPA’s anti-bribery, books and records, and accounting controls violations for conduct in Libya and the Democratic Republic of Congo, and conduct in Chad and Niger connected to Mebiame. Och-Ziff entered into a deferred prosecution agreement in connection with those charges. An Och-Ziff subsidiary company, OZ Africa Management GP, LLC, pleaded guilty to a one-count criminal information related to large-scale bribe payments in the Democratic Republic of Congo. Sentencing of OZ Africa Management GP, LLC has been scheduled for March 29, 2017.
The government’s case is being prosecuted by the U.S. Attorney’s Office Business and Securities Fraud Section, and the Foreign Corrupt Practices Act Unit of the Department of Justice, Fraud Section. Assistant United States Attorneys James P. Loonam, Jonathan P. Lax, and David Pitluck, Assistant Chief Leo R. Tsao and Trial Attorney James P. McDonald are in charge of the prosecution.
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The charges in this case were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
Former President of the Nicaraguan Soccer Federation and FIFA Development Officer Pleads Guilty to Racketeering and Corruption ChargesRead the Press Release
Earlier today in federal court in Brooklyn, Julio Rocha pleaded guilty to racketeering conspiracy and wire fraud conspiracy in connection with his receipt of bribes in exchange for his awarding contracts for the media and marketing rights to FIFA World Cup qualifier matches. Rocha, the president of the Nicaraguan soccer federation (FENIFUT) from 1998 to 2012, was the FIFA development officer for Central America and the Spanish-speaking Caribbean at the time of his arrest in Zurich, Switzerland on May 27, 2015. As part of his plea, Rocha also agreed to forfeit over $292,000. At sentencing, Rocha faces a maximum sentence of 20 years for each count. Today’s plea proceeding took place before United States District Judge Pamela K. Chen.
The guilty plea was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director in Charge, FBI, New York Field Office; and Acting Special Agent in Charge Anthony J. Orlando, IRS Criminal Investigation, Los Angeles Field Office.
According to court filings and facts presented during the plea proceeding, Rocha negotiated and accepted bribes totaling over $150,000 in exchange for exercising his influence as the president of FENIFUT to award a Florida sports marketing company named Traffic Sports USA, Inc. (Traffic) a contract for the media and marketing rights to the Nicaraguan national soccer team’s home World Cup qualifier matches for multiple editions of the World Cup, including the 2014 and 2018 editions. These bribes were transmitted from U.S. bank accounts, often through intermediaries, to accounts Rocha controlled. After he stepped down as president of FENIFUT and was employed by FIFA as a development officer, Rocha attempted to facilitate Traffic’s negotiations with a high-ranking FENIFUT official for the rights to Nicaragua’s World Cup qualifier matches for the 2022 edition of the World Cup in an effort to receive for himself a portion of any bribe money paid for those rights.
In addition, Rocha used his position as FENIFUT president to further enrich himself through other schemes, including one in which he took kickbacks from a Miami company that he had contracted with on behalf of FENIFUT for the purpose of obtaining assistance in securing corporate sponsorships for the federation.
The guilty plea announced today is part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office for the Eastern District of New York, the FBI New York Field Office, and the IRS-CI Los Angeles Field Office. The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Asset Forfeiture and Money Laundering Section, and the Fraud Section, as well as from INTERPOL Washington.
Assistant U.S. Attorneys Evan M. Norris, Paul Tuchmann, Keith D. Edelman, and Brian D. Morris of the Eastern District of New York are in charge of today’s prosecution.
The government’s investigation is ongoing.
The Defendant:
JULIO ROCHA
Age: 66
Nationality: NicaraguaE.D.N.Y. Docket No. 15 CR 252 (S-1)
Active Duty Member of U.S. Military Charged with Stealing and Selling Military-Issued Night Vision TechnologyRead the Press Release
Defendant Zachary Sizemore, an active-duty service member of the United States Air Force, made his initial appearance this morning before United States Magistrate Judge Marilyn Go at the U.S. Courthouse in Brooklyn, New York, on charges of theft and sale without authority of night-vision devices and components stolen from the Air Force. He was released on a $50,000 bond.
On November 29, 2016, the defendant was arrested on the Wright-Patterson Air Force Base in Dayton, Ohio, where he is stationed. He appeared that afternoon before United States Chief Magistrate Judge Sharon L. Ovington at the U.S. Courthouse in Dayton, Ohio, and was ordered to appear at the federal courthouse in Brooklyn this morning.
The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, Craig Rupert, Special Agent-in-Charge for the Department of Defense, Defense Criminal Investigative Service (DCIS) and Angel M. Melendez, Special Agent-in-Charge for the U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York.
“Our military’s night vision technology is among the most advanced in the world. As alleged, the defendant made stolen, military-issued, night vision devices available on the internet to anyone with the means to purchase them. Such technology gives our soldiers a critical advantage on the battlefield. Stealing that technology and selling it to the highest bidder puts our soldiers at risk. We will continue to use all of the law enforcement tools at our disposal to help protect our soldiers abroad,” stated United States Attorney Capers. Mr. Capers expressed his grateful appreciation to the U.S. Attorney’s Office for the Southern District of Ohio, the Air Force Office of Special Investigations, and Customs and Border Protection for their assistance.
DCIS Special Agent-in-Charge Rupert stated, “Continued cooperation with our military and federal law enforcement partners guarantees success in pursuing those who threaten the security of our American warfighters, their families, and our facilities, not to mention the investment of the American taxpayer in state-of-the-art technology for personal gain. This complaint highlights a continuing threat that DCIS will not be deterred in pursuing.”
“As an active duty member of the United States Air Force, Sizemore allegedly broke the sacred military oath of protecting this nation when he stole and sold high-tech military technology on the internet,” stated Special Agent-in-Charge Melendez of HSI New York. “This night vision equipment is highly advanced, giving our military a much deserved edge on today’s battlefield. HSI is committed to making sure this technology does not fall into the wrong hands.”
Night vision devices acquired by the United States military, such as the items allegedly stolen and sold by the defendant, contain components made to military specifications. They are required by the military to be rendered useless for their intended purpose prior to leaving government control. United States military policies prohibit the private sale of fully functional military-issued night vision equipment.
According to the complaint, between July 2013 and November 2016, Sizemore sold or attempted to sell at least three night vision devices that were stolen from the United States military, including an AN/PVS-7D night vision goggle and two mini-thermal monoculars. In addition, he created online postings for, and sold or attempted to sell, approximately 45 items described as night vision equipment or thermal equipment. Of those postings, Sizemore sold at least 38 such items for approximately $50,000.
The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, the defendant faces up to 10 years in prison, forfeiture, and a fine of up to $250,000.
The government’s case is being prosecuted by Assistant United States Attorney Nomi D. Berenson.
The Defendant:
ZACHARY SIZEMORE
Dayton, Ohio
Age: 24E.D.N.Y. Docket No. 16-M-1051
Ten Defendants Charged with Drug Trafficking and Attempted Robbery in the Queensbridge Houses and West VirginiaRead the Press Release
Earlier today, an indictment was unsealed in the United States District Court for the Eastern District of New York, charging seven defendants for their involvement in narcotics trafficking and an attempted Hobbs Act robbery in the Queensbridge Houses located in Long Island City, NY. Three additional defendants involved in narcotics trafficking in the Queensbridge Houses were indicted by the Queens County District Attorney’s Office and charged with felonies for selling cocaine. Six of the defendants are under arrest.
The federal defendants’ initial appearances and arraignments are scheduled this afternoon before United States Magistrate Judge Marilyn D. Go at the federal courthouse in Brooklyn, New York. The two state defendants’ initial appearances and arraignments are also scheduled for this afternoon in Queens County Supreme Court.
The charges were announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Richard A. Brown, District Attorney for Queens County; James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration (DEA); and James P. O’Neil, Commissioner, New York City Police Department (NYPD). The arrests follow a long-term investigation by the DEA and NYPD into the narcotics and related violence that has plagued the Queensbridge Houses for the last decade.
As alleged in the indictment and other court documents filed by the government, all but one of the seven federal defendants were members of a narcotics conspiracy that trafficked in a significant amount of crack cocaine in and around the Queensbridge Houses, the largest public housing development in the United States. Court-authorized wiretaps of telephones used by two of the defendants disclosed that during just a nine-month period, the defendants’ drug trafficking operation was responsible for the distribution of more than 280 grams of crack cocaine. In addition, three of the defendants – Edward Carrillo, Johnnie Monroe, and a co-conspirator – trafficked more than 400 grams of fentanyl as well as quantities of oxycodone. The distribution of the fentanyl pills by the defendants resulted in the death of a young mother in West Virginia. The three federal defendants continued to traffic in the deadly pills even after having learned about the woman’s death, and one of the defendants went so far as to proclaim that the deadly pills would “feed up the projects.”
Defendants Carrillo, Monroe, and a co-conspirator also are charged with an attempted armed robbery of an individual they believed to be traveling from West Virginia to New York carrying more than $100,000 in drug proceeds. When the defendants tried to commit the robbery, the putative drug trafficker never showed up but, as one of the defendants put it, if he had appeared they “would have taken him down” with their “biscuits” – a term the defendants used to refer to firearms.
“Today’s arrests are the latest example of the success that can be achieved through federal, state, and local law enforcement cooperation to combat violence and narcotics trafficking in our communities. The defendants wantonly distributed large quantities of addictive narcotics into our communities, some of which proved deadly. Even the death of a young mother did not stop their drug trafficking – but these arrests will.” Mr. Capers thanked the Queens County District Attorney’s Office for its participation and assistance in the investigation.
Queens County District Attorney Brown stated, “This investigation is just the latest result of a coordinated law enforcement and prosecutorial anti-drug initiative that began soon after I took office more than twenty-five years ago. Since that time, we have targeted hundreds of drug dealers operating in and around public housing developments throughout Queens and have put a significant dent in the drug trafficking which has long troubled the residents of these developments. It is imperative that we stop those who flood our streets and lure our children into lives of crime.”
DEA Special Agent-in-Charge Hunt stated, “As evident in this investigation, local drug crews are just as much a public health threat than overseas drug cartels. As alleged, not only was this violent drug crew selling crack cocaine, oxycodone, and fentanyl from their front doors, but sending fatal doses to areas in West Virginia for resale. Fentanyl abuse is death, and these defendants capitalized on their products’ potency fueling more addiction and death in their own community.”
“This case is a classic example of teamwork among local, state, and federal partners in dealing with criminal activity that knows no geographical boundaries,” said Police Commissioner O'Neill. “Illegal drugs often go hand-in-hand with violence and death. By dealing with these issues through a well-coordinated approach, indictments like these can be successfully obtained.”
The charges announced today are allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted, the federal defendants face maximum sentences of life and defendants Carrillo, Monroe, and a co-conspirator face a minimum sentence of 20 years’ imprisonment for distributing fentanyl that resulted in death. If convicted, the state defendants face up to nine years in prison.
The government’s case is being prosecuted by the Office’s Organized Crime and Gangs Section. Assistant United States Attorneys Andrey Spektor and Lindsay K. Gerdes are in charge of the prosecution. The state charges are being prosecuted by Assistant District Attorney Emily F. Collins, of the Queens District Attorney’s Gang Violence and Hate Crimes Bureau.
The Defendants:
Prosecuted by the United States Attorney’s Office:
TERRELL CARMICHAEL, also known as “Rell”
Age: 31
Long Island City, New YorkEDWARD CARRILLO, also known as “Super Ed”
Age: 43
New York, New YorkJOHNNIE MONROE, also known as “Nut”
Age: 46
Brooklyn, New YorkMICHAEL YOUNG, also known as “Littles”
Age: 32
Long Island City, New YorkProsecuted by the Queens County District Attorney’s Office:
MOHAMED SALEH, also known as “Arab”
Age: 30
Long Island City, New YorkSHAMAR STALLWORTH, also known as “Black”
Age: 31
Long Island City, New YorkE.D.N.Y. Docket No. 16-CR-617 (BMC)
Canadian Deputy Health Minister Impersonator Sentenced to 60 Months’ Imprisonment in $26 Million Fraud SchemeRead the Press Release
BROOKLYN, NY – Earlier today, Howard Leventhal, the President, Chief Executive Officer and Chief Technology Officer of mHealth Technologies Corp., formerly named Neovision USA, Inc. (Neovision), was sentenced by United States District Judge Brian M. Cogan to 60 months’ imprisonment. In December 2013, Leventhal had pleaded guilty to wire fraud and aggravated identity theft for defrauding and attempting to defraud a number of individuals and entities of millions of dollars by falsely claiming that Neovision had a lucrative contract with Canada’s Department of Health (Health Canada) and for stealing the identity of Glenda Yeates, Health Canada’s former Deputy Minister of Health. As part of the sentence, Leventhal was also sentenced to 3 years’ supervised release and ordered to pay $1,350,819.78 in forfeiture and restitution.
The sentence was announced by Robert L. Capers, 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).
“Leventhal used his considerable imagination, non-existent technology, and stolen identities to deceive a number of entities and individuals. Fortunately for investors, his alternate reality, propped up by fabricated bank documents, unraveled and collapsed when he attempted to defraud an undercover FBI agent. Today’s sentence sends a strong message to those who use lies and deceit to defraud investors that they will be held accountable for their crimes,” stated United States Attorney Capers. Mr. Capers expressed his appreciation to the FBI for their hard work and dedication over the course of this investigation and prosecution and thanked the Royal Canadian Mounted Police (RCMP) and Health Canada for their significant cooperation and assistance in the investigation.
“Stranger than fiction truly applies in this case with the subject using a popular sci-fi movie as the inspiration to scam millions of dollars from people. He also forged the signature of the Canadian deputy health minister, which not many people would question as legitimate. The FBI and our law enforcement partners do all we can every day to stop these fraudsters, but we can’t do it alone. This investigation serves as a warning to anyone thinking about investing any of their money, do the research and if everything doesn’t add up, we need them to call us,” stated FBI Assistant Director-in-Charge Sweeney.
According to court filings and facts presented at the sentencing hearings, Leventhal told potential investors that Neovision had written agreements with Health Canada, whereby Neovision would provide Health Canada with “Heltheo’s McCoy Home Health Tablet,” a device ostensibly named after the fictional Dr. Leonard McCoy of TV’s Star Trek series.[1] The written agreement provided by Leventhal to potential investors was purportedly signed by Glenda Yeates, Canada’s former Deputy Health Minister, on behalf of the government of Canada. For example, in May 2012, Leventhal used this agreement and entered into a factoring agreement with Paragon Financial Group, Inc. (Paragon”, a Florida company, whereby Paragon advanced Neovision $800,000 in exchange for Paragon’s right to collect a larger sum of money purportedly owed to Neovision by Health Canada. Leventhal also used the purported agreement with Health Canada to solicit more than $26 million from other potential investors, including an undercover law enforcement agent posing as a high net worth individual.
Contrary to Leventhal’s representations, (1) there was no agreement between Health Canada and Neovision, (2) Health Canada did not owe Neovision any money, and (3) Deputy Health Minister Glenda Yeates’ signature on the agreement was a forgery. To conceal his scheme, Leventhal assumed the identities of Health Canada representatives, including that of former Deputy Health Minister Glenda Yeates. Further, Leventhal created and used domain names, telephone numbers, and email addresses that closely resembled those actually used by Health Canada. For example, Leventhal created and used healthcanada.com.co and hc-sg-gc.ca in place of Health Canada’s true domain name hc-sc.gc.ca.
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The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorney Winston M. Paes is in charge of the prosecution.
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The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit ww.StopFraud.gov.
The Defendant:
HOWARD LEVENTHAL
Age: 60
Grayslake, IllinoisE.D.N.Y. Docket No. 13-CR-695 (BMC)
[1] Leventhal claimed that Heltheo’s McCoy Home Health Tablet can instantaneously and effectively deliver detailed patient data to physicians and other licensed medical care providers.
New York Man Arrested for Attempting to Provide Material Support to ISILRead the Press Release
A criminal complaint was unsealed today in federal court in the Eastern District of New York charging Mohamed Rafik Naji, 37, of Brooklyn, New York, with attempting to provide material support to the Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization. Naji was arrested earlier today at his home in Brooklyn, New York, and his initial appearance is scheduled for this afternoon before U.S. Magistrate Judge Robert M. Levy at the U.S. Courthouse at 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Acting Assistant Attorney General for National Security Mary B. McCord, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director in Charge William F. Sweeney of the FBI’s New York Field Office and Commissioner James P. O’Neill of the New York City Police Department.
“As alleged, the defendant attempted to join ISIL and support its terrorist objectives,” stated U.S. Attorney Capers. “We will continue to identify and prosecute individuals like Naji who seek to provide support to foreign terrorist organizations that endanger our citizens and partners around the world.” Mr. Capers extended his grateful appreciation to the FBI’s Joint Terrorism Task Force, which comprises a number of federal, state, and local agencies from the region.
“As we alleged in our complaint today, Naji has shown continued support to ISIL, beginning in 2014 with social media posts and ultimately traveling to Yemen in March 2015 where he claimed his allegiance to ISIL stating, ‘I belong to Islamic state only.’ He continued to express support for ISIL and violent jihad upon his return in the U.S. months later. Terrorism threats, like Naji, are only mitigated through the joint efforts of law enforcement to protect our communities,” said Assistant Director in Charge Sweeney.
“As alleged, the defendant expressed a devotion to join ISIL through both conversation and social media, traveling to Yemen in an effort to join their ranks,” said Police Commissioner O’Neill. “Detectives and agents on the Joint Terrorism Task Force uncovered the alleged terrorist objectives of the defendant. I want to commend their work in continually protecting New York City, and our nation, from those who seek to harm us.”
As set forth in court documents, Naji is a 37-year-old legal permanent resident of the U.S. Beginning in December 2014, through social media posts, Naji expressed his support of ISIL by, among other posts, sharing a video of an ISIL leader advocating violence against civilian targets.
According to the complaint, in March 2015, Naji traveled from New York to Yemen in an effort to join ISIL’s ranks. While in Yemen, Naji persistently tried to travel to areas controlled by ISIL. In emails to an associate in the U.S., Naji explained that he was on his fifth try to reach ISIL-controlled territory. He also sent his associate media files with sounds of gunfire and claimed to have been almost killed by the “army.” Following these email exchanges, Naji instructed his associate to “erase all ur messages,” “even from your trash.”
While in Yemen, Naji engaged in online conversations with a confidential source. During those conversations, Naji instructed the confidential source that in order to join “dawlat islam,” (ISIL), he should travel to Hadramout, an area in southern Yemen. In one of the online conversations with the confidential source, Naji proclaimed his allegiance to ISIL stating, “I belong to Islamic state only,” according to the complaint.
Naji returned to the U.S. in September 2015. Since his return, he has continued to express his support for ISIL and violent jihad. Following the deadly attack in Nice, France in July 2016, Naji expressed support for a similar attack in Time Square.
The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by Assistant U.S. Attorneys Melody Wells and Ian Richardson of the National Security & Cybercrime Section of the U.S Attorney’s Office, with assistance from Trial Attorney Brian Morgan of the National Security Division’s Counterterrorism Section.
Consultant to Iranian Mission to the United Nations Pleads Guilty to Filing False Income Tax Return and Conspiring to Violate Sanctions LawsRead the Press Release
Ahmad Sheikhzadeh, 60, a U.S. citizen and resident of New York City, New York, pleaded guilty to filing a false income tax return that substantially understated the amount of cash salary the defendant received from Iran’s Permanent Mission to the United Nations (IMUN) and conspiring to facilitate the transfer of funds to Iran without the required license from the Treasury Department in violation of the International Emergency Economic Powers Act (IEEPA).
The announcement was made by Acting Assistant Attorney General for National Security Mary B. McCord, U.S. Attorney Robert L. Capers for the Eastern District of New York, Assistant Director in Charge William F. Sweeney, Jr. for the FBI’s New York Field Office and Special Agent in Charge Shantelle Kitchen for the IRS Criminal Investigation Division in New York. The plea proceeding took place before U.S. District Judge Pamela K. Chen in federal court in Brooklyn.
According to court filings and facts presented during the plea proceeding, beginning in January 2008, Sheikhzadeh was employed as a consultant to the IMUN and received a regular salary, in cash, approximately once per month, through an intermediary who was an official at the IMUN. Sheikhzadeh was not a declared IMUN official. From 2008 through 2012, Sheikhzadeh filed personal income tax returns that substantially understated the amount of income he received from his work for the IMUN. In addition, distinct from his work for the IMUN, Sheikhzadeh provided money remitting (“hawala”) services to co-conspirators in the U.S. to facilitate investments in Iran and to direct disbursements from Iranian bank accounts. Sheikhzadeh engaged in these money transfers without a license from the Treasury Department’s Office of Foreign Assets Control in violation of IEEPA.
Sheikhzadeh will be sentenced on March 30, 2017. When sentenced, the defendant faces up to 23 years in prison. The defendant has agreed to pay over $147,000 in restitution and forfeiture. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.
This case is being prosecuted by Assistant U.S. Attorneys Tali Farhadian and Peter Baldwin from the Office’s Public Integrity and National Security and Cybercrime Sections, and Brian Morris from the Asset Forfeiture Section. Assistance was also provided by Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section.