Eastern District of New York
Press releases recorded for this federal judicial district.
United States Enters into Consent Judgment with New York City to Ensure That Individuals in the City’s Homeless Family Shelter System Who Are Deaf or Hard of Hearing Receive Necessary Aids and ServicesRead the Press Release
Robert L. Capers, United States Attorney for the Eastern District of New York, today announced the filing of a Complaint and Consent Judgment in United States v. City of New York, Civil Action No. CV-15-5986 to settle violations of the Americans with Disabilities Act, 42 U.S.C. §§ 12134-34 (the ADA), in the City’s homeless shelter system.
In its complaint, the United States alleges that the City of New York denied sign language interpreters and other auxiliary aids and services to deaf and hard of hearing individuals in its homeless shelter system. The complaint alleges that workers at DHS’ homeless family shelter intake facility often attempted to communicate through the use of handwritten notes or by relying on family members to provide sign language interpretation. In one case, workers at the City’s family shelter intake facility relied on the four year-old daughter of RK[1], a deaf single mother, to interpret. The complaint also alleges that the failure to provide necessary auxiliary aids and services, including visual doorbells and fire alarms, endangered the lives of hearing-impaired individuals and denied them the services provided to other shelter residents, such as job and housing placement assistance.
Under the terms of the settlement, the City has agreed to take appropriate steps to ensure effective communication with applicants for family shelter who are deaf or hard of hearing, including providing qualified sign language interpretation services. The City has also agreed to retrofit at least 10 dwelling units for families with children, six units for adult families, 200 beds for single men, and 100 beds for single women with accessible features, including visual alarms and doorbells. Employees within the homeless shelter system who interact regularly with residents or applicants for shelter will receive training in effective communication. The City will pay RK $2,500.00.
“The ADA requires the City to communicate effectively and provide auxiliary aids and services to the deaf or hard of hearing,” stated U.S. Attorney Capers. “This settlement ensures that vulnerable residents in the City’s homeless shelter system receive appropriate City services.”
The United States’ action was filed contemporaneously with settlement of Ihetu et al. v. City of New York et al., Civil Action No. CV-13-01732 (MKB/VMS), in which a mother who is deaf and her three children alleged similar ADA violations against the City and homeless family shelter operators.
The United States’ claims were litigated by Assistant United States Attorneys Kelly Horan Florio and Michael J. Goldberger.
[1] RK is identified by initials only to protect her confidentiality.
Brooklyn Man Sentenced to 10 Years for Sexually Abusing A MinorRead the Press Release
Earlier today, Andrew Goodman was sentenced by Judge Margo K. Brodie in United States District Court in Brooklyn, New York, to 10 years imprisonment, to be followed by 10 years of supervised release, for soliciting and enticing a minor to engage in sexual conduct. Based on his conviction, Goodman also will be required to register as a sex offender. The victim was between 12 and 15 years of age during the time of the abuse.
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego G. Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“Goodman enticed his young victim with gifts and plied the victim with alcohol. We will take every measure to protect our nation’s most vulnerable individuals from predators such as he,” stated Acting United States Attorney Currie. Mr. Currie extended his grateful appreciation to the Federal Bureau of Investigation, New York Field Office, the agency responsible for leading the government’s investigation, and thanked the Kings County District Attorney’s Office for its assistance in this case.
Goodman began his sexual abuse of the victim in 2006. Over the next several years, Goodman sexually assaulted the victim several times a week. Goodman was previously convicted in New York State court of 48 counts of sexually abusing the same minor, as well as a second victim, and served two years in prison.
The government’s case is being handled by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Tyler J. Smith and Ameet Kabrawala are in charge of the prosecution.
This case was brought as part of Project Safe Childhood, a nationwide initiative to protect children by combatting the sexual exploitation and abuse of minors. Led by the United States Attorneys’ Offices around the country, Project Safe Childhood marshals federal, state, and local resources to apprehend and prosecute individuals who exploit children and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc.
The Defendant:
ANDREW GOODMAN
Age: 31
Brooklyn, New YorkE.D.N.Y. Docket No. 12-CR-614 (MKB)
Former Executives of School Bus Company Indicted for Bank Fraud, Conspiracy to Commit Bank Fraud, and Payroll Tax Fraud ConspiracyRead the Press Release
Yesterday, a grand jury returned a five-count indictment in federal court in Brooklyn charging Laraine Castellano and her sons, Thomas Scialpi and Dennis Scialpi, with fraud committed in connection with school bus companies they owned and operated that provided transportation to children attending New York City Public Schools. All three defendants are charged with bank fraud and conspiring to commit bank fraud in connection with over $14 million in bank loans made to the bus companies they controlled. In addition, Castellano and Thomas Scialpi are charged with conspiring to defraud the United States of over $10 million in payroll taxes for employees of the bus companies. Thomas Scialpi is also charged with bank fraud and conspiring to commit bank fraud in connection with a $700,000 loan he used to purchase a yacht. The defendants surrendered this morning and were arraigned today at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The indictment was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York; Thomas E. Bishop, Acting Special Agent in Charge, Internal Revenue Service-Criminal Investigation (IRS-CI); Cheryl Garcia, Special Agent in Charge, United States Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations in New York; and Jonathan Kay, Regional Director, New York Regional Office, Employee Benefits Security Administration, United States Department of Labor.
As alleged in the indictment, Castellano, Thomas Scialpi, and Dennis Scialpi owned various school bus companies (referred to in the indictment as the United Entities) that provided transportation to children attending New York City Public Schools between 2004 and 2011. During that period, the New York City Department of Education paid the United Entities approximately $310 million for their transportation services.
The 2004 and 2007 Bank Frauds
As alleged, in 2004 at the direction of the defendants, the United Entities applied to Comerica Bank for a $10 million loan (the 2004 Loan). In support of its loan application, the United Entities submitted to Comerica false and fraudulent financial statements and corporate income tax returns. The primary purpose of the 2004 Loan was to establish an employee stock ownership plan (ESOP) for the benefit of non-union employees of the United Entities. On or about October 30, 2007, the United Entities executed another fraudulent loan agreement with Comerica for an additional $4.5 million (the 2007 Loan), related to the ESOP. However, although the United Entities formally established the ESOP by filing required forms with the United States Department of Labor, it never made any of the required disclosures to their employees and never funded the ESOP as promised. As a result, nearly all of the United Entities employees who were the intended beneficiaries of the ESOP were unaware that it existed, and those employees never received the benefits to which they were entitled under the ESOP.
In addition, between June 2004 and July 2011, at the direction of the defendants, the United Entities submitted materially false and fraudulent quarterly financial statements to Comerica that misrepresented its financial condition in order to conceal that the United Entities were violating the terms of the agreements for the 2004 Loan and the 2007 Loan. The United Entities ultimately defaulted on their repayment obligations for both loans.
The 2007 Yacht Loan
In 2007, Thomas Scialpi applied for a $700,615 loan from Soverign Bank for the purpose of purchasing a yacht. In support of the loan, Scialpi allegedly directed another individual to create false corporate tax returns for one of the United Entities and fictitious W-2 forms. Scialpi submitted these fabricated documents to Soverign, and Soverign approved the loan and disbursed $700,615 to Scialpi. Scialpi ultimately defaulted on the loan.
The Payroll Tax Fraud Conspiracy
As alleged, Laraine Castellano and Thomas Scialpi also created purported professional employer organizations, or PEOs, as part of a conspiracy to defraud the United States of more than $10 million in payroll taxes they owed for wages paid to the United Entities employees. A PEO is an entity created to perform some or all of a company’s federal payroll tax withholding, reporting, and payment functions. In 2008 and 2009, Castellano created and controlled entities that purported to be PEOs to handle payroll taxes for United Entities’ employees. In 2010, the two defendants created and controlled additional entities that purported to be PEOs for United Entities’ employees. Castellano and Scialpi were required to collect, account for, and pay to the IRS payroll taxes that were due and owing on wages of United Entities employees. However, they ensured that the funds transferred from the United Entities to the purported PEOs would be insufficient to satisfy the United Entities’ payroll tax obligations. When the shortfall in payroll taxes was discovered by the IRS, Castellano and Thomas Scialpi created yet another purported PEO to continue the scheme. Through these purported PEOs, the two defendants conspired to defraud the United States of more than $10 million in payroll taxes.
“Companies owned and operated by Laraine Castellano, Thomas Scialpi, and Dennis Scialpi received more than $300 million from city contracts to transport children to New York City public schools. But that was not enough for these defendants. As alleged, they used their companies to defraud the federal government and financial institutions of tens of millions of dollars, all to enrich themselves. We will continue to work closely with our law enforcement partners to protect taxpayers and to vigorously prosecute such criminal activity,” stated Acting United States Attorney Currie.
“The willful failure of a business owner to collect, account for, and pay over payroll taxes is a serious crime investigated by IRS-Criminal Investigation,” said Acting Special Agent in Charge Bishop. “As alleged, when the defendants created the purported PEOs to circumvent their payroll tax obligations, they potentially deprived their workers of future benefits, the U.S. Government of much needed tax revenue, and effectively left it to the taxpaying public to make up the difference.”
“Employee Stock Ownership Plans are intended to provide retirement income for employees. We will not countenance individuals using the guise of an ESOP to enrich themselves and deprive employees of retirement benefits while allegedly committing bank fraud and other crimes,” said Regional Director Kay.
If convicted of all counts, Castellano faces a maximum sentence of 65 years imprisonment, Thomas Scialpi faces a maximum sentence of 125 years imprisonment, and Dennis Scialpi faces a maximum sentence of 60 years imprisonment.
The government’s case is being handled by the Office’s Public Integrity Section. Assistant United States Attorneys Marisa Seifan, Kevin Trowel, and Lan Nguyen are in charge of the prosecution.
The Defendants:
LARAINE CASTELLANO
Age: 72
Staten Island, New YorkTHOMAS SCIALPI
Age: 51
Saddle River, New JerseyDENNIS SCIALPI
Age: 44
Staten Island, New YorkE.D.N.Y. Criminal Docket No. 15 CR 523
Violent Home Invasion Robbery Crew Member Sentenced to 272 Months for Conspiring to Commit Drug Robberies, Conspiring to Distribute Cocaine and Heroin, and Illegally Using A FirearmRead the Press Release
Earlier today in Brooklyn federal court, Marcos Rodriguez, who committed a string of drug robberies and related crimes, was sentenced to 272 months of imprisonment. The sentencing proceeding was held before U.S. District Judge Sandra L. Townes. Rodriguez was convicted in July 2011 after a two week jury trial.
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York.
Rodriguez was a member of a violent robbery crew responsible for more than 100 robberies of narcotics traffickers in the New York metropolitan area and elsewhere that netted more than 250 kilograms of cocaine and $1 million in drug proceeds. Beginning in approximately January 2001, crew members posing as law enforcement officers staged fake arrests of the traffickers and then forcibly seized the traffickers’ contraband. The crew members restrained victims with handcuffs, rope, or duct tape, often brandished firearms and physically assaulted victims, sold the stolen drugs, and divided the proceeds among themselves.
Rodriguez personally participated in at least 15 separate robberies and attempted robberies. He typically conducted surveillance, acted as a lookout, and helped to sell the seized narcotics. The robberies and attempted robberies in which Rodriguez directly participated involved at least 54 kilograms of cocaine, 1.3 kilograms of heroin, and approximately $60,000 in drug proceeds.
In announcing the sentence, Mr. Currie extended his grateful appreciation to the Drug Enforcement Administration, New York Division; U.S. Immigration and Customs Enforcement, Homeland Security Investigations; and the New York City Police Department.
The government’s case is being prosecuted by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Sylvia S. Shweder, Alexander Solomon, and Claire Kedeshian are in charge of the prosecution.
The Defendant:
MARCOS RODRIGUEZ
Age: 47
New York, NYE.D.N.Y. Docket No. 08-CR-242 (SLT)
Two Hezbollah Associates Arrested on Charges of Conspiring to Launder Narcotics Proceeds and International Arms TraffickingRead the Press Release
Earlier today, Iman Kobeissi, also known as “Iman Kobeissu” and “Iman Kobreissi-Ghadry,” was arraigned at the federal courthouse in Brooklyn, New York, on money laundering conspiracy charges and unlicensed firearms dealing conspiracy for laundering funds she believed to be drug money, and for arranging for the sale of thousands of firearms, including military assault rifles, machine guns, and sniper rifles, to criminal groups in Iran and Lebanon, including Hezbollah, a designated terrorist organization. [1] Kobeissi was arrested yesterday in Atlanta, Georgia. An indictment was also unsealed today against Joseph Asmar, an alleged Hezbollah associate who is charged with money laundering conspiracy. Asmar, Kobeissi’s alleged co-conspirator, was arrested in Paris, France, on a provisional arrest warrant issued from the Eastern District of New York.
The charges were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Carl J. Kotowski, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New Jersey Field Division.
According to court filings, the investigation, a DEA sting operation, determined that between September 2013 and October 2015, the defendants and other Hezbollah-connected associates conspired to conduct monetary transactions to assist individuals, who they believed to be drug traffickers, in concealing their drug money. In addition to offering to launder narcotics proceeds for a DEA undercover agent posing as a narcotics trafficker, Kobeissi informed him that she had associates in Hezbollah who were seeking to purchase cocaine, weapons, and ammunition. Asmar, allegedly an attorney with high-level connections at various banks throughout the Middle East and Europe, discussed potential narcotics transactions with the undercover DEA agent and suggested that he could use his connections with Hezbollah to provide security to narcotics shipments. Kobeissi and Asmar explained that they could arrange for planes from South America laden with multi-ton shipments of cocaine to land safely in Africa as a transit point before the drugs were smuggled to the United States or Europe.
In a series of recorded conversations, Kobeissi and Asmar discussed their money laundering network that spanned the globe and provided money laundering services to drug traffickers, terrorist organizations, and other criminal groups in Lebanon, Iran, France, Belgium, Bulgaria, Benin, the Democratic Republic of the Congo, Ghana, Nigeria, Cypress, and cities across the United States. Asmar claimed that, with his connections in the financial world, he could launder any sum of illegal money. During the course of the investigation, undercover agents provided approximately $400,000 in purported drug proceeds to Kobeissi and Asmar, who laundered the money back to the United States in exchange for a commission. As alleged, the defendants conspired to launder a total of $8 million in illicit funds on behalf of purported South and Central American drug trafficking organizations.
Kobeissi also allegedly arranged to obtain firearms and heavy weapons for her associates in Hezbollah and other independent criminal groups in Iran. During recorded conversations between Kobeissi and the undercover DEA agent, Kobeissi stated that she had customers in Iran who would like to purchase a variety of firearms and blue prints for “heavy weaponry.” In one list Kobeissi provided to the undercover agent containing a request for firearms for her Iran-based customer, Kobeissi included an order for more than 1,000 military-style assault rifles, including M200 sniper rifles, M4 carbine rifles, and Objective Individual Combat Weapons, as well as 1,000 Glock handguns. In another communication, Kobeissi attempted to obtain thousands of handguns for her Hezbollah associates. In recorded conversations between Kobeissi and the undercover DEA agent, Kobeissi also discussed the potential for obtaining aircraft parts for her customers in Iran in violation of U.S. sanctions. In those recordings Kobeissi can be heard stating that they had to hurry and obtain the aircraft parts while there were still sanctions against Iran so they could earn additional money for smuggling in the sanctioned parts.
Kobeissi was arrested on October 8, 2015, following a meeting in Atlanta with a criminal associate allegedly discussing the smuggling of blood diamonds out of Africa as a method to launder millions of dollars in drug proceeds.
“This investigation demonstrates the increasingly global reach of criminal organizations and marks an important victory in disrupting a vast money laundering, drug trafficking, and international arms trafficking network that spanned multiple continents and attempted to provide a pipeline of dangerous weapons to a designated terrorist organization,” stated Acting United States Attorney Currie. “Through our partnerships with law enforcement agencies around the world, we will continue to target and dismantle transnational criminal organizations.” Mr. Currie thanked the Department of Justice, Office of International Affairs; DEA New Jersey Field Division; DEA Atlanta Field Office; and DEA France Country Office for their invaluable assistance.
DEA Special Agent-in-Charge Kotowski said, “As alleged, this investigation shows the true relationship between narcotics trafficking and terrorist organizations. There isn’t any part of the world that the men and women of DEA would not go to track down such criminals. Today, the world is a little bit safer because of the arrest of these two individuals.”
Kobeissi was arraigned this afternoon before United States Magistrate Judge Cheryl L. Pollak at the federal courthouse in Brooklyn and remanded without bail.
The charges announced today are allegations, and the defendants are presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Steven L. Tiscione and Gina M. Parlovecchio are in charge of the prosecution.
The Defendants:
Iman Kobeissi
Age: 50
Beirut, LebanonJoseph Asmar
Age: 42
Beirut, LebanonE.D.N.Y. Docket No. 15-CR-491 (ENV); 15-M-962
[1] Hezbollah has been designated as a foreign terrorist organization by the United States Department of State since 1995.
Two Long Island Men Arrested for Defrauding Homeowners in Loan Modification SchemeRead the Press Release
An eleven-count indictment was unsealed today in United States District Court for the Eastern District of New York charging David Gotterup, also known as “David Gott,” and Jason Green with conspiracy to commit mail fraud, wire fraud, and bank fraud in connection with a scheme to defraud homeowners who were attempting to modify their mortgage loans, and related mail fraud counts. The indictment also charged Gotterup with conspiracy to commit wire and bank fraud in connection with a scheme to improperly obtain mortgage loans, and related bank fraud counts, disaster loan fraud, and aggravated identity theft.
The charges were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); Christina Scaringi, Special Agent-in-Charge, U.S. Department of Housing and Urban Development, Office of Inspector General (HUD/OIG); and Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP).
According to court filings, from 2008 to 2012, Gotterup and Green defrauded distressed homeowners who were seeking relief through government mortgage modification programs by convincing more than a thousand homeowners to pay thousands of dollars each in advance fees based on false promises. Gotterup also defrauded financial institutions and the Federal Housing Administration by obtaining mortgages on properties in Brooklyn and Queens by falsifying loan applications and providing false documentation to support the loan applications. In addition, Gotterup used another person’s social security number in connection with these schemes.
After Hurricane Sandy in 2012, Gotterup also applied for a low-interest disaster relief loan from the U.S. Small Business Administration (SBA), allegedly using false information to support the application. As a result, Gotterup received a loan of $113,900 from the SBA. Instead of using the funds to repair property damaged in the disaster, Gotterup used the money to pay for personal expenses, including wedding-related expenses in Cancun, Mexico.
“These men defrauded distressed homeowners and banks to line their pockets,” stated Acting United States Attorney Currie. “We are committed to ending these types of predatory fraud schemes.” Mr. Currie thanked the U.S. Small Business Administration and the Staten Island District Attorney’s Office for its assistance.
“The charges announced today describe a scheme in which the defendants allegedly benefitted from fraudulently obtained proceeds while the cost was transferred to ordinary citizens seeking financial assistance. They are alleged to have simultaneously defrauded the government by unjustly obtaining disaster relief benefits. Today our message is clear: those who exploit gaps in the mortgage industry, banking sector, and government assistance programs will be made to face the error of their ways,” stated FBI Assistant Director-in-Charge Rodriguez.
“We want to send a message to the real estate industry that my office, along with our law enforcement partners, will expend every resource to fight the growing trend of foreclosure rescue frauds, short sale frauds, and disaster-related frauds that ultimately victimize our struggling homeowners and the U.S. taxpayer,” said HUD OIG Special Agent-in-Charge Scaringi.
“Earlier today SIGTARP agents along with other law enforcement agents arrested Jason Green and David Gotterup, who are charged with a scheme in which they allegedly took advantage of homeowners devastated by the financial crisis by fraudulently misleading those seeking assistance through government mortgage modification programs, including HAMP,” said Special Inspector General Romero for the Troubled Asset Relief Program (SIGTARP). “Gotterup and Green purportedly took thousands of dollars in upfront fees from homeowners, making false promises to provide mortgage modification services. Homeowners were led to believe that they had retained the legal services of an attorney who would handle the application and negotiations with their banks but in reality little or nothing was done to modify their mortgages. SIGTARP will continue to aggressively pursue those who commit TARP-related crimes.”
The defendants are scheduled to be arraigned this afternoon before United States Magistrate Judge Orenstein at the federal courthouse in Brooklyn. The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
This prosecution was the result of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. 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, visit http://www.StopFraud.gov.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Unit. Assistant United States Attorneys Sylvia Shweder and Bonni Perlin are in charge of the prosecution.
The Defendants:
DAVID GOTTERUP
Age: 35
Oceanside, NYJASON GREEN
Age: 35
Oceanside, NYE.D.N.Y. Docket No. 15-CR-498
Department of Justice Obtains Settlement of Disability-Based Discrimination Allegations at Three Rental Complexes on Long Island, New YorkRead the Press Release
Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division, and Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, today announced the filing of a consent judgment and order in U.S. v. Sayville Development, et al. to settle alleged violations of the Fair Housing Act.
In its complaint which was filed in August 2007, the Department of Justice alleged that defendants engaged in a pattern or practice of discrimination against individuals with disabilities in the design and construction of a rental-housing complex for senior citizens on Long Island, New York, called Sayville Commons Apartments. Subsequent investigation revealed that the same defendants had designed and constructed two additional complexes, Broadway Knolls Apartments in Holbrook, New York, and Oak Creek Commons Condominiums in Oakdale, New York. All three were developed by Paul Aniboli and designed by Stephen Fellman, an architect. The consent order, which still must be approved the U.S. District Court for the Eastern District of New York, provides a comprehensive plan to remedy the violations at the three complexes.
“The requirement that new multifamily housing be built in a manner that is accessible to persons with disabilities has been in place since 1991,” said Principal Deputy Assistant Attorney General Gupta. “We will continue to enforce this protection vigorously so that persons with disabilities are free to live where they choose without facing unnecessary and unlawful barriers.”
“The Fair Housing Act protects the rights of all individuals, including persons with disabilities, to be free from discrimination,” said Acting U.S. Attorney Currie. “This settlement will ensure that the apartments in these complexes are accessible to the people living there, so they can fully use and enjoy their homes.”
The accessible and adaptable design provisions of the Fair Housing Act require that ground level apartment units or units that are elevator accessible and are constructed after 1991 be accessible to individuals with disabilities.
Litigation in this case revealed hundreds of violations of the Fair Housing Act’s requirement that apartments in the complex be designed and constructed to be accessible to and usable by individuals with disabilities. Violations include a lack of wheelchair accessible routes between dwelling units and common areas, excessively steep cross slopes and running slopes on such accessible routes, kitchen sinks and ranges that were inaccessible, outlets and thermostats that were too high or too low and door thresholds that were too high.
The consent order provides a comprehensive plan to remedy the violations at the three complexes. It requires defendants to perform substantial specific retrofits, including fixing the accessible routes, high door thresholds and out-swinging bathroom doors, inaccessible thermostats and outlets, and inaccessible kitchen ranges. In addition, defendants have agreed to be bound by the terms of the consent order for three years, which provides, in part, that they will complete a Fair Housing Act training course and report to the United States any new construction in which they are involved. The consent order also provides for relief for four aggrieved parties, who, due to disability, had difficulty moving about their own apartments or throughout the complex because of the Fair Housing Act violations. Defendants will pay $32,500 to compensate victims, who include current and former tenants, and a non-profit fair housing organization, Long Island Housing Services, whose investigation led to this lawsuit. In addition, the defendants must set aside $5,000 for certain retrofits that will be made at a tenant’s request, and pay the United States a civil penalty of $2,500.
The federal Fair Housing Act prohibits discrimination in housing based on race, color, religion, national origin, sex, disability and familial status. More information about the Civil Rights Division and the laws it enforces is available at www.justice.gov/crt. Persons who believe that they have experienced unlawful housing discrimination may contact the United States Attorney’s Office for the Eastern District of New York at 718-254-7000 or by email at [email protected], or the Justice Department Civil Rights Division at 1-800-896-7743, or by e-mail at [email protected], and or contact the Department of Housing and Urban Development at 1-800-669-9777.
The case is being prosecuted by Assistant U. S. Attorneys Diane C. Leonardo and Rachel G. Balaban of the Eastern District of New York, with assistance from the Department of Justice’s Civil Rights Division.
Department of Justice Obtains Settlement of Disability-Based Discrimination Allegations at Three Rental Complexes on Long IslandRead the Press Release
Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division, today announced the filing of a consent judgment and order in United States v. Sayville Development, et al., Civil Action No 07-CV-3622 (JFB/ARL), to settle alleged violations of the Fair Housing Act.
In its complaint, the United States alleged that defendants engaged in a pattern or practice of discrimination against individuals with disabilities in the design and construction of a rental housing complex for senior citizens on Long Island, New York, called Sayville Commons Apartments. Subsequent investigation revealed that the same defendants had designed and constructed two additional complexes, Broadway Knolls Apartments in Holbrook, New York, and Oak Creek Commons Condominiums in Oakdale, New York.[1] All three were developed by defendant Paul Aniboli and designed by defendant Stephen Fellman, an architect. The consent order, which still must be approved the U.S. District Court for the Eastern District of New York, provides a comprehensive plan to remedy the violations at the three complexes.
“The Fair Housing Act protects the rights of all individuals, including persons with disabilities, to be free from discrimination. This settlement will ensure that the apartments in these complexes are accessible to the people living there, so they can fully use and enjoy their homes,” said Acting U.S. Attorney Currie.
“The requirement that new multifamily housing be built in a manner that is accessible to persons with disabilities has been in place since 1991,” said Principal Deputy Assistant Attorney General Gupta. “We will continue to enforce this protection vigorously, so that persons with disabilities are free to live where they choose without facing unnecessary and unlawful barriers.”
The accessible and adaptable design provisions of the Fair Housing Act require that ground level apartment units or units that are elevator accessible and are constructed after 1991 be accessible to individuals with disabilities.
Litigation in this case revealed hundreds of violations of the Fair Housing Act’s requirement that apartments in the complex be designed and constructed to be accessible to and usable by individuals with disabilities. Violations include a lack of wheelchair accessible routes between dwelling units and common areas, excessively steep cross slopes and running slopes on such accessible routes, kitchen sinks and ranges that were inaccessible, outlets and thermostats that were too high or too low, and door thresholds that were too high.
The consent order provides a comprehensive plan to remedy the violations at the three complexes. It requires defendants to perform substantial specific retrofits, including fixing the accessible routes, high door thresholds and out-swinging bathroom doors, inaccessible thermostats and outlets, and inaccessible kitchen ranges. In addition, defendants have agreed to be bound by the terms of the consent order for three years, which provides, in part, that they will complete a Fair Housing Act training course and report to the United States any new construction in which they are involved. The consent order also provides for relief for four aggrieved parties, who, due to disability, had difficulty moving about their own apartments or throughout the complex because of the Fair Housing Act violations. Defendants will pay $40,000 toward compensation for the aggrieved parties, including Long Island Housing Services, a non-profit fair housing organization whose investigation led to this lawsuit, a civil penalty, and a retrofit fund to be used for certain retrofits made at a tenant’s request.
The federal Fair Housing Act prohibits discrimination in housing based on race, color, religion, national origin, sex, disability and familial status. More information about the Civil Rights Division and the laws it enforces is available at www.justice.gov/crt. Persons who believe that they have experienced unlawful housing discrimination may contact the United States Attorney’s Office for the Eastern District of New York at 718-254-7000 or by email at [email protected], or the Justice Department Civil Rights Division at 1-800-896-7743, or by e-mail at [email protected], and or contact the Department of Housing and Urban Development at 1-800-669-9777.
The United States’ claims were litigated by Assistant U.S. Attorneys Diane C. Leonardo and Rachel G. Balaban, with assistance from the Department of Justice’s Civil Rights Division.
[1] Sayville Commons Apartments are located at 400 Adams Way, Sayville, NY; Broadway Knolls Apartments are located at 2200 Dolphin Lane, Holbrook NY; and Oak Creek Commons Condominiums are located on Oakdale-Bohemia Road, Oakdale, NY.
Leader of Oxycodone Ring Sentenced to 15 Years’ Imprisonment for His Leadership in Long Island Oxycodone Distribution RingRead the Press Release
Earlier today, at the federal courthouse in Central Islip, New York, Cedric Moss, was sentenced to 15 years in prison by United States District Judge Joanna Seybert. Moss pleaded guilty to conspiring to illegally distribute oxycodone, a highly addictive prescription pain killer, on October 9, 2014.
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and James J. Hunt, Special Agent-in-Charge, Drug Enforcement Administration.
“Cedric Moss masterminded a criminal organization that for over a year forged prescriptions for a highly addictive and dangerous prescription drug, fueling an increasing addiction crisis on Long Island and elsewhere. Today’s sentence serves as a reminder to those who flood our streets with illegally obtained drugs that they will be prosecuted to the full extent of the law,” stated Acting U.S. Attorney Kelly T. Currie. Mr. Currie extended his grateful appreciation to the DEA, the agency responsible for leading the government’s investigation, and thanked the New York City Office of the Special Narcotics Prosecutor for its assistance in this case.
DEA Special Agent in Charge Hunt stated, “Cashing in on a national health crisis, Cedric Moss oversaw the diversion of millions of dollars’ worth of diverted pain medication throughout Long Island. Today’s sentencing demonstrates the will of law enforcement to continue to investigate and arrest those who illegally distribute opioids in our communities.”
As detailed in the defendant’s guilty plea allocution and court filings, between January 2013 and February 2014, Moss and his organization illegally obtained and sold more than 95,000 oxycodone 30 mg tablets, which were trafficked throughout Long Island, New York City, and the East Coast. The organization illegally obtained stolen blank prescription pads to create forged prescriptions using computer software and printers. More than 190 “runners” then posed as patients and filled the prescriptions at various pharmacies. Previously, three members of Moss’s organization pleaded guilty to felony charges for their participation in this scheme.
Moss’s conviction is the latest in a series of federal prosecutions by the United States Attorney’s Office for the Eastern District of New York as part of the Prescription Drug Initiative. In January 2012, this Office and the DEA, in conjunction with the five District Attorneys in this jurisdiction, 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 Prescription Drug 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 so-called opioid analgesics. So far, the Initiative has brought over 160 federal and local criminal prosecutions, including the prosecution of 16 health care professionals, taken civil enforcement actions against a hospital, a pharmacy, and a pharmacy chain, removed prescription authority from numerous rogue doctors, 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. These prosecutions are the product of investigations led by the DEA’s Tactical Diversion Squad, comprising agents and officers of the DEA, Nassau County Police Department, Rockville Centre Police Department, and Port Washington Police Department.
The government’s case is being prosecuted by the Office’s Long Island Criminal Division. Assistant United States Attorney Michael P. Canty is in charge of the prosecution.
The Defendant:
CEDRIC MOSS
Age: 48
Residence: Jamaica, New YorkE.D.N.Y. Docket No. 14-CR-147 (JS)
Three Charged in Sweepstakes Fraud Scheme That Used Hamptons-Based Bank AccountsRead the Press Release
A criminal complaint was unsealed today in federal court in the Eastern District of New York charging Ana P. Leon, also known as Ana P. Gonzalez, Sandra E. Leon, also known as Sandra E. Chavarria, and Ivan D. Pelaez with mail and wire fraud and conspiring to commit those offenses.[1] Ana P. Leon was arrested earlier today and her initial appearance is scheduled for this afternoon before United States Magistrate Judge Steven I. Locke at the United States Courthouse, 100 Federal Plaza, Central Islip, New York. Sandra E. Leon and Pelaez are currently at large.
The charges were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego G. Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI)
According to the criminal complaint, the three defendants participated in a scheme in which seven elderly victims from across the United States were told that they had won large cash prizes, often as much as $3.5 million, in a purported sweepstakes. In some instances, the victims were informed by phone and letter that these sweepstakes were operated by federal government agencies, such as the Government Accountability Office. Victims were directed to send check or wire transfers that would supposedly cover taxes and fees due on the sweepstakes winnings to post office boxes that one of the defendants established in Suffolk County’s East Hampton and Amagansett or to bank accounts that the defendants established, which had mailing addresses in East Hampton, Amagansett, Hampton Bays, and Manhattan. Victims sent more than $695,000 by mail or wire transfers, some of which was withdrawn as cash in ATM transactions or used to pay for personal expenses such as airline tickets.
“As described in the complaint, the defendants enriched themselves by taking advantage of elderly Americans,” stated Acting United States Attorney Currie. “We are committed to protecting seniors from such schemes.” Mr. Currie expressed his appreciation to FBI field offices in New York, Georgia, Florida, Michigan, Arizona, Texas, and Wisconsin for their assistance.
“As alleged, the defendants took advantage of seniors by claiming they had literally hit the jackpot by winning a cash prize, often as much as $3.5 million, with the stipulation they just had to pay supposed taxes and fees. The senior victims were directed to wire money or send checks only to never see the winnings they were promised. The money the victims paid netted the defendants more than a half a million dollars. The FBI is committed to investigating and bringing to justice those who seek to profit at the expense of defrauding the senior community,” stated FBI Assistant Director-in-Charge Rodriguez.
The government’s case is being prosecuted by the Office’s Long Island Criminal Division. Assistant United States Attorney Bradley T. King is in charge of the prosecution. Assistant United States Attorney Madeline O’Connor is handling matters related to forfeiture.
The Defendants:
ANA P. LEON
Age: 50
East Hampton, NYSANDRA E. LEON
Age: 47
Hampton Bays, NYIVAN D. PELAEZ
Age: 51
East Hampton, NYE.D.N.Y. Docket No. 15-M-922 (SIL)
[1] The charges in the complaint are merely allegations and the defendants are presumed innocent unless and until proven guilty.
The United States Files Civil Suit Against Long Island-Based Mortgage Lenders and “Counseling Fund”Read the Press Release
Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, David A. Montoya, Inspector General for the Department of Housing and Urban Development, and Frederick W. Gibson, Acting Inspector General for the Federal Deposit Insurance Corporation, announced the filing of a civil suit against the Rainy Day Foundation, Inc., a purported charitable “counseling fund,” together with its associated business entities and principals. The case was filed today in federal court in Central Islip and has been assigned to United States District Judge Joseph F. Bianco.
The complaint alleges that in at least 865 instances, the Rainy Day Foundation, together with five Eastern District of New York-based mortgage lenders and their principals, defrauded the United States and various banks insured by the Federal Deposit Insurance Corporation (“FDIC”), resulting in millions of dollars of mortgage losses, and requiring the United States to pay over $5,605,237 in false claims.
The defendant mortgage lenders participated in a federal program sponsored by the United States Department of Housing and Urban Development (“HUD”) that allowed the lenders to make mortgage loans that are insured by the Federal Housing Administration (“FHA”) in the event of default. The defendant mortgage lenders then sold those loans to federally-insured banks.
The complaint alleges that the mortgage lenders’ loans went into “early payment default” at more than twice the average default rate of other lenders, and that the lenders conspired with the Rainy Day Foundation to conceal their high default rates from HUD to avoid removal from HUD’s program. Specifically, the defendant mortgage lenders funneled their own money through the Rainy Day Foundation to make defaulting borrowers' monthly payments to the banks in order to conceal the defaults from HUD and the banks. When the loans had aged beyond the bank’s contractual right to force repurchase, or past the period that HUD monitored for early payment defaults, the lenders would stop making payments, leaving the borrowers without any further support.
When the Rainy Day Foundation attracted scrutiny from the United States, it quickly reorganized as a new business, Default Mitigation Services (“DMS”), to continue the Rainy Day Foundation’s money funneling activities under a new name. The United States alleges that defendants sought to further conceal their activities by claiming that the illicit payments were charitable “grants” made by a small American Indian tribe, located in Ely Nevada – the Ely Shoshone tribe. In reality, DMS was again funneling money from the defendant mortgage lenders, through Ely Shoshone tribal bank accounts, to the banks holding the loans.
The complaint seeks treble damages and penalties under the False Claims Act, 31 U.S.C. § 3729 et seq.; fines under the Financial Institutions Recovery, Reform and Enforcement Act ("FIRREA"), 12 U.S.C. § 1833a; and damages and indemnification under the common law theories of gross negligence, breach of fiduciary duty and unjust enrichment.
“Fraudulent practices, such as those alleged here, compromise the integrity of the FHA mortgage insurance program, and harm both the housing market and homeowners by contributing to loan defaults and housing foreclosures,” stated Acting United States Attorney Currie. “We will continue to vigorously use all means at our disposal to stop those who engage in such activity.”
HUD Inspector General Montoya stated, “When HUD's Office of the Inspector General uncovers fraud, we devote all of the available necessary investigatory resources to make certain that those individuals and entities are brought to justice and that the FHA Insurance Fund is reimbursed for the losses sustained. The Rainy Day Foundation and its multiple subsidiary companies solicited the business of FHA Direct Endorsement Lenders by promising to manipulate HUD databases to hide the existence of delinquent loans from the FHA. Such behavior will not be tolerated.”
FDIC Acting Inspector General Gibson said “The FDIC-OIG was pleased to support the Department of Justice and the Department of Housing and Urban Development in investigating this matter and in helping to ready this civil suit. Together we can broaden the government's efforts to pursue damages resulting from misconduct that has harmed the nation's financial institutions and its mortgage markets.”
United States Resolves Claims Against New York-Based Lender
In a related action, the United States filed a separate civil suit against, and simultaneous settlement with, the Intercontinental Capital Group, Inc. (“ICG”), a New York mortgage lender with offices in Bohemia, New York, its President, Dustin DiMisa, and its former Chief Executive Officer, Richard Steinberg. The complaint alleges that, on eleven occasions, ICG and its principals also transferred funds to the Rainy Day Foundation in order to make payments for borrowers on the lender’s behalf. The indirect payments artificially suppressed ICG’s comparative delinquency and default rates, as compiled and computed by the FHA. In the settlement, ICG, DiMisa and Steinberg admitted to making the payments and that the payments altered the company’s delinquency and default rates. ICG, DiMisa and Steinberg agreed to pay four hundred twenty-four thousand, eight hundred and fifty-nine dollars ($424,859) in settlement of the United States’ claims.
The United States’ cases are being litigated by Assistant United States Attorneys Edward Newman, John Vagelatos and Robert Schumacher.
The Defendants:
RAINY DAY HOLDINGS, LLC, an Idaho-incorporated limited liability corporation, with its principal place of business in Baltimore, Maryland.
THE RAINY DAY FOUNDATION, INC., a Maryland-incorporated 501(c)(3) corporation, domiciled in the District of Columbia.
DEFAULT MITIGATION SERVICES, LLC, an Idaho-incorporated limited liability corporation, with its principal place of business in Boise, Idaho.
RICK DEL SONTRO, the Chief Executive Officer of the Rainy Day Foundation.
TODD LUDLOW, a Senior Vice-President of the Rainy Day Foundation and founder and managing partner of Default Mitigation Services.
ROBERT CLUTE, a Senior Vice-President of the Rainy Day Foundation and Managing Partner of Rainy Day Holdings.
CHRIS HAUVER, Lender Relations Representative and Administrator for the Rainy Day Foundation.
KELLY SCHWEDLAND, marketer for Default Mitigation Services.
MICHAEL SHRUM, Delinquency Reduction Services Manager for the Rainy Day Foundation.
CHRISTOPHER NAILLON, Account Executive at the Rainy Day Foundation and an employee of Default Mitigation Services.
FRANKLIN FIRST FINANCIAL, LTD., a New York-incorporated limited company and mortgage lender, with its principal place of business in Melville, New York.
FREDERICK ASSINI, the Chief Executive Officer of Franklin First Financial.
ANTONIO BAINES, Senior Vice-President of Operations for Franklin First Financial.
ANDREW DAURO, a Manager at Franklin First Financial.
CHRIS BERTMAN, Chief Operating Officer at Franklin First Financial.
MAX KANE, Chief Financial Officer of Mortgage Source, a now defunct mortgage lender, with its principal place of business in Garden City, New York.
JOANN MEDEIROS, Chief Operating Officer of Mortgage Source.
CONTINENTAL MORTGAGE BANKERS, INC. d/b/a FINANCIAL EQUITIES, a New York corporation and mortgage lender, with its principal place of business in Westbury, New York.
WALTER STASHIN, President of Continental Mortgage Bankers.
GREGG MARCUS, Managing Director of Somerset Investors Corp, d/b/a Somerset Mortgage Bankers, a now defunct mortgage lender located in Melville, New York.
INTERCONTINENTAL CAPITAL GROUP, INC., a New York corporation and mortgage lender with offices in Bohemia, New York.
DUSTIN DIMISA, President and Managing Director of Intercontinental Capital Group.
RICHARD STEINBERG, former Chief Executive Officer of Intercontinental Capital Group.
Long Island Investment Fund Manager Sentenced to Six Years in Prison for Operating A $17 Million Ponzi SchemeRead the Press Release
Earlier today at the federal courthouse in Central Islip, New York, James Peister was sentenced to six years in prison and three years of supervised release, following his November 10, 2014 guilty plea to committing securities fraud for defrauding 74 investors of $17.9 million by operating a Ponzi scheme. As part of the sentence, Peister was ordered to pay $9,657,218.65 in restitution to the victims of his fraud and $17.9 million in forfeiture, which includes his residence in St. James, New York, and his Hummer sports utility vehicle.
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“For nearly a decade, Peister lulled his victims into a false sense of security through empty promises of reliable growth and conservative investing. After stealing millions of dollars in inheritances and retirement savings, Peister now faces his own retirement in prison while his victims struggle to rebuild their lives,” stated Acting United States Attorney Currie. “Would-be fraudsters take note that you, like Peister, who prey on the investing public will be held accountable.” Mr. Currie thanked the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) for their cooperation and assistance.
FBI Assistant Director-in-Charge Rodriguez stated, “Today's sentencing marks a closing for Peister's $17 million Ponzi scheme, although for his victims, who lost their inheritance and retirement savings, there is no closure that can make them whole again. The FBI is committed to investigating and bringing to justice those who prey upon trusting individuals for their own personal gain.”
Between January 2000 and June 2009, Peister raised more than $17 million from at least 74 investors in connection with an investment fund that he managed. He had assured those investors that their money would be invested safely in a variety of securities, including stocks, futures, and fixed income instruments. Instead of investing the money as he had promised, Peister misappropriated the money to run a Ponzi scheme. Among other things, he used the investors’ money to pay millions of dollars in redemptions to his victim investors to keep the scheme afloat and to purchase luxury items such as an expensive estate in St. James and a Hummer luxury vehicle. To avoid detection and continue the scheme, Peister sent phony account statements to investors that falsely showed that their funds were invested and performing well and submitted bogus financial statements to the investment fund’s independent auditor. As a result, investors believed that the funds were performing satisfactorily, and they continued to invest their money with Peister. Peister’s Ponzi scheme collapsed in the wake of the financial crisis in 2008, when he could no longer keep up with demands for redemptions from nervous investors.
This prosecution was the result of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets, and conducting outreach to the public, victims, financial institutions and other organizations. 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, visit http://www.StopFraud.gov.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Jacquelyn M. Kasulis and Jonathan P. Lax are in charge of the prosecution, with assistance provided by Assistant United States Attorney Brian D. Morris of the Office’s Civil Division, which is responsible for the forfeiture of assets.
The Defendant:
JAMES M. PEISTER
Age: 63
St. James, New YorkE.D.N.Y. Docket No. 14-CR-328 (JFB)
Brookyln Resident Indicted for Sex Trafficking MinorsRead the Press Release
Yesterday, a 12-count superseding indictment was unsealed in federal court in Brooklyn charging Alvaun Thompson, also known as “LP,” “Love Pimpin,” “Legit Pimp” and “AT,” with three counts of child sex trafficking, one count of production of child pornography, and various other prostitution-related offenses. The defendant’s arraignment is scheduled for Monday, September 21, 2015, before United States District Judge I. Leo Glasser.
The charges were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York; Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office; and William J. Bratton, Commissioner, New York City Police Department.
As alleged, from 2013 until his arrest in January 2015, the defendant recruited and enticed two minor victims to engage in prostitution and commercial sex acts. One of Thompson’s victims was 13 years old when he began exploiting her through commercial sex. While inducing one minor victim to engage in sexually explicit activity, the defendant used his cell phone to create a pornographic video recording of the minor. The defendant regularly promoted and managed his prostitution business over the Internet and on two occasions transported his victims to other States intending for them to engage in prostitutions.
“As alleged, the defendant sexually exploited vulnerable minor victims for profit,” stated Acting United States Attorney Currie. “We will aggressively investigate and prosecute those who would sexually exploit our children.”
FBI Assistant Director-in-Charge Rodriguez stated, "The sexual exploitation of children promotes the practice of inducting innocent victims into a life of prostitution and trapping them in a life of misery. This is an epidemic that is spreading rapidly throughout the nation, and the migratory nature of these crimes makes it critical for the FBI and our law enforcement entities to work together to tackle this widespread problem."
“There is no place in our city for the abuse of minors, particularly when the crime is sexual in nature. I commend the work of the NYPD investigators, FBI agents, and the prosecutors of the U.S. Attorney’s Office for the Eastern District of New York who have tirelessly pursued this case,” said Police Commissioner Bratton.
If convicted, the defendant faces a mandatory minimum term of 15 years imprisonment and a maximum sentence of life imprisonment. The charges in the indictment are merely allegations, and the defendants is presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by the Office’s General Crimes Section. Assistant United States Attorneys Matthew J. Jacobs and Jennifer S. Carapiet are in charge of the prosecution.
The Defendant:
Alvaun Thompson
Age: 28
E.D.N.Y. Docket No. 15-CR-80 (ILG)
U.S. Citizen 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 Ali Saleh with attempting to provide material support to the Islamic State of Iraq and the Levant (ISIL), a foreign terrorist organization. Saleh was arrested earlier today at his residence in Queens, New York, and his initial appearance is scheduled for this afternoon before United States Magistrate Judge Roanne L. Mann at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Attorney General for National Security John P. Carlin, Assistant Director in Charge Diego G. Rodriguez of the New York Field Office of the Federal Bureau of Investigation (FBI), and Commissioner William J. Bratton of the New York City Police Department.
As set forth in court documents, Saleh is a 22-year-old citizen of the United States. In the last year, Saleh made multiple attempts to travel to the Middle East to join ISIL. In August 2014, he made a flight reservation to travel from New York’s John F. Kennedy International Airport (JFK) to Istanbul, Turkey. A few days earlier, Saleh used his Twitter account to post, “I’m ready to die for the Caliphate, prison is nothing.”[1] Saleh was unable to travel at that time, but continued to pursue his goal of travelling overseas to join ISIL. For example, in July 2015, Saleh made a flight reservation to travel from JFK to Cairo, Egypt. On that same day, Saleh used his Twitter account to communicate with an ISIL facilitator who instructed followers to contact him “for hijrah advice to IS in Libya ONLY.”[2] After speaking with airline personnel, Saleh did not board a flight from JFK Airport. Over the span of the next two days, Saleh subsequently continued his attempts to travel to the Middle East by visiting Newark Liberty International Airport in New Jersey and Philadelphia International Airport, where he was again denied boarding.
Saleh then made his way to an Amtrak station in Cleveland, Ohio, in an attempt to take a train to Toronto, Canada, and travel to the Middle East from there. In a subsequent interview with law enforcement officers, Saleh indicated that were he not arrested, he would continue to attempt to travel to the Middle East.
“Saleh was relentless in his attempts to travel to the Middle East to join a terrorist organization,” stated Acting United States Attorney Currie. “We will continue to track down and prosecute individuals like Saleh before they are able to harm the United States and its allies.” Mr. Currie 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. Mr. Currie also thanked the FBI’s Indianapolis Field Office and the New York City Police Department’s Intelligence Division for their assistance.
“According to the allegations in the complaint, Ali Saleh attempted to provide material support to ISIL and made repeated efforts to travel overseas to join their ranks,” said Assistant Attorney General Carlin. “The National Security Division’s highest priority is counterterrorism, and we will continue to pursue justice against those who seek to provide material support to designated foreign terrorist organizations.”
“The persistence of Saleh in his alleged attempts to travel overseas in order to ‘die for the Caliphate,’ did not match the dedication of New York’s Joint Terrorism Task Force (JTTF) to work quickly to identify and interrupt this threat. We will continue to be vigilant in our attempts to proactively stop threats before harm can occur,” said FBI Assistant Director in Charge Diego Rodriguez.
“By his own words, Ali Saleh was willing to pledge allegiance to, and die for ISIL, an organization that has called for terrorist attacks against the United States,” said Police Commissioner Bratton. “Saleh’s attempts to travel to Syria and ISIL’s battlefields were halted by good intelligence and smart law enforcement. I commend the agents and detectives of the Joint Terrorism Task Force as well as the dedicated prosecutors at the office of the United States Attorney for the Eastern District of New York.”
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 National Security & Cybercrime Section. Assistant United States Attorney Saritha Komatireddy is in charge of the prosecution, with assistance provided by Trial Attorneys Lolita Lukose and Alison Daly of the Justice Department’s Counterterrorism Section.
The Defendant:
ALI SALEH
Age: 22
Queens, New YorkE.D.N.Y. Docket No. 15-M-886
[1] In this context, the term “Caliphate” refers to ISIL, given its stated goal of establishing an Islamic caliphate in Iraq and Syria.
[2] The term “hijrah” is a reference to making a journey, and “IS” is a reference to ISIL.
New York Man Arrested for Attempting to Provide Material Support to ISILRead the Press Release
Defendant Repeatedly Attempted to Travel to the Middle East to Join Terrorist Group
A criminal complaint was unsealed today in the Eastern District of New York charging Ali Saleh, 22, of Queens, New York, with attempting to provide material support to the Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization. Saleh was arrested earlier today at his residence in Queens and his initial appearance is scheduled for this afternoon before U.S. Magistrate Judge Roanne L. Mann of the Eastern District of New York.
The charges were announced by Assistant Attorney General for National Security John P. Carlin, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Field Office and Commissioner William J. Bratton of the New York City Police Department.
As set forth in court documents, in the last year, Saleh made multiple attempts to travel to the Middle East to join ISIL. In August 2014, he made a flight reservation to travel from New York’s John F. Kennedy International Airport (JFK) to Istanbul. A few days earlier, Saleh used his Twitter account to post, “I’m ready to die for the Caliphate, prison is nothing.” Saleh was unable to travel at that time, but continued to pursue his goal of traveling overseas to join ISIL. For example, in July 2015, Saleh made a flight reservation to travel from JFK to Cairo. On the same day, Saleh used his Twitter account to communicate with an ISIL facilitator who instructed followers to contact him “for hijrah advice to IS in Libya ONLY.” Saleh was denied boarding at JFK Airport by airline personnel. Over the span of the next two days, Saleh subsequently continued his attempts to travel to the Middle East by visiting Newark Liberty International Airport in New Jersey and Philadelphia International Airport, where he was again denied boarding. Saleh then made his way to an Amtrak station in Cleveland in an attempt to take a train to Toronto and travel to the Middle East from there. In a subsequent interview with law enforcement officers, Saleh indicated that were he not arrested, he would have continued to attempt to travel to the Middle East.
“According to the allegations in the complaint, Ali Saleh attempted to provide material support to ISIL and made repeated efforts to travel overseas to join their ranks,” said Assistant Attorney General Carlin. “The National Security Division’s highest priority is counterterrorism and we will continue to pursue justice against those who seek to provide material support to designated foreign terrorist organizations.”
“Saleh was relentless in his attempts to travel to the Middle East to join a terrorist organization,” said Acting U.S. Attorney Currie. “We will continue to track down and prosecute individuals like Saleh before they are able to harm the United States and its allies.”
“The persistence of Saleh in his alleged attempts to travel overseas in order to ‘die for the Caliphate,’ did not match the dedication of New York’s Joint Terrorism Task Force (JTTF) to work quickly to identify and interrupt this threat,” said Assistant Director in Charge Diego Rodriguez. “We will continue to be vigilant in our attempts to proactively stop threats before harm can occur.”
“By his own words, Ali Saleh was willing to pledge allegiance to, and die for ISIL, an organization that has called for terrorist attacks against the United States,” said Commissioner Bratton. “Saleh’s attempts to travel to Syria and ISIL’s battlefields were halted by good intelligence and smart law enforcement. I commend the agents and detectives of the Joint Terrorism Task Force as well as the dedicated prosecutors at the office of the United States Attorney for the Eastern District of New York.”
The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
The case is being investigated by the FBI’s Joint Terrorism Task Force, the FBI’s Indianapolis Field Office and the New York City Police Department’s Intelligence Division. The case is being prosecuted by Assistant U.S. Attorney Saritha Komatireddy of the Eastern District of New York, with assistance provided by Trial Attorneys Lolita Lukose and Alison Daly of the National Security Division’s Counterterrorism Section.
Saleh Complaint
Former New York State Assemblyman William F. Boyland, JR. Sentenced to 14 Years for Bribery, Fraud, Extortion, Conspiracy, and TheftRead the Press Release
Earlier today in federal court in Brooklyn, former New York State Assemblyman William F. Boyland, Jr. was sentenced to 14 years of incarceration in connection with his conviction at trial of 21 felony counts, including federal programs bribery, conspiracy to violate the Travel Act, extortion, honest services wire fraud, federal programs theft, and conspiracy to commit mail fraud. Boyland committed these offenses by corruptly exploiting his official position representing the 55th Assembly District in Brooklyn, comprising Ocean Hill, Brownsville, Bedford-Stuyvesant, Crown Heights, and Bushwick. As part of the sentence, the Court also ordered Boyland to forfeit $169,410.14 and pay restitution in the amount of $71,339.66 to the New York State Department of Taxation and Finance and $84,270.48 to the New York State Office of the Aging. Today’s proceeding was held before United States District Judge Sandra L. Townes.
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office.
“As he demonstrated time and again, Boyland, a lawmaker himself, lacked any respect for either the law or his constituents who elected him,” said Acting U.S. Attorney Currie. “Officials who would seek to sell the power and influence of their office to the highest bidder are on notice that they will be held to account for their crimes.” Mr. Currie praised the outstanding work of the FBI and expressed his grateful appreciation to the New York State Comptroller’s Office, the New York State Office of the Aging, the Internal Revenue Service-Criminal Investigations, the New York State Assembly Department of Finance, and the New York City Department of Investigation for their assistance.
“Boyland was elected to represent his district, not cash in on them. By repeatedly taking unscrupulous opportunity after opportunity–from bribes to fraudulent vouchers to misappropriation of state funds intended to help seniors–Boyland only showed he was only trying to help himself. Today’s sentencing should serve as a warning to those in public office who seek to profit from their positions rather than legislate from them–they are not above the law. The FBI remains committed to investigating and bringing to justice public officials who seek to misuse their power.”
The evidence admitted at trial established that, beginning in January 2007 and continuing through December 2011, Boyland engaged in four corrupt schemes.
Carnival Extortion Scheme. In August 2010, Boyland met with a carnival promoter and an undercover FBI agent on multiple occasions to discuss the promoter’s desire to hold carnivals in Boyland’s district, for which government approvals were required. Boyland requested payments in exchange for his assistance, and the promoter agreed. In furtherance of the scheme, Boyland described various ways in which the bribes could be concealed, directed his Assembly staff to assist the promoter obtain government approvals, arranged for a non-profit organization to sponsor the promoter’s carnivals, and directed his staff to give the promoter letters of support on Boyland’s Assembly letterhead. In exchange, the undercover FBI agent paid Boyland three separate bribes – $7,000 in cash, a $3,000 check with the payee line left blank, and $3,800 worth of money orders that were deposited into Boyland’s campaign bank account.
Real Estate Scheme. Boyland also accepted the $7,000 cash bribe described above in exchange for undertaking official action to benefit two FBI undercover agents in a purported real estate venture in Boyland’s district. In this scheme, the undercover agents would purchase the former St. Mary’s Hospital in Boyland’s district for $8 million, obtain state grant money to renovate the hospital, and resell it for $15 million to a non-profit organization that Boyland claimed to control. Boyland assured the agents he would use his influence as an Assemblyman to secure state grant money for the project and handle any zoning issues that arose. After accepting the $7,000 cash bribe, Boyland later demanded an additional $250,000 bribe payment from the agents as a condition of using his official position to carry out the scheme.
False Voucher Scheme. From January 2007 to December 2011, Boyland submitted over 200 fraudulent vouchers in which he falsely claimed to be in Albany on legislative business when he in fact was not in Albany, including days when he was in New York City meeting with the undercover FBI agents and demanding $250,000 in bribes, days when he was in North Carolina and Virginia visiting with family and friends, and for days when he was in Istanbul, Turkey. In reliance on the false vouchers, New York State paid Boyland over $70,000 in fraudulent mileage expense reimbursements and per diem payments.
Theft of State Funds for the Elderly. Between July 2007 and September 2010, Boyland conspired to defraud New York State and the New York State Office of the Aging. Boyland, a member of the Assembly’s Committee on the Aging, steered $200,000 of New York State member item funds to a Brooklyn-based non-profit organization whose purported mission was to provide a “social setting that enable[s] elderly individuals to maintain their independence and remain at home in the community.” Boyland certified that these state funds would not be used for partisan or political purpose, but then directed that the majority of the funds be used to benefit himself and his political campaigns by paying for community events that promoted Boyland.
The government’s case is being prosecuted by the Office’s Public Integrity Section. Assistant United States Attorneys Lan X. Nguyen and Marisa Megur Seifan are in charge of the prosecution. Assistant United States Attorney Tanya Hill is responsible for handling the forfeiture of assets.
The Defendant:
WILLIAM F. BOYLAND, JR.
Age: 45
Brooklyn, New YorkE.D.N.Y. Docket No. 11-CR-850 (SLT)
New York Doctor Charged with Falsely Certifying Physical Examinations for Commercial DriversRead the Press Release
A criminal complaint was unsealed this morning in Brooklyn federal court charging Gerald Surya, M.D., with falsely certifying physical examinations for commercial drivers. Specifically, the complaint charges that Dr. Surya certified that he had examined applicants for commercial driver’s licenses (CDLs) and found them physically fit to drive heavy commercial vehicles when in fact he had not performed those examinations. The defendant’s initial appearance is scheduled later today before United States Magistrate Judge Roanne L. Mann, at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charge was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Douglas Shoemaker, Regional Special Agent-in-Charge, United States Department of Transportation-Office of Inspector General (USDOT-OIG).
As set forth in the complaint, drivers of certain commercial vehicles, such as school buses and heavy transportation trucks, must possess a CDL, issued by the New York State Department of Motor Vehicles (DMV), pursuant to regulations set forth by the United States Department of Transportation (USDOT). Before obtaining a CDL, all applicants must pass written and road tests related to safely driving such large vehicles. In addition, the applicants must be examined and certified fit to drive such vehicles by a physician or other qualified medical personnel authorized by the USDOT to conduct such examinations. Upon receipt of the certification, the applicant must file a copy with the DMV. Further, on a monthly basis, USDOT certified medical examiners are required to electronically transmit to USDOT copies of certifications they have executed for CDL applicants.
As alleged in the complaint, Dr. Surya was authorized to conduct USDOT mandated medical examinations and certifications for CDL applicants and purportedly performed such examinations at his JFK Medport office, located at JFK airport in Queens, New York. In fact, the applicants were not examined by Dr. Surya, but instead by other JFK Medport staff members who had little or no medical training and were not authorized to conduct the mandated medical examinations.
“Dr. Surya’s conduct put at risk pedestrians as well as other drivers. We are committed to aggressively investigating and prosecuting those who would commit crimes that compromise the safety of the public,” stated Acting United States Attorney Currie. Mr. Currie extended his appreciation to the Federal Motor Carrier Safety Administration for its assistance.
“As evidenced by the arrest of Dr. Gerald Surya on charges related to unlawful medical examinations for applicants of Commercial Driver’s Licenses, ensuring safety on the nation’s roadways remains a high priority for the Office of Inspector General (OIG), the Department of Transportation (DOT) and the Federal Motor Carrier Safety Administration (FMCSA),” said DOT-OIG regional Special Agent-in-Charge Shoemaker. “Working with our DOT, FMCSA, law enforcement and prosecutorial colleagues, we will continue our vigorous efforts to prevent, detect, and prosecute violations of laws and regulations, CDL and otherwise, designed to ensure the public’s safety.”
The charge in the complaint is merely an allegation, and the defendant is presumed innocent unless and until proven guilty. If convicted, the defendant faces a maximum sentence of 15 years of imprisonment.
The government’s case is being prosecuted by the Office’s Public Integrity Section. Assistant United States Attorney Michael H. Warren is in charge of the prosecution.
The Defendant:
GERALD SURYA
Age: 45
Residence: New Hyde Park, New YorkE.D.N.Y. Docket No. 14-M-853
Defendant Sentenced to 33 Months for Impersonating an Attorney, Defrauding Clients of over $200,000 in Legal FeesRead the Press Release
Earlier today in Brooklyn federal court, Steven H. Dickman was sentenced to 33 months of imprisonment. Dickman stole an attorney’s identity and collected legal fees from more than 50 clients to whom Dickman falsely claimed he was that attorney. The sentencing proceeding was held before U.S. District Judge Allyne Ross. Dickman pleaded guilty to one count of wire fraud in December 2014.
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.
As set forth in court filings, Dickman was admitted to the New York Bar in 1969 but resigned from the bar in 1987 when he was investigated for attorney misconduct. In 2009, Dickman stole the identity of a victim-attorney and assumed that victim-attorney’s status as a member of the New York Bar. Dickman then represented himself to be the victim-attorney to putative clients in order to obtain legal fees from them. In 2012, Dickman submitted an application to be admitted to practice law in the United States District Court for the Eastern District of New York and falsely swore an oath affirming that his name was that of the victim-attorney, that he was an attorney, and that he was a member in good standing of the New York Bar.
As part of his sentence, Dickman was also ordered to forfeit $20,000. The Court did not impose restitution today, but scheduled a restitution hearing for December 18, 2015.
The government’s case is being prosecuted by the Office’s Public Integrity Section. Assistant United States Attorney Lan Nguyen is in charge of the prosecution.
The Defendant:
Steven H. Dickman
Age: 70
Brooklyn, NYE.D.N.Y. Docket No. 14-CR-610 (ARR)
Three Members of International Organization of Money Launderers for the Largest Drug Cartels ArrestedRead the Press Release
Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, James Hunt, Special Agent-in-Charge, Drug Enforcement Administration, New York Field Division (DEA), and Thomas E. Bishop, Acting Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York Field Division (IRS), announced today the unsealing of an indictment in Brooklyn federal court charging three alleged leaders of an international money laundering organization for their role in brokering a series of financial transactions designed to conceal the source of illegal narcotics trafficking. The defendants allegedly used the Chinese and Hong Kong financial system and the shipment of counterfeit goods around the world to launder over $5 billion for drug cartels based in Mexico and Colombia.
“As alleged, the defendants and their co-conspirators laundered billions of dollars in illegal narcotics proceeds on behalf of several of the largest drug cartels in the world. The organization used a variety of methods to conceal the source of the drug proceeds in an operation that stretched around the globe,” stated Acting United States Attorney Currie. Mr. Currie thanked the Department of Justice, Office of International Affairs; DEA Dallas Field Office; New York City Police Department; New York State Police; DEA Beijing Country Office; DEA Hong Kong Country Office; IRS Beijing Country Office; IRS Hong Kong Country Office; the Financial Investigations Group of the Hong Kong Customs and Excise Department; and the Chinese Ministry of Public Security.
“These indictments are a result of a lengthy and extensive investigation that tracked the profit of billions of dollars made by drug traffickers through five continents. Allegedly, the three defendants provided the financial lifeline for drug cartels to operate and push illegal drugs into the United States,” said Drug Enforcement Administration Special Agent-in-Charge Hunt.
“Attacking the proceeds from the sale of illegal drugs is a proven technique for dismantling drug organizations of all sizes,” said IRS Acting Special Agent-in-Charge Bishop. “Collaborations between IRS-Criminal Investigation and the DEA are successful, as our joint investigations bring together highly skilled drug investigators with highly skilled financial investigators in the fight against global narcotics trafficking organizations. Accordingly, we are pleased to partner with the DEA and the U.S. Attorney’s Office in this trade-based money laundering investigation.”
As alleged in the indictment, the investigation determined that from approximately January 1, 2004 to the present, members of an international organization of money launderers and drug trafficking organizations conspired to carryout trade-based money laundering activities in China, Colombia, the United States, Spain, Ecuador, Venezuela, and elsewhere. The group was led by Colombian nationals based in Guangzhou, China (the Guangzhou Enterprise). The Guangzhou Enterprise laundered money through bank accounts in Hong Kong and China on behalf of drug trafficking organizations in Mexico and Colombia to fund purchases of counterfeit goods in China, which were then shipped to Colombia and elsewhere for resale.
The Enterprise typically paid Colombian pesos to the drug traffickers in exchange for their U.S. dollar proceeds of drug trafficking at a heavily discounted exchange rate, which reflected the risks incurred by the money brokers. The Enterprise then located Colombian or other South American customers – usually businesses – that needed U.S. dollars to pay for imported goods or services. They then sold the U.S. dollars to those customers, who used the money to purchase goods and services in China for resale.
The investigation revealed that the Guangzhou Enterprise, led by Christian Duque-Aristizabal, Jhon Hincapie-Ramirez and Henry Poveda, among others, was responsible for laundering over $5 billion in narcotics proceeds.
Duque-Aristizabal was arrested in Panama City, Panama, on July 13, 2015, and Hincapie-Ramirez was arrested in Cali, Colombia, on August 13, 2015. The government is currently seeking their extradition to the United States. Poveda was arrested in Honolulu, Hawaii, on August 23, 2015. Poveda was arraigned earlier today before the Hon. Carol B. Amon at the U.S. District Court in Brooklyn.
The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Amir H. Toossi, Tyler J. Smith, and Ameet B. Kabrawala are in charge of the prosecution.
The Defendants:
CHRISTIAN DUQUE-ARISTIZABAL
Age: 36JHON HINCAPIE-RAMIREZ
Age: 54HENRY POVEDA
Age: 49E.D.N.Y. Docket No. 15-Cr-81
Russian Agent Pleads Guilty to Leading Scheme to Illegally Export Controlled Technology to Russian MilitaryRead the Press Release
Alexander Fishenko, 49, of Houston, and a dual citizen of the United States and Russia, pleaded guilty today to acting as an agent of the Russian government within the United States without prior notification to the Attorney General, conspiring to export and illegally exporting controlled microelectronics to Russia, conspiring to launder money and obstruction of justice.
The plea was announced by Assistant Attorney General for National Security John P. Carlin and Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York.
“Alexander Fishenko illegally acted as an agent of the Russian government in the United States and evaded export laws by sending microelectronics and other technology with military applications to Russia,” said Assistant Attorney General Carlin. “By purposefully circumventing U.S. law, including the International Emergency Economic Powers Act and the Arms Export Control Act, the defendant jeopardized our national security. I would like to thank the many members of law enforcement whose tireless efforts led to this guilty plea.”
“Fishenko lined his pockets at the expense of our national security,” said Acting U.S. Attorney Currie. “This prosecution highlights the importance of vigorously enforcing United States export control laws.”
As alleged in the indictment and reflected in court filings, between approximately October 2008 and October 2012, Fishenko led a conspiracy to obtain advanced, technologically cutting-edge microelectronics from manufacturers and suppliers located within the United States and to export those high-tech goods to Russia, while carefully evading the government licensing system set up to control such exports. The microelectronics shipped to Russia included analog-to-digital converters, static random access memory chips, microcontrollers and microprocessors. These commodities have applications in and are frequently used in a wide range of military systems, including radar and surveillance systems, missile guidance systems and detonation triggers. Russia does not produce many of these sophisticated goods domestically.
According to the indictment and other court filings, in 1998, Fishenko founded Arc Electronics Inc. (Arc), which was also indicted, in Houston. Between 2002 and the present, Arc has shipped approximately $50 million worth of microelectronics and other technologies to Russia. Fishenko also served as an executive of co-defendant Apex System L.L.C. (Apex) a Moscow-based procurement firm. Apex, working through subsidiaries, served as a certified supplier of military equipment for the Russian government. Fishenko exported many of these high-tech goods, frequently through intermediary procurement firms, to Russian end users, including Russian military and intelligence agencies. To induce manufacturers and suppliers to sell them these high-tech goods and to evade applicable export controls, Fishenko and his co-conspirators often provided false end user information in connection with the purchase of the goods, concealed the fact that they were exporters and falsely classified the goods they exported on export records submitted to the Department of Commerce. For example, Arc falsely claimed to be a traffic light manufacturer on its website. In fact, Arc manufactured no goods and operated exclusively as an exporter.
Despite this ploy, the investigation revealed that the defendants were supplying Russian government agencies with sophisticated microelectronics. For example, the investigation uncovered a letter sent by a specialized electronics laboratory of Russia’s Federal Security Service (FSB), Russia’s primary domestic intelligence agency, to an Apex affiliate regarding certain microchips that Arc obtained for the FSB. The letter stated that the microchips were faulty and demanded that the defendants supply replacement parts.
The guilty plea took place before U.S. District Judge Sterling Johnson Jr. of the Eastern District of New York. At sentencing, Fishenko faces up to 20 years in prison for each violation of the International Emergency Economic Powers Act and the Arms Export Control Act, up to 20 years in prison for money laundering conspiracy and obstruction of justice and up to 10 years in prison for acting as a Russian agent. The defendant will also face potential criminal forfeiture and fines.
Ten other individuals and two corporations were originally charged in October 2012. Four members of the conspiracy have pleaded guilty and three are scheduled to commence trial on Sept. 21, 2015.
The case is being investigated by the FBI and the Department of Commerce. The case is being prosecuted by Assistant U.S. Attorneys Daniel Silver, Una Dean, Richard Tucker and Claire Kedeshian of the Eastern District of New York, as well as Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section.
Russian Agent Pleads Guilty to Leading Scheme to Illegally Export Controlled Technology to the Russian MilitaryRead the Press Release
Earlier today, Alexander Fishenko, a dual citizen of the United States and Russia, pled guilty at the federal courthouse in Brooklyn, New York, to all charges pending against him, including acting as an agent of the Russian government within the United States without prior notification to the Attorney General, conspiring to export, and illegally exporting, controlled microelectronics to Russia, conspiring to launder money, and obstruction of justice. Fishenko, ten other individuals, and two corporations were originally charged in October 2012. Four members of the conspiracy previously pled guilty, and three are scheduled to commence trial on September 21, 2015.[1]
The guilty plea was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and John P. Carlin, Assistant Attorney General for National Security.
“Fishenko lined his pockets at the expense of our national security,” stated Acting United States Attorney Currie. “This prosecution highlights the importance of vigorously enforcing United States export control laws.” Mr. Currie thanked the Federal Bureau of Investigation and the Department of Commerce for their leading roles in the investigation.
“Alexander Fishenko illegally acted as an agent of the Russian government in the United States and evaded export laws by sending microelectronics and other technology with military applications to Russia,” said Assistant Attorney General Carlin. “By purposefully circumventing U.S. law, including the International Emergency Economic Powers Act and the Arms Export Control Act, the defendant jeopardized our national security. I would like to thank the many members of law enforcement whose tireless efforts led to this guilty plea.”
As alleged in the indictment and reflected in court filings, between approximately October 2008 and October 2012, Fishenko led a conspiracy to obtain advanced, technologically cutting-edge microelectronics from manufacturers and suppliers located within the United States and to export those high-tech goods to Russia, while carefully evading the government licensing system set up to control such exports. The microelectronics shipped to Russia included analog-to-digital converters, static random access memory chips, microcontrollers, and microprocessors. These commodities have applications, and are frequently used, in a wide range of military systems, including radar and surveillance systems, missile guidance systems, and detonation triggers. Russia does not produce many of these sophisticated goods domestically.
In 1998, Fishenko founded Arc Electronics, Inc. (Arc), which was also indicted, in Houston, Texas. Between 2002 and the present, Arc has shipped approximately $50,000,000 worth of microelectronics and other technologies to Russia. Fishenko also served as an executive of co-defendant Apex System, L.L.C. (Apex) a Moscow, Russia-based procurement firm. Apex, working through subsidiaries, served as a certified supplier of military equipment for the Russian government. Fishenko exported many of these high-tech goods, frequently through intermediary procurement firms, to Russian end users, including Russian military and intelligence agencies. To induce manufacturers and suppliers to sell them these high-tech goods, and to evade applicable export controls, Fishenko and his co-conspirators often provided false end user information in connection with the purchase of the goods, concealed the fact that they were exporters, and falsely classified the goods they exported on export records submitted to the Department of Commerce. For example, Arc falsely claimed to be a traffic light manufacturer on its website. In fact, Arc manufactured no goods and operated exclusively as an exporter.
Despite this subterfuge, the investigation revealed that the defendants were supplying Russian government agencies with sophisticated microelectronics. For example, the investigation uncovered a letter sent by a specialized electronics laboratory of Russia’s Federal Security Service (FSB), Russia’s primary domestic intelligence agency, to an Apex affiliate regarding certain microchips obtained for the FSB by Arc. The letter stated that the microchips were faulty and demanded that the defendants supply replacement parts.
Today’s proceeding took place before United States District Judge Sterling Johnson, Jr. When sentenced, Fishenko faces up to 20 years in prison for each violation of the International Emergency Economic Powers Act (IEEPA) and the Arms Export Control Act (AECA), up to 20 years in prison for money laundering conspiracy and obstruction of justice, and up to 10 years in prison for acting as a Russian agent, as well as criminal forfeiture and fines.
The government’s case is being handled by the Office’s National Security & Cybercrime Section. Assistant United States Attorneys Daniel Silver, Una Dean, Richard Tucker, and Claire Kedeshian, as well as Trial Attorney David Recker from the Department of Justice’s Counterintelligence and Export Control Section, are in charge of the prosecution.
The Defendant:
ALEXANDER FISHENKO
Age: 49
Houston, TexasE.D.N.Y. Docket No. 12 CR 626 (SJ)
[1] As to the defendants awaiting trial, the charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
President of Office Equipment Leasing Company Arrested for Engaging in Multi-Million Dollar Fraud SchemeRead the Press Release
Michael Conway, the President of Choice Office Solutions LLC (Choice Office), was arrested earlier today on charges of wire fraud and aggravated identity theft in connection with a scheme where he forged lease agreements to defraud an individual investor and De Lage Landen Financial Solutions Partner (DLLFSP) of approximately $3.5 million. Earlier today, FBI agents also executed a search of Choice Office’s offices in Fairfield, New Jersey. The defendant’s initial appearance is scheduled for this afternoon before United States Magistrate Judge Cheryl L. Pollak at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges and arrest were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“As charged in the criminal complaint, Conway claimed to have lucrative contracts to lease office equipment with more than 50 companies, including law firms, universities, and a major league baseball franchise, and relied on these lease contracts to obtain financing. In reality, the only one making money on these phony lease agreements was the defendant himself,” stated Acting United States Attorney Currie.
“Crime does not need to be violent to have a devastating impact on society. White collar crimes, like the ones alleged herein, can reach more victims and have a disparate impact on the most vulnerable persons and businesses. Fraud disguises itself as legitimate and true, while abusing trust and eroding faith in fair and honest dealings. The FBI will continue to investigate lack of integrity leading to criminal activities in order to protect the community from such harm,” stated FBI Assistant Director-in-Charge Rodriguez.
According to the complaint unsealed this morning in Brooklyn federal court, from approximately 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, Conway 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 $3.1 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 ostensibly 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.
The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, Conway faces a mandatory minimum sentence of two years imprisonment and a maximum sentence of 22 years.
The government’s case is being prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Winston Paes and Celia Cohen 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: 39
Verona, New JerseyLong Island Businessman Harendra Singh Indicted for Bribery, Fraud, and ObstructionRead the Press Release
Singh Charged with Fraudulently Under-Reporting to the IRS Over $17 Million of His Businesses’ Sales and Wages and Submitting False Documents to FEMA to Obtain Over $900,000 in Disaster Relief Funds
A 13-count indictment was unsealed this morning in federal court in Central Islip charging Harendra Singh, also known as “H. Singh,” with five counts of honest services wire fraud, one count of honest services wire fraud conspiracy, one count of federal program bribery, one count of disaster relief fraud, two counts of conspiring to defraud the United States, one count of impeding the Internal Revenue Service, one count of tampering with evidence, and one count of obstruction of justice.[1] Singh was arrested this morning and will be arraigned later today before the Hon. A. Kathleen Tomlinson, United States Magistrate Judge, at the United States Courthouse, 100 Federal Plaza, Central Islip, NY.
The indictment was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Shantelle P. Kitchen, Special Agent- in-Charge, Internal Revenue Service-Criminal Investigation, New York Field Office (IRS-CI).
“As alleged, Harendra Singh ran his businesses through fraud and deceit, using bribes and kickbacks to tilt the playing field in the Town of Oyster Bay. He accomplished this by lying to FEMA and the IRS in order to obtain hundreds of thousands of Hurricane Sandy disaster relief funds to which he was not entitled and evading taxes on millions of dollars of sales and wages,” stated Acting United States Attorney Currie. “The obligation to deal honestly is shared by everyone in our society, and we and our partners in the FBI and IRS-CI are unwavering in our commitment to root out corruption at all levels.”
“The charges alleged in today’s indictment describe an outpouring of greed. As alleged, Singh put local business owners at a significant disadvantage, siphoned funds from public money he was not entitled to, and sidestepped his responsibility to pay taxes on underreported income. Today’s arrest is proof of the FBI’s continued determination to work with our partners in rooting out those who engage in unlawful schemes for profit,” stated FBI Assistant Director-in-Charge Rodriguez.
“IRS-Criminal Investigation, in its mission of ensuring that everyone pays their fair share of taxes, investigates business owners who willfully do not report all of their business receipts and who willfully fail to collect and pay over payroll taxes to the government, said Special Agent-in-Charge Kitchen. “Obviously, taxes are needed to keep the government running, so when people and businesses do not pay their fair share, they increase the burden on law abiding taxpayers. When business owners do not collect payroll taxes, they compound this burden and harm their own employees, potentially depriving them of future government benefits that are funded by these collections, like Social Security payments.”
The Town of Oyster Bay Loan Scheme
Singh owned and operated restaurants and food concessions located primarily in Nassau County (collectively, the Singh entities), and was awarded agreements with the Town of Oyster Bay (the Town), including concession agreements to operate various food concessions within the Town. The indictment charges that Singh paid bribes and kickbacks to a Town employee (identified in the indictment as co-conspirator #3) in exchange for the co-conspirator’s assistance in obtaining the Town’s guarantee of two loans totaling approximately $20 million that two of Singh’s businesses received from a private corporate financing company (identified in the indictment as the Lender). As a result, were Singh’s entities to default on the loans, the Town would be responsible for repaying the Lender the entire amount of the loan.
The first loan, which closed in November 2011, was for $7,843,138. Approximately one week after the loan closed, Singh gave co-conspirator #3 an envelope with five checks, each in the amount of $5,000; the five checks were made out to “cash.” The second loan, which closed in June 2012, was for $12,273,748. Approximately one week after closing, Singh gave co-conspirator #3 an envelope with five additional checks, each in the amount of $5,000; the five checks were each made out to “cash.” In addition, Singh paid for co-conspirator #3 and a relative to travel to Asia a few weeks after the second loan closed, including all transportation and hotel expenses.
The indictment alleges that in late 2012 and 2013, Singh sought an additional loan of approximately $12 million from the Lender in connection with improvements to be made to Singh’s concession facilities at two Town beaches. To assist Singh, co-conspirator #3 arranged for meetings between the Lender and Town officials. Although the loan was not ultimately extended, between September 2012 and February 2015, Singh made monthly cash payments to co-conspirator #3 for the lease of a BMW automobile.
The Tax Fraud Schemes
The indictment alleges that Singh fraudulently under-reported to the IRS the true amount of money certain of the Singh entities earned and the wages he paid his workers, thereby lowering significantly the federal taxes he and his businesses owed and paid. Specifically, for tax years 2009 and 2012, Singh allegedly failed to report approximately $10,000,000 in gross receipts for seven Singh entities. To facilitate this fraud, Singh employed an individual who, at Singh’s direction, did not record the seven Singh entities’ cash sales as gross receipts in the books and records of those businesses. Because the profits of those businesses flowed through to Singh as their owner, the failure to properly report the gross receipts of the businesses enabled Singh to under-report his own income on his personal income tax returns.
In addition, from 2010 through 2014, Singh allegedly concealed approximately $7,091,331 of wages paid to employees of the same Singh entities, plus an additional Singh entity, fraudulently depriving the federal government of payroll taxes. Singh accomplished this scheme by paying a significant portion of the wages paid to employees of these entities “off the books.” By under-reporting employee hours and even concealing the existence of some employees, Singh caused his payroll processing companies to underreport the employee wages and fail to withhold the proper amount of federal payroll taxes required by law.
The FEMA Fraud Scheme
The indictment also alleges that between October 2012 and January 2015, Singh fraudulently obtained federal disaster relief funds by preparing and filing false and fraudulent documents and invoices with FEMA. These documents claimed that the Singh entity, “The Water’s Edge,” which operated a restaurant in Long Island City, New York, suffered losses following Hurricane Sandy. The invoices inflated the amount of losses, often by double or triple the actual amount. Singh also submitted or caused to be submitted to FEMA fraudulent receipts from vendors that inflated the value of the contents of the building that housed the restaurant. As a result, Singh fraudulently received approximately $950,000 in disaster relief funds from FEMA.
Obstruction of Justice
Singh is charged with evidence tampering and obstruction of justice in connection with the execution of a search warrant at his offices by FBI Special Agents on August 5, 2014. When agents questioned Singh about the contents of a locked safe on the premises, he informed the agents that he did not have a key to the safe and that the safe contained guns, for which he had permits. In fact, the safe contained $175,000 in cash which were diverted cash receipts from a Town beach concession operated by one of the Singh entities. Following the execution of the search warrant, Singh removed the cash and instructed two others to each take a portion of the cash home for “safekeeping.” A few days later, Singh instructed those individuals to return the money to his wife.
If convicted, Singh faces terms of imprisonment of up to o 20 years for each honest services wire fraud charge and up to 10 years for the federal program bribery charge, both in connection with the Town loan scheme. If convicted of any of those charges, the government will seek to forfeit Singh’s properties that constitute or are derived from proceeds of those offenses, including two residences located in Nassau County. Singh further faces terms of imprisonment of up to 30 years for the disaster relief fraud charge and up to five years for conspiring to defraud the United States in connection with his submitted claims for disaster relief, up to 20 years for each of the obstruction charges, up to five years for the charge of conspiring to defraud the United States in connection with his scheme to under-report gross receipts and payroll taxes, and up to three years for the charge of obstructing and impeding the due administration of the Internal Revenue Laws.
Mr. Currie expressed his appreciation to the Nassau County District Attorney’s Office, the Northern Criminal Enforcement Section of the Tax Division of the Department of Justice, and the New York State Department of Taxation and Finance for their assistance in and cooperation with the investigation.
The government’s case is being prosecuted by the Office’s Public Integrity Section and Long Island Criminal Division. Assistant United States Attorneys Catherine M. Mirabile, Raymond A. Tierney, and Lara Treinis Gatz are in charge of the prosecution. Assistant United States Attorney Madeline O’Connor of the Office’s Civil Division will be responsible for the forfeiture of assets.
The Defendant:
HARENDRA SINGH
Age: 56
Syosset, New YorkE.D.N.Y. Criminal Docket No. 15-450
[1] The charges contained in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
Four Plead Guilty in Health Care Fraud ConspiracyRead the Press Release
BROOKLYN, NY – Earlier today, Jeffrey Suh, Kang Young Chung, Sophia Lin, and Emily Shim pleaded guilty to conspiring to commit health care fraud in connection with a $4 million health care fraud scheme.
Today’s guilty pleas were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, Scott J. Lampert, Special Agent-in-Charge, U.S. Department of Health and Human Services, Office of the Inspector General, Office of Investigations’ New York Region (HHS-OIG), and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
The defendants were charged as part of a nationwide Medicare Fraud takedown in June 2015.
According to court filings and facts presented during the plea proceeding, from approximately December 2010 through June 2013, the four defendants at Plaza Medi Group, Inc. and New Plaza Group, Inc., located in Flushing, NY, submitted more than $4 million in false claims to Medicare for physical therapy, occupational therapy and chiropractic services that were not medically necessary, were often not provided, and otherwise did not qualify for reimbursement.
“Clinic owner Jeffrey Suh and his employees defrauded Medicare for personal financial gain, and they now will be held to account for their crimes,” stated Acting United States Attorney Currie. “Health care fraud prevention is a priority of the Department of Justice and this office. We are committed to preserving the resources of the Medicare program for truly needy recipients.”
The fraud scheme that Mr. Suh and his employees engaged in was motivated by nothing more than greed,” said HHS-OIG Special Agent-in-Charge Lampert. “HHS-OIG and its law enforcement partners will continue to aggressively pursue to the fullest extent of the law those who seek to unlawfully enrich themselves by victimizing participants of the Medicare program.”
“Public health insurance programs, such as Medicare, incur staggering financial losses when their programs are exploited. Today, the defendants in this scheme have admitted to their illegal behavior and will now be held accountable for the error of their ways as they face the due process of law,” stated FBI Assistant Director-in-Charge Rodriguez.
Today’s guilty pleas took place before United States Magistrate Judge Steven M. Gold. When sentenced, the defendants face up to 10 years in prison, as well as restitution to reimburse Medicare for the false claims paid, fines and forfeiture of $2,808,190 for Suh, $2,183,012 for Chung, $272,641 for Lin, and $115,136 for Shim.
The government’s case is being prosecuted by the Office’s Business and Security Fraud Unit. Assistant United States Attorneys Sylvia Shweder and Whitman Knapp are in charge of the prosecution, with assistance provided by Assistant United States Attorney Karin Orenstein of the Office’s Civil Division, which is responsible for the forfeiture of assets.
The Defendants:
JEFFREY SUH
Age: 55
Bay Side, New YorkKANG YOUNG CHUNG
Age: 42
Woodside, New YorkSOPHIA LIN
Age: 34
Rocky Point, New YorkEMILY SHIM
Age: 40
Flushing, New YorkE.D.N.Y. Docket No. 15-CR-300 (CBA)
Largest Online Male Escort Service RaidedRead the Press Release
A criminal complaint was unsealed today in federal court in Brooklyn charging the CEO of Rentboy.com, Jeffrey Hurant, and six Rentboy.com employees with conspiring to violate the Travel Act by promoting prostitution. The defendants were arrested this morning and are scheduled to appear before United States Magistrate Judge Marilyn Go at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York; Glenn Sorge, Acting Special Agent in Charge, U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), New York; and William J. Bratton, Commissioner, New York City Police Department.
As alleged in the complaint, Rentboy.com is a male escort advertising site founded in 1997 which hosts thousands of paid advertisements. While the site has disclaimers stating that the advertisements are for companionship and not sexual services, Rentboy.com is designed primarily for advertising illegal prostitution. The website charges subscribers a minimum monthly fee of $59.95 and up to several hundred dollars to advertise sexual services. Once the fee is paid, subscribers can select from a number of categories created by Rentboy.com the sexual services they are willing to perform and the price charged. Subscribers can also include their physical descriptions and provide links to another website where their sexual services are rated by prior customers. Between 2010 and 2015, Rentboy.com had over $10 million in gross proceeds.
“As alleged, Rentboy.com attempted to present a veneer of legality, when in fact this internet brothel made millions of dollars from the promotion of illegal prostitution,” stated Acting United States Attorney Currie. Mr. Currie thanked the Drug Enforcement Administration’s Field Office in New York for their assistance in the investigation.
HSI Acting Special Agent in Charge Sorge stated, “The facilitation and promotion of prostitution offenses across state lines and international borders is a federal crime made even more egregious when it’s blatantly advertised by a global criminal enterprise,” said Acting Special Agent in Charge Sorge of HSI New York. “HSI will use its unique authorities to disrupt and dismantle such organizations and seize the millions of dollars in illegal proceeds they generate.”
“As alleged, Rentboy.com profited from the promotion of prostitution despite their claim that their advertisements were not for sexual services. Thanks to the detectives, agents, and prosecutors of the U.S. Attorney’s Office in the Eastern District involved in this investigation, these individuals will be held accountable for running this racket,” said Police Commissioner Bratton.
In addition, earlier today the government served warrants authorizing the seizure of over $1.4 million of alleged criminal proceeds from six bank accounts. The government also took steps to restrain the domain name www.rentboy.com.
The charges in the complaint are merely allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted each defendant faces up to five years imprisonment and a fine of up to $250,000.
The government’s case is being prosecuted by the Office’s International Narcotics and Money Laundering Section. Assistant United States Attorneys Tyler Smith and Melanie Hendry are in charge of the prosecution.
The Defendants:
JEFFREY HURANT
Age: 50
New York, NYMICHAEL SEAN BELMAN
Age: 47
New York, NYCLINT CALERO
Age: 48
New York, NYEDWARD LORENZ ESTANOL
Age: 23
New York, NYSHANE LUKAS
Age: 41
New York, NYDIANA MILAGROS MATTOS
Age: 43
Queens, NYMARCO SOTO DECKER
Age: 28
New York, NYE.D.N.Y. Docket No. 15-MJ-780
Five Defendants Pay over $8 Million to Resolve Civil Fraud Allegations That They Billed Medicare and Medicaid for Unlicensed and Unnecessary Inpatient Detoxification ServicesRead the Press Release
Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Scott J. Lampert, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General’s New York Region (HHS-OIG), today announced that three New York hospitals, Benedictine Hospital, Columbia Memorial Hospital, and St. Joseph’s Medical Center, together with SpecialCare Hospital Management Corporation (SpecialCare), a Missouri-based company, and SpecialCare’s chief executive officer, Robert McNutt, had agreed to pay over $8 million to resolve claims that they had defrauded the Medicare and Medicaid programs in connection with detoxification treatment provided to patients at the hospitals.
The settlements resolved claims brought jointly by the United States and the New York State Attorney General’s Medicaid Fraud Control Unit that the defendants operated inpatient drug and alcohol detoxification programs under the name "New Vision" without having received licenses from the New York State Office of Alcoholism and Substance Abuse Services. Because the programs were unlicensed, the hospitals were not entitled to bill Medicare and Medicaid for treatment provided to patients. The government also alleged that two of the hospitals, Columbia Memorial and St. Joseph’s, paid SpecialCare for patient referrals in violation of federal and state anti-kickback statutes. Additionally, the government claimed that services provided to New Vision patients were not medically necessary. The period covered by the government’s allegations spanned 2002-2006.
The government=s claims arose from an investigation of allegations made in suits filed by private individuals pursuant to the False Claims Act, 31 U.S.C. '' 3729-33, United States ex rel. Mathew I. Gelfand, M.D. v. SpecialCare Hospital Management Corp., et al., Civil Action
No. 02-CV-6079, and United States ex rel. Montaperto v. New Parkway Hospital, et al., Civil Action No. 05-CV-491. United States District Judge Leonard D. Wexler presided over the two cases and approved each of the settlements announced today, including the settlement with St. Joseph’s Hospital which was entered on August 14, 2015. Under the terms of their agreement with the government, SpecialCare and McNutt agreed to pay $6 million and to be enjoined from doing business with any Medicaid or Medicare provider in New York State for five-years. SpecialCare and McNutt also entered into a Corporate Integrity Agreement with the United States Office of Inspector General of the Department of Health and Human Services. Pursuant to separate agreements, Benedictine Hospital paid $880,000; St. Joseph’s Medical Center paid $600,000, and Columbia Memorial Hospital paid $650,000. These settlements bring the total recovery from the government’s investigation into SpecialCare and hospitals with New Vision programs to over $25 million. Previously, New York Downtown Hospital and Our Lady of Mercy Medical paid $13.4 million and $4.5 million, respectively, to resolve the government’s civil fraud claims.
“Health care providers must understand that they cannot bill Medicare or Medicaid for unlicensed or otherwise unauthorized care. These practices are not only fraudulent, but inflate the cost of health care in general," stated Acting United States Attorney Currie. “Those who defraud and jeopardize the nation=s vital, federally-funded health care programs will be held fully accountable." Mr. Currie thanked New York State Attorney General Eric Schneiderman and his staff, including Acting Director of the New York Medicaid Fraud Control Unit Amy Held and Principal Auditor Investigator Margaret McArdle, for their partnership in investigating the case.
“Health care providers will be held accountable for the quality of care they deliver and the manner in which that care is provided,” said HHS-OIG Special Agent in Charge Lampert. “This settlement is another example of HHS-OIG’s commitment to protecting the federally funded health care programs intended for our most vulnerable individuals.”
The United States’ investigation was handled by Assistant U.S. Attorney Richard K. Hayes, with assistance from Affirmative Civil Enforcement Auditor Emily Rosenthal.
Former Chief Executive Officer of Financial Lending Company Sentenced to 97 Months of Imprisonment for Bank Fraud SchemeRead the Press Release
Earlier today, John Murphy, the former Chief Executive Officer of Oak Rock Financial, LLC (Oak Rock), was sentenced in federal court in Central Islip, New York to 97 months of imprisonment. In December 2013, Murphy pled guilty to bank fraud after admitting that he had been lying to various financial institutions and investors regarding Oak Rock’s financial health since January 2009.
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistance Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“By making fraudulent representations with respect to Oak Rock’s financial position, Murphy caused financial institutions and private investors to suffer millions of dollars in losses,” stated Acting United States Attorney Currie. “Those who defraud others will be held accountable for their actions.” Mr. Currie expressed his appreciation to the New York State Department of Financial Services for its assistance in the investigation.
Oak Rock, a financial lending company located in Suffolk County, New York, secured lines of credit for businesses throughout the United States. During his time as Chief Executive Officer, Murphy misled banks about the state of Oak Rock’s financial health by providing them with false documentation concerning businesses that failed to make timely payments on their loans or that were in default. Murphy, who was compensated $600,000 a year, failed to address the defaulting loans and instead operated Oak Rock as if it were a sound financial organization through lies and deception. Specifically, he defrauded the banks by changing delinquency dates to make it appear that loans were current; booking fictitious payments, thereby creating fictitious accounts receivable; and falsifying delinquent accounts receivable by copying data from timely paid accounts so that the defaulting loans appeared to be timely paid and stable. These misrepresentations caused Israel Discount Bank, Oak Rock’s primary lender, as well as other financial institutions and private investors, to sustain losses totaling in excess of $93 million.
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 sentence was imposed by United States District Judge Leonard D. Wexler.
The case is being prosecuted by the Office’s Long Island Criminal Division. Assistant United States Attorney Michael P. Canty is in charge of the prosecution.
The Defendant:
JOHN MURPHY
Age: 65
Nesconset, New YorkE.D.N.Y Docket No 13-CR-702 (LDW)
Current and Former JFK Airport Cargo Handlers Arrested in Schemes to Steal from the Mail and Launder Foreign Currency Valued at More Than $250,000Read the Press Release
A criminal complaint was unsealed today in federal court in the Eastern District of New York charging current and former cargo handlers at John F. Kennedy International Airport (JFK Airport) with conspiracy to steal United States mail and money laundering. Frantz Janvier, Machel Scarlett, Tracey Mellisa Sandy, Greguy Janvier, Jamila Malika Allen, and Melbourne Black were arrested earlier today and their initial appearances are scheduled for this afternoon before United States Magistrate Judge Viktor V. Pohorelsky at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Phillip R. Bartlett, Postal Inspector in Charge of the United States Postal Inspection Service’s New York Field Office.
As detailed in the criminal complaint, in a conspiracy spanning over four years, former cargo handlers Frantz Janvier, Machel Scarlett, and Tracey Mellisa Sandy, agreed to steal mail from international flights arriving at and departing from Terminal One of JFK Airport, including Japan Airlines flights carrying mail from Japan. The cargo handlers targeted mail they believed to contain foreign currency, including Japanese Yen, and then exchanged the foreign currency at currency exchange businesses at JFK Airport and at other financial institutions. The complaint also charges Frantz Janvier, Greguy Janvier, Jamila Malika Allen, and Melbourne Black with laundering the proceeds of their theft. As alleged in the complaint, the United States Postal Inspection Service estimates that the loss attributable to the mail theft is likely to exceed $250,000.
“As charged in the complaint, JFK Airport cargo handlers stole foreign currency from the mail and laundered tens of thousands of dollars in the proceeds of that theft through airport currency exchanges and other financial institutions,” stated Acting United States Attorney Currie. “Federal law enforcement authorities are committed to protecting the integrity of the mail, and we will hold accountable those who steal mail or attempt to profit from the theft of mail.”
“These defendants allegedly took advantage of the access given to them by their employer when they devised a scheme to steal US Mail from the cargo of airplanes at JFK and then lie to launder the proceeds for their personal gain,” said Inspector in Charge Bartlett. “Let there be no mistake, Postal Inspectors will use every resource to bring criminals to justice for crimes violating the sanctity of the US Postal Service.”.
The charges in the complaint are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by the Office’s General Crimes Section. Assistant United States Attorney Ian C. Richardson is in charge of the prosecution.
The arrests are the latest in a series of recent investigations and prosecutions of airport cargo handlers by the United States Attorney’s Office for the Eastern District of New York and the United States Postal Inspection Service:
In United States v. Hamilton, et al., Docket No. 15-CR-280 (DLI), five defendants, all cargo handlers at Terminal One of JFK Airport, pleaded guilty in June and July 2015 to charges that they stole U.S. letter mail between April 2014 and November 2014. Evidence included four of the defendants being caught with a total of approximately 500 pieces of stolen letter mail stuffed in backpacks and in articles of clothing.
In United States v. Ali, et al., Docket No. 14-CR-484 (FB), two defendants, both cargo handlers at Terminal One of JFK Airport, pleaded guilty in March 2015 to charges that they stole U.S. letter mail between April 2014 and August 2014. Evidence included the defendants being caught in August 2014 stashing a bag filled with stolen letter mail in a car parked at JFK Airport.
In United States v. Ramkhelawan, et al., Docket No. 13-CR-692 (DLI), five defendants, all cargo handlers at LaGuardia Airport, pleaded guilty and were sentenced in November 2014 and February and March 2015 on mail theft charges. The defendants stole dozens of high-value electronic devices from the mail, including smartphones, laptops, tablets, and video game consoles worth at least $10,000.
The Defendants:
FRANTZ JANVIER
Age: 32
Brooklyn, New YorkMACHEL SCARLETT
Age: 37
Queens, New YorkTRACEY MELLISA SANDY
Age: 45
Queens, New YorkGREGUY JANVIER
Age: 34
Brooklyn, New YorkJAMILA MALIKA ALLEN
Age: 24
Brooklyn, New YorkMELBOURNE BLACK
Age: 50
Queens, New YorkE.D.N.Y. Docket No. 15-M-777
Doctor at Brooklyn, New York, Clinic Sentenced to Two Years in Prison for Engaging in $13 Million Health Care Fraud SchemeRead the Press Release
A doctor at a Brooklyn, New York, clinic was sentenced to two years in prison for his role in a $13 million health care fraud scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Special Agent in Charge Scott Lampert of the U.S. Department of Health of Human Services-Office of Inspector General (HHS-OIG) New York Region and Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Field Office made the announcement.
Okon Umana, 68, of West Haven, Connecticut, pleaded guilty on Dec. 1, 2014, to conspiracy to commit health care fraud. In addition to imposing the prison term, U.S. District Judge John Gleeson of the Eastern District of New York ordered Umana to pay $6,429,330 in restitution and to forfeit $6,550,036.
From 2009 to 2012, Umana was the medical director of Cropsey Medical Care PLLC (Cropsey), a health care clinic. In connection with his guilty plea, Umana admitted that many of Cropsey’s medical services were provided by a physician’s assistant who was acting without supervision by a medical doctor, and that Cropsey nevertheless billed Medicare and Medicaid for the services using Umana’s provider number. In addition, Umana admitted that in seeking reimbursement for costs purportedly incurred transporting certain beneficiaries to and from Cropsey by ambulette, he falsely certified that transportation by ambulette was medically necessary.
Between November 2009 and October 2012, Cropsey submitted more than $13 million in claims to Medicare and Medicaid for a wide variety of fraudulent medical services and procedures, including physician office visits, physical therapy and diagnostic tests. Medicare and Medicaid reimbursed Cropsey more than $6 million for the claimed services and procedures.
Eight other individuals charged in connection with the scheme previously pleaded guilty. To date, one other individual has been sentenced.
This case is being investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Eastern District of New York. This case is being prosecuted by Trial Attorney Sarah Hall of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Shannon C. Jones of the Eastern District of New York.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged over 2,300 defendants who collectively have billed the Medicare program for over $7 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are 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.
Brooklyn, New York, Resident Pleads Guilty to Conspiring to Provide Material Support to TerroristsRead the Press Release
Defendant Purchased Ticket to Travel to Turkey to Join ISIL
Abdurasul Hasanovich Juraboev, 25, a citizen of Uzbekistan and resident of Brooklyn, New York, pleaded guilty today to conspiring to provide material support to a designated foreign terrorist organization, the Islamic State in Iraq and the Levant (ISIL).
The guilty plea was announced by Assistant Attorney General for National Security John P. Carlin, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI New York Field Office, Acting Special Agent in Charge Glenn Sorge of the Homeland Security Investigations (HIS) New York Field Office and Commissioner William J. Bratton of the New York City Police Department (NYPD).
According to previous court filings, in August 2014, Juraboev posted a threat on an Uzbek-language website to kill President Obama in an act of martyrdom on behalf of ISIL. In subsequent interviews by federal agents, Juraboev stated his belief in ISIL’s terrorist agenda, including the establishment by force of an Islamic caliphate in Iraq and Syria. Juraboev stated that he wanted to travel to Syria to fight on behalf of ISIL but lacked the means to travel. He stated that if he were unable to travel, he would engage in an act of martyrdom on U.S. soil if ordered to do so by ISIL, such as killing the President or planting a bomb on Coney Island, New York. During the next several months, Juraboev and a co-conspirator discussed plans to travel to Syria to fight on behalf of ISIL, culminating in Juraboev’s purchase on Dec. 27, 2014, of a ticket to travel from John F. Kennedy International Airport in Queens, New York, to Istanbul, departing on March 29, 2015.
Juraboev pleaded guilty before U.S. District Court Judge William F. Kuntz II of the Eastern District of New York. At sentencing, Juraboev faces up to 15 years in prison.
“Abdurasul Hasanovich Juraboev 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 Assistant Attorney General Carlin. “The National Security Division’s highest priority is counterterrorism, and this case reflects our commitment to finding those who wish to provide material support to ISIL and to fight on behalf of the terrorist organization, either at home or abroad, and preventing them from doing so.”
“The defendant planned to travel to Syria to wage jihad on behalf of ISIL, and was prepared to commit a terrorist attack on American soil if he were not able to make that trip,” said Acting U.S. Attorney Currie. “The defendant’s guilty plea today is a testament to the hard work of the FBI’s Joint Terrorism Task Force in New York to prevent local residents from becoming foreign fighters in Syria or launching terrorist attacks at home.”
“Juraboev clearly expressed the desire to commit violence, either domestically or abroad, on behalf of a terrorist organization,” said Assistant Director in Charge Rodriguez. “His failure to carry out this desire is a testament to the tireless efforts of FBI New York’s Joint Terrorism Task Force. We will continue to work day and night, with our law enforcement partners, to ensure the safety of all Americans.”
“Today’s guilty plea is the culmination of just one of many efforts to arrest and prosecute individuals who wish to join terrorist organizations in order to do harm to Americans both here and abroad,” said Acting Special Agent in Charge Sorge. “As a member of the Joint Terrorism Task Force, HSI will continue to use its unique customs and immigration authorities to root out these evil individuals and bring them to justice.”
“Abdurasul Juraboev was quite clear that he wanted to provide material support to ISIL by fighting in Syria, if not, by his offer to assassinate the President of the United States, or by carrying out a terrorist attack in Coney Island,” said Commissioner Bratton. “This case is another example of the reach that ISIL has within the United Sates through social media, and the fact that some are willing to follow that call. I commend the work of the agents and detectives of the Manhattan based Joint Terrorism Task Force.”
The case is being investigated by the FBI’s Joint Terrorism Task Force in New York. The case is being prosecuted by Assistant U.S. Attorneys Alexander Solomon, Douglas M. Pravda and Peter W. Baldwin of the Eastern District of New York, with assistance provided by Trial Attorney Danya Atiyeh of the National Security Division’s Counterterrorism Section.
Juraboev Plea Agreement
Brooklyn Doctor Sentenced to 24 Months in Prison for Engaging in A $13 Million Health Care Fraud SchemeRead the Press Release
BROOKLYN, NY – Earlier today, defendant Dr. Okon Umana, 68, was sentenced to 24 months in prison for his role as the “no show” doctor in a $13 million health care fraud scheme. Umana previously pleaded guilty to health care fraud conspiracy on December 1, 2014. As part of the sentence, the court entered an order directing Umana to pay $6,429,330 in restitution and to forfeit $6,550,036. The sentencing proceeding was held before U.S. District Judge John Gleeson.
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York; Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division; Scott Lampert, Special Agent-in-Charge, Health of Human Services, Office of Inspector General (HHS-OIG), New York Region; and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
From 2009 to 2012, Umana was the medical director of Cropsey Medical Care PLLC (Cropsey), a health care clinic located in Bensonhurst, Brooklyn. In connection with his guilty plea, Umana admitted that many of Cropsey’s medical services were provided by a physician’s assistant who was acting without supervision by a medical doctor, and that Cropsey nevertheless billed Medicare and Medicaid for the services using Umana’s provider number. In addition, Umana admitted that in seeking reimbursement for costs purportedly incurred transporting certain beneficiaries to and from Cropsey by ambulette, he falsely certified that transportation by ambulette was medically necessary.
Between November 2009 and October 2012, Cropsey submitted more than $13 million in claims to Medicare and Medicaid for a wide variety of fraudulent medical services and procedures, including physician office visits, physical therapy and diagnostic tests. Medicare and Medicaid reimbursed Cropsey more than $6 million for the claimed services and procedures. Eight other individuals charged in connection with the scheme previously pleaded guilty. To date, one other individual has been sentenced.
“Rather than using his license to practice medicine, Dr. Umana used it to fraudulently bill Medicare and Medicaid for services he did not provide,” stated Acting United States Attorney Currie. “Protecting taxpayer funded programs such as Medicaid and Medicare is a priority of this Office and the Department of Justice.” Mr. Currie extended his grateful appreciation to HHS-OIG and the FBI for their work on the investigation.
The government’s case is being prosecuted by Assistant U.S. Attorney Shannon C. Jones of the Eastern District of New York and Trial Attorney Sarah M. Hall of the Criminal Division’s Fraud Section.
This case is being investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged over 2,300 defendants who collectively have billed the Medicare program for over $7 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are 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.
The Defendant:
OKON UMANA
Age: 68
West Haven, ConnecticutE.D.N.Y. Docket No. 12 CR 617 (S-1)(JG)
Albanian National Sentenced to 16 Years for Attempting to Support TerrorismRead the Press Release
Agron Hasbajrami, 31, an Albanian citizen and resident of Brooklyn, New York, was sentenced to 16 years in prison for attempting and conspiring to provide material support to terrorists. Pursuant to the terms of his plea agreement, Hasbajrami will be removed from the United States at the conclusion of his sentence. The sentencing proceeding was held before U.S. District Judge John Gleeson of the Eastern District of New York.
Assistant Attorney General for National Security John P. Carlin, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI New York Field Office and Commissioner William J. Bratton of the New York City Police Department (NYPD) made the announcement.
As stated during the guilty plea and sentencing proceedings, and according to court filings, in September 2011, Hasbajrami attempted to travel to the Federally Administered Tribal Areas of Pakistan (the FATA) for the purpose of joining a radical jihadist insurgent group. In addition, he sent over $1,000 in multiple wire transfers abroad to support terrorist activities in Pakistan and Afghanistan. In pursuing his goal of fighting jihad, the defendant exchanged email messages with an individual in Pakistan who said he was a member of an armed group that had murdered American soldiers and kidnapped Westerners. In one email message, Hasbajrami stated that it was difficult to ask for money from fellow Muslims because they became apprehensive “when they hear it is for jihad.” In another email, he stated that he wished to travel overseas, using jihadist rhetoric to describe his desire to die as a martyr.
On Sept. 5, 2011, Hasbajrami purchased a one-way airline ticket to travel to Turkey the following day. Based on Hasbajrami’s email communications, he intended to travel from Turkey to the FATA to join a jihadist group. On Sept. 6, 2011, the defendant was arrested at John F. Kennedy International Airport. At the time of his arrest, he was carrying a tent, boots and cold weather gear. A search of the defendant’s residence revealed, among other items, a note reading “Do not wait for invasion, the time is martyrdom time.”
“This case, like many others before it, has shown that the application of lawful surveillance can allow the United States government to detect and neutralize a terrorist in the United States,” said Acting U.S. Attorney Currie. “The sentence imposed today leaves no question as to the defendant’s role in a very serious offense and helps ensure that he will no longer pose a threat to the United States and our allies.”
“Hasbajrami is yet another individual in the U.S. who was inspired to commit acts of violence in the name of jihad,” said Assistant Director in Charge Rodriguez. “He used technology to propagate terrorist messages and create a plan to attack U.S. interests. Due to the excellent collaboration and work of all our law enforcement partners on the Joint Terrorism Task Force, we stopped his travel abroad to fight with a foreign terrorist organization. These threats remain among the highest priorities for the FBI and the Intelligence Community as a whole. Through his guilty plea and today’s sentence, once completed, he will no longer be able to remain in the U.S. while trying to harm us.”
“The sentence imposed today sends a clear message: members of Manhattan-based Joint Terrorism Task Force will work tirelessly to uncover and stop any efforts to provide material support to organizations built to kill Americans,” said Commissioner Bratton.
Assistant Attorney General Carlin joined Acting U.S. Attorney Currie in thanking the federal, state and local law enforcement agencies who participate in the FBI’s Joint Terrorism Task Force in New York.
The case was prosecuted by Assistant U.S. Attorneys Seth D. DuCharme, Saritha Komatireddy, Peter Baldwin and Matthew Amatruda of the Eastern District of New York, and Trial Attorney Danya Atiyeh of the National Security Division’s Counterterrorism Section.
Albanian National Sentenced to 16 Years’ Imprisonment for Attempting to Support TerrorismRead the Press Release
Earlier today, at the United States District Court for the Eastern District of New York in Brooklyn, Agron Hasbajrami, an Albanian citizen and resident of Brooklyn, was sentenced to 16 years in prison based on his June 2015 guilty plea to attempting and conspiring to provide material support to terrorists. Pursuant to the terms of his plea agreement, Hasbajrami will be removed from the United States at the conclusion of his sentence. The sentencing proceeding was held before United States District Judge John Gleeson.
The sentence was announced by Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Attorney General for National Security John P. Carlin, Assistant Director-in-Charge Diego G. Rodriguez of the FBI’s New York Field Office, and Commissioner William J. Bratton of the New York City Police Department.
As stated during the guilty plea and sentencing proceedings, and according to court filings, in September 2011, Hasbajrami attempted to travel to the Federally Administered Tribal Areas of Pakistan (the FATA) for the purpose of joining a radical jihadist insurgent group. In addition, he sent over $1,000 in multiple wire transfers abroad to support terrorist activities in Pakistan and Afghanistan. In pursuing his goal of fighting jihad, the defendant exchanged email messages with an individual in Pakistan who said he was a member of an armed group that had murdered American soldiers and kidnapped Westerners. In one email message, Hasbajrami stated that it was difficult to ask for money from fellow Muslims because they became apprehensive “when they hear it is for jihad.” In another email, he stated that he wished to travel overseas, using jihadist rhetoric to describe his desire to die as a martyr.
On September 5, 2011, Hasbajrami purchased a one-way airline ticket to travel to Turkey the following day. Based on Hasbajrami’s email communications, he intended to travel from Turkey to the FATA to join a jihadist group. On September 6, 2011, Hasbajrami was arrested at John F. Kennedy International Airport. At the time of his arrest, he was carrying a tent, boots, and cold weather gear. A search of the defendant’s residence revealed, among other items, a note reading “Do not wait for invasion, the time is martyrdom time.”
“This case, like many others before it, has shown that the application of lawful surveillance can allow the United States government to detect and neutralize a terrorist in the United States,” said Acting U.S. Attorney Currie. “The sentence imposed today leaves no question as to the defendant’s role in a very serious offense and helps ensure that he will no longer pose a threat to the United States and our allies.”
“Hasbajrami is yet another individual in the U.S. who was inspired to commit acts of violence in the name of jihad. He used technology to propagate terrorist messages and create a plan to attack U.S. interests. Due to the excellent collaboration and work of all our law enforcement partners on the Joint Terrorism Task Force, we stopped his travel abroad to fight with a foreign terrorist organization. These threats remain among the highest priorities for the FBI and the Intelligence Community as a whole. Through his guilty plea and today’s sentence, once completed, he will no longer be able to remain in the U.S. while trying to harm us,” stated FBI Assistant Director-in-Charge Rodriguez.
“The sentence imposed today sends a clear message: members of Manhattan-based Joint Terrorism Task Force will work tirelessly to uncover and stop any efforts to provide material support to organizations built to kill Americans,” said Police Commissioner Bratton.
Assistant Attorney General Carlin joined Acting U.S. Attorney Currie in thanking the federal, state, and local law enforcement agencies who participate in the FBI’s Joint Terrorism Task Force in New York.
The government’s case was prosecuted by the office’s National Security & Cybercrime Section. Assistant U.S. Attorneys Seth D. DuCharme, Saritha Komatireddy, Peter Baldwin, and Matthew Amatruda of the Eastern District of New York, and Trial Attorney Danya Atiyeh of the National Security Division’s Counterterrorism Section, are in charge of the prosecution.
The Defendant
AGRON HASBAJRAMI
Age: 31
Docket No.: 11 CR 623 (S2) (JG)Terrorist Sentenced to 22 Years for Providing Material Support to al-Qaeda in the Arabian PeninsulaRead the Press Release
Lawal Olaniyi Babafemi, 35, a Nigerian citizen, was sentenced today to 22 years in prison for conspiring to provide and providing material support to a designated foreign terrorist organization, al-Qaeda in the Arabian Peninsula (AQAP). The sentence was imposed by the U.S. District Judge John Gleeson of the Eastern District of New York.
Assistant Attorney General for National Security John P. Carlin, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI New York Field Office and Commissioner William J. Bratton of the New York City Police Department (NYPD) made the announcement.
Babafemi pleaded guilty to providing and conspiring to provide material support to AQAP on April 29, 2014. According to previous court filings, between approximately January 2010 and August 2011, the defendant traveled twice from Nigeria to Yemen to meet and train with leaders of AQAP, the Yemen-based branch of al-Qaeda that has been linked to a number of plots targeting the U.S. homeland over the past decade. AQAP leaders trained Babafemi in the use of weapons, including AK-47 assault rifles, and taught him the importance of AQAP’s English-language media operations to its mission of inspiring “lone-wolf” style attacks abroad in the name of AQAP. Babafemi assisted in AQAP’s English-language media operations, which include the publication of the online Inspire Magazine, and worked closely with Samir Khan, the founder of Inspire and a U.S. citizen. Babafemi’s photograph, alongside Khan and other AQAP members, each holding an AK-47, was published in Issue 5 of Inspire; he also wrote rap lyrics on behalf of the group, hoping to extend its appeal to young Westerners. At the direction of the now-deceased senior AQAP leader Anwar al-Aulaqi, AQAP provided Babafemi with the equivalent of almost $9,000 in cash to recruit other English-speakers from Nigeria to join the terrorist organization. Babafemi attempted to recruit other Nigerians to join AQAP, but was arrested before he could complete that mission and conduct further activities on behalf of the organization.
“With this sentence, Lawal Olaniyi Babafemi is being held accountable for conspiring with members of al-Qaeda in the Arabian Peninsula and providing material support to the foreign terrorist organization,” said Assistant Attorney General Carlin. “Babafemi travelled to Yemen to receive weapons training and to learn how to contribute to AQAP’s English-language media operation, in addition to receiving money to recruit others to join AQAP’s ranks. Counterterrorism is the National Security Division’s highest priority and we will continue our efforts to detect, deter and hold accountable those who provide material support to designated foreign terrorist organizations.”
“The defendant traveled to Yemen twice to seek out and commit himself to the radical terrorist organization AQAP and its goal of causing mass devastation in the West,” said Acting U.S. Attorney Currie. “He undertook his journey soon after his fellow countryman’s notorious, albeit failed, attempt on behalf of AQAP to detonate a bomb concealed in his underwear in U.S. airspace. Babafemi received weapons training and worked with AQAP’s English-language media organization to recruit Westerners to its murderous mission. The investigation, prosecution, and conviction of Babafemi exemplifies the tireless efforts of the FBI’s Joint Terrorism Task Forces in New York and San Diego to identify and bring to justice those intent on joining and supporting violent terrorist organizations around the globe. This case is especially important as it relates to efforts to prosecute individuals who both engage in physical violence themselves and who create and disseminate violent terrorist propaganda worldwide in an effort to convince others to do so.”
The case is being prosecuted by Assistant U.S. Attorneys Zainab Ahmad and Hilary Jager of the Eastern District of New York, with assistance from Trial Attorney Annamartine Salick of the Justice Department’s Counterterrorism Section.
Terrorist Sentenced to 22 Years for Providing Material Support to Al-Qaeda in the Arabian PeninsulaRead the Press Release
WASHINGTON –Lawal Olaniyi Babafemi, 35, a Nigerian citizen, was sentenced today to 22 years in prison following his guilty plea to conspiring to provide and providing material support to a designated foreign terrorist organization, al-Qaeda in the Arabian Peninsula (AQAP). The sentence was imposed by the U.S. District Judge John Gleeson of the Eastern District of New York.
The charges were announced by Assistant Attorney General for National Security John P. Carlin, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI New York Field Office and Commissioner William J. Bratton of the New York City Police Department (NYPD).
According to previous court filings, between approximately January 2010 and August 2011, the defendant traveled twice from Nigeria to Yemen to meet and train with leaders of AQAP, the Yemen-based branch of al-Qaeda that has been linked to a number of plots targeting the U.S. homeland over the past decade. AQAP leaders trained Babafemi in the use of weapons, including AK-47 assault rifles, and taught him the importance of AQAP’s English-language media operations to its mission of inspiring “lone-wolf” style attacks abroad in the name of AQAP. Babafemi assisted in AQAP’s English-language media operations, which include the publication of the online Inspire Magazine, and worked closely with Samir Khan, the founder of Inspire and a U.S. citizen. Babafemi’s photograph, alongside Khan and other AQAP members, each holding an AK-47, was published in Issue 5 of Inspire; he also wrote rap lyrics on behalf of the group, hoping to extend its appeal to young Westerners. At the direction of the now-deceased senior AQAP leader Anwar al-Aulaqi, AQAP provided Babafemi with the equivalent of almost $9,000 in cash to recruit other English-speakers from Nigeria to join the terrorist organization. Babafemi attempted to recruit other Nigerians to join AQAP, but was arrested before he could complete that mission and conduct further activities on behalf of the organization.
“With this sentence, Lawal Olaniyi Babafemi is being held accountable for conspiring with members of al-Qaeda in the Arabian Peninsula and providing material support to the foreign terrorist organization,” said Assistant Attorney General Carlin. “Babafemi travelled to Yemen to receive weapons training and to learn how to contribute to AQAP’s English-language media operation, in addition to receiving money to recruit others to join AQAP’s ranks. Counterterrorism is the National Security Division’s highest priority and we will continue our efforts to detect, deter, and hold accountable those who provide material support to designated foreign terrorist organizations.”
“The defendant traveled to Yemen twice to seek out and commit himself to the radical terrorist organization AQAP and its goal of causing mass devastation in the West,” stated Acting United States Attorney Currie. “He undertook his journey soon after his fellow countryman’s notorious, albeit failed, attempt on behalf of AQAP to detonate a bomb concealed in his underwear in U.S. airspace. Babafemi received weapons training and worked with AQAP’s English-language media organization to recruit Westerners to its murderous mission. The investigation, prosecution, and conviction of Babafemi exemplifies the tireless efforts of the FBI’s Joint Terrorism Task Forces in New York and San Diego to identify and bring to justice those intent on joining and supporting violent terrorist organizations around the globe. This case is especially important as it relates to efforts to prosecute individuals who both engage in physical violence themselves and who create and disseminate violent terrorist propaganda worldwide in an effort to convince others to do so.”
The case is being prosecuted by Assistant U.S. Attorneys Zainab Ahmad and Hilary Jager of the Eastern District of New York, with assistance from Trial Attorney Annamartine Salick of the Justice Department’s Counterterrorism Section.
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Long Island Physicians Pay $1.1 Million to Resolve Civil Fraud Allegations That They Provided and Billed for Unnecessary Medical TestingRead the Press Release
Dr. Vikas Desai (Desai), the principal of Desai MD, P.C. d/b/a East Islip Family Care (EIFC), and Dr. Robert Maccone, a physician who was previously affiliated with EIFC, have entered into separate civil settlement agreements in which they have collectively agreed to pay the United States a total of $1,120,299 to resolve allegations that they submitted claims to Medicare for nerve conduction studies (NCVs) that were not medically necessary.
The settlement was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York; Scott Lampert, Special Agent-in-Charge of New York’s Office of the Inspector General for the Department of Health and Human Services (HHS-OIG); and Scott Rezendes, Special Agent-in-Charge of New York’s Office of Personnel Management, Office of the Inspector General, Field Operations (OPM).
The government alleged that Dr. Desai, Dr. Maccone, and the late Dr. Edmond Ross – all of whom were at various times affiliated with EIFC – ordered and rendered NCVs on patients for whom those studies were not medically necessary. NCVs involve the electrical stimulation of a patient’s nerves and muscles to measure the conduction speed of electric impulses and proper nerve and muscle function. Because NCVs involve the administration of low levels of electric current, or shocks, to a patient, the tests can be uncomfortable and even painful. Specifically, the government alleged that Drs. Desai, Ross, and Maccone ordered the subject NCV studies despite the lack of apparent indications in the medical charts, and that when NCV studies were indicated, they were not performed in conformance with those indications (e.g., patients with arm complaints were inexplicably given leg NCV studies). The government contended that there was no medically necessary reason for the subject studies, and that accordingly, defendants falsely submitted thousands of claims for those studies to Medicare and OPM.
Dr. Desai has agreed to settle the government’s allegations regarding medically unnecessary billings made by both Dr. Desai and the late Dr. Ross from January 1, 2009 (the year that Dr. Desai purchased the EIFC from Drs. Ross and Maccone) to December 31, 2012, for the sum of $302,208.00. Dr. Maccone has agreed to settle the government’s allegations regarding his medically unnecessary billings from November 1, 2007 to December 31, 2011, for the sum of $818,091.33.
The investigation that led to the settlements began after Rosemarie Hennessey, a receptionist at EIFC, filed a complaint on behalf of the United States in the Eastern District of New York. The government recently intervened in that matter and is resolving it consistent with the terms set forth herein. Under the federal False Claims Act, a private individual who has uncovered fraud against the federal government may file a suit in federal court on behalf of the United States. If the United States is successful in resolving those claims, the individual who filed the complaint may receive a share of the recovery.
“We are committed to battling health care fraud, especially in situations where the allegations involve doctors making testing and treatment decisions that do not benefit patients, only themselves, and harm the Medicare program,” stated Acting United States Attorney Currie. Mr. Kelly extended his grateful appreciation to HHS-OIG and OPM for their assistance in this matter.
The government’s case was handled by Assistant U.S. Attorney Erin E. Argo, with assistance from Affirmative Civil Enforcement Auditor Emily Rosenthal.
E.D.N.Y. Docket No. 10-CV-3851
Two New York City Residents Charged with Conspiracy to Provide Material Support to ISILRead the Press Release
Knife-Wielding Defendants Allegedly Attacked Federal Law Enforcement Officers
Yesterday, a federal grand jury in the Eastern District of New York returned an indictment charging Munther Omar Saleh, 20, of Queens, New York, with conspiring and attempting to provide material support to the Islamic State of Iraq and the Levant (ISIL), and assault and conspiracy to assault federal officers. The same indictment also charges Fareed Mumuni, 21, of Staten Island, New York, with conspiring and attempting to provide material support to ISIL, assault and conspiracy to assault federal officers and attempted murder of federal officers.
The charges were announced by Assistant Attorney General for National Security John P. Carlin, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI New York Field Office and Commissioner William J. Bratton of the New York City Police Department (NYPD).
The defendants’ arraignments are scheduled for Aug. 20, 2015, at 11:00 a.m. EDT, before U.S. Magistrate Judge James Orenstein of the Eastern District of New York at the U.S. Courthouse in Brooklyn, New York.
As alleged in the indictment and in other court filings, during the conspiracy, the defendants expressed fervent support for ISIL. Saleh and Mumuni conspired to conduct an attack in the United States, including plotting to use a pressure cooker bomb in the New York metropolitan area on behalf of ISIL. On June 13, 2015, Saleh and another individual were arrested in Queens after they approached a federal agent while armed with knives. On June 17, 2015, during the execution of a search warrant at his residence in Staten Island, Mumuni was arrested after repeatedly stabbing an FBI agent in the torso with a large kitchen knife. Fortunately, the knife did not penetrate the agent’s body armor. During a search of the vehicle used by Mumuni, investigators recovered a second large knife.
“According to the indictment, 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 Assistant Attorney General Carlin. “Counterterrorism is the National Security Division’s highest priority and we will continue to seek justice against those who conspire to provide material support to designated foreign terrorist organizations – and we will relentlessly pursue any individuals who attempt to harm the brave law enforcement officials who risk their lives to protect us.”
“Both Munther Omar Saleh and Fareed Mumuni allegedly conspired to provide material support to ISIL. Both men also attacked law enforcement officers who work to keep our communities safe,” said Acting U.S. Attorney Currie. “The officers exercised extraordinary skill and restraint in safely subduing the defendants, who will now face the full force of justice in federal court.”
“These indictments remind us of the dangers faced by law enforcement and the community alike,” said Assistant Director in Charge Rodriguez. “The FBI remains vigilant in its pursuit against violence and restrained in its apprehension of such offenders. We are grateful for the safety of our agents and will continue to work to eliminate threats to our country with the help of our law enforcement partners.”
“Stabbing an FBI agent and providing material support to a designated terrorist organization are a recipe for indictment, as alleged,” said Commissioner Bratton. “I commend the agents and detectives from the Manhattan-based Joint Terrorism Task Force and prosecutors in the Eastern District for their work on this case.”
If convicted, Mumuni faces a maximum sentence of 85 years’ imprisonment and Saleh faces a maximum sentence of 65 years’ imprisonment. The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The case is being prosecuted by Assistant U.S. Attorneys Alexander A. Solomon, Douglas M. Pravda and Ian C. Richardson of the Eastern District of New York, with assistance provided by Trial Attorney Robert Sander of the Justice Department’s Counterterrorism Section.
Saleh and Mumuni Indictment
Two New York City Residents Charged with Conspiracy to Provide Material Support to IsilRead the Press Release
WASHINGTON – Yesterday, a federal grand jury in the Eastern District of New York returned an indictment charging Munther Omar Saleh, of Queens, New York, 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. The same indictment also charges Fareed Mumuni, of Staten Island, New York, with conspiring and attempting to provide material support to ISIL, assaulting and conspiring to assault federal officers, and with attempted murder of federal officers. The defendants’ arraignments are scheduled for August 20, 2015 at 11 a.m. EDT before United States Magistrate Judge James Orenstein at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Assistant Attorney General for National Security John P. Carlin, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI New York Field Office, and Commissioner William J. Bratton of the New York City Police Department (NYPD).
As alleged in the indictment and in other court filings, during the conspiracy, the defendants expressed fervent support for ISIL. Saleh and Mumuni conspired to conduct an attack in the United States, including plotting to use a pressure cooker bomb in the New York metropolitan area on behalf of ISIL. On June 13, 2015, Saleh and another individual were arrested in Queens after they charged at a federal officer while armed with knives. On June 17, 2015, during the execution of a search warrant at his residence in Staten Island, Mumuni was arrested after repeatedly stabbing an FBI agent in the torso with a large kitchen knife. Fortunately, the knife did not penetrate the agent’s body armor. During a search of the vehicle used by Mumuni, investigators recovered a second large knife.
“According to the indictment, 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 Assistant Attorney General Carlin. “Counterterrorism is the National Security Division’s highest priority and we will continue to pursue justice against those who seek to provide material support to designated foreign terrorist organizations.”
“Both Munther Omar Saleh and Fareed Mumuni allegedly conspired to provide material support to ISIL. Both men also attacked law enforcement officers who work to keep our communities safe,” said Acting U.S. Attorney Currie. “The officers exercised extraordinary skill and restraint in safely subduing the defendants, who will now face the full force of justice in federal court.”
“These indictments remind us of the dangers faced by law enforcement and the community alike. The FBI remains vigilant in its pursuit against violence and restrained in its apprehension of such offenders. We are grateful for the safety of our agents and will continue to work to eliminate threats to our country with the help of our law enforcement partners,” said FBI Assistant Director in Charge Rodriguez.
“Stabbing an FBI agent and providing material support to a designated terrorist organization are a recipe for indictment, as alleged. I commend the agents and detectives from the Manhattan-based Joint Terrorism Task Force and prosecutors in the Eastern District for their work on this case,” said Police Commissioner Bratton.
If convicted, Mumuni faces a maximum sentence of 85 years’ imprisonment and Saleh faces a maximum sentence of 65 years’ imprisonment. The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The case is being prosecuted by Assistant U.S. Attorneys Alexander A. Solomon, Douglas M. Pravda, and Ian C. Richardson of the Eastern District of New York, with assistance provided by Trial Attorney Robert Sander of the Justice Department’s Counterterrorism Section.
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15-CR-393 (EDNY)
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Nine People Charged in Largest Known Computer Hacking and Securities Fraud SchemeRead the Press Release
NEWARK, N.J. – Nine people were charged in two indictments unsealed today in Brooklyn, New York, and Newark federal court with an international scheme to hack into three business newswires and steal yet-to-be published press releases containing non-public financial information that was then used to make trades that allegedly generated approximately $30 million in illegal profits.
U.S. Attorney Paul J. Fishman, District of New Jersey, and Acting U.S. Attorney Kelly T. Currie, Eastern District of New York, announced the indictments today, along with U.S. Secretary of Homeland Security Jeh Johnson; U.S. Secret Service Director Joseph P. Clancy; FBI Assistant Director-in-Charge Diego Rodriguez, New York Field Office; and U.S. Securities Exchange Commission (SEC) Chair Mary Jo White. The SEC also unsealed a civil complaint today charging the nine indicted defendants and several other individuals and entities.
The indictments unsealed today charge the defendants with hacking into the newswires and stealing confidential information about companies traded on the NASDAQ and NYSE in what is the largest scheme of its kind ever prosecuted. The defendants allegedly stole approximately 150,000 confidential press releases from the servers of the newswire companies. They then traded ahead of more than 800 stolen press releases before their public release, generating millions of dollars in illegal profits.
“The defendants were a well-organized group that allegedly robbed the newswire companies and their clients and cheated the securities markets and the investing public by engaging in an unprecedented hacking and trading scheme,” U.S. Attorney Fishman said. “The defendants launched a series of sophisticated and relentless cyber attacks against three major newswire companies, stole highly confidential information and used to enrich themselves at the expense of public companies and their shareholders.”
“As alleged, the defendants and their co-conspirators formed an alliance of hackers and securities industry professionals to systematically steal valuable inside information and profit by trading ahead of authorized disclosures to the investing public,” stated Acting United States Attorney Currie. “Today’s sweeping indictments are the result of a cutting edge investigation by law enforcement to combat twenty-first century criminal schemes.”
“Today’s announcement is a testament to the countless hours of hard work and dedication by law enforcement and other personnel across government, including the Secret Service investigative team. In today’s day and age, criminals are using computers instead of guns to steal money and threaten the safety and security of our cyber networks,” Secretary Johnson said. “In matters of cybersecurity, the Department of Homeland Security has a major law enforcement role, and our work to counter cyber threats is a critical priority for the Secret Service because of the substantial threat it poses to this nation’s financial infrastructure.”
The 23-count District of New Jersey indictment charges five defendants – Ivan Turchynov, 27; Oleksandr Ieremenko, 24; and Pavel Dubovoy, 32; all of Ukraine, and Arkadiy Dubovoy, 51, and Igor Dubovoy, 28, of Alpharetta, Georgia – with wire fraud conspiracy, securities fraud conspiracy, wire fraud, securities fraud, and money laundering conspiracy. Turchynov and Ieremenko are additionally charged with computer fraud conspiracy, computer fraud, and aggravated identity theft.
The Eastern District of New York indictment charges four defendants: Vitaly Korchevsky, 50, of Glen Mills, Pennsylvania; Vladislav Khalupsky, 45, of Brooklyn, New York; and Odessa, Ukraine; Leonid Momotok, 47, of Suwanee, Georgia; and Alexander Garkusha, 47, of Cummings and Alpharetta, Georgia, with wire fraud conspiracy, securities fraud conspiracy, securities fraud, and money laundering conspiracy.
Earlier today, the government seized 17 bank and brokerage accounts containing more than $6.5 million of alleged criminal proceeds. The government also took steps to restrain 12 properties, a shopping center located in Pennsylvania, an apartment building located in Georgia, and a houseboat, all worth more than $5.5 million.
Five of the nine defendants named above were arrested this morning: Arkadiy Dubovoy, Igor Dubovoy, Momotok, and Garkusha were all arrested at their homes in Georgia, and are scheduled to appear this afternoon before U.S. Magistrate Judge Alan J. Baverman in federal court in Atlanta, Georgia. Korchevsky was arrested at his home in Glenn Mills, Pennsylvania, and is scheduled to appear this afternoon before U.S. Magistrate Judge Linda K. Caracappa in federal court in Philadelphia, Pennsylvania. Turchynov, Ieremenko, Pavel Dubovoy, and Khalupsky remain in Ukraine, and international arrest warrants were issued today for their arrests.
According to the indictments:
Between February 2010 and August 2015, Turchynov and Ieremenko, computer hackers based in Ukraine, gained unauthorized access into the computer networks of Marketwired L.P., PR Newswire Association LLC (PRN), and Business Wire. They used a series of sophisticated cyber attacks to gain access to the computer networks. The hackers moved through the computer networks and stole press releases about upcoming announcements by public companies concerning earnings, gross margins, revenues, and other confidential and material financial information.
At one point, one of the hackers sent an online chat message in Russian to another individual stating, “I’m hacking prnewswire.com.” In another online chat, Ieremenko told Turchynov that he had compromised the log-in credentials of 15 Business Wire employees.
The hackers shared the stolen press releases with traders Arkadiy Dubovoy, Korchevsky, Momotok, Igor Dubovoy, Pavel Dubovoy, Khalupsky, Garkusha, and others, using overseas computer servers that they controlled. In a series of emails, the hackers even shared “instructions” on how to access and use an overseas server where they shared the stolen releases with the traders, and the access credentials and instructions were distributed amongst the traders. In an email sent by one of the traders, the instructions for accessing the overseas server suggested that users conceal their Internet Protocol address when accessing the server as a precaution to avoid detection. The traders created “shopping lists” or “wish lists” for the hackers listing desired upcoming press releases from Marketwired and PRN for publicly traded companies. Trading data obtained over the course of the investigation showed that, after one of the shopping lists or wish lists was sent, the traders and others traded ahead of several of the press releases listed on it.
The traders generally traded ahead of the public distribution of the stolen releases, and their activities shadowed the hackers’ capabilities to exfiltrate stolen press releases. In order to execute their trades before the releases were made public, the traders sometimes had to execute trades in extremely short windows of time between when the hackers illegally accessed and shared information and when the press releases were disseminated to the public by the newswires, usually shortly after the close of the markets. Frequently, all of this activity occurred on the same day. Thus, the trading data often showed a flurry of trading activity around a stolen press release just prior to its public release. The defendants illegal trading resulted in gains of more than $30 million, of which Korchevsky accounted for more than $17 million and Arkadiy Dubovoy accounted for more than $11 million.
The traders traded on stolen press releases containing material nonpublic information about publicly traded companies that included, among hundreds of others: Align Technology Inc.; Caterpillar Inc.; Hewlett Packard; Home Depot; Panera Bread Co.; and Verisign Inc.
The traders paid the hackers for access to the overseas servers based, in part, on a percentage of the money the traders made from their illegal trading activities. The hackers and traders used foreign shell companies to share in the illegal trading profits.
“This is the story of a traditional securities fraud scheme with a twist—one that employed a contemporary approach to a conventional crime. In this case the defendants allegedly traded on nonpublic information, ultimately benefitting from more than $30 million in illegal profits over the course of three years,” Assistant Director-in-Charge Rodriguez said. “But just as criminals continue to develop relationships with one another in order to advance their objectives, the law enforcement community has developed a collaborative approach to fighting these types of crimes.”
“Cyber cases such as this are a vital part of the Secret Service's integrated mission,” Joseph P. Clancy, Director of the U.S. Secret Service, said. “This is yet another example of the successful investigative work being done in coordination with our partners in the global law enforcement community.”
The wire fraud conspiracy and substantive wire fraud counts with which all defendants are charged carry a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gain or loss from the offense. The securities fraud conspiracy count with which all defendants are charged carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gain or loss from the offense. The substantive securities fraud counts with which all defendants are charged carry a maximum potential penalty of 20 years in prison and a $5 million fine, or twice the gain or loss from the offense. The money laundering conspiracy count with which all defendants are charged carries a maximum potential penalty of 20 years in prison and a $500,000 fine, or twice the value of the funds involved in the illegal transfers. The computer fraud counts with which the alleged hackers are charged carry a maximum potential penalty of five years’ imprisonment and a $250,000 fine, or twice the gain or loss from the offense. The aggravated identity theft counts with which the hackers are charged carry a mandatory consecutive term of imprisonment of 24 months.
U.S. Attorney Fishman and Acting U.S. Attorney Currie credited special agents of the U.S. States Secret Service, Criminal Investigations, under the direction of Director Clancy, and the Newark Field Office under the direction of Special Agent in Charge Carl Agnelli; and special agents of the FBI, New York Field Office, under the direction of Assistant Director Diego Rodriguez, for the investigation leading to today’s arrests and indictments. They thanked the U.S. Securities and Exchange Commission, for its significant cooperation and assistance in the investigation and the newswires, which cooperated with law enforcement over the course of the investigation.
In the District of New Jersey, the government is represented by Assistant U.S. Attorneys Andrew S. Pak, Daniel V. Shapiro, and David M. Eskew of the Economic Crimes Unit, Computer Hacking & Intellectual Property Section, Assistant U.S. Attorney Svetlana M. Eisenberg of the Office’s Civil Division, and Special Assistant U.S. Attorney Sarah Devlin of the Asset Forfeiture and Money Laundering Unit.
In the Eastern District of New York, the government’s case is being prosecuted by the Business and Securities Fraud Section and the National Security and Cybercrime Section. Assistant U.S. Attorneys Christopher A. Ott, Christopher L. Nasson, and Richard M. Tucker are in charge of the prosecution. Assistant U.S. Attorneys Brian D. Morris and Tanisha Payne of the Office’s Civil Division are responsible for the forfeiture of assets.
The charges and allegations contained in the indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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.
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Violent Fugitive Captured After Four Year SearchRead the Press Release
On Friday, July 31st, Andrew Smith, also known as “Back-it,” was arrested by members of the United States Marshals Service New York/New Jersey Regional Fugitive Task Force; the United States Marshals Service Southern Ohio Fugitive Apprehension Strike Team; Immigration and Customs Enforcement and Removal; and the Cincinnati Police Department. Smith was arrested with the assistance of a K-9 unit at approximately 1:30 a.m. in Cincinnati, Ohio, after a brief stand-off.
Smith is allegedly a member of the violent Fatherless Crew marijuana trafficking organization, which for years used violence and intimidation to control drug trafficking in portions of Queens, New York.
The capture was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Charles Dunne, United States Marshal for the Eastern District of New York.
Smith has been a fugitive since October 2010. He narrowly escaped arrest when, following a year-long investigation, federal, state, and local law enforcement officers conducted a search of the Fatherless Crew’s stash house in Queens. That search resulted in the arrest of more than a dozen individuals and the seizure of nearly 300 pounds of marijuana, three loaded handguns, and a variety of drug trafficking paraphernalia, including electronic scales, heat-sealing machines, and a vehicle outfitted with a with a hydraulic trap for concealing firearms. Smith was allegedly responsible for both the distribution of marijuana at the organization’s stash house and the use of violence against rival drug dealers. In March 2010, Smith was also allegedly involved in a shootout with a rival drug gang during a baby shower in St. Albans, Queens. Detectives from the NYPD recovered more than 30 shell casings and bullets, including one bullet that ricocheted off the door of a neighboring daycare center. One individual was shot in the chest during the gunfight but survived.
To date, more than 15 members and associates of the Fatherless Crew have been convicted, including four who were convicted following a five week trial in early 2012.
“Andrew Smith thought he could evade justice by living his life on the run. He learned today that he was wrong,” stated Acting United States Attorney Currie. “Law enforcement will work cooperatively and tirelessly to find and capture violent fugitives.” Mr. Currie expressed his appreciation to each of the agencies that participated in the arrest and thanked the Drug Enforcement Administration, United States Postal Inspection Service, New York City Police Department, and U.S. Attorney’s Office for the Southern District of Ohio for their assistance in this case.
“This fugitive was located because multiple federal, state and local law enforcement agencies cooperated with each other over a period of several years through the United States Marshals Service’s Fugitive Task Forces both in New York and Ohio. These Task Forces produce results like this every day,” stated United States Marshall Dunne.”
The defendant was arraigned on Friday afternoon before United States Magistrate Judge Stephanie Bowman at the federal courthouse in Cincinnati, Ohio, and was ordered to be removed to the Eastern District of New York to face drug tracking and firearms charges. The defendant was remanded without bail. The charges 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 International Narcotics and Money Laundering Section. Assistant United States Attorneys Steven Tiscione, Gina Parlovecchio, and Tyler Smith are in charge of the prosecution.
The Defendant:
ANDREW SMITH
Age: 41E.D.N.Y. Docket No. 10-CR-809 (KAM)
Long Island Man Sentenced to 55 Months for Stealing More Than $31 Million Dollars in A Wire Fraud Scheme Involving Sub-Prime MortgagesRead the Press Release
Earlier today, defendant Thomas Donovan, 67, was sentenced to 55 months of incarceration for his guilty plea to wire fraud conspiracy on May 31, 2013. The District Court also entered an order directing Donovan to forfeit more than $31 million that he received and to pay more than $31 million in restitution.
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
According to court filings and facts presented during the sentencing proceeding, Donovan was the co-owner of Private Capital Group that invested in sub-prime mortgages. Private Capital Group’s main investor was Ficus Investments, Inc., which invested more than $300 million. Rather than investing those funds as agreed upon, the owners of Private Capital Group, Thomas Donovan and Lawrence Cline, took more than $31 million for themselves and concealed that theft by providing his investors with false and misleading financial reports. Cline and Private Capital Group’s chief financial officer, Christopher Chalavoutis, previously pleaded guilty and have been sentenced.
“Under the guise of rehabilitating and reselling distressed mortgages, Donovan lied to his investors and stole their money. Donovan took advantage of the residential mortgage crisis for his personal financial gain, and he has now been held to account,” stated Acting United States Attorney Currie. Mr. Currie extended his grateful appreciation to the FBI, who led the government’s investigation.
The government’s case is being prosecuted by the Office’s Long Island Criminal Division. Assistant United States Attorney Christopher Ott is in charge of the prosecution.
The sentence was imposed by the Honorable Joanna Seybert at the federal courthouse in Central Islip, New York.
This prosecution was the result of efforts by President Obama’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. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit http://www.StopFraud.gov.
The Defendant:
Thomas DONOVAN
Age: 67
Huntington, NYE.D.N.Y. Docket No. 12-CR-196
Long Island Educator and Coach Pleads Guilty to Receiving Child PornographyRead the Press Release
Earlier today, Long Island educator and coach Kevin Barry O’Connell, 54, pleaded guilty to receiving child pornography at his residence in Patchogue, New York. The plea proceeding was conducted before U.S. District Judge Leonard D. Wexler at the federal courthouse in Central Islip, NY. O’Connell faces a minimum penalty of five years in prison and a maximum of 20 years, and a fine of $250,000.
Today’s guilty plea was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Raymond R. Parmer, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), New York.
“Charged by profession with caring for children, the defendant instead acted to foster their victimization by receiving numerous images of the abuse of children,” stated Acting United States Attorney Currie. Mr. Currie thanked the U.S. Immigration and Customs Enforcement, HSI for its investigation of this case.
According to court filings and admissions made in court at the time he entered the plea, O’Connell downloaded video files of the rape and abuse of children as young as eight years old which he kept on thumb drives in his Patchogue home. During a court-ordered search of his residence on October 15, 2012, O’Connell initially lied to HSI agents and denied that he possessed child pornography until agents found three thumb drives in the pocket of a jacket at the house. O’Connell then admitted that he had hidden the drives in the jacket.
Following his arrest, O’Connell was suspended from his employment as an Assistant Superintendent for Secondary Education in the Roosevelt Union Free School District. O’Connell had previously served as the Principal of Bellport Senior High School in the South Country Central School District and an Assistant Principal at Walter G. O’Connell Copiague High School. O’Connell was the Varsity Baseball Coach from 1990 to 2001 at William Floyd High School.
This prosecution is part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by United States Attorneys’ Offices and the Department of Justice Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to better locate, apprehend, and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.
The government’s case is being prosecuted by Assistant United States Attorney Allen Bode.
The Defendant:
Kevin Barry O’Connell
Age: 54
Patchogue, New YorkE.D.N.Y. Docket No. 12-CR-715 (LDW)
New York State Senator John Sampson Convicted of Obstruction of Justice and False StatementsRead the Press Release
Earlier today, following four weeks of trial, a federal jury in Brooklyn, New York, returned guilty verdicts against New York State Senator John Sampson, for one count of obstruction of justice and two counts of making false statements to federal agents. Since 1997, Sampson has 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 January 2011 to December 2012, he was also the Senate Minority Leader. Sampson has also served as the chairman of the Senate Ethics Committee and the Senate Judiciary Committee. When sentenced by United States District Judge Dora L. Irizarry, Sampson faces a sentence of up to 20 years in prison.
The verdict was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.
“Today’s verdict stands as a vindication of the efforts of this office and the FBI to aggressively root out corruption undertaken by a public official in New York,” stated Acting United States Attorney Currie. “Sampson, a lawyer, New York State Senator, Senate leader, and one time chair of the Senate Ethics Committee, abused his power and violated his oath undermining the very system of laws he was sworn to uphold. He will now be held accountable for his crimes.” Mr. Currie 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.
FBI Assistant Director-in-Charge Rodriguez stated, “Sampson’s decision to engage in corrupt and illegal behavior was further aggravated by his efforts to conceal the scheme from FBI agents charged with investigating his misconduct. As this case proves, we, along with our partners, will continue to root out obstruction of justice in all forms and at all levels of government.”
The evidence at trial and publicly filed documents in the case established that, among other things, Sampson, as an attorney practicing in Brooklyn, embezzled funds he held in escrow from the sale of real estate properties. Concerned that his theft might be discovered by law enforcement, in 2006 Sampson asked an associate for $188,500 to replenish the stolen funds. In exchange, Sampson used his position as a Senator to assist the associate’s real estate business interests.
In the summer of 2011, the associate was arrested and charged by this office with bank and wire fraud. Sampson feared that the associate might cooperate with the government and disclose Sampson’s embezzlement, so Sampson contacted a close personal friend, who was also a supervisory paralegal in this office, and asked him to find out if Sampson was under investigation and to obtain confidential information about the associate’s case, including the identities of cooperating witnesses. The paralegal agreed and reported his findings to Sampson.
Sampson told his associate about his source and added that if they could determine the identities of cooperating witnesses in the associate’s case, they could “take them out.” Sampson also suggested that they hire a private investigator to do the “dirty work.”
Sampson then directed his associate to withhold from the government evidence regarding the $188,500 payment. At a February 2012 meeting, the associate told Sampson that the government had subpoenaed the associate’s business records, including a check register page documenting the payment. The Associate showed the page to Sampson, who examined it and stated, “That’s a problem . . . I mean for me.” Sampson kept the page and instructed his associate not to disclose it to the government.
On July 27, 2012, FBI Special Agents interviewed Sampson, and he denied being familiar with the check register page. Sampson also falsely denied directing his Senate staffers to take certain actions relating to regulatory issues for a liquor store in which Sampson held an ownership interest. At the conclusion of the interview, the agents advised Sampson that he had lied to federal agents, which constituted a federal crime. When asked whether he wished to revise his statement, Sampson stated, “Not everything I told you was false.”
The government’s case is being prosecuted by the Office’s Public Integrity Section. Assistant United States Attorneys Paul Tuchmann, Alexander Solomon, and Marisa Seifan are in charge of the prosecution.
The Defendant:
JOHN L. SAMPSON
Age: 50
E.D.N.Y. Docket No. 13-CR-269 (DLI)Board Certified Obstetrician and Gynecologist Agrees to Civil Fraud Settlement in Conjunction with Deferred Prosecution in Medicare and Medicaid Fraud InvestigationRead the Press Release
The United States and New York State have entered into a civil settlement agreement with Haroutyoun Margossian, a Board Certified Obstetrician and Gynecologist (OB/GYN). Margossian maintains an OB/GYN subspecialty in urogynecology and is the sole practitioner at NY Urogynecology & Reconstructive Pelvic Surgery, P.C. with a main office located in Brooklyn. The agreement resolves an investigation under the federal False Claims Act and the New York False Claims Act involving allegations that, in contravention of Medicare and Medicaid regulations, Margossian utilized an unlicensed and often unsupervised staff to treat women suffering from urinary incontinence. Under the terms of the civil settlement agreement, Margossian will pay a total of $8,047,291.06. Contemporaneously with the execution of the civil settlement agreement, the government filed a criminal charge against Margossian for making false statements to Medicare and entered into a deferred prosecution agreement with him.
The civil settlement agreement, criminal charge, and deferred prosecution agreement were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, Scott J. Lampert, Special Agent-in-Charge, Health and Human Services, Office of Inspector General (HHS-OIG), New York Region, and Diego G. Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
The government’s investigation revealed that between approximately January 1, 2007 and December 31, 2013, the primary focus of Margossian’s practice was the treatment of woman suffering from incontinence. Patients received urodynamics testing and underwent pelvic floor rehabilitation by an unlicensed staff without proper physician supervision. Margossian was often absent from the office while conducting surgery at area hospitals and, at times, on vacation out of the country. Medicare and Medicaid rules required that these procedures be performed by a licensed physician or licensed physical therapist, or a properly trained medical provider under the physician’s direct supervision. Furthermore, Margossian used improper billing codes to bill Medicare for the pelvic floor rehabilitation, which substantially increased Margossian’s Medicare reimbursement.
The deferred prosecution agreement requires Margossian to install an independent billing monitor of his practice. As part of the deferred prosecution agreement, Margossian is obligated to comply with the terms of the civil settlement agreement under which he is paying the government over $8 million. If Margossian abides by all of the terms of the deferred prosecution agreement for two years, the government will then seek dismissal of the charge.
“Those who jeopardize the health and safety of their patients, while at the same time knowingly submitting false claims to Medicare, Medicaid, and other government health care programs, will be pursued to the full extent of the law,” stated United States Attorney Currie. Mr. Currie thanked HHS-OIG, the FBI, and the New York Attorney General’s Medicaid Fraud Control Unit for their assistance in the investigation.
“It is distressing to learn that a physician would be so driven by profit that he allowed his unlicensed employees to conduct testing and provide treatment to patients when he was not present, and at times, when he was out of the country. HHS-OIG and our law enforcement partners will not tolerate this behavior, and we will remain vigilant in our efforts to protect patients’ welfare,” said HHS-OIG Special Agent-in-Charge Lampert.
“Health care fraud is ultimately a financial crime, which can lead to significant loss to both victims and government programs. Through successful engagement with our partners, the FBI is protecting potential victims and ensuring Medicare billing is utilized within the boundaries of the law,” said FBI Assistant Director-in-Charge Rodriguez.
The United States’ civil case was handled by Assistant U.S. Attorney Kenneth M. Abell, with assistance from Kaitlyn L. Dunn of the Office of Counsel to HHS-OIG. The criminal investigation was handled by U.S. Attorney Patricia E. Notopoulos. The state case was handled by Special Assistant Attorney General Jill D. Brenner.
The Defendant:
HAROUTYOUN MARGOSSIAN
Age: 55
Residence: Staten Island, NYFormer United States Congressman Michael Grimm Sentenced to Eight Months for Tax FraudRead the Press Release
Earlier today in federal court in Brooklyn, former United States Congressman Michael Grimm was sentenced to a term of incarceration of eight months of incarceration in connection with his conviction for aiding and assisting the preparation of a false tax return. Grimm served as a member of the United States House of Representatives representing New York’s 11th Congressional District, which includes the borough of Staten Island and parts of the borough of Brooklyn, from January 2011 to January 2015. Grimm was sentenced by the Honorable Pamela K. Chen, United States District Judge, Eastern District of New York. The Court also sentenced the defendant to 200 hours of community service.[1]
The sentence was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office, and Richard Weber, Chief, IRS- Criminal Investigation.
“This prosecution and sentence should be a reminder to those in positions of trust that we and our partners in the FBI and IRS will vigorously pursue whomever commits fraud,” said Acting U.S. Attorney Currie. Mr. Currie expressed his grateful appreciation to the Public Integrity Section of Department of Justice, the Northern Criminal Enforcement Section of the Tax Division of the Department of Justice, the New York State Insurance Fund, the New York State Department of Taxation and Finance, and the New York State Department of Labor for their assistance in the investigation.
FBI Assistant Director-in-Charge Rodriguez stated, “Grimm didn’t serve his community with honor; he instead engaged in criminal activity to the detriment of the public trust. Today’s sentence should send a message that this type of behavior will not be tolerated, especially when public officials break the law. The FBI and our partners at the IRS will continue our efforts to identify fraudulent practices carried out by elected representatives and free the system from the consequences of their actions.”
“Former Congressman Grimm made a conscious decision to break the law and benefit personally by underreporting $900,000 in restaurant gross receipts and lowering payroll taxes through 'off-the-book' payments, then lying under oath to conceal his criminal activity,” said IRS-Criminal Investigation Chief Weber. “Tax crimes are not victimless crimes and Grimm’s actions harmed the very citizens he was elected to serve. We expect all taxpayers to follow the law—whether you are a business owner, individual, or elected official—we all must play by the same rules.”
In connection with his guilty plea on December 23, 2014, Grimm entered into a stipulation of facts acknowledging the scope of his criminal conduct. As part of that stipulation of facts, Grimm admitted that:
- From 2007 through 2009, Grimm was a member in Healthalicious, a Manhattan restaurant. During that time period, Grimm oversaw the day-to-day operations of the restaurant, which included the reporting and distribution of the restaurant’s payroll.
- Grimm under-reported the true amount that Healthalicious earned, using a portion of those unreported receipts to pay the restaurant’s workers “off the books” in cash. With Grimm’s knowledge, the restaurant employed those who were not lawfully admitted to the United States and who were not authorized to work in this country.
- In total, Grimm concealed over $900,000 in Healthalicious’ gross receipts from the accountant who prepared and filed the restaurant’s tax returns. That accountant used the false information provided by Grimm to prepare and file false federal and state tax returns for Healthalicious.
- Grimm also failed to report the “off the books” cash wages he was paying to Healthalicious workers, which resulted in the restaurant paying lower federal and state payroll taxes. Some Healthalicious employees received at least half of their wages in cash, while other workers were paid entirely in cash. Grimm tracked these payments in electronic spreadsheets, but failed to provide accurate information about the restaurant’s payroll to the payroll processing companies employed by the restaurant. As a result, Grimm caused the payroll processing companies to report to the IRS and the NYS Tax Department less than half of the wages Healthalicious actually paid its employees.
- Additionally, Grimm under-reported Healthalicious’ payroll to the New York State Insurance Fund (“NYSIF”), lowering the monthly workers’ compensation premium the restaurant paid to NYSIF.
- As part of his scheme, Grimm caused numerous false documents to be filed with federal and state tax authorities between 2007 and 2010. In total, Grimm’s conduct caused federal and New York State tax and NYSIF premium losses between $80,000 and $200,000.
- While a Member of Congress in January 2013, Grimm was deposed under oath by the attorney of a former employee in connection with a civil lawsuit relating to the labor practices at Healthalicious in which Grimm was a defendant. The lawsuit was pending in the United States District Court for the Southern District of New York. Grimm admitted to testifying during the deposition to things that, at the time, he knew to be false. Specifically, Grimm testified during the deposition that Healthalicious employees had not been paid in cash, when he knew that restaurant employees had in fact been paid “off the books” in cash. Similarly, Grimm testified that, to the extent he used email in operating Healthalicious, he used a Yahoo account to which he no longer had access. Grimm also admitted that, at the time of the deposition, he in fact had access to an AOL account which he had used for Healthalicious related business and which contained many emails related to the restaurant.
The government’s case is being prosecuted by the Office’s Public Integrity Section. Assistant United States Attorneys James Gatta and Nathan Reilly are in charge of the prosecution.
The Defendant:
MICHAEL GRIMM
Age: 45
Staten Island, New YorkE.D.N.Y. Docket No. 14-CR-248 (PKC)
[1]In addition to the term of incarceration, the Court ordered Grimm to pay restitution to the Internal Revenue Service (IRS), the New York State Department of Taxation and Finance, and the New York State Insurance Fund (NYSIF) in a total amount to be determined after sentencing.
Five Defendants Convicted of Conspiring to Obtain Commercial Driver’s Licenses from the Department of Motor Vehicles Through Fraud and BribesRead the Press Release
Earlier today, after a three-day trial, a federal jury in Brooklyn, New York, returned guilty verdicts against Dale Harper, Joachim Pierre Louis, Luc Desmangles, Beayeah Kamara, and Tanael Daniel for their participation in a scheme to enable applicants for commercial driver’s licenses (CDLs) to cheat on required tests for those licenses in exchange for money. When sentenced by United States District Judge Raymond J. Dearie, the defendants each face a sentence of up to 20 years in prison.
The guilty verdicts were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, New York State Inspector General Catherine Leahy Scott, Raymond R. Parmer, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement, Homeland Security Investigations, New York (HSI), and Douglas Shoemaker, Department of Transportation, Office of the Inspector General (DOT-OIG), Regional Special Agent-in-Charge.
The evidence at trial demonstrated that drivers of certain commercial vehicles, such as school buses, tractor trailers, vehicles transporting hazardous waste, ambulettes, and heavy transportation trucks, must possess a CDL, which is issued by the DMV, pursuant to the regulations set forth by the United States Department of Transportation. Before obtaining a CDL, all applicants must pass tests covering various subjects related to safely driving such large vehicles. The defendants Daniel, Harper, Pierre Louis, and Desmangles brought CDL applicants to the DMV office on Greenwich Street in Manhattan. After applicants entered the testing area, the defendant Kamara, who was employed as a security guard, signaled to the applicants to leave the testing area with their answer sheets. Upon leaving the testing area, those applicants were met by Daniel, Pierre Louis, and Desmangles, who took the exam to be completed by another co-conspirator, Marie Daniel, outside the DMV office.[1] The test was then returned to the applicant, who re-entered the DMV office and submitted the exam for grading. Kamara received cash bribes for his role in the scheme. The applicants were charged approximately $1,400 to $2,500 for the defendants’ assistance with cheating on the CDL exam. The evidence further showed that the defendants enabled over 40 people to fraudulently obtain or attempt to obtain CDLs, during the period April 1, 2013 through September 25, 2013.
“Today’s verdict demonstrates our commitment to aggressively prosecute and investigate anyone who compromises public safety,” stated Acting United States Attorney Currie. “The greed of these defendants jeopardized passengers and pedestrians on our roads. Together with our law enforcement partners, we will bring to justice those who endanger the public by committing such crimes.”
“These individuals chose corruption and greed over the safety of the general public,” said Inspector General Leahy Scott. “These convictions send a message to those who put innocent people at risk as a result of their criminal acts … they will be investigated and prosecuted. I will use the full force of my office to relentlessly pursue anyone who violates the public trust and resorts to criminal measures to circumvent laws intended to ensure that those who are licensed by the State of New York are properly qualified to drive on our highways.”
“These individuals convicted today jeopardized public safety by using fraudulent means to obtain commercial driver’s licenses that would have given the defendants the ability to drive school buses and other large vehicles,” said HSI New York Special Agent-in-Charge Parmer. “HSI will work with our law enforcement partners and use every tool at our disposal to arrest those who threaten public safety of any variety."
“As evidenced by the guilty verdicts handed down against Dale Harper, Joachim Pierre Louis, Luc Desmangles, Beayeah Kamara, and Tanael Daniel, ensuring safety on the Nation’s roadways remains a high priority for both the Office of Inspector General (OIG) and the Department of Transportation,” said DOT OIG Regional Special Agent-in-Charge Shoemaker. “Working with our law enforcement and prosecutorial colleagues, we will continue our vigorous efforts to prevent, detect, and prosecute violations of laws and regulations, CDL and otherwise, designed to ensure the public’s safety.”
Mr. Currie expressed his grateful appreciation to the Office’s partners in the investigation, U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), the U.S. Department of Transportation-Office of Inspector General (DOT-OIG), and the Office of the New York State Inspector General (NYS-OIG). In addition, Mr. Currie thanked the New York State Attorney General’s Office; the New York City Police Department, Internal Affairs Bureau; New York County District Attorney’s Office; and the New York State Department of Motor Vehicles for their cooperation and assistance in the investigation.
The government’s case is being prosecuted by the Office’s Public Integrity Section. Assistant United States Attorneys Michael Warren and Lauren Howard Elbert are in charge of the prosecution.
The Defendants:
DALE HARPER
Age: 49
Residence: Bronx, New YorkJOACHIM PIERRE LOUIS
Age: 33
Residence: Brooklyn, New YorkLUC DESMANGLES
Age: 28
Residence: Brooklyn, New YorkBEAYEAH KARMARA
Age: 26
Residence: Staten Island, New YorkTANAEL DANIEL
Age: 37
Residence: Brooklyn, New York
[1] In January 2015, Marie Daniel pled guilty for her role in this scheme.
Colombo Crime Family Captain and Two Associates Charged in Racketeering Conspiracy IndictmentRead the Press Release
A ten-count indictment was unsealed today in United States District Court for the Eastern District of New York charging Luca DiMatteo and his nephew, Lukey DiMatteo, with racketeering conspiracy, extortion, loansharking, and operating an illegal gambling business. The indictment was returned under seal by a federal grand jury sitting in Brooklyn, New York, on July 9, 2015, and relates to the defendants’ alleged criminal activities in Brooklyn and elsewhere between January 2009 and June 2015.
The charges were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
As alleged in the indictment and detention memorandum, Luca DiMatteo is a long-time member of the Colombo organized crime family of La Cosa Nostra, and has served for several years as the acting captain in charge of a crew of the crime family’s members and associates.
As alleged, both Luca DiMatteo and Lukey DiMatteo participated in the extortion of a local business owner for more than ten years that lasted until the business owner closed down the business last month. The business owner paid the DiMatteos $100 to $200 every two weeks based on his fear of these defendants and the potential consequences of not paying. The DiMatteos are also charged separately in loansharking counts. Lukey DiMatteo is separately charged in an additional extortion count, as well as in counts alleging the operation of illegal gambling businesses – based on his operation of a gambling club in Brooklyn, along with co-defendant John Shields and others – and sports betting.
“Along with our partners at the FBI, we are committed to defeating organized crime,” stated Acting United States Attorney Currie. “We will not tolerate the use of violence or threats of violence to extort local business people, and we will shut down illegal gambling businesses in our neighborhoods.”
“As alleged, Luca DiMatteo and Lukey DiMatteo picked up a check every couple of weeks from a local business for more than ten years, but it wasn’t a paycheck—rather they picked up a shakedown check. In addition to facing charges of racketeering conspiracy, extortion, and loansharking, Lukey DiMatteo and John Shields are charged with allegedly operating an illegal gambling business. The FBI will continue to work to protect victims and root out any and all organized crime activity—wherever we may find it,” stated FBI Assistant Director-in-Charge Rodriguez.
Two of the defendants, Luca DiMatteo and John Shields, were arraigned yesterday before United States Magistrate Judge Cheryl L. Pollak at the federal courthouse in Brooklyn. The third defendant, Lukey DiMatteo, is scheduled to be arraigned this afternoon before United States Magistrate Judge Ramon E. Reyes, Jr., at the federal courthouse in Brooklyn. The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by the Office’s Organized Crime & Gangs Section. Assistant United States Attorneys Elizabeth A. Geddes and Allon Lifshitz are in charge of the prosecution.
The Defendants:
LUCA DIMATTEO
Age: 70
Merrick, New YorkLUCA DIMATTEO (“Lukey Dimatteo”)
Age: 46
Brooklyn, New YorkJohn Shields (“Scott Greco”)
Age: 46
East Atlantic Beach, New YorkE.D.N.Y. Docket No. 15 CR 334 (ILG)
Canadian Citizen Pleads Guilty to Leading an International Fraud SchemeRead the Press Release
Earlier today, Sandy Winick pleaded guilty at the federal courthouse in Brooklyn, New York, to conspiring to commit wire fraud for running an international advance fee scheme. According to court filings and facts presented during the plea proceeding, Winick was the leader of the multi-million dollar scheme, which used call centers around the world to defraud victims. Winick, a Canadian citizen, was extradited from Thailand to face charges here.
The guilty plea was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York and Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
In announcing the guilty plea, Mr. Currie extended his grateful appreciation to the FBI, which led the government’s investigation, and thanked the Internal Revenue Service, Criminal Investigation, New York; Homeland Security Investigations, Department of Homeland Security, Buffalo; Treasury Inspector General for Tax Administration; and the Royal Canadian Mounted Police and law enforcement authorities in England, Thailand, and China for their assistance.
Winick is the seventh defendant to plead guilty in this case to date. Nine defendants were charged in two related schemes that Winick led from 2008 through 2013. In the first scheme, several defendants, including Winick, were charged with engaging in an international “pump and dump” operation, fraudulently inflating the share price of worthless penny stocks, and then dumping billions of shares on unsuspecting victim investors across the globe. In the second scheme, the defendants, including Winick, were charged with operating boiler rooms in four countries, inducing investors in penny stocks, including many of the victims in the first scheme, to pay advance fees that the defendants promised would enable them to sell the stocks and recover any losses they incurred. In reality, Winick and his co-conspirators simply stole the fees without providing any services, fraudulently extracting more than five million dollars from their victims. As part of this scheme, Winick established and operated boiler rooms or call centers in various locations around the world, including Canada, Thailand, and China, to solicit fees from the victims. Winick also planned to open a call center in Brooklyn.
When sentenced by United States District Judge Eric N. Vitaliano, Winick faces a maximum sentence of 20 years.
This prosecution was the result of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets, and conducting outreach to the public, victims, financial institutions, and other organizations. 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, visit http://www.StopFraud.gov.
The government’s case is being prosecuted by the Office’s Business and Security Fraud Section. Assistant United States Attorneys Christopher A. Ott and Sylvia Shweder are in charge of the prosecution, with assistance provided by Assistant United States Attorney Melanie Hendry of the Office’s Civil Division, which is responsible for the forfeiture of assets.
The Defendant:
SANDY WINICK
Citizenship: Canada
Age: 57
Ontario, CanadaE.D.N.Y. Docket No. 13-CR-452 (S-2)(ENV)
Twenty Arrested as Federal and Local Authorities Dismantle Violent Set of Crips GangRead the Press Release
A 75-count superseding indictment was unsealed today in United States District Court for the Eastern District of New York charging alleged members and associates of the Outlaw Gangsta Crips (OGC) with crimes including racketeering conspiracy, murder conspiracy, attempted murder, bank fraud, narcotics trafficking, and firearms offenses. The indictment was returned under seal by a federal grand jury on July 15, 2015, and charges the defendants with crimes committed in New York, Connecticut, and West Virginia between August 9, 2013 and May 12, 2015.
The charges were announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), William J. Bratton, Commissioner, New York City Police Department (NYPD), and Kenneth P. Thompson, District Attorney, Kings County District Attorney’s Office (KCDA).
“This prosecution effectively ends OGC’s reign of terror over East Flatbush,” stated Acting United States Attorney Currie. “We are committed to dismantling these criminal gangs and making our communities safe.” Mr. Currie thanked the FBI, NYPD, U.S. Marshal Service, Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Postal Inspection Service, Martinsburg, West Virginia Police Department, and the Norwich, Connecticut Police Department for their assistances in the investigation.
FBI Assistant Director-in-Charge Rodriguez stated, “The FBI remains committed to working with our law enforcement partners to eliminate violent criminal gangs like OGC while protecting our communities. The profits OGC allegedly obtained by peddling poison and committing bank fraud allowed them to purchase weapons in support of their illegal operations. Their crimes, alleged herein, run the gamut from racketeering conspiracy and drug distribution to robbery, assault, murder conspiracies, and attempts. We would like to thank all the agencies noted above for their participation in this investigation.”
Police Commissioner Bratton stated, “The members of OGC and their associates allegedly operated their violent gang on the streets of Brooklyn and beyond the borders of New York City, but with these arrests and indictments we send a message–the NYPD and our law enforcement partners will work tirelessly to bring you to justice and remove you from our communities. I want to commend the hard work of the investigators of Gang Squad Brooklyn South and the many law enforcement agencies who contributed to this investigation.”
District Attorney Thompson stated, “With this indictment, we are returning the streets of East Flatbush to the people of East Flatbush – who should not have to live in the midst of gun violence, murder plots, and drug dealing.”
OGC was based in and around the East Flatbush neighborhood of Brooklyn, and comprised a set, or subgroup, of the Crips street gang that included an offshoot known as Shoota Gang, which in turn included members and associates of OGC as well as members and associates of other gangs, including the Eight Trey Gangsta Crips (Eight Trey), Bosses In Business, and the Bloods. As alleged in the superseding indictment and the government’s detention memorandum, 16 of the defendants – including the leaders of OGC, Conell Brogdon, Courtney Coy, and Parris Desuze – participated in the affairs of OGC through a variety of crimes. The charged crimes of violence included robberies, gang shootouts, and displays of power over gang turf:
- On October 9 and 10, 2013, Solomon Artis and others conspired to break into and rob at gunpoint a check-cashing store at 1446 Nostrand Avenue. They entered a vacant apartment above the check-cashing business and began cutting a hole in the floor. Their plan was to enter the store during the day and to force an employee – at gunpoint – to open the safe. The plan was thwarted when an employee noticed damage to the ceiling.
- On October 12, 2013, Brogdon shot victims identified in the indictment as John Doe #2 and John Doe #3 in front of 1404 Nostrand Avenue. The shootings were part of an ongoing dispute with rivals of OGC.
- On June 3, 2014, Brogdon, Malik Campbell, Brandon Greenidge, Jeffrey Joseph, and Stephon Rene attempted to murder a victim identified as John Doe #1. The defendants surrounded John Doe #1 inside of the Big Boy Deli at 1452 Nostrand Avenue in Brooklyn and attempted to steal his chain. During the confrontation, Brogdon handed Campbell a gun, and Campbell shot John Doe #1 multiple times.
- On July 19, 2014, Cordero Passley and others assaulted and stabbed – in the torso, throat, and neck – a victim identified as John Doe #4 in front of 116 Lenox Road. The incident began when Passley ordered a woman to stop playing a song by alleged rival gang member Ackquille Jean Pollard, better known as the rapper “Bobby Shmurda.” When John Doe #4 defended the woman, which Passley viewed as disrespectful, Passley and others attacked him, sending him to the hospital.
Significantly, the government’s investigation, which included a judicially-authorized wiretap, thwarted a conspiracy to murder two individuals. In January 2014, a member of OGC named Kareem Mitchell, also known as “Pop,” was murdered. OGC members believed that John Doe #5 and John Doe #6, and a third individual, were responsible for the murder. On May 12, 2015, Artis, Leonard Barletto, Coy and Desuze discussed in a series of intercepted telephone calls their belief that John Does #5 and #6 were in a specific location in East Flatbush, and Barletto, Coy, and Desuze confirmed that they had guns. Later that day, law enforcement observed Barletto, Coy, and Andre Holman in a car parked on the block where they expected to find the intended victims. After the three defendants stepped out of the car and walked around the corner, Barletto and Coy were arrested along with Desuze, who was with them; Artis was arrested one block away in his home. A search of the car revealed three firearms. Holman was arrested on May 24, 2015.
The members and associates of OGC also profited by narcotics trafficking and bank fraud. The bank fraud charges allege that Derrick Bienaime, Davon Brown, Passley, Gabriel Patterson, and Akeem Watson conspired to defraud financial institutions between January 6, 2014 and January 20, 2015, and that they participated in schemes to defraud Bank of America, Citibank, JPMorgan Chase, and TD Bank. The schemes involved numerous transactions in New York and elsewhere and, conservatively, caused losses in excess of $500,000. In each instance a scheme began with a member or associate of OGC – including Eight Trey members Brown and Passley, who were closely affiliated with OGC – obtaining a paycheck and then using the information on that check to create phony checks that appeared to be written by business entities. The phony checks were deposited into various individuals’ bank accounts, and money was then quickly withdrawn before the checks could be determined to be fraudulent.
If convicted of the charges in the superseding indictment, Artis, Barletto, Derrick Bienaime, Brogdon, Campbell, Stanley Cherenfant, Steven Cherenfant, Coy, Desuze, Greenidge, Cory Harris, Jamar Harry, Holman, Silbert Nicholson, Joseph, and Rene each face a maximum sentence of life.
Thirteen of the defendants are scheduled to be arraigned this afternoon before United States Magistrate Judge Cheryl L. Pollak at the federal courthouse in Brooklyn. Greenidge was arraigned earlier today at the federal courthouse in Martinsburg, West Virginia, and Passley will be arraigned this afternoon at the federal courthouse in Atlanta, Georgia. The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by the office’s Organized Crime & Gangs Section. Assistant United States Attorneys Allon Lifshitz and Rena Paul are in charge of the prosecution.
The Defendants:
SOLOMON ARTIS
Age: 25
Residence: Brooklyn, New YorkLEONARD BARLETTO
Age: 27
Residence: Brooklyn, New YorkDERRICK BIENAIME
Age: 20
Residence: Brooklyn, New YorkCONELL BROGDON
Age: 28
Residence: Brooklyn, New YorkDAVON BROWN
Age: 21
Residence: Brooklyn, New YorkMALIK CAMPBELL
Age: 27
Residence: Brooklyn, New YorkSTANLEY CHERENFANT
Age: 24
Residence: Brooklyn, New YorkSTEVEN CHERENFANT
Age: 23
Residence: Brooklyn, New YorkCOURTNEY COY
Age: 28
Residence: Brooklyn, New YorkPARRIS DESUZE
Age: 26
Residence: Brooklyn, New YorkBRANDON GREENIDGE
Age: 29
Residence: Brooklyn, New YorkCORY HARRIS
Age: 26
Residence: Brooklyn, New YorkJAMAR HARRY
Age: 26
Residence: Brooklyn, New YorkANDRE HOLMAN
Age: 27
Residence: Brooklyn, New YorkJEFFREY JOSEPH
Age: 30
Residence: Brooklyn, New YorkSILBERT NICHOLSON
Age: 23
Residence: Brooklyn, New YorkCORDERO PASSLEY
Age: 20
Residence: Brooklyn, New YorkGABRIEL PATTERSON
Age: 20
Residence: Brooklyn, New YorkSTEPHON RENE
Age: 18
Residence: Brooklyn, New YorkAKEEM WATSON
Age: 23
Residence: Brooklyn, New YorkE.D.N.Y. Docket No. 15 CR 287 (S-1) (WFK)
Two Convicted in Multi-Million Dollar Investment Fraud Scheme That Victimized Professional Hockey Players and Long Island InvestorsRead the Press Release
Following ten weeks of trial, a federal jury in Central Islip, New York, today returned a verdict convicting Phillip A. Kenner, a financial advisor, and Tommy C. Constantine, a part-time race car driver, on charges of wire fraud, wire fraud conspiracy, and money laundering conspiracy arising from the defendants’ pocketing of millions of dollars raised from Long Island businessmen and professional athletes ostensibly for the purpose of funding the development of land in Hawaii and a start-up credit card business based in Arizona. Sentencing has been scheduled for November 20, 2015. The defendants face a maximum of 20 years’ imprisonment on each count of conviction as well as forfeiture of up to $30 million in proceeds derived from the frauds.
The verdict was announced by Kelly T. Currie, Acting United States Attorney for the Eastern District of New York, Diego Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Shantelle P. Kitchen, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York (IRS).
The evidence from 39 government witnesses and hundreds of exhibits, including audio recordings made by several investor victims of each of the defendants as they struggled to comprehend the extent of their losses, established that as early as 2004, Kenner and Constantine used a labyrinth of holding companies to siphon millions in investor dollars away from their intended use and into companies, real estate, and other ventures that solely benefitted the defendants.
“Driven by personal greed, Kenner and Constantine spent years lying to investors and stealing their money, and then attempted to conceal their fraud by repeatedly and brazenly avoiding responsibility, shifting blame, and scapegoating others. Today, their scheme has been brought to an end,” stated Acting United States Attorney Currie. Mr. Currie expressed his grateful appreciation to the United States Attorney’s Office for the District of Arizona, the FBI and IRS Phoenix Offices, and the Scottsdale Police Department for their assistance in this prosecution.
"After defrauding victim investors out of millions of dollars over many years, the lies, deception, and criminal behavior of Kenner and Constantine have caught up with them today. The FBI thanks all of our partners for their assistance with this case," said FBI Assistant Director-in-Charge Rodriguez.
“Hopefully, today’s verdict will bring some closure to the victims of Kenner and Constantine,” said IRS Special Agent-in-Charge Kitchen. “Their success in defrauding so many individuals reinforces how important it is to use care when investing, no matter how much confidence you have in the individual or company you are investing with. Fortunately, federal law enforcement strives to be vigilant in uncovering fraud schemes and thorough in its investigation of them.”
As a college hockey player at Renssellaer Polytechnic Institute in Troy, New York, Kenner befriended then-teammate and future Olympian and National Hockey League (NHL) star Joe Juneau, who testified during the trial that after college he helped introduce Kenner to a number of other NHL players in the 1990’s as Kenner began working as a financial advisor in Boston. Through those early contacts, Kenner developed a clientele that included one-time New York Islanders forward Michael Peca, 1995 first-round draft pick and U.S. Olympian Bryan Berard, and Stanley Cup champions Darryl Sydor, Bill Ranford, and Sergei Gonchar, among other NHL players, whose careers blossomed just as Kenner took over greater and greater control of their finances and wealth.
The Hawaii Real Estate Investment Scheme
Beginning in 2003, Kenner convinced Peca, Berard, and several other clients to invest $100,000 each for the development of land in Hawaii into luxury estates. Kenner also had the players open lines of credit, collateralized by their personal stock, bond, and savings accounts, worth at least $10 million. Witness after witness testified that Kenner assured them that the credit lines would be used only to pay for initial development costs associated with the Hawaii project, and would be fully replenished after Lehman Brothers Holdings, Inc. agreed to loan the project up to $105 million in August 2006. In fact, the government’s evidence established that Kenner borrowed nearly all of his clients’ lines of credit and used the money to purchase his personal interest in unrelated real estate projects in Hawaii and Mexico, transfer funds to his partner in crime Constantine, and fund both his and Constantine’s personal expenses.
Meanwhile, Kenner and Constantine negotiated sweetheart deals that also dissipated the players’ assets and diverted millions to the defendants’ various pet projects. In one such deal, Constantine brokered a loan from an Arizona businessman for $3.5 million, ostensibly to close on a certain Hawaii parcel of land. The loan would have been unnecessary but for the fact that Kenner had already stolen millions through the player lines of credit. Worse, the loan agreement included a $2 million prepayment penalty at a time when the Lehman funding deal was all but certain to trigger the penalty. Although he put up no money of his own, Constantine walked away from that single loan with some $2 million that represented the diverted player assets. Bank records established that Constantine almost immediately kicked back a portion of the loan repayment proceeds to Kenner.
The Eufora LLC Scheme
During the conspiracy, Constantine operated Eufora, LLC, a prepaid debit card business which he founded in 2002. Between February 2008 and May 2009, as Eufora’s operating balances were in the red and Constantine testified in civil depositions that the company was nearly worthless, Kenner urged his clients to invest in Eufora. Approximately $700,000 of player investments was immediately wired out of Eufora to Kenner-controlled accounts. Another $725,000 in funds were similarly diverted to accounts that Constantine controlled and was used to cover the costs of Kenner’s and Constantine’s personal mortgages, credit card bills, and other debts.
In December 2009, Constantine fraudulently convinced a Long Island electrician, who had previously worked on a Kenner real estate project, to invest another $200,000 in Eufora, an investment that Constantine subsequently disavowed. In a recorded phone conversation played for the jury, Constantine offered a series of contradictory explanations refusing to acknowledge that the $200,000 was to have bought the victim a 1.5 percent interest in the company, which included a refusal to admit receiving the money, an admission that the investment had been received but not approved by Eufora’s board of directors, and even a suggestion that the victim should have asked for the money back before it was spent, even though records show that victim’s money was diverted and spent by the defendant within a day of being wired into Constantine’s control.
The Global Settlement Fund Scheme
In early 2009, Kenner’s player-clients who had opened lines of credit for the Hawaii venture received notices that their lines of credit were in default. For years, Kenner concealed that he had wiped out most of his clients’ savings by borrowing against one line of credit to pay monthly interest charges for another. By late 2008, the concealment scheme collapsed. Rather than admit to the diversions, Kenner and Constantine used the crisis to engineer a new phase of their fraud conspiracy by persuading the players to contribute new money towards something they termed the Global Settlement Fund or GSF.
At trial, the victims testified that Constantine and Kenner told them that the reason for their losses was the purported failure to repay loans by the managing partner of a Mexican resort known as Diamante Cabo San Lucas (DCSL). None of the players had previously been told that funds intended for the Hawaii land deal had been loaned to another developer in Mexico. Furthermore, documentary evidence at trial showed that much of the money that Kenner stole from the Hawaii project ended up being used to buy Kenner a personal 39 percent stake in DCSL.
Convinced that the only hope to recoup their losses lay in contributing to the Global Settlement Fund to fund litigation against the DCSL partner, Constantine and Kenner raised more than $2.9 million from the players. However, only $225,000 in contributions to the GSF were used for litigation. Instead, the vast majority of the money was again diverted to the defendants’ personal use, which included Constantine buying his personal home out of foreclosure, Kenner and Constantine paying legal bills related to Kenner’s personal investment in a tequila company in Mexico, defending Constantine in Florida litigation over his race car sponsorship activities, and an aborted effort by Constantine to buy Playboy Enterprises.
The Sag Harbor Scheme
In a separate scheme, Kenner acquired a 25 percent interest in real property in Sag Harbor, New York, without using any of his own money. To achieve this result, Kenner took $395,000 from Michael Peca’s line of credit, without Peca’s knowledge or permission, while at the same time convincing Berard to pay $375,000 for a supposed 50 percent interest, when in fact Kenner diluted Berard’s stake by half and pocketed the excess money. In early 2010, the investors realized Kenner had not contributed any of his own money, and they sold the property at a loss.
The government’s case is being prosecuted by the Office’s Long Island Criminal Division. Assistant United States Attorneys James M. Miskiewicz, Saritha Komatireddy, and Diane Leonardo are in charge of the prosecution.
The Defendants:
PHILLIP KENNER
Age: 46
Scottsdale, AZTOMMY CONSTANTINE
Age: 48
Scottsdale, AZE.D.N.Y. Docket No. 13-CR-607 (JFB)