Eastern District of New York
Press releases recorded for this federal judicial district.
Texas-Based Political Contributor Pleads Guilty to Evading Federal Election Campaign Contribution LimitsRead the Press Release
Earlier today, Diana Durand pleaded guilty to violating the Federal Election Campaign Act (FECA) by funneling campaign contributions through “straw donors” to the campaign committees of two candidates running for federal office. The guilty plea proceeding was held before Senior United States District Judge Sterling Johnson, Jr., at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, NY.
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Office (FBI).
The defendant admitted to the Court that during the 2010 election cycle, she recruited “straw donors” who made political campaign contributions in excess of $10,000 to the campaign committees of two candidates for the House of Representatives, who are identified in the indictment as Candidate A and Candidate B. The defendant also admitted that in furtherance of this criminal activity, she either made advance payments to the straw donors who made the contributions, or reimbursed them after they made the contributions.
United States Attorney Lynch stated: “We and our partners in the FBI are committed to protecting the integrity of the electoral process and will aggressively pursue anyone who attempts to circumvent federal campaign financing laws. Enforcement of these laws ensures that all candidates compete on a level playing field and that the public knows the true source of a candidate’s campaign funds.”
Ms. Lynch expressed her grateful appreciation to the Public Integrity Section of the Department of Justice for its assistance throughout the investigation and prosecution of Durand.
The maximum term of imprisonment for the crime to which Durand pleaded guilty is two years.
The government’s case is being prosecuted by Assistant United States Attorneys Anthony M. Capozzolo, Robert L. Capers, and Marisa Megur Seifan.
The Defendant:
DIANA DURAND
Houston, Texas
Age: 48
Two Individuals Plead Guilty to Importing and Selling Hazardous and Counterfeit ToysRead the Press Release
Yesterday, at the federal courthouse in Brooklyn, New York, two Queens, New York residents pled guilty today in connection with importing more than 100,000 hazardous and counterfeit children’s toys from China for sale in the United States.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Loretta E. Lynch of the Eastern District of New York, Special Agent in Charge James T. Hayes Jr. of Homeland Security Investigations (HSI) New York, Director Robert E. Perez of Customs and Border Protection (CBP) New York Field Operations, Chairman Elliott Kaye of the Consumer Product Safety Commission (CPSC) and Commissioner William J. Bratton of the New York City Police Department (NYPD) made the announcement.
“In a criminal twist on a toy story, the defendants made millions importing dangerous, knock-off toys that put children in harm’s way,” said Assistant Attorney General Caldwell. “The defendants used a continuously shifting series of corporate entities in an effort to stay one step ahead of law enforcement. But their game has now come to an end. The Department of Justice is committed to stopping those who would smuggle hazardous, counterfeit goods into the United States.”
“For eight years, the defendants lined their pockets while putting at risk the health of our children by smuggling dangerous and copyright-infringing toys into the United States. Today’s guilty pleas signify the end of this dangerous pipeline from China. We will continue to be vigilant and prosecute those who would smuggle dangerous and unlawful items into our country and neighborhoods,” said U. S. Attorney Lynch. Ms. Lynch extended her grateful appreciation to the HSI Intellectual Property Rights Group and the NYPD and thanked the Consumer Product Safety Commission and Customs and Border Protection for their assistance.
“The United States has some of the strongest toy standards and lowest lead limits in the world, specifically to keep children safe,” said CPSC Chairman Kaye. “We have no more important mission than protecting children. For that reason, the CPSC will continue to work with our federal partners to enforce toy safety requirements at the ports and in the marketplace.”
“The defendants in this case endangered thousands of American children by manufacturing for sale counterfeit toys made with unsafe amounts of lead and other hazardous chemicals,” said Special Agent in Charge Hayes Jr. “HSI focuses its efforts to protect intellectual property, first and foremost, on those counterfeit goods that present health and safety hazards to consumers.”
Chenglan Hu, 52, and Hua Fei Zhang, 53, of Bayside, New York, pleaded guilty in connection with importing children’s toys with copyright-infringing images and counterfeit trademarks of popular children’s characters, as well as unsafe lead levels, small parts that presented risks of choking or ingestion, easily-accessible battery compartments, and other potential hazards. Hu and Zhang were the last of nine defendants to plead guilty in this investigation; Guan Jun Zhang, Jun Wu Zhang, and five corporations – Family Product USA Inc., H.M. Import USA Corp., ZCY Trading Corp., Zone Import Corp. and ZY Wholesale Inc. – previously pleaded guilty to Consumer Product Safety Act (CPSA) and trademark counterfeiting charges. In pleading guilty to trafficking in hazardous consumer goods in violation of CPSA, Hu and Zhang also agreed to forfeit $700,000 and more than 120,000 unsafe children’s toys. The government previously seized three luxury vehicles and six bank accounts, and filed lis pendens against two real properties owned by Zhang in Queens, New York.
According to court filings and facts presented at the plea hearings, from July 2005 through January 2013, Hu, Zhang and the other individual defendants used the companies they owned to import toys from China and sell them from a storefront and warehouse in Ridgewood, New York, and other locations in Brooklyn and Queens. According to court documents, CBP seized toys imported by the defendants from shipping containers entering the United States from China on thirty-three separate occasions. Seventeen of the thirty-three seizures contained toys prohibited from import into the United States because of excessive lead content, excessive phthalate levels, small parts that presented risks of choking, aspiration or ingestion, and easily-accessible battery compartments. Sixteen of the thirty-three seizures contained toys bearing copyright-infringing images and counterfeit trademarks, including a wide variety of popular children’s characters, such as Winnie the Pooh, Dora the Explorer, SpongeBob SquarePants, Betty Boop, Teenage Mutant Ninja Turtles, Power Rangers, Spiderman, Tweety, Mickey Mouse, and Pokémon, as well as those from movies such as “Cars,” “Toy Story” and “High School Musical.”
Hu, Zhang and the other individual defendants changed their use of the companies, sometimes even forming new companies, and alternated their formal titles in order to conceal their continued importation and distribution of the hazardous and counterfeit toys.
Hu and Zhang pleaded guilty before U.S. Magistrate Judge James Orenstein of the Eastern District of New York.
The case was prosecuted by Assistant U.S. Attorneys William P. Campos and Claire Kedeshian of the Eastern District of New York and Senior Counsel Evan Williams of the Criminal Division’s Computer Crime and Intellectual Property Section. The case was jointly investigated by the HSI Intellectual Property Rights Group and the NYPD, through its participation in the New York Border Enforcement Security Taskforce, with the assistance of CPSC and CBP.
MS-13 Gang Member from Jamaica, Queens Indicted for Murder of 19-Year-Old Man in Long IslandRead the Press Release
Earlier today, an indictment was unsealed charging the defendant, Byron Lopez, with conspiracy to commit murder in-aid-of racketeering, murder in-aid-of racketeering, obstruction-of-justice murder and firearms offenses.1 If convicted, Lopez will face mandatory life imprisonment. Lopez, who was arrested this morning, was presented for arraignment earlier today at the United States Courthouse in Brooklyn, New York.
The charges and arrest were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), New York Field Office; James Higgins, Acting Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Explosives and Firearms, New York Field Division (ATF); and William J. Bratton, Commissioner, New York City Police Department.
“This Office has a long history of prosecuting and convicting members of the MS-13 gang, which for years has pursued its particularly brutal brand of violence and lawlessness in neighborhoods throughout Queens and Long Island,” stated U.S. Attorney Lynch. “This prosecution, which brings another member of the gang to justice for a murder that disrupted one of our communities earlier this year, is part of our ongoing mission to dismantle MS-13 wherever and whenever it rears its head in this district.” Ms. Lynch thanked the Suffolk County Police Department for its assistance with the investigation.
"Today’s arrest of Byron Lopez, a member of the violent MS-13 street gang who is alleged to have coordinated the murder of a fellow gang member and other violent crimes, is yet another step in the efforts of law enforcement to attack the leadership of MS-13 and put an end to their menacing criminal conduct," said James T. Hayes Jr., special agent in charge of HSI. “HSI is proud of its partnerships with law enforcement agencies in Suffolk County, the Suffolk County District Attorney’s Office and the United States Attorney’s Office for the Eastern District of New York that further investigations against violent criminal street gangs that present significant threats to public safety."
As alleged in court documents, Lopez is a member of the Jamaica, Queens chapter of the violent street gang La Mara Salvatrucha, also known as “MS-13.” On February 25, 2014, Lopez and other members of the gang directed the victim, fellow gang member Sidney Valverde, to travel to Long Island under the false pretense that they needed him to assist in gang business there. In fact, Lopez and his co-conspirators planned to kill Valverde because they believed that he was providing information about the gang’s activities to federal law enforcement. After Valverde traveled to Long Island, the conspirators shot him in the back of the head and left his body on Miller Place Beach in Suffolk County, where it was discovered by a beachcomber approximately two weeks later.
The indictment of Lopez is the latest in a series of federal prosecutions by the United States Attorney’s Office for the Eastern District of New York targeting members of the MS-13, a violent international street gang comprised primarily of immigrants from El Salvador and Honduras. With numerous chapters, or “cliques,” through the United States, MS-13 has a significant presence in Queens and is the largest street gang in Long Island. Since 2003, more than 250 MS-13 members, including dozens of clique leaders, have been convicted on federal felony charges in the Eastern District of New York. More than 150 of those MS-13 members have been convicted on federal racketeering charges. Since 2010 alone, this Office has obtained indictments charging MS-13 members with carrying out more than 20 murders in the Eastern District of New York, and has convicted more than 35 MS-13 members in connection with those murders.
The government’s case is being prosecuted by Assistant United States Attorneys Darren A. LaVerne and Alixandra E. Smith.
The Defendant:
BYRON LOPEZ, also known as “Viruz”
Age: 23
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1 The charges contained in the indictments are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
Two Bloods Members Sentenced to Life in Prison for the Execution of Rival Gang LeaderRead the Press Release
Earlier today at the Brooklyn federal courthouse, Dontae Sebbern and Dexter Waiters were sentenced to life in prison for, among other crimes, the racketeering-related murder of gang leader Jermaine Dickersen, also known as “Big Den.” The defendants, members of a set of the Bloods known by various names including the “Gorilla Bloods,” were convicted after trial in December 2012 of racketeering, racketeering conspiracy, murder in-aid-of racketeering, narcotics trafficking, and other firearms charges.
The sentences were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and James J. Hunt, Acting Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division.
“The defendants turned the streets of Staten Island into a war zone to perpetuate their gang feud. These defendants were not commissioned soldiers, however, but common criminals who used gang allegiance as an excuse for murder and mayhem. This sentencing closes one chapter in this Office’s ongoing investigations into gang and narcotics-related violence on Staten Island,” stated United States Attorney Lynch. “This Office and our federal and city law enforcement partners will not tolerate such senseless and heinous criminal conduct in our communities.” Ms. Lynch thanked the Drug Enforcement Administration, the Federal Bureau of Investigation, Immigration and Customs Enforcement, the New York City Police Department, and the Richmond County District Attorney’s Office for their assistance in the investigation.
In late 2009, a gang war erupted between the Gorilla Bloods and a rival criminal organization known as the “Arlington Crew,” comprised largely of Bloods gang members based in the Arlington neighborhood of Staten Island. Sebbern, Waiters, and their associate Earl Mangen sold drugs together and, prior to the war, were supplied by associates of the Arlington Crew. In the early morning of November 7, 2009, at a party on Arlington Avenue, a Gorilla Bloods leader started a fight with a member of the Arlington Crew. Dickersen, who at the time was one of the highest ranking Bloods on Staten Island, as well as Arlington Crew members Dion Nelson and Frankie Nelson joined in the fight. When a member of the Gorilla Bloods pulled out a knife, Dion Nelson drew a firearm and shot him in the lower back.1 About an hour after this shooting, Dickersen was shot and killed in a nearby parking lot. Moments later, Sebbern and Waiters were arrested jumping out of a car in possession of firearms, including the murder weapon, and wearing matching camouflage bullet-proof vests.2
Overall, as a result of a series of investigations begun in 2008 into drug and gang-related activity on the North Shore of Staten Island, more than 30 defendants have been convicted of racketeering, murder, narcotics trafficking, and firearms offenses.
The sentencing proceeding of Sebbern and Waiters was held before United States District Judge Sandra L. Townes.
The government’s case was prosecuted by Assistant United States Attorneys Shreve Ariail and Kevin Trowel.
The Defendants:
DEXTER WAITERS, also known as “Bugotti”
Age: 27
Staten Island, New York
DONTAE SEBBERN, also known as “K.D.”
Age: 26
Staten Island, New York
E.D.N.Y. Docket No. 10-CR-087
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1 In April 2013, Dion Nelson was sentenced to 25 years in prison following his guilty plea to discharging a firearm in connection with a narcotics trafficking offense.
2 One week later, Mangen was found dead outside his home, shot three times. Andre Collier, an associate of Dickerson’s and Mangen’s former drug supplier, subsequently pled guilty to premeditated homicide and was sentenced to 35 years in prison.
Staten Island Man Who Defrauded over 250 Victims Sentenced to 292 Months of Imprisonment for Multi-Million Dollar Fraudulent Investment SchemeRead the Press Release
BROOKLYN, NY – Earlier today, at the federal courthouse in Brooklyn, Peter Liounis, a resident of Staten Island, was sentenced to 292 months in prison following his conviction on February 5, 2014, of six counts of wire fraud, one count of mail fraud, one count of wire and mail fraud conspiracy, and one count of securities fraud after a two-week trial. For nearly four years, Liounis and his co-conspirators ran three successive fraudulent investment schemes through which they obtained over $15 million from over 250 investors based on false promises about investment opportunities.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Philip R. Bartlett, Postal Inspector in Charge, U.S. Postal Inspection Service, New York Division; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Department of Homeland Security, Homeland Security Investigations (HSI), New York; and Robert J. Sica, Special Agent-in-Charge, United States Secret Service. The sentence was imposed by United States District Judge I. Leo Glasser.
“Peter Liounis hid behind assumed identities to fleece unsuspecting investors. His two prior convictions didn’t teach him respect for the law, as he continued to cheat hundreds of innocent victims of millions of dollars. Liounis thought his third time in court would be a charm. Instead a federal jury saw him for the inveterate fraudster and con man he really is,” stated United States Attorney Lynch. “We will continue to pursue tirelessly those individuals who would victimize investors.”
At a pre-sentencing proceeding, Judge Glasser stated that the “scam was as sophisticated as any scam that I have had occasion to deal with in this courthouse in over 30 years.”
A. The Grayson Hewitt Scheme
As proven at trial, in March 2011, investors were contacted by a person identifying himself as “Mark Anderson from Grayson Hewitt.” “Anderson” told investors that Grayson Hewitt purchased plaintiffs’ rights to future recoveries in personal injury and other lawsuits, and promised a 15% return on their investments.
In a series of calls captured by a court-ordered wiretap, the son of an investor sought the return of his father’s money so that the son could place his father, who had suffered a heart attack, into an assisted living facility. Although the father had approximately $23,000 left in his Grayson Hewitt account, Liounis falsely told the son that his father had been depleting the account and had only $3,000 remaining. Liounis then sent the father and son a “get well fruit basket.” In another call, a Grayson Hewitt investor expressed skepticism about the company, noting, “I see this as a Bernie Madoff deal….” Liounis responded, “this is no way, no how, a Bernie Madoff … believe that! … You gotta understand, the amount of money we handle here, uh, we’d go away for a hell of a lot longer than Bernie did.”
The members of the scheme used investor funds to purchase gold, meals, clothing, and other consumer items. The Grayson Hewitt scheme resulted in over $4 million of losses to investors.
B. Prior Related Schemes
Liounis had also participated in two closely related prior schemes, as proven at a sentencing hearing.
From approximately December 2008 to November 2009, Liounis and his co-conspirators participated in a fraudulent investment scheme through a company called the Rockford Group. The Rockford Group marketed itself as a “leading private equity firm,” claimed to invest in plaintiffs’ rights to future recoveries in personal injury and other lawsuits, and promised a 15% return on their investments. The Rockford Group, however, never invested in any lawsuits. Instead, nearly all of the investor funds were wired to bank accounts overseas. Approximately 200 investors in the U.S. and Canada lost approximately $11 million as a result of this scheme.
In September 2010, an individual who had been solicited to invest in the Rockford Group by one of its representatives, “James Weston,” began receiving calls from someone who sounded like “Weston,” but was now identifying himself as “Andrew Black from UBS.” “Black” solicited multiple investors to invest in an initial public offering (IPO) of General Motors stock. Federal agents determined that there was no “Andrew Black” at UBS, and were able to halt this scheme in its early stages and return most of the investors’ funds.
Federal agents identified Liounis as the person who solicited the Rockford Group, General Motors IPO and Grayson Hewitt investors, using the names “James Weston,” “Andrew Black,” and “Mark Anderson.”
Prior to his most recent convictions at trial, Liounis had been convicted of federal fraud offenses three times before in 2001 and 2007.
The government’s case is being prosecuted by Assistant United States Attorneys Justin D. Lerer and Daniel A. Spector.
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. 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:
PETER LIOUNIS
Age: 42
Staten Island, NY
E.D.N.Y. Docket No. 12-CR-350
Bank of America to Pay $16.65 Billion in Historic Justice Department Settlement for Financial Fraud Leading up to and During the Financial CrisisRead the Press Release
Attorney General Eric Holder and Associate Attorney General Tony West announced today that the Department of Justice has reached a $16.65 billion settlement with Bank of America Corporation – the largest civil settlement with a single entity in American history — to resolve federal and state claims against Bank of America and its former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch. As part of this global resolution, the bank has agreed to pay a $5 billion penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) – the largest FIRREA penalty ever – and provide billions of dollars of relief to struggling homeowners, including funds that will help defray tax liability as a result of mortgage modification, forbearance or forgiveness. The settlement does not release individuals from civil charges, nor does it absolve Bank of America, its current or former subsidiaries and affiliates or any individuals from potential criminal prosecution.
“This historic resolution - the largest such settlement on record - goes far beyond ‘the cost of doing business,’” said Attorney General Holder. "Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers and communities affected by the bank’s conduct. This is appropriate given the size and scope of the wrongdoing at issue.”
This settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force and its Residential Mortgage-Backed Securities (RMBS) Working Group, which has recovered $36.65 billion to date for American consumers and investors.
“At nearly $17 billion, today’s resolution with Bank of America is the largest the department has ever reached with a single entity in American history,” said Associate Attorney General West. “But the significance of this settlement lies not just in its size; this agreement is notable because it achieves real accountability for the American people and helps to rectify the harm caused by Bank of America’s conduct through a $7 billion consumer relief package that could benefit hundreds of thousands of Americans still struggling to pull themselves out from under the weight of the financial crisis.”
The Justice Department and the bank settled several of the department’s ongoing civil investigations related to the packaging, marketing, sale, arrangement, structuring and issuance of RMBS, collateralized debt obligations (CDOs), and the bank’s practices concerning the underwriting and origination of mortgage loans. The settlement includes a statement of facts, in which the bank has acknowledged that it sold billions of dollars of RMBS without disclosing to investors key facts about the quality of the securitized loans. When the RMBS collapsed, investors, including federally insured financial institutions, suffered billions of dollars in losses. The bank has also conceded that it originated risky mortgage loans and made misrepresentations about the quality of those loans to Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).
Of the record-breaking $16.65 billion resolution, almost $10 billion will be paid to settle federal and state civil claims by various entities related to RMBS, CDOs and other types of fraud. Bank of America will pay a $5 billion civil penalty to settle the Justice Department claims under FIRREA. Approximately $1.8 billion will be paid to settle federal fraud claims related to the bank’s origination and sale of mortgages, $1.03 billion will be paid to settle federal and state securities claims by the Federal Deposit Insurance Corporation (FDIC), $135.84 million will be paid to settle claims by the Securities and Exchange Commission. In addition, $300 million will be paid to settle claims by the state of California, $45 million to settle claims by the state of Delaware, $200 million to settle claims by the state of Illinois, $23 million to settle claims by the Commonwealth of Kentucky, $75 million to settle claims by the state of Maryland, and $300 million to settle claims by the state of New York.
Bank of America will provide the remaining $7 billion in the form of relief to aid hundreds of thousands of consumers harmed by the financial crisis precipitated by the unlawful conduct of Bank of America, Merrill Lynch and Countrywide. That relief will take various forms, including principal reduction loan modifications that result in numerous homeowners no longer being underwater on their mortgages and finally having substantial equity in their homes. It will also include new loans to credit worthy borrowers struggling to get a loan, donations to assist communities in recovering from the financial crisis, and financing for affordable rental housing. Finally, Bank of America has agreed to place over $490 million in a tax relief fund to be used to help defray some of the tax liability that will be incurred by consumers receiving certain types of relief if Congress fails to extend the tax relief coverage of the Mortgage Forgiveness Debt Relief Act of 2007.
An independent monitor will be appointed to determine whether Bank of America is satisfying its obligations. If Bank of America fails to live up to its agreement by Aug. 31, 2018, it must pay liquidated damages in the amount of the shortfall to organizations that will use the funds for state-based Interest on Lawyers’ Trust Account (IOLTA) organizations and NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development. The organizations will use the funds for foreclosure prevention and community redevelopment, legal assistance, housing counselling and neighborhood stabilization.
As part of the RMBS Working Group, the U.S. Attorney’s Office for the District of New Jersey conducted a FIRREA investigation into misrepresentations made by Merrill Lynch to investors in 72 RMBS throughout 2006 and 2007. As the statement of facts describes, Merrill Lynch regularly told investors the loans it was securitizing were made to borrowers who were likely and able to repay their debts. Merrill Lynch made these representations even though it knew, based on the due diligence it had performed on samples of the loans, that a significant number of those loans had material underwriting and compliance defects - including as many as 55 percent in a single pool. In addition, Merrill Lynch rarely reviewed the unsampled loans to ensure that the defects observed in the samples were not present throughout the remainder of the pools. Merrill Lynch also disregarded its own due diligence and securitized loans that the due diligence vendors had identified as defective. This practice led one Merrill Lynch consultant to “wonder why we have due diligence performed” if Merrill Lynch was going to securitize the loans “regardless of issues.”
“In the run-up to the financial crisis, Merrill Lynch bought more and more mortgage loans, packaged them together, and sold them off in securities – even when the bank knew a substantial number of those loans were defective,” said U.S. Attorney Paul J. Fishman for the District of New Jersey. “The failure to disclose known risks undermines investor confidence in our financial institutions. Today’s record-breaking settlement, which includes the resolution of our office’s imminent multibillion-dollar suit for FIRREA penalties, reflects the seriousness of the lapses that caused staggering losses and wider economic damage.”
This settlement also resolves the complaint filed against Bank of America in August 2013 by the U.S. Attorney’s Office for the Western District of North Carolina concerning an $850 million securitization. Bank of America acknowledges that it marketed this securitization as being backed by bank-originated “prime” mortgages that were underwritten in accordance with its underwriting guidelines. Yet, Bank of America knew that a significant number of loans in the security were “wholesale” mortgages originated through mortgage brokers and that based on its internal reporting, such loans were experiencing a marked increase in underwriting defects and a noticeable decrease in performance. Notwithstanding these red flags, the bank sold these RMBS to federally backed financial institutions without conducting any third party due diligence on the securitized loans and without disclosing key facts to investors in the offering documents filed with the SEC. A related case concerning the same securitization was filed by the SEC against Bank of America and is also being resolved as part of this settlement.
“Today’s settlement attests to the fact that fraud pervaded every level of the RMBS industry, including purportedly prime securities, which formed the basis of our filed complaint,” said U.S. Attorney Anne M. Tompkins for the Western District of North Carolina. “Even reputable institutions like Bank of America caved to the pernicious forces of greed and cut corners, putting profits ahead of their customers. As we deal with the aftermath of the financial meltdown and rebuild our economy, we will hold accountable firms that contributed to the economic crisis. Today’s settlement makes clear that my office will not sit idly while fraud occurs in our backyard.”
The U.S. Attorney’s Office for the Central District of California has been investigating the origination and securitization practices of Countrywide as part of the RMBS Working Group effort. The statement of facts describes how Countrywide typically represented to investors that it originated loans based on underwriting standards that were designed to ensure that borrowers could repay their loans, although Countrywide had information that certain borrowers had a high probability of defaulting on their loans. Countrywide also concealed from RMBS investors its use of “shadow guidelines” that permitted loans to riskier borrowers than Countrywide’s underwriting guidelines would otherwise permit. Countrywide’s origination arm was motivated by the “saleability” of loans and Countrywide was willing to originate “exception loans” (i.e., loans that fell outside of its underwriting guidelines) so long as the loans, and the attendant risk, could be sold. This led Countrywide to expand its loan offerings to include, for example, “Extreme Alt-A” loans, which one Countrywide executive described as a “hazardous product,” although Countrywide failed to tell RMBS investors that these loans were being originated outside of Countrywide’s underwriting guidelines. Countrywide knew that these exception loans were performing far worse than loans originated without exceptions, although it never disclosed this fact to investors.
“The Central District of California has taken the lead in the department’s investigation of Countrywide Financial Corporation,” said Acting U.S. Attorney Stephanie Yonekura for the Central District of California. “Countrywide’s improper securitization practices resulted in billions of dollars of losses to federally-insured financial institutions. We are pleased that this investigation has resulted in a multibillion-dollar recovery to compensate the United States for the losses caused by Countrywide’s misconduct.”
In addition to the matters relating to the securitization of toxic mortgages, today’s settlement also resolves claims arising out of misrepresentations made to government entities concerning the origination of residential mortgages.
The U.S. Attorney’s Office for the Southern District of New York, along with the Federal Housing Finance Agency’s Office of Inspector General and the Special Inspector General for the Troubled Asset Relief Program, conducted investigations into the origination of defective residential mortgage loans by Countrywide’s Consumer Markets Division and Bank of America’s Retail Lending Division as well as the fraudulent sale of such loans to the government sponsored enterprises Fannie Mae and Freddie Mac (the “GSEs”). The investigation into these practices, as well as three private whistleblower lawsuits filed under seal pursuant to the False Claims Act, are resolved in connection with this settlement. As part of the settlement, Countrywide and Bank of America have agreed to pay $1 billion to resolve their liability under the False Claims Act. The FIRREA penalty to be paid by Bank of America as part of the settlement also resolves the government’s claims against Bank of America and Countrywide under FIRREA for loans fraudulently sold to Fannie Mae and Freddie Mac. In addition, Countrywide and Bank of America made admissions concerning their conduct, including that they were aware that many of the residential mortgage loans they had made to borrowers were defective, that many of the representations and warranties they made to the GSEs about the quality of the loans were inaccurate, and that they did not self-report to the GSEs mortgage loans they had internally identified as defective.
“For years, Countrywide and Bank of America unloaded toxic mortgage loans on the government sponsored enterprises Fannie Mae and Freddie Mac with false representations that the loans were quality investments,” said U.S. Attorney Preet Bharara for the Southern District of New York. “This office has already obtained a jury verdict of fraud and a judgment for over a billion dollars against Countrywide and Bank of America for engaging in similar conduct. Now, this settlement, which requires the bank to pay another billion dollars for false statements to the GSEs, continues to send a clear message to Wall Street that mortgage fraud cannot be a cost of doing business.”
The U.S. Attorney’s Office for the Eastern District of New York, together with its partners from the Department of Housing and Urban Development (HUD), conducted a two-year investigation into whether Bank of America knowingly made loans insured by the FHA in violation of applicable underwriting guidelines. The investigation established that the bank caused the FHA to insure loans that were not eligible for FHA mortgage insurance. As a result, HUD incurred hundreds of millions of dollars of losses. Moreover, many of Bank of America’s borrowers have defaulted on their FHA mortgage loans and have either lost or are in the process of losing their homes to foreclosure.
“As a Direct Endorser of FHA insured loans, Bank of America performs a critical role in home lending,” said U.S. Attorney Loretta E. Lynch for the Eastern District of New York. “It is a gatekeeper entrusted with the authority to commit government funds earmarked for facilitating mortgage lending to first-time and low-income homebuyers, senior citizen homeowners and others seeking or owning homes throughout the nation, including many who live in the Eastern District of New York. In obtaining a payment of $800 million and sweeping relief for troubled homeowners, we have not just secured a meaningful remedy for the bank’s conduct, but have sent a powerful message of deterrence.”
“Bank of America failed to make accurate and complete disclosure to investors and its illegal conduct kept investors in the dark,” said Rhea Kemble Dignam, Regional Director of the SEC’s Atlanta Office. “Requiring an admission of wrongdoing as part of Bank of America’s agreement to resolve the SEC charges filed today provides an additional level of accountability for its violation of the federal securities laws.”
“Today’s settlement with Bank of America is another important step in the Obama Administration’s efforts to provide relief to American homeowners who were hurt during the housing crisis,” said U.S. Department of Housing and Urban Development (HUD) Secretary Julián Castro. “This global settlement will strengthen the FHA fund and Ginnie Mae, and it will provide $7 billion in consumer relief with a focus on helping borrowers in areas that were the hardest hit during the crisis. HUD will continue working with the Department of Justice, state attorneys general, and other partners to take appropriate action to hold financial institutions accountable and provide consumers with the relief they need to stay in their homes. HUD remains committed to solidifying the housing recovery and creating more opportunities for Americans to succeed.”
“Bank of America and the banks it bought securitized billions of dollars of defective mortgages,” said Acting Inspector General Michael P. Stephens of the FHFA-OIG. “Investors, including Fannie Mae and Freddie Mac, suffered enormous losses by purchasing RMBS from Bank of America, Countrywide and Merrill Lynch not knowing about those defects. Today’s settlement is a significant, but by no means final step by FHFA-OIG and its law enforcement partners to hold accountable those who committed acts of fraud and deceit.”
The attorneys general of California, Delaware, Illinois, Kentucky, Maryland and New York also conducted related investigations that were critical to bringing about this settlement. In addition, the settlement resolves investigations conducted by the Securities and Exchange Commission (SEC) and litigation filed by the Federal Deposit Insurance Company (FDIC).
The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis. The RMBS Working Group brings together more than 200 attorneys, investigators, analysts and staff from dozens of state and federal agencies including the Department of Justice, 10 U.S. Attorneys’ Offices, the FBI, the Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s Office of Inspector General, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network, and more than 10 state attorneys general offices around the country.
The RMBS Working Group is led by Director Geoffrey Graber and five co-chairs: Assistant Attorney General for the Civil Division Stuart Delery, Assistant Attorney General for the Criminal Division Leslie Caldwell, Director of the SEC’s Division of Enforcement Andrew Ceresney, U.S. Attorney for the District of Colorado John Walsh and New York Attorney General Eric Schneiderman.
Investigations were led by Assistant U.S. Attorneys Leticia Vandehaar of the District of New Jersey; Dan Ryan and Mark Odulio of the Western District of North Carolina; George Cardona and Lee Weidman of the Central District of Carolina; Richard Hayes and Kenneth Abell of the Eastern District of New York; and Pierre Armand and Jaimie Nawaday of the Southern District of New York.
Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at: www.stopfraud.gov .
Related Material:
Member of Home Invasion Robbery Crew Sentenced to 27 Years for Murdering Pregnant Woman During Botched RobberyRead the Press Release
Alejo Polanco was sentenced today to 27 years in prison to be followed by five years of supervised release by United States District Judge Raymond J. Dearie at the federal courthouse in Brooklyn. In August 2013, following a two-week trial, Polanco and co-defendant Emilino Vasquez were convicted of all counts against them, including participating in a ten-year conspiracy to commit armed home invasion robberies and to traffic in heroin, cocaine, and marijuana. In addition, Polanco and Vasquez were convicted of the June 2001 murder of Liliana Colmenares in Manhattan. On June 20, 2014, Vasquez was sentenced to 22 years’ incarceration for his role in the offense.
The sentences were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and James J. Hunt, Acting Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division.
“Polanco, Vasquez, and their associates thought they had gotten away with murder,” stated United States Attorney Lynch. “For years, these defendants committed brazen armed robberies that terrorized our city. Thanks to the diligent efforts of the DEA’s experienced investigators, those responsible for this brutal murder have been brought to justice.”
Polanco and Vasquez were members of a violent robbery crew responsible for numerous robberies of narcotics traffickers in the New York metropolitan area. The crew often received inside information regarding the location of narcotics and money stashes, and then performed extensive surveillance of their intended targets before robbing them at gunpoint. The crew targeted narcotics traffickers because they were unlikely to call the police or cooperate with law enforcement investigations. Altogether, Polanco, Vasquez, and their co-conspirators stole hundreds of kilograms of cocaine, heroin, and marijuana, as well as hundreds of thousands of dollars in drug proceeds.
In the spring of 2001, the crew received information from a member of an international drug trafficking organization that there was a large quantity of heroin stored in an apartment located on Fort Washington Avenue in upper Manhattan. For months, the conspirators performed surveillance of the apartment and its occupants. On June 10, 2001, six members of the crew, including Polanco and Vasquez, assembled in the vicinity of the apartment. Communicating with each other via radio, they watched as the male occupant of the apartment briefly left the apartment to walk to a restaurant. When he returned, three members of the crew, including Polanco, each of whom was armed with a handgun, attempted to force their way into the apartment. A struggled ensued, and several shots were fired. Liliana Colmenares, a Colombian national who resided in the apartment and was unarmed, approached Polanco and briefly struggled with him. Polanco then shot Colmenares in the face, causing her to bleed to death within minutes. Colmenares was approximately five months pregnant at the time of her death.
After the shooting, the conspirators fled the scene in two vehicles, one of which was driven by Vasquez. The murder remained unsolved for several years until agents and investigators with the Drug Enforcement Administration’s New York Drug Enforcement Task Force identified several suspects and ultimately solved the case.
Ms. Lynch extended her grateful appreciation to the DEA and the New York State Police for their extraordinary assistance in this lengthy investigation.
The government’s case was prosecuted by Assistant United States Attorneys
Daniel Silver, Soumya Dayananda, and Nathan Reilly.
The Defendants:
ALEJO POLANCO
Age: 47
EMILINO VASQUEZ
Age: 59
E.D.N.Y. Docket No. 08-CR-65
Former Chief Merchandising Officer of Aeropostale, Inc. Sentenced to 8 Years in Prison for $25 Million Bribery SchemeRead the Press Release
Christopher Finazzo, the former Executive Vice President and Chief Merchandising Officer of national teenage clothing retailer Aéropostale, Inc. (“Aéropostale”), was sentenced in federal court in Brooklyn, New York, to 8 years in prison. In April 2013, Finazzo was convicted of all 16 counts of fraud and bribery, following a three-week jury trial, for directing more than $350 million in t-shirt and fleece business to South Bay Apparel Inc. (“South Bay”), a company owned by Hollywood movie producer Douglas Dey, in exchange for receiving more than $25 million in kickbacks from Dey. As part of the sentence, Finazzo was also sentenced to 3 years’ supervised release, ordered to forfeit more than $25 million to the government, and pay $13,690,822.94 in restitution to Aéropostale, a publicly traded company on the New York Stock Exchange. Dey pleaded guilty in September 2012 to conspiracy to violate the Travel Act through commercial bribery for his role in the scheme and was sentenced on August 6, 2014 to 42 months in prison.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“For over a decade, Christopher Finazzo abused his position of power at Aéropostale and betrayed the trust placed in him by the company, its investors, and its employees by lining his own pockets at his employer’s expense. To succeed in this decade-long kickback scheme, Finazzo lied on numerous disclosure forms and caused Aéropostale to make false filings with the Securities and Exchange Commission. These lies and false representations compromised the financial well-being of a publicly-traded retail company. Those who seek to commit corporate fraud by abusing their positions of trust are on notice that they will be held accountable for their crimes,” stated United States Attorney Lynch. Ms. Lynch thanked the FBI and the Securities and Exchange Commission for their assistance.
Shortly after Finazzo was hired by Aéropostale in July 1996, he and Dey entered into a fraudulent scheme whereby Finazzo directed Aéropostale’s graphic t-shirt business to South Bay in exchange for splitting South Bay’s profits with Dey. From 1996 to 2006, Finazzo caused Aéropostale to buy more than $350 million in t-shirt and fleece merchandise from South Bay, often for significantly higher prices and lower quality than was available from other suppliers. In exchange, Dey paid Finazzo more than $25 million in bribes and kickbacks, equaling approximately 50% of South Bay’s profits. In 2005 alone, at the peak of the business between Aéropostale and South Bay, Dey paid Finazzo more than $13 million in kickbacks. The kickbacks were paid through C&D Retail Consultants, a shell consulting corporation set up by Finazzo, and through companies jointly-owned by Finazzo and Dey.
Finazzo’s lies and omissions about his relationship with Dey on numerous disclosure forms, which he was required to complete as a senior officer of Aéropostale, caused Aéropostale to make multiple false filings with the SEC. Finazzo completely controlled Aéropostale’s business with South Bay and favored Dey and South Bay to the detriment of Aéropostale’s profit margins. For example, Finazzo refused to comply with Aéropostale’s then Chief Executive Officer Julian Geiger’s directive to place 25% of the t-shirts orders with overseas vendors at a significantly lower cost than what Aéropostale paid South Bay, thereby costing Aéropostale approximately $6 million.
When Aéropostale’s employees sought to lower the price of t-shirts purchased from South Bay or hold South Bay accountable for poor quality and late deliveries, Finazzo stepped in and quashed their efforts. For example, when a graphic t-shirt merchant questioned South Bay’s cost structure, Finazzo emailed the head of Aéropostale’s men’s division and stated, “I would like to let you know that if I hear that [the merchant] is talking trash about South Bay to other people in the company, I will not tolerate that, and I will be swift in my actions.” Similarly, when other employees questioned South Bay’s effective monopoly on the t-shirt business, Finazzo sent an email to his senior staff stating, “Last night when I could not sleep I decided that as long as I’m here we will run the business as we started it with our key vendors … I will not change our vendor structure or the way we set up this business and I guess I can make that decision. I want South Bay to be the main t-shirt supplier.”
The sentence was imposed by United States District Judge Roslynn R. Mauskopf.
The government’s case was prosecuted by Assistant United States Attorneys Winston M. Paes and Claire Kedeshian.
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 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. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants. For more information on the task force, visit http://www.StopFraud.gov.
The Defendant:
CHRISTOPHER FINAZZO
Age: 57
Garden City, New York
E.D.N.Y. Docket No. 10-CR-457
Canadian Drug Kingpin with Ties to the Rizutto and Bonanno Crime Families, the Hells Angels, and the Mexican Sinaloa Cartel Sentenced to 27 Years for Leading A Billion Dollar Narcotics Trafficking EnterpriseRead the Press Release
Jimmy Cournoyer, the leader of a massive international drug trafficking enterprise with ties to La Cosa Nostra, the Hells Angels, and the notorious Sinaloa Cartel in Mexico, was sentenced earlier today to 27 years in prison by the Hon. Raymond J. Dearie. Cournoyer previously pled guilty to being the leader of a continuing criminal enterprise, conspiracies to manufacture, import, and distribute marijuana, conspiracies to export and distribute cocaine, substantive cocaine distribution, and a conspiracy to launder the proceeds of narcotics trafficking. As part of his sentence, Cournoyer agreed to a $1 billion forfeiture money judgment and will forfeit $10,871,120 in narcotics proceeds that federal agents seized from multiple locations in New York, California, Pennsylvania, and Kansas during the multi-year investigation.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York and James J. Hunt, Acting Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division.
“With the assistance of our law enforcement partners across the United States and in Canada, the United States Attorney’s Office for the Eastern District of New York was able to bring to justice a prolific drug kingpin with ties to some of the most powerful organized crime groups in the world,” stated United States Attorney Lynch. “Jimmy Cournoyer used Native American Reservations to violate the security of our national borders and smuggled more than $1 billion worth of deadly narcotics and firearms between the United States, Canada, and Mexico. Today’s sentence sends a powerful message to those engaged in international organized crime: law enforcement is committed to tracking down and dismantling dangerous criminal organizations wherever they are located, and the penalty for engaging in such conduct is severe.”
DEA Acting Special Agent-in-Charge James Hunt praised the men and women of the U.S. Attorney’s Office, Eastern District of New York for their diligent work in this investigation and stated, "This sentence is a message to drug distributors who profit millions while pushing drugs and violence through our country and abroad. Today, law enforcement's efforts have led to twenty seven years in prison for Jimmy Cournoyer and mark the end of his drug empire."
According to the indictment and other court filings submitted by the government, Cournoyer was the principal leader of a Montreal-based drug distribution organization affiliated with the Rizutto and Bonanno crime families, the Hells Angels, and the Sinaloa Cartel. A superseding indictment charged Cournoyer with trafficking more than $1 billion worth of marijuana, cocaine, and ecstasy into the United States between 1998 and 2012. Cournoyer’s organization transported tens of thousands of pounds of marijuana from outdoor growers in British Colombia to Montreal, Canada, and controlled numerous warehouses in and around Montreal for the manufacture of ecstasy and hydroponic marijuana. The drugs were smuggled into the United States using transportation networks run by the Hells Angels and Native American co-conspirators from the Akwesasne Mohawk Reservation along the U.S./Canadian border. Once the drugs were sold in the United States, much of it by distributors tied to the Bonanno crime family in New York, the organization used millions of dollars in drug proceeds to purchase cocaine from the powerful Sinaloa Cartel in Mexico for exportation to and distribution in Canada by members and associates of the Rizzuto crime family. Cournoyer was also charged with witness tampering in connection with his attempts to dissuade co-conspirators from cooperating with law enforcement by, among other things, establishing a $2 million “hit fund” set aside to murder or otherwise retaliate against any individuals who cooperated with the government.
During the course of the government’s investigation, law enforcement agents in the United States and Canada seized hundreds of pounds of marijuana, 83 kilograms of cocaine, 60,000 MDMA pills, multiple firearms and ammunition, more than 800 marijuana plants, and nearly $11,000,000 in narcotics proceeds from Cournoyer’s criminal enterprise. In total, more than 100 defendants have pled guilty to narcotics trafficking charges since the investigation commenced in 2007.
United States Attorney Lynch extended her grateful appreciation to the Drug Enforcement Administration, the Nassau County Police Department, the Laval Police Service, Laval, Quebec, and the Department of Justice Office of International Affairs for their extraordinary work on this nearly seven-year investigation. Ms. Lynch further thanked the New York City Police Department; New York State Police; Surete Du Quebec; Montreal Police Department; Peel Regional Police Department, Ontario; Delta Police Department, British Colombia; Royal Canadian Mounted Police - Swift Current Division; Ontario Provincial Police; Akwesasne Mohawk Police Service; Akwesasne Tribal Police; Beverly Hills Police Department; Santa Ana Police Department; Anaheim Police Department; Costa Mesa Police Department; U.S. Border Patrol, and Philadelphia Police Department for their important contributions to the successful outcome.
The government’s case is being prosecuted by Assistant United States Attorneys Steven L. Tiscione, Amir H. Toossi and Tanisha Payne.
The Defendant:
JIMMY COURNOYER
Age: 34
Alleged Bonanno Organized Crime Family Associate Sentenced to Eleven Years ImprisonmentRead the Press Release
Earlier today at the federal courthouse in Brooklyn, New York, John Venizelos, also known as “John V,” “Big Man,” and “John from Staten Island,” an alleged associate of the Bonanno organized crime family of La Cosa Nostra, was sentenced to 11 years in prison to be followed by five years of supervised release. In May 2013, Venizelos pled guilty to marijuana trafficking charges contained in a superseding indictment returned on April 3, 2013. As part of his sentence, Venizelos will also forfeit $148,480 and two firearms that federal agents seized from multiple locations in Staten Island where Venizelos stored narcotics and drug proceeds.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and James Hunt, Acting Special Agent-in-Charge of the Drug Enforcement Administration, New York (DEA).
"Venizelos used violence and intimidation to protect his position as a major narcotics distributor. Those who challenged him were threatened, tortured, and beaten. Venizelos's conviction underscores our commitment to prosecuting drug traffickers who flood our communities with narcotics, especially when those individuals have chosen a life of organized crime,” stated United States Attorney Lynch. Ms. Lynch extended her grateful appreciation to the Drug Enforcement Administration, the New York Police Department, and New York State Police for their work on the case. Ms. Lynch also expressed her appreciation to the Laval Police Service and the Department of Justice Office of International Affairs for their invaluable assistance during this multi-year international investigation.
“Today’s sentencing is a credit to the New York Drug Enforcement Task Force who worked diligently with the United States Attorney’s Office in order to keep our city and state crime free. John Venizelos was responsible for flooding American streets with thousands of pounds of marijuana while profiting millions of dollars. DEA is committed to identifying the drug kingpins that sit on the top of the drug trafficking chain and bringing them to justice,” stated DEA Acting Special Agent-in-Charge Hunt.”
According to the indictment and other court filings submitted by the government, Venizelos was a major Staten Island-based distributor of narcotics for a Canadian narcotics trafficking enterprise. Specifically, Venizelos was charged with narcotics and firearm-related offenses and witness tampering as a part of an indictment in which ten members of a Montreal-based drug distribution organization affiliated with the Rizzuto and Bonanno crime families, the Hells Angels, and the Sinaloa Cartel were charged with trafficking over $1 billion worth of marijuana, cocaine, and ecstasy into the United States between 1998 and 2012. The organization transported tens of thousands of pounds of marijuana from outdoor growers in British Colombia to Montreal, Canada, and controlled numerous warehouses in and around Montreal for the manufacture of ecstasy and hydroponic marijuana. The drugs were smuggled into the United States using transportation networks run by the Hells Angels and Native American co-conspirators from the Akwesasne Mohawk Reservation along the U.S./Canadian border. Once the drugs were sold in the United States, much of it by distributors tied to the Bonanno crime family in New York, the organization used millions of dollars in drug proceeds to purchase more cocaine from the powerful Sinaloa Cartel in Mexico for exportation to and distribution in Canada. Venizelos was charged with witness tampering in connection with his attempts to dissuade a co-conspirator from cooperating with law enforcement by, among other things, informing the co-conspirator about a $2 million “hit fund” set aside to murder or otherwise retaliate against any individuals who cooperated with the government.
During the course of the investigation, federal agents seized more than 80 kilograms of cocaine and approximately $10,000,000 in suspected drug proceeds. At the time of Venizelos’ arrest, agents discovered narcotics, multiple encrypted Blackberry devices, approximately $150,000 in drug proceeds, and multiple firearms in his residence and a second stash house used by Venizelos – including a loaded semi-automatic handgun that had been stolen from a law enforcement officer. During the search, federal agents also discovered several handwritten letters addressed to Venizelos by an incarcerated associate of organized crime discussing a myriad of violent crimes committed by the author with, or on behalf of, Venizelos, including “a broad daylight kidnaping” and “torture” of an individual Venizelos suspected of stealing his drugs, threats of violence, and vicious assaults against customers who owed Venizelos drug debts, and preventing a witness (through threats and intimidation) from positively identifying Venizelos for a crime that would have resulted in him serving “at least 7 years in jail.”
The government's case is being prosecuted by Assistant United States Attorneys Steven L. Tiscione, Gina M. Parlovecchio, Amir H. Toossi, and Tanisha Payne.
The Defendant:
JOHN VENIZELOS
Age: 35
Leader of Maritime International Drug Transportation Organization Arraigned in BrooklynRead the Press Release
Earlier today, Jair Estupinan-Montano was arraigned at the federal courthouse in Brooklyn, New York, on charges relating to international narcotics trafficking. Estupinan-Montano was arrested in Panama on October 14, 2013, on a provisional arrest warrant issued from the Eastern District of New York.
The arraignment was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and James J. Hunt, Acting Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division.
According to court filings, prior to his arrest, Estupinan-Montano was the leader of a narcotics trafficking organization responsible for transporting shipments of cocaine from Colombia to locations in Central America and Mexico for ultimate delivery to the United States. Estupinan-Montano allegedly worked closely with the violent “Los Rastrojos” drug trafficking organization, a paramilitary organization that employed hundreds of individuals and controlled drug trafficking along the Pacific coast of Colombia. Estupinan-Montano was responsible for arranging boats and submarines that transported the cocaine from Colombia to other members of his organization in Central America, who then transported the cocaine north to be sold to Mexican cartels for eventual shipment to the United States. A detention memo filed today by the government details that, between 2010 and 2012, the United States Coast Guard seized two ships and a semi-submersible vessel that had been sent from Colombia by Estupinan-Montano. In total, those vessels contained over 7,200 kilograms of cocaine when they originally left South America.
“Evoking Jules Verne, the defendant Estupinan-Montano relied on boats and submarines to ferry his illegal cargo, and was an essential link in the flow of illegal narcotics from Colombia to the United States, ” stated United States Attorney Lynch. “The illegal narcotics trade is a scourge, both in the United States and throughout the world. With the help of our international allies, we will continue to strike at those who enrich themselves off this violent industry wherever they are found.” Ms. Lynch thanked the Drug Enforcement Administration, New York Division; the Drug Enforcement Administration’s Bogota Country Office and Panama Express Task Force; the United States Coast Guard; the Department of Justice Office of International Affairs; and the Republic of Panama for their help in investigating and capturing Estupinan-Montano.
The defendant was arraigned this afternoon before United States Magistrate Judge Steven M. Gold at the federal courthouse in Brooklyn. The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by Assistant United States Attorneys Tyler Smith, Amir Toossi, Justin Lerer, and Robert Polemeni.
The Defendant:
JAIR ESTUPINAN-MONTANO
Age: 31
COLOMBIA
E.D.N.Y. Docket No. 12-CR-793 (SLT)
Estupinan Montano Arraignment Press Release Submarine Photo
Estupinan Montano Arraignment Press Release Submarine Photo 2
United States and State of New York Announce Lodging of Modified Consent Decree for Croton Drinking Water SupplyRead the Press Release
Loretta E. Lynch, United States Attorney for the Eastern District of New York, Sam Hirsch, Acting Assistant Attorney General, United States Department of Justice, Environment and Natural Resources Division, Judith A. Enck, Regional Administrator, United States Environmental Protection Agency Region 2, Eric T. Schneiderman, Attorney General for the State of New York, and Dr. Howard Zucker, New York State Acting Commissioner of Health, announced today that the United States and the State have reached agreement with New York City to modify the Consent Decree entered in November 1998 which required the City to construct a filtration plant for its Croton drinking water supply. Under the Third Supplement to the Consent Decree, lodged today in U.S. District Court in Brooklyn, the City completed construction of the filtration plant on April 15, 2014 and will commence operation of the filtration plant at its selected site, the Mosholu Golf Course Site in the Bronx, no later than May 17, 2015. If the City fails to meet the May 17, 2015 deadline, the Consent Decree provides for stipulated penalties in the amount of $65 million. Under the Consent Decree, the City is required to conduct interim measures including monitoring the quality and safety of the Croton System and implementing watershed protection measures.
The need for this modification arose when the City failed to meet certain deadlines under the Second Supplement to the Consent Decree, including completion of construction. The City has paid $5,064,000 in penalties to date for missed deadlines associated with the delays in the project schedule.
New York City is required to filter its Croton System under the Safe Drinking Water Act and the Surface Water Treatment Rule (SWTR), as well as the New York State Sanitary Code. Under the SWTR, the City was required to implement filtration for its Croton System by June 29, 1993. By stipulation with the State of New York, the City agreed to begin construction by July 1, 1996, and operate a filtration plant by June 1, 2000. The City failed to comply with the stipulation and, in 1997, the United States brought suit against New York City to enforce the filtration requirements. Soon thereafter, the State of New York and its Commissioner of Health intervened in the suit as plaintiffs and are parties to the Consent Decree as supplemented.
Filtering drinking water obtained from surface water sources, such as the Croton System, reduces the risk of waterborne disease. These sources are susceptible to potential contamination from disease causing organisms such as Giardia and Cryptosporidium which can easily get into surface water supplies from human activity and animals. Filtration, coupled with disinfection and source water protection, is the best means of ensuring the safety of drinking water from the City’s Croton water supply. Drinking water from the Croton System does not pose an immediate threat to public health, but filtration is necessary to assure the continued long term safety of water delivered from the Croton System.
The City has not used of the Croton System since 2008 due to the ongoing construction of the filtration plant. With the completion of the filtration plant and when the Croton drinking water supply system is fully reactivated, the City will have the ability to deliver 290 million gallons of high-quality water each day from the Croton System. The City has stated that use of the Croton drinking water supply system will be critical in ensuring that the City can continue to meet the City’s drinking water needs during the shutdown of the Delaware Aqueduct. The Croton drinking water supply system will also supplement the city’s water supply during future drought conditions.
“The United States brought this action in 1997 to ensure that New York City residents are provided with safe drinking water from the Croton Water Supply. Despite many hurdles in siting and challenges in construction and contracting, we have vigorously enforced the Consent Decree to ensure that construction of the filtration plant was completed and that filtered water will be available to New York City residents from the Croton System in the very near future,” said United States Attorney Lynch. Ms. Lynch promised continued vigorous enforcement and oversight of the requirements of the Consent Decree as supplemented.
“Ensuring that people have a safe source of drinking water is essential to protecting public health,” said EPA Regional Administrator Enck. “EPA required the city to build a filtration plant because the New Yorkers who drink Croton water deserve to have the highest quality water possible. The Safe Drinking Water Act was designed to protect people from Giardia and Cryptosporidium, which can affect the water supply and cause serious illness. The Croton system is vulnerable to these types of contamination, which makes filtration imperative.”
“Water from the Croton system has been critical to New Yorkers since the first Croton aqueduct was put in operation in 1842. Completion of the filtration plant, as required under the Third Supplement, will help ensure that water from the Croton watershed will remain safe, available, and integral to New York City’s supply. My office will continue to work with our federal, state, and local partners to confirm the Consent Decree is followed and the filtration plant is completed and operational as soon as possible,” said New York Attorney General Schneiderman.
“Drinking water is a vital resource, and the New York State Department of Health is committed to ensuring that New Yorkers have a safe dependable supply. The Croton water filtration plant will play an important role in this effort now and well into the future,” said Acting New York State Health Commissioner Zucker.
The proposed settlement will be published in the Federal Register for a 30-day public comment period and to become effective must be approved by United States District Judge Nina Gershon of the Eastern District of New York, who is overseeing enforcement of the Consent Decree. The action was litigated and the Consent Decree was negotiated by Assistant United States Attorney Deborah B. Zwany, Elizabeth Yu, U. S. Department of Justice, Environment and Natural Resources Division, and Andrew Gershon, New York State Attorney General’s Office, with assistance from EPA Region 2, Phyllis Feinmark, Regional Counsel’s Office, Doughlas McKenna, Chief of the Water Compliance Branch, and Nicole Kraft, Chief of the Ground Water Compliance Section, and the New York State Department of Health’s Bureau of Water Supply Protection.
U.S. Attorney Loretta Lynch for the Eastern District of New York Delivers Remarks at the Convention on the Elimination of Racial Discrimination ~ Geneva, Switzerland ~ Wednesday, August 13, 2014Read the Press Release
Mr. Chairperson, distinguished members of the committee, and representatives of civil society, it is an honor to be a part of the U.S. delegation and share some of the highlights of the Department of Justice’s efforts to eliminate racial discrimination and uphold human rights in the area of criminal justice.
Attorney General Eric Holder – and all of us at the Department of Justice who work on criminal justice issues – take seriously our obligation to protect the safety of all Americans and the security of our nation; to safeguard civil and human rights; to prevent and combat violent crime, financial fraud, and threats to the most vulnerable members of society; and to strengthen collaboration among government, law enforcement and our community partners.
As part of this mission, the department has made great progress in reforming America’s criminal justice system. Our focus is not just on the prosecution of crime, but on eradicating its root causes as well as providing support for those re-entering society after having paid their debt to it.
There is, of course, much work still to be done. Currently our country imprisons approximately 2.2 million people, disproportionately people of color. This situation is a drain on both precious resources and human capital. The Attorney General is committed to reform of this aspect of our criminal justice system.
Last August the Attorney General announced the “Smart on Crime” initiative. Under this initiative, we’re ensuring that stringent mandatory minimum sentences for certain federal drug crimes will now be reserved for the most serious criminals. This is not an abandonment of prison as a means to reduce crime, but rather a recognition that, quite often, less prison can also work to reduce crime. We’re advancing alternative programs in place of incarceration in appropriate cases. And we’re committed to providing formerly incarcerated people with fair opportunities to rejoin their communities and become productive, law-abiding citizens.
As part of this effort, the Attorney General has directed every component of the Justice Department to review proposed rules, regulations or guidance with an eye to whether they may impose collateral consequences that may prevent reintegration into society. He has called upon state leaders to do the same, with a particular focus on enacting reforms to restore voting rights to those who have served their debt to society, thus ending the chain of permanent disenfranchisement that visits many of them.
To further ensure that the elimination of discrimination is an ongoing priority, the Attorney General has created a Racial Disparities Working Group, led by the U.S. Attorney community, to identify policies that result in unwarranted disparities within criminal justice and to eliminate those disparities as quickly as possible
From the reduction of the use of solitary confinement, to the expansion of the federal clemency program, to our support for the retroactive reduction of penalties for non-violent drug offenders to the reduction in the sentencing disparity between crack and powder cocaine, we have worked to improve our criminal justice system in furtherance of our human rights treaty obligations. We look forward to the future and the opportunity to do even more.
Thank you for the opportunity to discuss these issues with you. Our next speaker is my friend and colleague, Mark Kappelhoff, of the department’s Civil Rights Division.
See more photos here: https://www.flickr.com/photos/us-mission/
USA Lynch- Senior U.S. Gov't Delegation
USA Lynch speaking w/ civil society reps at UN Office at Geneva
USA Lynch Consultation with US Civil Society
Douglas Dey, Owner of Former Major Supplier of Aeropostale, Inc., Sentenced to 42 Months in Prison for $25 Million Bribery SchemeRead the Press Release
Douglas Dey, the owner of South Bay Apparel, Inc. (“South Bay”), a former major supplier of t-shirts and fleece merchandise for national teenage clothing retailer Aéropostale, Inc., was sentenced today in federal court in Brooklyn, New York, to 42 months in prison, to be followed by 3 years’ supervised release. Dey and was also ordered to forfeit $7.5 million to the government, and pay $13,690,822.94 in restitution to Aéropostale, a publicly traded company on the New York Stock Exchange.
On September 27, 2012, Dey pled guilty to conspiracy to violate the Travel Act through commercial bribery for paying more than $25 million in kickbacks to Christopher Finazzo, Aéropostale’s former Executive Vice President and Chief Merchandising Officer, to obtain over $350 million in business. Finazzo was convicted on all 16 counts of fraud and commercial bribery for his role in the scheme following a three-week jury trial in April 2013, and is scheduled to be sentenced on August 20, 2014.
Dey’s sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“For over a decade, Dey used bribes and kickbacks to gain an unfair and illegal advantage for his t-shirt and fleece business. By doing so, he fleeced Aéropostale and its investors out of tens of millions of dollars and damaged the financial well-being of a publicly-traded retail company. Today’s sentence sends a strong message to those who commit corporate fraud that they will be held accountable for their crimes,” stated United States Attorney Lynch. Ms. Lynch thanked the FBI and the Securities and Exchange Commission for their assistance.
Shortly after Finazzo was hired by Aéropostale in July 1996, he and Dey entered into a fraudulent scheme whereby Finazzo directed Aéropostale’s graphic t-shirt business to South Bay in exchange for splitting South Bay’s profits with Dey. From 1996 to 2006, Finazzo caused Aéropostale to buy more than $350 million in t-shirt and fleece merchandise from South Bay, often for significantly higher prices and lower quality than was available from other suppliers. In exchange, Dey paid Finazzo more than $25 million in bribes and kickbacks, equaling approximately 50% of South Bay’s profits. In 2005 alone, at the peak of the business between Aéropostale and South Bay, Dey paid Finazzo more than $13 million in kickbacks. The kickbacks from Dey to Finazzo were paid through C&D Retail Consultants, a shell consulting corporation set up by Finazzo, and through companies jointly-owned by Finazzo and Dey.
The sentence was imposed by United States District Judge Roslynn R. Mauskopf.
The government’s case was prosecuted by Assistant United States Attorneys Winston M. Paes and Claire Kedeshian.
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 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. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants. For more information on the task force, visit http://www.StopFraud.gov.
The Defendant:
DOUGLAS DEY
Age: 57
New York, New York
E.D.N.Y. Docket No. 10-CR-457
Two Associates of La Cosa Nostra Sentenced for the July 2, 2010 Robbery and Murder of A Brooklyn BusinessmanRead the Press Release
Earlier today, Louis Grasso and Richard Riccardi were sentenced before Judge John Gleeson in U.S. District Court in Brooklyn, New York, to 38 and 36 years in prison, respectively, for the robbery and murder of James Donovan on July 2, 2010. The defendants were convicted after trial in March 2014.
The sentences were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and James J. Hunt, Acting Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division.
“For more than 20 years, these defendants have preyed on our community by engaging in narcotics and firearms trafficking, burglary, and, most recently, robbery and murder,” stated United States Attorney Lynch. “The sentences imposed appropriately reflect both the seriousness of the crimes of conviction and the long history of crimes that these recidivist offenders have committed.”
According to the government’s trial evidence, and as recounted in the government’s sentencing memorandum, the defendants, along with two other associates, robbed and murdered Donovan, who operated a check-cashing business, in front of an auto body shop in the Gravesend section of Brooklyn. The plan to rob Donovan was hatched by Riccardi, who recruited Grasso and two other men into the scheme. Riccardi supplied the men with loaded firearms to use in the robbery and agreed to drive the “crash car,” used to block off or delay law enforcement pursuing the robbery crew.
During the course of the robbery, the defendant Grasso, with a co-conspirator, ambushed Donovan, pointed a gun at him, and grabbed a bag full of cash and checks from Donovan’s car. When Donovan tried to flee, the co-conspirator shot him in the leg, severing Donovan’s femoral artery. Donovan died of his wounds later that day. Grasso, Riccardi, and the co-conspirators sped off with approximately $200,000 in cash, which they later divided among themselves.
Law enforcement subsequently recovered from Riccardi’s home firearms, ammunition, a ballistic vest, and narcotics trafficking paraphernalia, among other items. A search of Grasso’s home and garage also yielded firearms, ammunition, masks, and a list of police radio codes. Riccardi has prior federal convictions for narcotics trafficking and possession of firearms. Grasso has prior federal convictions for bank larceny, burglary, and narcotics trafficking.
The government’s case was prosecuted by Assistant United States Attorneys Nicole M. Argentieri and Darren LaVerne.
The Defendants:
RICHARD RICCARDI
Age: 41
LOUIS GRASSO
Age: 46
Chief Executive Officer of International Stock Transfer Pleads Guilty in $3 Million Securities Fraud SchemeRead the Press Release
BROOKLYN, NY – Yesterday, Cecil Franklin Speight, also known as Frank Speight, pleaded guilty to conspiracy to commit mail fraud and securities fraud for engaging in a conspiracy to steal over three million dollars from investors. Speight was the sole owner, officer, and director of International Stock Transfer (IST), a registered transfer agent with the United States Securities and Exchange Commission (SEC) since May 2004. According to court filings and facts presented at the plea hearing, Speight stole at least $3.3 million from victim investors and used the proceeds to pay personal expenses, including purchases at Mercedes Benz, Nordstrom, Netflix, and Groupon. Speight faces up to five years’ imprisonment, at least $3.3 million in restitution, and a fine equal to double the investors’ losses.
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“Rather than transferring capital to issuers, the defendant used the investors’ funds as his own, including financing his lifestyle in Florida. His victims, from the Eastern District of New York and around the world, were conned into buying bogus securities that were not worth the paper they were printed on. Now, he will be held to account for his crimes,” stated United States Attorney Lynch. Ms. Lynch extended her grateful appreciation to the Federal Bureau of Investigation, the agency responsible for leading the government’s investigation, and thanked the Securities and Exchange Commission for its assistance.
“Speight tricked his victims into thinking their money would be invested in high-yield securities, but he was essentially using their investments to fund his own lifestyle to the tune of several million dollars. People have the right to trade in an uncorrupted market, and today’s guilty plea is proof of the FBI’s continued determination to root out those who unlawfully interfere with this process,” stated FBI Assistant Director-in-Charge Venizelos.
IST was founded by Speight in 2004 as a transfer agent registered with the SEC with offices in Palm Beach, Florida. Speight used “cold callers” and other means to entice victims into investing their money in allegedly high yield securities. Speight promised the victims a high rate of return if they invested in securities that were purportedly associated with IST. Speight and his coconspirators directed the victims to wire their investment funds into purportedly secure attorney escrow accounts. Once the victims wired money to those escrow accounts, Speight typically stole the funds for his personal use, including the purchase of a Mercedes Benz automobile. Speight also withdrew over $350,000 of investors’ funds in cash.
Today’s guilty plea took place before United States Magistrate Judge Roanne L. Mann at the federal courthouse in Brooklyn, N.Y.
The government’s case is being prosecuted by Assistant United States Attorney Jack Dennehy.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The Defendant:
CECIL FRANKLIN SPEIGHT
Age: 53
West Palm Beach, FL
E.D.N.Y. Docket No. 14-CR-379
Brooklyn Man Convicted of Attempting to Drug and Sexually Abuse ChildrenRead the Press Release
Earlier today, following a two week trial, a federal jury in Brooklyn, New York, returned a guilty verdict against Bebars Baslan on charges of travel with intent to engage in sexual acts with a child under 12, conspiracy to produce child pornography, attempted production of child pornography, and attempted coercion and enticement of a child to engage in illegal sexual conduct. The charges relate to the defendant’s plot to sexually abuse three children, who were the sons and niece of an individual who became a government informant. The conviction was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, George Venizelos, Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office, and William J. Bratton, Commissioner, New York City Police Department.
The evidence at trial showed that in January 2013, the informant reported the defendant’s sexual interest in children to the government. Over the course of the next month, the informant made numerous recordings of the defendant plotting to sexually abuse children. The evidence showed that Baslan wanted to take photographs and video of his girlfriend giving oral sex to a 3-month old in order to use that photograph as blackmail to prevent her from going to the police. The defendant planned to use his girlfriend’s history of working with children to entice parents to allow her to babysit their children, whom the defendant would then drug and sexually abuse.
The evidence showed that the defendant’s plan was halted when the government set up a sting in which its informant offered the defendant the opportunity to sexually abuse his two sons and 7-year-old niece at a Jersey City hotel on March 19, 2013. On that day, the defendant provided the informant with children’s Benadryl and instructed the informant to give his niece an excessive dose in order to “knock her out” so that the defendant could sexually abuse her. Later that night, Baslan and his girlfriend then traveled to the Jersey City hotel armed with an array of camera equipment to photograph the sexual abuse. As they attempted to enter the room that they believed the informant to be in, agents of the FBI arrested them.
“The protection of children from sexual predators is one of our highest priorities. Let this be a warning to those who would prey on the most vulnerable among us; we will use every means to ensure that those who seek to sexually exploit children are prosecuted to the fullest extent of the law,” stated United States Attorney Lynch. Ms. Lynch expressed her grateful appreciation to the Federal Bureau of Investigation and New York City Police Department who investigated this case.
At sentencing, the defendant faces a minimum of 30 years’ imprisonment and maximum of life imprisonment.
The government’s case is being prosecuted by Assistant United States Attorney Tyler Smith, Tiana Demas, and Robert Polemeni.
The Defendant:
Name: BEBARS BASLAN
Age: 36
Brooklyn, New York
E.D.N.Y. Docket No. 13-220 (RJD)
Long Island Doctor Sentenced to 10 Years’ Imprisonment for Conspiracy to Distribute Oxycodone and Distribution of OxycodoneRead the Press Release
Earlier today, at the federal courthouse in Central Islip, New York, Long Island doctor Leonard I. Stambler was sentenced to 10 years in prison by United States District Court Judge Joseph F. Bianco. Stambler was convicted by a jury in October 2013 following three weeks of trial of conspiracy to distribute oxycodone and distribution of oxycodone, a highly addictive prescription pain killer, in connection with prescriptions that he provided to patients outside the scope of his professional practice and not for any medical purpose. At the time of the verdict, the defendant’s bail was revoked, and he was ordered detained pending sentencing.
The conviction was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; James J. Hunt, Acting Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York; Thomas C. Krumpter, Acting Commissioner, Nassau County Police Department (NCPD); Joseph A. D’Amico, Superintendent, New York State Police (NYSP); and Shantelle P. Kitchen, Acting Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York (IRS).
“Rather than ‘Do No Harm,’ Dr. Stambler acted as a drug dealer, putting thousands of oxycodone pills onto the streets of Long Island for no valid medical reason, even going so far as to drive his patient-friends to a drug deal,” stated United States Attorney Lynch. “This conviction and sentence should serve as a warning to any health care professionals engaged in such conduct that in addition to losing their license to practice medicine, they will face prison for such conduct.” Ms. Lynch extended her grateful appreciation to each of the law enforcement agencies for their assistance in this case.
At trial, the government’s evidence established that Stambler provided prescriptions for hundreds of oxycodone pills to two of his patients without a legitimate medical purpose and outside the course of a professional medical practice, and also conspired with those patients and assisted them in the sale of pills that he prescribed. On November 21, 2011, investigators with the DEA Task Force observed Stambler driving his patient, Christopher Adams, to a pharmacy in East Rockaway, New York, where Stambler and Adams filled a prescription that Stambler had written in the name of Adams’s girlfriend, Nancy Cook. As investigators watched, Stambler then drove Adams to a nearby location to meet with a third individual where some of the oxycodone pills were exchanged for cash. Investigators stopped Stambler’s vehicle shortly after the drug deal. On a separate occasion, Stambler drove Cook, who was also Stambler’s patient, to a home in East Rockaway where she sold oxycodone pills to the same individual involved in the November 21, 2011, drug deal. Both Adams and Cook testified at trial about Stambler’s participation in the drug transactions as well as their own destructive addiction to oxycodone.
Oxycodone is a scheduled controlled substance that may be dispensed by medical professionals only for a legitimate medical purpose in the usual course of a doctor’s professional practice. It is a powerful and highly addictive drug and is increasingly abused because of its potency when crushed into a powder and ingested, leading to a heroin like euphoria.
Stambler’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 Prescription Drug Initiative has brought over 160 federal and local criminal prosecutions, including the prosecution of 15 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.
The government’s case was prosecuted by Assistant United States Attorney Allen Bode.
The Defendant:
Name: LEONARD I. STAMBLER
Age: 63
Residence: Baldwin Harbor, NY
Four Arrested on Bank Fraud and ConspiracyRead the Press Release
An indictment was unsealed earlier today charging individuals with bank fraud and conspiracy arising from a scheme to take advantage of plans by an all-girls high school in Hempstead, New York, to expand its campus and build an athletic field for students.
The defendants, two couples, including a real estate attorney and the officer of a real property corporation, were arrested earlier today by special agents of the Federal Bureau of Investigation and will be arraigned this afternoon before United States Magistrate Judge William D. Wall at the United States Courthouse in Central Islip, New York. If convicted, each defendant faces up to 30 years of imprisonment, fines, and the forfeiture of $539,000 in allegedly illegal profits arising from the scheme.1
The charges and arrests were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
As set forth in the indictment, defendants Sofia Atias, Joseph Atias, and Nicholas Pellegrini conspired to defraud Bank of America of over half a million dollars by fraudulently avoiding foreclosure on a home through a fraudulent “short sale” of the property to a straw buyer -- defendant and co-conspirator Paula Berckhoff, also known as “Paula Pellegrini” -- and then profiting from the home’s re-sale or “flip” to Sacred Heart Academy, a Catholic all-girls high school that paid the conspirators almost $1 million for the property to accomplish long-sought plans to improve and expand its facilities.
Early in 2011, defendant Sophia Atias had defaulted on some $750,000 in a mortgage and home equity loan secured by a home she owned at 83 Cathedral Avenue, Hempstead, New York, which sat adjacent to the high school. As Bank of America began foreclosure proceedings, defendants Sophia Atias, Joseph Atias, and Nicholas Pellegrini, acting as the couple’s attorney, negotiated with representatives of Sacred Heart Academy and ultimately won a commitment from the school to buy the property for $925,000 -- an amount that would have been enough to repay the Atias’ debts to the bank.
Instead, the defendants allegedly conspired to induce Bank of America to agree to a short sale of the Cathedral Avenue property. Short sales are an alternative to lengthier and often costly foreclosure proceedings. In a short sale, a bank agrees to accept whatever price a defaulting borrower can get on the immediate or short sale of a property in foreclosure. As the bank did here, lenders may also release the borrower from any obligation to repay any remaining balances owed on the original mortgage or loans.
Knowing that Sacred Heart Academy had already agreed to buy the Cathedral Avenue home for $925,000, the defendants nonetheless induced Bank of America to agree to a short sale of the house for only $480,000 to Jefferson Real Property Corporation, whose secretary and treasurer was defendant Nicholas Pellegrini’ s wife. As part of their agreement with the bank, Mrs. Pellegrini, using the name Paula Berckhoff, and Mrs. Atias, both falsely represented that neither would receive any undisclosed proceeds from the transaction and further claimed that the short sale was not an attempt to “flip” or use “straw buying” to avoid repayment of Atias’ debt.
In fact, as charged in the indictment, several months after the fraudulent short sale, the Atiases and Pellegrinis did re-sell or “flip” the Cathedral Avenue home to Sacred Heart Academy for the previously agreed price of $925,000. Given the fraudulent inducement to accept the short sale, Bank of America was defrauded of almost $540,000.
“Through a web of lies and false documents, the defendants took advantage of a school’s desires to improve its students’ athletic facilities, lied to win concessions from a bank, and then lied again by ‘flipping’ the property and defrauding the bank of over half a million dollars. This is not a case about tough bargaining. This is fraud, pure and simple,” stated United States Attorney Lynch.
FBI Assistant Director-in-Charge Venizelos stated, “As alleged in the indictment, while the defendants did not brandish a weapon, they stole over half a million dollars from Bank of America based upon their false misrepresentations and filing of false documents with the victim-lender. Bank fraud burdens lenders with bad loans and weakens our financial markets. Individuals who engage in this criminal activity should be reminded that they will be vigorously investigated and held accountable.”
The government’s case is being prosecuted by Assistant United States Attorney Charles P. Kelly.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The Defendants:
Name: SOFIA ATIAS
Age: 44 years old
Residence: Great Neck, NY
Name: JOSEPH ATIAS
Age: 50 years old
Residence: Great Neck, NY
Name: NICHOLAS A. PELLEGRINI
Age: 51 years old
Residence: Garden City, NY
Name: PAULA BERCKHOFF
Age: 34 years old
Residence: Garden City, NY
__________________________________________________________________________
1 The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
Corporate Executives, Registered Brokers and an Attorney Indicted for Orchestrating A $300 Million Market Manipulation Scheme Involving Four Publicly Traded CompaniesRead the Press Release
A ten-count indictment was unsealed this morning in federal court in Brooklyn, New York, against seven defendants, Abraxas J. Discala, also known as “AJ Discala,” the Chief Executive Officer of OmniView Capital Advisors LLC (“OmniView”); Marc Wexler, the Managing Director of OmniView; Ira Shapiro, the Chief Executive Officer of CodeSmart Holdings, Inc. (“CodeSmart”), a publicly traded company; Matthew Bell, a registered broker and investment adviser representative; Craig Josephberg, a registered broker; Kyleen Cane, an attorney; and Victor Azrak, the Vice President and Director of Excel Corp., a publicly traded company.1 The charges include securities fraud, wire fraud and conspiracy to commit securities fraud, mail fraud and wire fraud in connection with the fraudulent market manipulation of four publicly traded companies -- CodeSmart, trading under the ticker symbol ITEN; Cubed, Inc. (“Cubed”), trading under the ticker symbol CRPT; StarStream Entertainment Inc. (“StarStream”), trading under the ticker symbol SSET; and The Staffing Group, Ltd. (“Staffing Group”), trading under the ticker symbol TSGL. In addition, the government restrained Discala’s residence in Norwalk, Connecticut, worth over $1 million, and seized a dozen bank and brokerage accounts containing criminal proceeds.
Shapiro, Josephberg and Azrak will be arraigned later today before Magistrate Judge Robert M. Levy, at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York. Discala, Wexler and Cane’s initial appearance for removal proceedings to the Eastern District of New York is scheduled for this afternoon at the United States Courthouse, 333 S. Las Vegas Blvd., Las Vegas, Nevada. Bell’s initial appearance for removal proceedings to the Eastern District of New York is scheduled for this afternoon at the United States Courthouse, 655 E. Cesar E. Chavez Blvd., San Antonio, Texas.
The indictment was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“Discala and his company insiders, registered brokers, investment advisers, an attorney and corrupt investors designed an elaborate but fraudulent scheme built on lies, deceit and manipulated trading activity to defraud the securities markets and the investing public. They took companies with essentially no assets or activity and deceived the market into believing they were worth hundreds of millions of dollars through a dizzying round of insider and unauthorized trades. When the defendants stopped their criminal game of musical shares it was the unsuspecting investors who were left holding the bag. The defendants abused their positions of trust and preyed upon unsuspecting and elderly investors, oftentimes placing worthless stocks in their retirement accounts, to perpetrate this far-reaching fraud,” stated United States Attorney Lynch. “Today’s seven arrests, across five states, reflect the scope of this fraud and our commitment to aggressively locate and bring to justice those who abuse our financial markets in order to fraudulently enrich themselves.” Ms. Lynch expressed her grateful appreciation to the FBI, the United States Securities and Exchange Commission and the Texas State Securities Board for their significant cooperation and assistance in the investigation.
“As outlined in the indictment, the defendants engaged in a coordinated and sophisticated scheme to manipulate the share price and trading volume of four publicly traded stocks for personal gain. This lucrative scheme to manipulate our financial markets made the defendants money, while draining the bank accounts of innocent investors. Their client-victims trusted them to manage their money as if it were their own, not to steal it. Together with our partners in both law enforcement and the private sector, to include the Securities and Exchange Commission, we remain vigilant in identifying and bringing to justice those who look to profit at the expense of hard-working Americans,” stated FBI Assistant Director-in-Charge Venizelos.
I. Overview
As alleged in the indictment and other court filings, between October 2012 and July 2014, the defendants, together with others, agreed to defraud investors and potential investors in four public companies: CodeSmart, Cubed, StarStream and Staffing Group (collectively, the “Manipulated Public Companies”) by artificially controlling the price and volume of traded shares in the Manipulated Public Companies through, among other things: (a) false and misleading press releases; (b) false and misleading SEC filings; (c) fraudulent concealment of the defendants’ and their co-conspirators’ ownership interests; (d) engineering price movements and trading volume in the stocks; and (e) unauthorized purchases of stock in accounts of unwitting investors.
II. The CodeSmart Manipulation Scheme
In early May 2013, Discala and his co-conspirators engineered a reverse merger of CodeSmart, a private company, with a shell public company. After gaining control of CodeSmart’s three million unrestricted shares, Discala and his co-conspirators, on two occasions, fraudulently inflated CodeSmart’s share price and trading volume and then sold the unrestricted CodeSmart stock at a profit when the share price reached desirable levels -- a scheme commonly referred to as a “pump and dump.” The first pump and dump occurred between approximately May 13, 2013 and August 21, 2013. During this period, Discala and his co-conspirators manipulated CodeSmart’s stock price by raising it from $1.77 to a high of $6.94, before causing it to drop to $2.19. The second pump and dump occurred between approximately August 21, 2013 and September 20, 2013. During this period, Discala and his co-conspirators manipulated CodeSmart’s stock price by raising it from $2.19 to a high of $4.60, before causing it drop to $2.13.
CodeSmart’s market capitalization at its highest closing price of $6.94 per share on July 12, 2013 was $86,347,800. However, that same day, CodeSmart filed with the SEC an amended Form 10-K, signed by Shapiro, in which CodeSmart listed only $6,000 in total assets, $7,600 in revenue and a net loss of $103,141. By December 30, 2013, CodeSmart’s stock was trading at $0.66 per share, and on July 9, 2014, CodeSmart’s stock closed at $0.01 per share. On one occasion, Discala boasted that his manipulation of CodeSmart’s stock “should be in the hall of shame.”
To successfully orchestrate the two pumps and dumps, Discala and his co-conspirators coordinated their trading activity with the issuance of company press releases and public filings with the SEC, a number of which contained false and misleading information. Shapiro played a leading role in disseminating such information to the public. During the pump phase of the first pump and dump, CodeSmart issued a press release which stated that it was “the exclusive strategic partner” to provide medical coding and consulting services to the State University of New York at Binghamton. Contrary to this representation, CodeSmart was not the “exclusive strategic partner” for ICD-10 education courses at Binghamton University -- the university also offered courses through other providers and had no plans to exclusively market CodeSmart University to its students.
Similarly, during the pump phase of the second pump and dump, CodeSmart filed with the SEC a Form 8-K, signed by Shapiro, in which CodeSmart announced that Shapiro, its Chief Executive Officer, had purchased 25,000 shares of the company’s stock from the public market at the market value of $3.21 per share for a cost of $80,250. In this SEC filing, Shapiro extolled his purchase of CodeSmart stock, stating that it was “symbolic of [his] confidence in the Company and its mission.” In reality, Shapiro did not actually pay for the 25,000 CodeSmart shares purchased in his brokerage account -- the same day he paid $81,278 from his personal bank account to his brokerage firm for the 25,000 shares, Discala transferred $81,278 to Shapiro’s personal bank account.
Shapiro’s role in this scheme is further illustrated by his fluctuating revenue forecasts in SEC filings. After estimating $10 million in revenue over the next twelve months during the first pump, approximately one month later, on August 19, 2013, Shapiro stated that CodeSmart did not have sufficient funds and “may need to curtail or cease [its] operations” until it obtained sufficient funds. As the second pump began, a mere seven days later, Shapiro announced, “If we continue on the track we are on, I believe we will achieve our revenue and profit goals that were previously disclosed for 2013 and beyond.”
Discala and his co-conspirators profited by selling CodeSmart stock, issued to them at pennies, to investment adviser representative Bell’s clients and broker Josephberg’s customers. On some occasions, the CodeSmart shares were sold to Bell’s clients and Josephberg’s customers without their clients’ and customers’ knowledge and consent. Additionally, Bell and Josephberg were selling CodeSmart shares in their personal trading accounts at the same time that they were purchasing CodeSmart stock in their clients’ and customers’ accounts. During the first pump and dump, Discala and his co-conspirators sold approximately 800,000 shares of CodeSmart in their personal accounts while Bell and Josephberg purchased virtually the identical amount in their clients’ and customers’ accounts.
III. The Cubed Manipulation Scheme
In March 2014, Discala and his co-conspirators took Cubed public through an asset purchase agreement. On April 22, 2014, Cubed’s stock began trading in earnest. Between April 22, 2014 and April 30, 2014, Discala and his co-conspirators concocted trading volume in this stock by purchasing more than 50% of the total number of Cubed shares purchased during this period.
Between May 2, 2014 and June 29, 2014, law enforcement authorities conducted a judicially-authorized wiretap of Discala’s cellular telephone (the “Discala Wiretap”). The Discala Wiretap revealed that Discala, Wexler, Bell, Josephberg, Cane and Azrak, together with others, fraudulently manipulated Cubed’s stock by artificially controlling the price and volume of that stock through, among other things, wash trades and match trades.2 Rather than generating significant market interest and causing a quick pump and dump that would elicit regulators’ scrutiny this time, the defendants gradually increased the price of Cubed’s stock to give it the appearance of a legitimate company with genuine and steady market demand for the security. For example, on May 6, 2014, while Cubed was in a period of gradual increase from $5.20 on April 22, 2014 to $5.42 on May 22, 2014, Discala sent a text message to Josephberg stating, “Go 531. Please.” That day, Cubed’s stock closed at $5.32 per share.
The defendants used an escrow account maintained by Cane to successfully control the price and volume of Cubed’s stock. For example, on May 20, 2014, during a telephone call between Discala and Azrak, Discala emphasized his control over Cubed’s share price through the use of the escrow account, stating, “I’m the [expletive] brake and the gas, [expletive]. If I take my foot off the brake it’s 55 [dollars] tomorrow (laughter).”
On June 23, 2014, Cubed reached its highest closing price of $6.75 per share, resulting in a market capitalization of approximately $200 million. Previously, however, Cubed had filed with the SEC a Form 10-Q and reported less than $1,500 in cash, zero revenue, negative stockholders’ equity, a net loss of $15,000 and accrued professional fees of $131,824.
IV. The StarStream and Staffing Group Manipulation Schemes
In addition to the CodeSmart and Cubed stocks, Discala and his co-conspirators were simultaneously fraudulently manipulating StarStream’s and Staffing Group’s stocks by artificially controlling the price and volume of the stocks through the use of, among other things, text messages and telephone calls. Below are examples of text messages intercepted on the Discala Wiretap.
A. StarStream Manipulation
On May 7, 2014, Wexler sent a text message to Discala, stating, “We may need to buy SSET at close. I think EJA has some $. Got get it to 15 cents. LOL what a joke.” That day, StarStream’s stock price closed at $0.30 on 41,100 trading volume, a significant decrease from the previous day’s closing price of $0.48 on 16,200 trading volume. The following day, on May 8, 2014, StarStream’s stock price closed at $0.15 per share, exactly the price proposed by Wexler. Similarly, on May 13, 2014, before trading commenced, Discala sent a text message to Bell, stating, “We got good stuff going. Sset. Should be over a buck today.” That day, StarStream’s stock price, which opened at $0.35 per share, reached an intraday high of $1.05 per share, before closing at $0.80 per share.
B. Staffing Group Manipulation
On May 7, 2014, Bell sent a text message to Discala, stating, “TSGL is tanking. We still good?” In response, Discala stated, “Yes. Buy all u can at 20 or better. We’re cleaning it up.” That day, Staffing Group’s stock price closed at $0.25 on 178,300 trading volume, a significant decrease from the previous day’s closing price of $0.36 on no trading volume. Similarly, on May 30, 2014, Discala sent a text message to Wexler, stating, “Buy 5k more ts [TSGL] market im gonna get this thing flying.” That day, Staffing Group’s stock price closed at $0.42 per share on 187,300 trading volume, which was almost double the closing price of $0.23 on 6,000 trading volume on the previous day.
The government’s case is being prosecuted by Assistant United States Attorneys Winston M. Paes, Walter M. Norkin, Shannon C. Jones and Claire Kedeshian.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it 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. 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 2,900 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The Defendants:
ABRAXAS J. DISCALA, also known as “AJ Discala”
Age: 43
Residence: Norwalk, Connecticut
MARC WEXLER
Age: 52
Residence: Colts Neck, New Jersey
IRA SHAPIRO
Age: 53
Residence: Congers, New York
MATTHEW BELL
Age: 47
Residence: Boerne, Texas
CRAIG JOSEPHBERG
Age: 41
Residence: New York, New York
KYLEEN CANE
Age: 59
Residence: Las Vegas, Nevada
VICTOR AZRAK
Age: 32
Residence: Brooklyn, New York
E.D.N.Y. Docket No. 14-CR-399
___________________________________________________________________________
1 The charges announced today are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
2 Wash trades are purchases and sales of securities that match each other in price, volume and time of execution, and involve no change in beneficial ownership. For example, a wash trade occurs when Investor A buys 100 shares at $5.00 of Company A through Broker A while simultaneously selling 100 shares at $5.00 of Company A through Broker B. Match trades are similar to wash trades but involve a related third person or party who places one side of the trade. For example, a match trade occurs when Investor A buys 100 shares at $5.00 of Company A through a broker, while Investor B, who coordinates with Investor A, simultaneously sells 100 shares at $5.00 of Company A through a broker. Both wash trades and match trades are used to create the appearance that the stock price rose as a result of genuine market demand for the securities.
Justice Department, Federal and State Partners Secure Record $7 Billion Global Settlement with Citigroup for Misleading Investors About Securities Containing Toxic MortgagesRead the Press Release
WASHINGTON – The Justice Department, along with federal and state partners, today announced a $7 billion settlement with Citigroup Inc. to resolve federal and state civil claims related to Citigroup’s conduct in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) prior to Jan. 1, 2009. The resolution includes a $4 billion civil penalty – the largest penalty to date under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). As part of the settlement, Citigroup acknowledged it made serious misrepresentations to the public – including the investing public – about the mortgage loans it securitized in RMBS. The resolution also requires Citigroup to provide relief to underwater homeowners, distressed borrowers and affected communities through a variety of means including financing affordable rental housing developments for low-income families in high-cost areas. The settlement does not absolve Citigroup or its employees from facing any possible criminal charges.
This settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered $20 billion to date for American consumers and investors.
“This historic penalty is appropriate given the strength of the evidence of the wrongdoing committed by Citi,” said Attorney General Eric Holder. “The bank's activities contributed mightily to the financial crisis that devastated our economy in 2008. Taken together, we believe the size and scope of this resolution goes beyond what could be considered the mere cost of doing business. Citi is not the first financial institution to be held accountable by this Justice Department, and it will certainly not be the last.”
The settlement includes an agreed upon statement of facts that describes how Citigroup made representations to RMBS investors about the quality of the mortgage loans it securitized and sold to investors. Contrary to those representations, Citigroup securitized and sold RMBS with underlying mortgage loans that it knew had material defects. As the statement of facts explains, on a number of occasions, Citigroup employees learned that significant percentages of the mortgage loans reviewed in due diligence had material defects. In one instance, a Citigroup trader stated in an internal email that he “went through the Diligence Reports and think[s] [they] should start praying . . . [he] would not be surprised if half of these loans went down. . . It’s amazing that some of these loans were closed at all.” Citigroup nevertheless securitized the loan pools containing defective loans and sold the resulting RMBS to investors for billions of dollars. This conduct, along with similar conduct by other banks that bundled defective and toxic loans into securities and misled investors who purchased those securities, contributed to the financial crisis.
“Today, we hold Citi accountable for its contributing role in creating the financial crisis, not only by demanding the largest civil penalty in history, but also by requiring innovative consumer relief that will help rectify the harm caused by Citi's conduct,” said Associate Attorney General Tony West. “In addition to the principal reductions and loan modifications we've built into previous resolutions, this consumer relief menu includes new measures such as $200 million in typically hard-to-obtain financing that will facilitate the construction of affordable rental housing, bringing relief to families pushed into the rental market in the wake of the financial crisis.”
Of the $7 billion resolution, $4.5 billion will be paid to settle federal and state civil claims by various entities related to RMBS: Citigroup will pay $4 billion as a civil penalty to settle the Justice Department claims under FIRREA, $208.25 million to settle federal and state securities claims by the Federal Deposit Insurance Corporation (FDIC), $102.7 million to settle claims by the state of California, $92 million to settle claims by the state of New York, $44 million to settle claims by the state of Illinois, $45.7 million to settle claims by the Commonwealth of Massachusetts, and $7.35 to settle claims by the state of Delaware.
Citigroup will pay out the remaining $2.5 billion in the form of relief to aid consumers harmed by the unlawful conduct of Citigroup. That relief will take various forms, including loan modification for underwater homeowners, refinancing for distressed borrowers, down payment and closing cost assistance to homebuyers, donations to organizations assisting communities in redevelopment and affordable rental housing for low-income families in high-cost areas. An independent monitor will be appointed to determine whether Citigroup is satisfying its obligations. If Citigroup fails to live up to its agreement by the end of 2018, it must pay liquidated damages in the amount of the shortfall to NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development.
The U.S. Attorney’s Offices for the Eastern District of New York and the District of Colorado conducted investigations into Citigroup’s practices related to the sale and issuance of RMBS between 2006 and 2007.
“The strength of our financial markets depends on the truth of the representations that banks provide to investors and the public every day,” said U.S. Attorney John Walsh for the District of Colorado, Co-Chair of the RMBS Working Group. “Today's $7 billion settlement is a major step toward restoring public confidence in those markets. Due to the tireless work by the Department of Justice, Citigroup is being forced to take responsibility for its home mortgage securitization misconduct in the years leading up to the financial crisis. As important a step as this settlement is, however, the work of the RMBS working group is far from done, we will continue to pursue our investigations and cases vigorously because many other banks have not yet taken responsibility for their misconduct in packaging and selling RMBS securities.”
“After nearly 50 subpoenas to Citigroup, Trustees, Servicers, Due Diligence providers and their employees, and after collecting nearly 25 million documents relating to every residential mortgage backed security issued or underwritten by Citigroup in 2006 and 2007, our teams found that the misconduct in Citigroup’s deals devastated the nation and the world’s economies, touching everyone,” said U.S. Attorney of the Eastern District of New York Loretta Lynch. “The investors in Citigroup RMBS included federally-insured financial institutions, as well as a host of states, cities, public and union pension and benefit funds, universities, religious charities, and hospitals, among others. These are our neighbors in Colorado, New York and around the country, hard-working people who saved and put away for retirement, only to see their savings decimated.”
This settlement resolves civil claims against Citigroup arising out of certain securities packaged, securitized, structured, marketed, and sold by Citigroup. The agreement does not release individuals from civil charges, nor does it release Citigroup or any individuals from potential criminal prosecution. In addition, as part of the settlement, Citigroup has pledged to fully cooperate in investigations related to the conduct covered by the agreement.
Michael Stephens, Acting Inspector General for the Federal Housing Finance Agency said, “Citigroup securitized billions of dollars of defective mortgages, after which investors suffered enormous losses by purchasing RMBS from Citi not knowing about those defects. Today’s settlement is another significant step by FHFA-OIG and its law enforcement partners to hold accountable those who committed acts of fraud and deceit in the lead up to the financial crisis, and is a necessary step toward reviving a sound RMBS market that is crucial to the housing industry and the American economy. We are proud to have worked with the Department of Justice, the U.S. Attorneys’ Offices in the Eastern District of New York and the District of Colorado. They have been great partners and we look forward to our continued work together.”
The underlying investigation was led by Assistant U.S. Attorneys Richard K. Hayes, Kevin Traskos, Lila Bateman, John Vagelatos, J. Chris Larson and Edward K. Newman, with the support of agents from the Office of the Inspector General for the Federal Housing Finance Agency, in conjunction with the President’s Financial Fraud Enforcement Task Force’s RMBS Working Group.
The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis. The RMBS Working Group brings together more than 200 attorneys, investigators, analysts and staff from dozens of state and federal agencies including the Department of Justice, 10 U.S. Attorneys’ Offices, the FBI, the Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s Office of Inspector General, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network, and more than 10 state Attorneys General offices around the country.
The RMBS Working Group is led by its Director Geoffrey Graber and its five co-chairs: Assistant Attorney General for the Civil Division Stuart Delery, Assistant Attorney General for the Criminal Division Leslie Caldwell, Director of the SEC’s Division of Enforcement Andrew Ceresney, U.S. Attorney for the District of Colorado John Walsh and New York Attorney General Eric Schneiderman.
Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at: www.stopfraud.gov.
Citi - Settlement Agreement SIGNED
Citi - SOF FINAL
Citi - Appendix 1 SOF
Citi - Annex 2 (Consumer Relief) FINAL (2)
Citi - Annex 3 (Deal List) FINALInternational Hacker Pleads Guilty to 2011 Global CyberattackRead the Press Release
Earlier today at the federal courthouse in Brooklyn, Qendrim Dobruna, a member of an international cybercrime organization that was responsible for a cyberattack that inflicted millions of dollars in losses on the global financial system over the course of two days in 2011, pleaded guilty to bank fraud. The defendant, who was extradited from Germany, and his co-conspirators hacked into the systems of a U.S.-based credit and debit card payment processor that processed debit card transactions for the American Red Cross in connection with disaster relief victims. The stolen card data was then disseminated worldwide and used in an “unlimited operation” that made $14 million in fraudulent withdrawals from ATMs across the globe.
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Robert J. Sica, Special Agent in Charge, United States Secret Service, New York Field Office.
“The defendant and his associates hacked into the global financial system and helped themselves to funds using prepaid debit cards meant for the needy and vulnerable,” stated United States Attorney Lynch. “We will continue to work with our private sector partners to solve these 21st century heists and bring the perpetrators, no matter where in the world they may hide, to justice.”
“Our success in this case and other similar investigations is a result of our close work with our law enforcement partners,” said Secret Service Special Agent in Charge Sica. “The Secret Service worked closely with the Department of Justice and INTERPOL to share information and resources that ultimately brought Qendrim Dobruna to justice. This case demonstrates there is no such thing as anonymity for those engaging in data theft and fraudulent schemes.”
As described in the indictment, court filings in related cases, and public court proceedings, the cyberattack employed by the defendant and his co-conspirators is known in the cyber underworld as an “Unlimited Operation” – through its hacking “operation,” the cybercrime organization can access virtually “unlimited” criminal proceeds.
The “Unlimited Operation” begins when the cybercrime organization hacks into the computer systems of a payment card processor, compromises prepaid debit card accounts, essentially eliminates the withdrawal limits of those accounts, and manipulates the security protocols that would alert the victim to the attack. The compromised card data is then distributed to cells worldwide that use the data to encode magnetic stripe cards to use at ATMs. These sophisticated techniques enable the participants to withdraw literally unlimited amounts of cash until the operation is finally detected and shut down. “Unlimited Operations” are marked by three key characteristics: (1) the surgical precision of the hackers carrying out the cyberattack, (2) the global nature of the cybercrime organization, and (3) the speed and coordination with which the organization executes its operations on the ground. These attacks rely upon both highly sophisticated hackers and organized criminal cells whose role is to withdraw the cash as quickly as possible.
In February 2011 the defendant and his co-conspirators targeted a publicly traded credit and debit card processing company based in the United States that processed transactions for prepaid debit cards issued by the American Red Cross for disaster relief victims. After the hackers penetrated the payment card processor’s computer network, compromised the American Red Cross prepaid card accounts, and manipulated the balances and withdrawal limits, casher cells across the globe operated a coordinated ATM withdrawal campaign. In total, more than 15,000 ATM transactions were conducted in approximately 18 countries using the compromised disaster relief prepaid cards, resulting in $14 million in financial loss worldwide.
The defendant, also known by the aliases “cl0sEd” and “cL0z,” participated in the cyber-attack from overseas by obtaining account information from co-conspirators who directly hacked into the payment card processor’s database and selling that account information to other co-conspirators over the Internet, including to an individual in Brooklyn, New York. The defendant was arrested in an apartment in Stuttgart, Germany in March 2012 by the German federal criminal police and subsequently extradited to the United States.
In announcing the guilty plea, United States Attorney Lynch praised the extraordinary efforts of the Secret Service in investigating this complex network intrusion. Ms. Lynch also thanked the Department of Justice’s Office of International Affairs, INTERPOL, and the authorities in Germany for their assistance in effecting the defendant’s extradition.
Today’s plea took place before Senior United States District Judge I. Leo Glasser. When sentenced on October 24, 2014, the defendant faces up to 30 years in prison, a fine of up to $1 million, and forfeiture of the proceeds of his crimes.
The government’s case is being prosecuted by Assistant United States Attorney Amir H. Toossi.
The Defendant:
QENDRIM DOBRUNA
Age: 27
E.D.N.Y. Docket No. 12 CR 300 (ILG)
New Jersey Man Convicted of Enticing A Minor to Travel in Interstate Commerce to Engage in Illegal Sexual ActivityRead the Press Release
Following a three-day trial, a federal jury in Brooklyn, New York, today found Gregory John Schaffer guilty of enticement to travel to engage in illegal sexual activity, enticement of a minor to engage in illegal sexual activity, attempted enticement to travel to engage in illegal sexual activity, and enticement of a minor to engage in illegal sexual activity.
The convictions were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and James T. Hayes, Jr., Special Agent-in-Charge, U.S. Department of Homeland Security, Homeland Security Investigations (HSI), New York Field Office.
Using the website Craigslist, the defendant lured the victim, a 15-year-old girl from Brooklyn, to his Jersey City, New Jersey, office with false promises of a job. Once there, however, the defendant convinced her to try on several provocative swimsuits, filming her as she changed into them, and repeatedly touched the victim’s breasts, buttocks and groin. The defendant also tricked her into signing a contract that, he claimed, obligated her to have sex with him. When the victim asked to be let out of the contract, the defendant threatened to sue her and her family for breach of contract. The defendant then told the victim that he would be willing to change the contract if she had sex with him. The defendant then had sex with the victim and warned her not to tell anyone about the sex because of an alleged confidentiality agreement in the contract.
“We are committed to protecting children and adolescents from online predators,” stated United States Attorney Lynch. “The defendant created a fake document and spurious legal obligation in order to confuse and exploit a vulnerable young girl. Those who sexually exploit children will be prosecuted to the full extent of the law.” Ms. Lynch expressed her grateful appreciation to the New York Field Office of HSI, the agency responsible for leading the government’s investigation, and the New York Police Department, for assisting in the investigation.
When sentenced by United States District Judge Allyne R. Ross, the defendant faces a mandatory minimum sentence of 10 years’ imprisonment and a maximum term of life imprisonment on each of the four counts of the indictment.
The government’s case was prosecuted by Assistant United States Attorney Peter W. Baldwin.
The Defendant:
GREGORY JOHN SCHAFFER
Age: 34
Member of Violent Home Invasion Robbery Crew Sentenced to 264 Months for Conspiring to Commit Drug Robberies, Conspiring to Distribute Cocaine and Heroin, and Illegally Using A FirearmRead the Press Release
Randall Martinez was sentenced today to 264 months in prison by United States District Judge Sandra L. Townes at the federal courthouse in Brooklyn. Previously, Martinez pleaded guilty to robbery conspiracy, cocaine trafficking conspiracy, and firearm charges.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and James J. Hunt, Acting Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division.
Martinez 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 posed as law enforcement officers, staged fake arrests of the traffickers, and then forcibly seized the traffickers’ contraband. Members of the robbery crew restrained victims with handcuffs, rope, or duct tape. The crew members often brandished firearms and physically assaulted victims. Crew members sold the stolen drugs and divided the proceeds among themselves.
Martinez participated in at least 22 separate robberies and attempted robberies. During these crimes, Martinez personally entered the residences and, on at least nine occasions, Martinez or his fellow crew members brandished firearms. On one occasion, Martinez brought two firearms to the scene of a robbery and acted as the lookout for the robbery crew while a victim was strangled to death in the residence. The robberies and attempted robberies in which Martinez directly participated involved at least 600 kilograms of cocaine and approximately $434,000 in drug proceeds. Agents seized 107 kilograms of cocaine from these robberies.
Ms. Lynch extended her grateful appreciation to the DEA, U.S. Immigration and Customs Enforcement, Homeland Security Investigations, and the New York City Police Department.
The government’s case is being prosecuted by Assistant United States Attorneys Sylvia Shweder and Alexander Solomon.
The Defendant:
RANDALL MARTINEZ
Age: 33
Bronx, NY
E.D.N.Y. Docket Nos. 08-CR-242 and 12-CR-91
S.D.N.Y. Docket No. 10-CR-955 (removed to E.D.N.Y. for purposes of sentencing)
Brooklyn Man Convicted of Conspiracy to Commit Honor Killings in PakistanRead the Press Release
Earlier today, a federal jury returned verdicts of guilty against Mohammad Ajmal Choudhry of conspiring to commit murder in a foreign country, transmitting threats via interstate communications, and immigration fraud. The verdict followed a nine-day trial at the federal courthouse in Brooklyn, New York. The verdict was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), New York, and David Schnorbus, Special Agent-in-Charge, New York Field Office, U.S. Department of State’s Diplomatic Security Service.
The evidence at trial established that the defendant’s daughter, Amina Ajmal, was held against her will in Pakistan for more than three years by relatives at her father’s direction. During that time, Ajmal, a U.S. citizen, was forced into an arranged marriage with a Pakistani national. Ajmal eventually escaped Pakistan and returned to the United States with the assistance of a Pakistani man and U.S. State Department officials. During subsequent recorded telephone calls between Ajmal and the defendant, the defendant threatened to orchestrate the murder of the man who helped Ajmal flee if Ajmal, whose whereabouts remained unknown to the defendant, did not return immediately to the family home in Brooklyn. On February 25, 2013, after Ajmal refused to return home, the father and sister of the man who helped Ajmal flee were shot and killed in Pakistan. According to eyewitnesses, the defendant’s brother and other relatives were observed standing over the victims, holding guns, and desecrating the bodies.
“Choudhry placed himself and his honor above the lives of anyone who dared to thwart his plans. From the front seat of his yellow taxicab as he drove the streets of New York City, the defendant planned, directed, and executed the murders of family members of the man who offended his honor by helping his daughter leave Pakistan,” stated United States Attorney Lynch. “A clash of cultures can never be resolved with murder.” Ms. Lynch expressed her grateful appreciation to U.S. Immigration and Customs Enforcement, Homeland Security Investigations, and the U.S. State Department’s Diplomatic Security Service, which worked closely together to investigate the case.
At sentencing, the defendant faces up to life imprisonment.
The government’s case is being prosecuted by Assistant United States Attorneys Amanda Hector, Richard M. Tucker, and Margaret E. Gandy.
The Defendant:
MOHAMMAD AJMAL CHOUDHRY
Age: 61
E.D.N.Y. Docket No. 13 CR 150 (WFK)
U.S. Files Complaint and Consent Decree Against MIRA Health and Senior OfficersRead the Press Release
Mira Consent Decree
Mira-Complaint-06-05-14Leader of Bloods Street Gang Convicted of Racketeering, Including Three MurdersRead the Press Release
Earlier today, following a month-long trial, Ronald Herron, also known as “Ra Diggs,” was convicted of all counts, including racketeering and three homicides, arising from his leadership of a violent set of the Bloods Street Gang that operated in the Gowanus Housing Development in Brooklyn. The verdict was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office, and William J. Bratton, Commissioner, New York City Police Department.
“Ronald Herron and his gang of thugs preyed on their community while glorifying their criminal lifestyle,” stated United States Attorney Lynch. “He styled himself a rap artist, but the jury’s verdict makes clear who Herron really is, a drug dealer and murderer who sought power through fear and intimidation.” Ms. Lynch expressed her thanks to the agents and investigators from the FBI and NYPD who worked for years to dismantle this violent gang and bring Herron to justice.
Since 1998, Herron committed numerous crimes of violence in support of his drug trafficking operation in and around the Gowanus Houses and Wyckoff Gardens, two New York City public housing communities located in the Boerum Hill section of Brooklyn. In 2001, Herron murdered Frederick Brooks. Herron was acquitted of that murder in state court after witnesses refused to testify because they were threatened by Herron and his associates. After being released from state custody and consolidating his control over the drug trade in Gowanus and Wyckoff Gardens, Herron murdered Richard Russo in 2008 and Victor Zapata in 2009.
Herron boasted about his exploits in songs and videos in which he identified himself as the leader of the “Murderous Mad Dogs” set of the Bloods Street Gang and claimed that he had previously “beat a body.” The jury rejected Herron’s claim that the videos were simply exaggerations and that he was an aspiring rap artist rather than a murderer.
Herron’s conviction follows dozens of successful prosecutions over the past ten years conducted by the U.S. Attorney’s Office, along with the FBI and NYPD, of violent gang members and drug dealers from the Gowanus Housing Development. When he is sentenced, Herron faces a mandatory term of life imprisonment without the possibility of parole.
The government’s case was prosecuted by Assistant United States Attorneys Shreve Ariail, Sam Nitze, and Rena Paul.
The Defendant:
RONALD HERRON, also known as “Ra Diggs”
Age: 32
E.D.N.Y. Docket No. 10 CR 615 (NGG)
Former NYPD Detective Pleads Guilty to Conspiracy and Tax FraudRead the Press Release
Earlier today, Rafael Astacio, a former detective with the New York City Police Department, pleaded guilty in Central Islip federal court to conspiracy to commit interstate transportation of stolen property and filing a fraudulent tax return. When sentenced, Astacio faces up to eight years in prison, a forfeiture money judgment of $200,000, and a fine of up to $500,000.
The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, Kathleen M. Rice, Nassau County District Attorney, George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), Thomas C. Krumpter, Acting Commissioner, Nassau County Police Department (NCPD), Shantelle P. Kitchen, Acting Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York (IRS), and William J. Bratton, Commissioner, New York City Police Department (NYPD).
“For three years, Astacio and his band of thieves invaded people’s homes and businesses and stole millions of dollars. What makes Astacio’s crimes even more disgraceful is that he committed them while he was a NYPD detective who took an oath to protect and serve our community,” stated United States Attorney Lynch. “Today’s plea demonstrates that no one is above the rule of law. I want to thank my law enforcement partners for their hard work and unwavering commitment to ensure that Astacio was brought to justice.”
According to the indictment, court filings,and statements at today’s proceeding, between 2009 and 2012, Astacio was a member of a burglary crew that committed approximately three dozen commercial burglaries and ten residential burglaries in the Eastern District of New York stealing approximately $10,000,000 in cash and property. The crew used traditional burglary tools, such as blow torches, crowbars, wire cutters, and sledge hammers, as well as modern technology, including cell phone jammers and police scanners, to commit those burglaries. In addition, they often conducted surveillance of their burglary victims to determine when the victims would be out of their homes and businesses. On at least one occasion, they even installed a tracking device on a victim’s car to assist in that endeavor.
On April 29, 2010, Astacio’s co-conspirators burglarized a business in Plainview, New York, entering that commercial establishment while Astacio and another co-conspirator monitored a police scanner and acted as lookouts. Astacio’s co-conspirators spent approximately three and a half hours in the business and stole more than 45,000 pairs of Under Armour, Hobie, and other sunglasses that were worth approximately $3,000,000. After the burglary, Astacio and his co-conspirators transported the stolen property across state lines and sold some of the sunglasses on the Internet. In another instance, Astacio and his crew stole approximately $2,000,000 in cash from a plastic surgeon’s office located in Nassau County.
The government’s case is being prosecuted by Assistant United States Attorney Christopher C. Caffarone and Special Assistant United States Attorney Rick Whelan.
The Defendant:
RAFAEL ASTACIO
Age: 41
Copiague, New York
E.D.N.Y. Docket No. 13-CR-640 (JFB)
Member of the Granados-Hernandez Sex Trafficking Organization, Antonio Lira-Robles, Sentenced to 188 Months in PrisonRead the Press Release
Earlier today, Antonio Lira-Robles was sentenced before Judge Kiyo A. Matsumoto in U.S. District Court in Brooklyn, New York, to 188 months’ imprisonment, to be followed by five years of supervised release, for the sex trafficking of one victim and restitution in the amount of approximately $1.2 million dollars.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York and James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), New York.
“This defendant is the final defendant to be sentenced in this case, which sought to end the Granados-Herndandez’s long standing family business of preying on young women and luring them to the United States, only to be forced into the violent world of prostitution,” stated United States Attorney Lynch. “Although no prosecution can remedy the egregious harms that the victims of sex trafficking suffer, we sincerely hope that this prosecution brought some closure to the many victims of the Granados-Hernandez organization.” Ms. Lynch extended her grateful appreciation to the organizations that provided services and advocacy to the victims in this case, including Sanctuary for Families and the law firm of Simpson, Thacher and Bartlett, LLP.
On December 19, 2013, Lira-Robles pled guilty to one count of a superseding indictment, which charged that between October 2000 and April 2011, he smuggled a victim from Mexico illegally into the United States and forced her to engage in prostitution. Over approximately ten years, Lira-Robles was a member of the Granados-Hernandez sex trafficking organization (the “Organization”). As part of the trafficking scheme engaged in by the Organization, Lira-Robles and his co-conspirators started romantic relationships with females in Mexico and then lured them to the United States with the false promise of a better life. Each of these victims was transported by a member of the Organization, with the intent that they would engage in prostitution. Once in the United States, the Organization forced victims into prostitution by threats, coercion, and violence. For each of the victims, the Organization kept all of the proceeds from the prostitution.
Lira-Robles was responsible for the sex trafficking of Jane Doe #1 and the recruitment of Jane Doe #4. Lira-Robles conduct towards both of these victims shows the same pattern of criminal conduct and abuse. In 1999, Lira-Robles recruited Jane Doe #1 in Tenancingo, Mexico, soon began a relationship with her and moved her into his parents’ home. Shortly thereafter, Jane Doe #1 became pregnant and Lira-Robles forced her to abort the child. Lira-Robles then forced Jane Doe #1, through threats and physical violence, to begin prostituting in Mexico City. In June 2000, Lira-Robles and Jane Doe #1 travelled to Queens, New York. Upon their arrival, Jane Doe #1 stated that she did not want to work as a prostitute to which Lira-Robles responded by physically assaulting her. As a result of the defendant’s violence towards her, Jane Doe #1 worked for Lira-Robles in New York and Boston from 2001 to 2010 and gave all the prostitution proceeds to him.
During the same time period as his involvement with Jane Doe #1, Lira-Robles recruited Jane Doe #4. Similar to his relationship with Jane Doe #1, Lira-Robles began a romantic relationship with Jane Doe #4 and suggested they travel to the United States. Upon their arrival to here, Lira-Robles told Jane Doe #4 that in order to pay off the smuggling debt she had to work as a prostitute. Jane Doe #4 worked for Lira-Robles from approximately 2004 until 2010.
At the sentencing, Jane Doe #1 stated that, “I was a victim of sex trafficking and forced into prostitution because of Antonio [Lira Robles].” Jane Doe #1 described in detail the extreme abuse she suffered under the control of Lira-Robles, stating that “He did not treat me like a human being. He treated me like a sexual robot.” Jane Doe #1 further stated: “For years I cried in silence. I carried the scars of Antonio’s abuse every day, but I can no longer be silent. I am here today so Antonio and his family will no longer be able to force another woman into prostitution.”
Lira-Robles’ cousins, Samuel Granados-Hernandez, Eleuterio Granados-Hernandez and Angel Cortez-Granados, also smuggled young women from Mexico illegally into the United States, forced them to work as prostitutes in New York City and elsewhere, and collected profits from their activities. Each of the three defendants pleaded guilty to sex trafficking. In September 2013, Cortez-Granados was sentenced to 15 years in prison, in a separate case. In March 2014, Eleuterio Granados-Hernandez was sentenced to 22 years in prison for the sex trafficking of five victims. In May 2014, Samuel Granados was sentenced to 15 years for the sex trafficking of three victims.
The government’s case was prosecuted by Assistant United States Attorney Soumya Dayananda.
The Defendant:
ANTONIO LIRA-ROBLES
Age: 38
Mexico
E.D.N.Y. Docket No. CR-11-297 (S-5) (KAM)
Four Arrested for Defrauding Mortgage Lending InstitutionsRead the Press Release
BROOKLYN, NY – A six-count indictment was unsealed this morning in federal court in Brooklyn charging mortgage broker Alex Barrett, property manager Barthelemy Adjavehoude, title agent Michelle Baker, property manager and self-described foreclosure specialist James Bayfield, and property managers Samuel Terrell Bell and Dirk Hall with engaging in a bank and wire fraud conspiracy to steal millions of dollars from financial lending institutions.1 Defendants Adjavehoude, Baker, Bayfield, and Bell were arrested and will be arraigned this afternoon before United States Magistrate Judge Lois Bloom at the United States Courthouse in Brooklyn, New York. The defendants face penalties of up to 30 years’ imprisonment if convicted.
The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); Michael Stephens, Acting Inspector General, Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG); Christina Scaringi, Special Agent-in-Charge, Northeast Region, U.S. Department of Housing and Urban Development, Office of Inspector General (HUD-OIG); and Derek Evans, Special Agent-in- Charge, Federal Deposit Insurance Corporation-Office of Inspector General, New York Region.
According to the indictments unsealed this morning, the defendants and other participants in the scheme (“the conspirators”) caused mortgage loan applications with false information to be submitted to lending institutions in connection with the purchase of residential properties located within the Eastern District of New York. These applications contained fraudulently inflated purchase prices and appraisals for the properties, as well as false information about the assets and income of the purchasers of the properties, many of whom were being compensated as part of the scheme to act as straw purchasers. The conspirators also falsified HUD forms and provided false down payment checks to make it appear as if the straw purchasers and the other borrowers had made down payments in connection with the purchase of the properties, which was a condition of the lending institutions for issuing the mortgage loans.
To carry out their scheme, the conspirators allegedly often conducted simultaneous purchases and sales of the properties, sometimes called “flips,” in an effort to conceal their criminal involvement and to inflate the value of the properties. For example, a conspirator would purchase a property from a homeowner. That same day, the conspirator would sell the property to a straw purchaser at an inflated value. The conspirators, through the use of backdated and falsified documents, concealed from the lending institutions the fact that the purchase and sale had occurred on the same day and made it appear as if the transaction between the homeowner and the conspirator had occurred over 60 days prior to the sale from the conspirator to the straw purchaser.
As a result of the false applications and appraisals, the lending institutions were fraudulently induced to issue millions of dollars of mortgage loans secured by properties that had inflated appraisal values to individuals who had insufficient income and assets to qualify for the mortgage loan. In many instances, the straw purchasers and the other borrowers failed to make required mortgage payments to the lending institutions, which caused the mortgage loans to be placed into default status.
At approximately the time of the closings of the properties, the conspirators diverted for their own use the portion of the loan proceeds that exceeded the actual value of the properties. The conspirators collectively caused the financial lending institutions to loan out over $5.5 million, of which over $2.7 million was the conspirators’ profit from the scheme. The investigation identified at least 17 properties in the scheme, including locations in Cambria Heights, Far Rockaway, Brooklyn, Laurelton, Jackson Heights, Jamaica, Hempstead, Rosedale, and Hollis, New York.
“Through a web of lies and false documentation, these real estate professionals allegedly stole millions from banks, which they used to line their own pockets,” stated United States Attorney Lynch. “The size and scope of the conspiracy were noteworthy, but the charges announced today are the result of an even more impressive collaboration between all the agencies that worked tirelessly to bring the defendants to account for these crimes. This is a clear message to anyone who contemplates engaging in mortgage fraud: do not even attempt it because you will be caught.”
FBI Assistant Director-in-Charge Venizelos stated, “In an elaborate scheme between brokers, appraisers, straw buyers, and others, it is alleged that these defendants conspired to shake down and defraud banks. The scheme not only victimized those institutions, but millions of consumers who either paid higher rates or could not get a loan.”
HUD-OIG Special Agent-in-Charge Christina Scaringi stated, “The arrests and charges announced today serve to remind the public that we will continue the important work of investigating mortgage industry professionals who deceive and defraud homeowners, the Federal Housing Administration, and mortgage lending institutions to satisfy their own personal enrichment. As alleged, the conduct of these defendants is particularly troubling as it is yet another reminder of the fraud and difficulties many endured in the aftermath of the recent housing crisis. We wish to thank our law enforcement partners at the FBI, FHFA-OIG, FDIC-OIG, and the U.S. Attorney's Office for their perseverance and steadfast efforts in ensuring these defendants are brought to justice.”
FDIC-OIG Special Agent-in-Charge Derek Evans stated, “The Federal Deposit Insurance Corporation Office of Inspector General is committed to its partnerships with others in the law enforcement community as we address mortgage fraud cases throughout the country. Today’s arrests illustrate that the government is working to ensure integrity in the financial services and housing industries and that those involved in criminal activities that undermine that integrity will be held accountable if ultimately found guilty.”
FHFA Acting Inspector General Michael Stephens stated, “As alleged, the individuals charged in this scheme operated with impunity under the flawed belief that as industry insiders they could better cover their tracks to avoid detection. However, as evidenced by today’s charges, no fraudulent plan is foolproof. We are proud to have worked with our law enforcement partners and will continue our collaborative efforts to bring those who cheat our financial institutions, and ultimately American taxpayers, to justice.”
The government’s case is being prosecuted by Assistant United States Attorney Walter M. Norkin.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The Defendants:
ALEX BARRETT
Age: 47
Residence: Farmingville, New York
BARTHELEMY ADJAVEHOUDE
Age: 54
Residence: Baldwin, New York
GEORGE ALDERDICE
Age: 42
Residence: Manhasset, New York
MICHELLE BAKER
Age: 47
Residence: Jamaica, New York
JAMES BAYFIELD
Age: 42
Residence: Jamaica, New York
SAMUEL TERRELL BELL
Age: 33
Residence: North Babylon, New York
DIRK HALL
Age: 39
Residence: Jamaica, New York
SHARIF RASHED
Age: 32
Residence: Jamaica, New York
__________________________________________________________________________
1 The charges announced today are merely allegations, and the defendants are presumed innocent unless and until proven guilty. Previously, co-conspirators George Alderdice, an attorney, and Sharif Rashed, an appraiser, pled guilty to conspiring to commit bank and wire fraud for their respective participation in the scheme.
Barrett.Alderdice.InformationSIGNED
Barrett Indictment
Barrett.Rashed.InformationSIGNEDFormer Marine Pleads Guilty to Theft of $880,000 in Military Equipment from Department of DefenseRead the Press Release
Earlier today, at the federal courthouse in Central Islip, New York, Vincent P. Vulaj, a resident of Bronx, New York, pleaded guilty to Theft of Government Property. When sentenced on December 16, 2014, Vulaj faces up to 10 years in prison. The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York and Jeremy Gauthier, Acting Special Agent in Charge of the Northeast Field Office, Naval Criminal Investigative Service (“NCIS”).
According to court filings and facts presented during the plea proceeding, between 2009 and 2013, while working as a Staff Sergeant at the 2nd Battalion, 25th Marine Regiment, Marine Corps Reserves Base in Garden City, New York, Vulaj stole property belonging to the Department of Defense worth more than $880,000, and sold it on eBay.com. The stolen items included tactical helmets, goggles, jackets, vests, sleep systems and backpacks. The Marine Corps Reserves discovered the thefts and reported it to NCIS for investigation. NCIS investigators then purchased some of the stolen equipment online and traced the transactions back to Vulaj. In September 2013, Vulaj was discharged to Individual Ready Reserve (“IRR”) status with the Marine Corps Reserve. Individuals placed on IRR status are subject to recall to active military service.
“As a non-commissioned officer with the Marine Corps Reserves, the defendant was charged with safeguarding the welfare of his fellow soldiers and the American public. Instead, he cast aside his duty and shamelessly stole equipment that was meant to provide safety and comfort to our troops in the field in order to line his own pockets,” stated United States Attorney Lynch. Ms. Lynch thanked the Marine Corps Reserves for their assistance in this investigation.
“Vulaj abused his access and violated the trust placed in him to embezzle from the American people. Not only is there the matter of $800,000 of property he stole and sold, his actions also resulted in the expenditure of a considerable amount of time and effort on his case; resources which should have been put to better use elsewhere, keeping our communities and warfighters safe,” stated Acting Special Agent in Charge Gauthier.
The guilty plea proceeding was held before United States District Judge Sandra J. Feuerstein.
The government’s case is being prosecuted by Assistant United States Attorney Allen Bode.
The Defendant:
Name: VINCENT P. VULAJ
Age: 32
Residence: Bronx, NY
Self-Described New York Money Manager Pleads Guilty in $5 Million Fraud SchemeRead the Press Release
Thomas Bannon, the president of Overseas Investors LLC and Overseas Investors International, Ltd. (collectively, “Overseas Investors”), pleaded guilty today in federal court in Brooklyn, New York, to one count of wire fraud for defrauding an individual entrepreneur of $5 million through, among other things, false representations about his access to hedge funds and wealthy investors. When sentenced on October 3, 2014, Bannon faces up to 20 years in prison and the payment of $5,001,949 in restitution to the defrauded entrepreneur. Co-defendant Theodore Sweeten pleaded guilty on June 19, 2013, to one count of wire fraud and was sentenced to 48 months in prison on January 7, 2014.1
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office.
“Thomas Bannon claimed to be a money manager who had access to millions of dollars. In reality, Bannon was a con man and the only access he had was to the phony bank documents that he used to perpetrate this bold fraud,” stated United States Attorney Lynch. “This Office is unrelenting in its commitment to bring to justice those who seek to defraud unsuspecting investors through lies and deceit.” Ms. Lynch expressed her appreciation to the Federal Bureau of Investigation, the agency responsible for leading the government’s investigation.
Bannon falsely represented to the victim entrepreneur that Overseas Investors collaborated with hedge funds and wealthy investors who were willing, in exchange for a substantial fee, to “lease” funds and set up bank accounts in its clients’ names that contained the leased funds. Based on this and other misrepresentations, Bannon and his co-conspirators induced the victim to invest $5 million in order to “lease” a credit line of $100 million, which in turn would enable them to generate millions of dollars in profit through special investment programs. In furtherance of that scheme, Bannon and his co-conspirators falsely represented that the victim’s funds would be held in an attorney escrow account pending confirmation of the posting of $100 million in the leased-funds account. In fact, Bannon and his co-conspirators simply distributed the victim’s $5 million among themselves and falsely represented that a $100 million account had been created at HSBC by sending the victim fabricated bank documents on HSBC letterhead.
When the victim discovered that the bank documents on HSBC letterhead were phony, he requested a refund of the $5 million that he had deposited into the attorney escrow account. In response, Bannon and his co-conspirators told the victim that the money had been disbursed to the investors who created the $100 million account. In particular, Bannon concealed from the victim the fact that he had requested and received $600,000 of the escrowed funds prior to the issuance of the fabricated HSBC documents.
The government’s case is being prosecuted by Assistant United States Attorneys Winston M. Paes and Marcia M. Henry.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it 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. 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 2,900 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The Defendant:
THOMAS BANNON
Age: 82
Residence: New York, New York
E.D.N.Y. Docket No. 12-CR-471
_________________________________________________________________________
1 The case against co-defendant Robert Bardey is pending and scheduled for trial. The charges against Bardey are merely allegations, and he is presumed innocent unless and until proven guilty.
Former New York City Police Officer Convicted of Armed Robbery and Drug Trafficking ChargesRead the Press Release
Earlier today, following a two-week trial, a federal jury in Brooklyn, New York, returned a guilty verdict against former New York City Police Officer Jose Tejada on charges of armed robbery conspiracy and narcotics distribution conspiracy. Tejada was a 17-year veteran of the New York City Police Department (NYPD) who, at the time of the robberies, was assigned to the 28th Precinct in Harlem. These charges arose out of the defendant’s commission of multiple robberies and attempted robberies in Queens, Manhattan, and the Bronx in 2006 and 2007, some of which he committed while on duty and in uniform. When sentenced by United States District Judge John Gleeson, the defendant faces a maximum sentence of 80 years’ imprisonment.
The defendant was previously convicted in November 2013, following a jury trial, of two counts of obstruction of justice for his role in helping other members of his robbery crew avoid arrest.
The verdict was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, James J. Hunt, Acting Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division, and William J. Bratton, Commissioner of the New York City Police Department.
“Tejada dishonored his badge and his uniform when he crossed the line from cop to robber. Tejada and his crew targeted drug dealers, not to bring them to justice, but to steal their narcotics for their own profit. In the process, innocent citizens were terrorized and threatened,” stated United States Attorney Lynch. “We will continue to prosecute aggressively law enforcement officers who abuse their authority and violate the law.” Ms. Lynch expressed her thanks to the New York Drug Enforcement Task Force – comprising DEA special agents, NYPD officers, and New York State Police investigators – and the NYPD’s Internal Affairs Division, Police Impersonation Investigation Unit, which jointly led the investigation.
The evidence presented at trial showed that Tejada participated in multiple armed robberies and attempted robberies, which netted thousands of dollars in cash and multiple kilograms of cocaine.
During an attempted robbery on Schley Avenue in the Bronx, Tejada, while on duty and in uniform, used his status as a police officer to demand and gain access to a private residence. The robbery crew mistakenly believed the residents to be drug dealers. In fact, the residents were a family of three, including a teenager, who had no involvement in drug dealing. Tejada and two others unsuccessfully searched the premises for drugs, while Tejada brandished his service weapon to intimidate the innocent family and attempted to handcuff a victim.
In a robbery on Broadway in Upper Manhattan, Tejada, NYPD officer Jorge Arbaje-Diaz, and NYPD Auxiliary officer Yvan Tineo pulled over a car, handcuffed the driver, and stole five kilograms of cocaine hidden inside the car. In another robbery on Seaman Avenue in Upper Manhattan, Tejada and Tineo robbed a drug supplier of three kilograms of cocaine at gunpoint.
In an incident at John F. Kennedy International Airport in Queens, Tejada, Arbaje-Diaz, and Tineo staged the arrest of a corrupt airline employee who was part of a scheme to smuggle narcotics into the United States through incoming commercial flights. The corrupt airline employee wanted Tejada and others to pretend to arrest him at the arrivals terminal while he delivered a drug shipment to his confederates. This staged arrest yielded Tejada, Arbagje-Diaz, and Tineo at least five kilograms of cocaine.
The evidence at trial also showed that Tejada supplied members of the robbery crew with police equipment and paraphernalia to enable them to impersonate police officers.
In the November 2013 trial, the evidence showed that Tejada searched law enforcement databases to determine whether there were outstanding warrants for his own arrest, as well as for the arrest of other members of the robbery crew. Tejada then shared that information with his confederates in an effort to assist them in evading arrest.
Tejada’s conviction is the most recent of dozens of convictions in a set of interlocking cases brought in the Eastern District of New York against the members of violent drug robbery crews who impersonated police officers and frequently committed robberies with real officers. Tejada is the third NYPD officer to be convicted in these cases; two NYPD Auxiliary officers have been convicted as well. In total, 52 defendants have been convicted.
The government’s case is being prosecuted by Assistant United States Attorneys Alexander A. Solomon, Douglas M. Pravda, and Kenji M. Price.
The Defendant:
JOSE FELIX TEJADA
Age: 46
Mahopac, New York
E.D.N.Y. Docket No. 08-CR-242 (JG)
___________________________________________________________________________
1 Arbaje-Diaz was previously convicted of robbery conspiracy and narcotics distribution conspiracy, and was sentenced to 20 years’ imprisonment. Tineo was previously convicted of robbery conspiracy, narcotics distribution conspiracy, and unlawful use of a firearm, and is awaiting sentencing.
USA Lynch Interviewed in Documentary About Sex TraffickingRead the Press Release
http://fusion.net/Modern_Life/video/fusion-investigates-pimp-city-full-investigation-778729
http://abcnews.go.com/Nightline/video/inside-americas-secret-neighborhood-brothels-24293507
Gabriel Gabella Pleads Guilty to Hiding Swiss Bank AccountRead the Press Release
Gabriel Gabella, a former client of the Swiss bank UBS AG, pleaded guilty today at the federal courthouse in Brooklyn, New York, to a felony information charging him with concealing ownership of his Swiss UBS AG bank account from the United States by willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR). When sentenced, Gabella faces a statutory maximum of five years’ incarceration for his crime. In the plea agreement he entered today, Gabella agreed to pay a civil penalty of $3,140,346, which is half the value of his unreported Swiss bank account in 2007, for the willful failure to file the FBAR. Gabella also agreed to make restitution of $239,012 to the Internal Revenue Service for federal income taxes he failed to pay for 2005, 2006 and 2007 by hiding his ownership of his UBS account.
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, Tamara W. Ashford, Acting Assistant Attorney General for the Justice Department’s Tax Division, and Shantelle P. Kitchen, Acting Special Agent-in-Charge, Internal Revenue Service - Criminal Investigation, New York.
As described in the information, United States citizens or residents with a financial interest in, or signatory authority over, a foreign financial account worth more than $10,000 in a particular year, must file a FBAR report with the Department of the Treasury disclosing such an account by June 30 of the following year.
“Those who willfully conceal assets abroad will be investigated and prosecuted, and those convicted of such conduct will not only face imprisonment but significant financial penalties as well,” stated United States Attorney Lynch.
IRS Special Agent-in-Charge Kitchen stated, “Offshore tax enforcement remains a top priority for the Internal Revenue Service and we continue to gain access to more and more information about individuals who hide money in bank accounts outside of the United States. Individuals who choose to conceal assets offshore expose themselves to a variety of criminal charges and severe penalties when they fail to notify the government about their foreign bank accounts or report the income from them.”
The guilty plea proceedings were held before United States Magistrate Judge James Orenstein.
This case was prosecuted by Assistant United States Attorney Michael Warren and
Senior Litigation Counsel Mark Daly of the Justice Department’s Tax Division.
The Defendant:
GABRIEL GABELLA
Age: 73
Residence: Manhattan
E.D.N.Y. Docket No. 14-CR-207 (JBW)
Former Attorney Pleads Guilty to Lying to Federal Investigators About His Role in A Million-Dollar Fraud SchemeRead the Press Release
Earlier today, Barry Stephen Zornberg pleaded guilty at the federal courthouse in Central Islip, New York, to lying to federal investigators about his role in a million dollar foreclosure rescue fraud scheme. The scheme ensnared at least ten families, defrauding them of approximately $1.3 million in home equity and caused some of them to lose their homes. Zornberg faces up to five years of imprisonment. As a part of the plea agreement, Zornberg has agreed to pay a total of $1,261,149.50 to the victims of the foreclosure rescue fraud scheme.
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge, New York Field Office Criminal Division, Federal Bureau of Investigation (FBI); and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (USPIS).
“The defendant, a disbarred attorney, has now admitted to a judge that he lied to federal investigators about the role that he played in this fraud scheme, which took advantage of people who were looking to save their homes from foreclosure. A license to practice law is not a license to steal or lie,” stated United States Attorney Lynch. “We are committed to protecting our communities from the abuses of fraud. I would like to thank our partners at the Federal Bureau of Investigation and the United States Postal Inspection Service for their hard work on this important investigation.”
The foreclosure rescue fraud was perpetrated out of Empire Property Solutions, LLC (AEmpire@) in Bethpage, New York. Empire held itself out to be a home foreclosure rescue specialist operated by John Rutigliano and Kenneth Kiefer. On November 4, 2011, a federal grand jury returned an indictment charging Rutigliano and Kiefer with conspiracy to commit wire fraud, in violation of Title 18, United States Code, Section 1349, and two counts of wire fraud, in violation of Title 18, United States Code, Section 1343. Rutigliano and Kiefer encouraged distressed homeowners to “refinance” their homes with Empire, when, in reality, the homeowner victims were tricked into transferring title in their homes to straw buyers and paying large fees to Empire. Zornberg conducted real estate closings and provided other legal services to Empire. Rutigliano and Kiefer used the escrow accounts of Zornberg’s law firm to hold and transfer funds during the scheme. Zornberg falsely told federal investigators that he advised the victims to not participate in the scheme when, in fact, he encouraged the victims to sign over their homes to Rutigliano and Kiefer, thereby losing title to their homes. Kiefer has since pleaded guilty to the charges.1
The guilty plea proceeding took place before United States Magistrate Judge William D. Wall.
The defendant’s sentencing has not yet been scheduled.
The government’s case is being prosecuted by Assistant United States Attorney Christopher A. Ott.
The Defendants:
BARRY STEPHEN ZORNBERG
Age: 54
Hauppauge, New York
_________________________________________________________________________
1 Rutigliano died while the charges were still pending.
New York City Police Officer and Customs and Border Protection Officer Plead Guilty to International Arms TraffickingRead the Press Release
Earlier today, Rex Maralit, a New York City Police Officer previously assigned to police headquarters in Manhattan, and his brother Wilfredo Maralit, a Customs and Border Protection Officer previously assigned to Los Angeles International Airport, pleaded guilty in Brooklyn federal court to violating the Arms Export Control Act. The two men were charged in connection with their respective roles in the export of high-powered weapons from the United States to the Philippines, without a license from the U.S. State Department.
The pleas were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York; Craig W. Rupert, Special Agent-in-Charge of the Defense Criminal Investigative Service (DCIS), Northeast Field Office; Thomas J. Cannon, Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), New York Field Division; and William J. Bratton, Commissioner, New York City Police Department (NYPD).
According to court filings and statements at today’s proceedings, between January 2009 and September 2013, the defendants engaged in a scheme to smuggle high-powered assault rifles, sniper rifles, pistols, and firearm accessories, such as high-capacity magazines, from the United States to the Philippines, where they were sold to overseas customers. Both of the defendants who pleaded guilty today are American law enforcement officers, who brazenly used their credentials and status to obtain extremely dangerous weapons and ship the weapons for export and resale, as well as to obtain discounts on various weapons from U.S.-based gun dealers. The firearms that the defendants illegally exported and sold included the Barrett M82A1 .50 caliber semi-automatic long range sniper rifle, the FN “SCAR” assault rifle, and the FN Herstal 5.7mm semi-automatic pistol. Many of the weapons the defendants exported are specifically designed to penetrate both hard and soft body armor.
The Arms Export Control Act requires exporters of firearms to first obtain the approval of the State Department before shipping weapons overseas. The United States Munitions List requires export licenses for firearms such as the military-style assault rifles, sniper rifles, and semi-automatic handguns exported by the defendants. Similarly, dealing in firearms is regulated by the ATF, which requires gun dealers to first obtain a federal firearms license before engaging in such a business.
“Today a New York Police Officer and a Customs and Border Protection Officer admitted their involvement in a serious federal crime. This is a sad day for American law enforcement. But make no mistake: the laws that are designed to regulate the trafficking of dangerous weapons apply with equal force to anyone who would dare to ignore them,” stated U.S. Attorney Lynch. “Criminal conduct by police officers, federal agents, and their confederates is intolerable. I commend our law enforcement partners who brought these men to justice though their diligence and professionalism.” Ms. Lynch expressed her grateful appreciation to HSI, DCIS, ATF, and the NYPD’s Internal Affairs Bureau, which worked closely together to investigate the case, and to the U.S. Attorney’s Offices for the Central District of California and the District of New Jersey for their assistance.
When sentenced on October 16, 2014, by the Hon. Allyne R. Ross, the defendants each face up to 20 years in prison, forfeiture, and a fine of up to $1,000,000.
The government’s case is being prosecuted by Assistant United States Attorneys Seth DuCharme and Sam Nitze, with assistance from Trial Attorney David Recker of the Department of Justice Counterespionage Section.
The Defendants:
REX G. MARALIT
Lawrenceville, New Jersey
Age: 45
WILFREDO MARALIT
Garden Grove, California
Age: 49
Fund Manager Arrested and Charged in $17 Million Ponzi SchemeRead the Press Release
A five-count indictment was unsealed this morning in federal court charging James M. Peister, a fund manager who resides in St. James, New York, with securities, wire and mail fraud in connection with his operation of a $17 million Ponzi scheme. The defendant is in custody and will be arraigned this afternoon before United States District Judge Joseph F. Bianco at the United States Courthouse in Central Islip, New York. In addition, the government seized the defendant’s Hummer sport utility vehicle and seeks to forfeit the home in St. James, New York, he paid for with the victims’ investments.
The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
According to the indictment and other court filings, 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 Ponzi 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. Additionally, Peister submitted bogus financial statements to the investment fund’s independent auditor, causing the auditor to overstate the value and profits of the investment fund to the victim investors. 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.
“As alleged, Peister preyed upon innocent investors to construct his house of cards. But that house collapsed under the weight of his lies,” stated United States Attorney Lynch. “Peister promised investors that he would invest their money safely and responsibly. Instead, he stole their money to finance his personal life style. Now, he will be held to account for his crimes. This Office will aggressively investigate and prosecute those who commit financial crimes and victimize investors.” Ms. Lynch expressed her grateful appreciation to the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission for their cooperation and assistance in the investigation.
FBI Assistant Director-in-Charge Venizelos stated, “As alleged, for years Peister swindled and conned innocent investors out of their hard-earned money to support his lavish lifestyle. He made false representations about the success of the investment fund to keep the financial scheme afloat and unsuspecting investors at bay. His actions serve as an example of the unconscionable greed that fuels these all too common fraud cases. The FBI is committed to investigating those who prey upon trusting individuals for their own personal gain.”
The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted, the defendant faces a maximum sentence of 20 years’ imprisonment on each of the securities fraud, wire fraud and mail fraud counts. Additionally, if convicted, Peister may be fined up to $5,000,000 for the securities fraud count and $250,000 for each of the wire and mail fraud counts.
The government’s case is being prosecuted by Assistant United States Attorneys Jacquelyn M. Kasulis, Jonathan P. Lax and Brian D. Morris.
This prosecution was the result of efforts by President Barack 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, investigator 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. For more information on the task force, visit http://www.StopFraud.gov.
The Defendant:
JAMES M. PEISTER
Age: 62
St. James, New York
Aubrey Lee Price, Former Bank Director Who Faked His Own Death, Pleads Guilty to Bank, Wire and Securities FraudRead the Press Release
STATESBORO, GA – Earlier today, Aubrey Lee Price, 47, pleaded guilty to bank, securities and wire fraud to resolve charges brought in the Southern District of Georgia and the Eastern District of New York relating to a multi-million dollar fraud scheme that Price executed to defraud dozens of investors and a federally insured bank. Based upon his guilty pleas, Price now faces up to 30 years in prison, millions of dollars in fines, and millions of dollars in restitution to the victims of his fraud. Today’s guilty plea took place before the Honorable B. Avant Edenfield, Senior United States District Judge for the Southern District of Georgia.
Southern District of Georgia United States Attorney Edward J. Tarver and Eastern District of New York United States Attorney Loretta E. Lynch announced the guilty pleas.
According to court filings and evidence presented at the guilty plea hearing, in 2010, an investment group controlled by Price invested approximately $10 million in the failing Montgomery Bank & Trust (“MB&T”), an FDIC-insured financial institution in Ailey, Georgia. Price was then made a director of MB&T and put in charge of investing the bank’s capital. Price told MB&T officials that he would invest the bank’s capital in U. S. Treasury securities, but instead, over the next eighteen months, Price embezzled over $21 million in capital from MB&T, and lost much of it by investing in risky equity securities and options. To cover up his fraud, Price provided MB&T officials with bogus account statements and other false documents which falsely indicated the bank’s capital was safely held in an account at a financial services firm, when in truth, most of the money was gone.
A further investigation of Price revealed that between June 2009 and June 2012, Price also defrauded numerous individuals who had invested in two investment funds Price managed, PFG LLC (“PFG”) and the Montgomery Growth Fund (“Montgomery Growth”). Price raised approximately $51 million from approximately 115 investors from across the country, and unsuccessfully invested funds in various equity securities, options, and real estate, including farms in South America. To cover up his losses, Price posted fake account statements on a secure PFG web site that fraudulently reflected fictitious assets and fabricated investment returns.
In mid-June 2012, Price sent acquaintances “suicide letters” in which he admitted he had defrauded MB&T Bank and his PFG investors, and suggested that he planned to kill himself by throwing himself off a high-speed ferry boat after it left the coast of Florida. As a result of the suicide claim, the United States Coast Guard searched to no avail for Price’s body. Shortly after sending the letters, Price disappeared. After a several-month search, on December 31, 2013, Price was arrested after he presented a false identification to a member of the Glynn County Georgia Sheriff’s Department office during a routine traffic stop in Brunswick, Georgia.
U. S. Attorneys Tarver and Lynch credited the Federal Bureau of Investigation (FBI) in Georgia, under the direction of Special Agent in Charge Britt Johnson, and in New York, under the direction of Assistant Director in Charge George Venizelos, with the investigation leading to today’s guilty pleas. They also thanked the United States Attorney’s Office for the Southern District of Florida; the United States Attorney’s Office for the Northern District of Georgia; the Securities and Exchange Commission (SEC), Atlanta Regional Office; the Federal Deposit Insurance Corporation (FDIC); the Federal Reserve Board; the Office of Inspector General; the United States Coast Guard; the United States Department of Labor; the Lowndes County Georgia Sheriff’s Department; the Glynn County Georgia Sheriff’s Department; the Toombs County Georgia Sheriff’s Department; and the Marion County Florida Sheriff’s Department for their cooperation and assistance in the investigation and prosecution of Price.
The Government is represented by Assistant United States Attorneys Brian T. Rafferty, T. Shane Mayes, and First Assistant United States Attorney James D. Durham of the U. S. Attorney’s Office for the Southern District of Georgia, and Assistant United States Attorneys Shannon C. Jones and Brian Morris of the U. S. Attorney’s Office for the Eastern District of New York.
This prosecution was the result of efforts by President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U. S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants. For more information on the task force, visit http://www.StopFraud.gov.
The Defendant:
AUBREY LEE PRICE
Age: 47
Valdosta, Georgia
S.D.G.A. Docket No. 612-CR-10
E.D.N.Y. Docket No. 13-CR-058
Philadelphia Store Owner Sentenced to 30 Months’ Imprisonment for Smuggling Elephant Ivory from AfricaRead the Press Release
Earlier today, Victor Gordon was sentenced before Judge Kiyo A. Matsumoto in U.S. District Court in Brooklyn, New York, to 30 months’ imprisonment, to be followed by 2 years of supervised release, for smuggling elephant ivory into the United States. As part of that sentence, the court ordered Gordon to pay a fine of $7,500 and to forfeit $150,000, along with the approximately one ton of elephant ivory that was seized by agents from Gordon’s Philadelphia store in April 2009.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Honora Gordon, Special Agent in Charge of the U.S. Fish and Wildlife Service’s Northeast Region Office of Law Enforcement.
“The illicit trade in elephant ivory has created an environmental crisis in Africa and is fueling the development of organized criminal groups around the world,” said United States Attorney Lynch. “For this reason, the United States has committed itself, through international treaties and domestic law, to preventing the flow of illegal ivory through and within our borders. This prosecution – which resulted in the seizure and forfeiture of one of the largest known caches of illegal elephant ivory in the United States and the imprisonment of the person who acquired and attempted to profit from it – is emblematic of that commitment.” Ms. Lynch commended the agents and inspectors of the Fish and Wildlife Service for their outstanding efforts in leading the investigation.
As is described in the government’s sentencing memorandum, over a period of at least nine years, the Gordon acquired more than 400 pieces of carved elephant ivory, valued at approximately $800,000. On four occasions beginning in 2006, Gordon paid a smuggler to acquire ivory directly from Africa and then unlawfully secret it into the United States through John F. Kennedy International Airport. In some instances, Gordon stained the ivory and directed the smuggler to create false receipts in order to make it appear that the ivory had been lawfully acquired before international and U.S. law imposed strict regulations on the importation of elephant ivory in 1989. Over the years, Gordon sold tens of thousands of dollars of carved ivory to customers from his Philadelphia store, and prior to the search of the store in April 2009, was attempting to sell his business, including the ivory collection, for $20 million.
Gordon’s sentence caps an eight-year investigation that has yielded nine convictions in this district for smuggling and Lacey Act offenses relating to the illegal importation and sale of elephant ivory.
The government’s case was prosecuted by Assistant United States Attorneys Darren A. LaVerne and Claire Kedeshian.
The Defendant:
Victor Gordon
Age: 71
Penn Valley, Pennsylvania
E.D.N.Y. Docket No. CR-11-517 (KAM)
Gambino Family Adminstration Member Bartolomeo Vernace Sentenced to Life ImprisonmentRead the Press Release
Earlier today at the federal courthouse in Brooklyn, Bartolomeo Vernace, a member of the administration of the Gambino organized crime family of La Cosa Nostra (the “Gambino family”), was sentenced to life imprisonment without parole plus ten years. On April 17, 2013, following a five-week jury trial before the Hon. Sandra L. Townes, Vernace was found guilty of a racketeering conspiracy spanning 1978 through 2011. The jury found that Vernace participated in all nine racketeering acts alleged as part of the conspiracy, including the 1981 double homicide of Richard Godkin and John D’Agnese, heroin trafficking, robbery, loansharking, and illegal gambling.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“For more than four decades, the defendant dedicated his life to committing crimes for the mafia. He rose through the ranks to become a powerful Gambino family leader by making money from crime and committing brutal acts of violence, including the 1981 murders of two innocent bar owners over a spilled drink. Though they were taken from their families long ago, Richard Godkin and John D’Agnese – two businessmen who also ran the local Boys’ Club – have not been forgotten,” stated United States Attorney Lynch. “We hope the victims’ families are able to take some measure of comfort from the fact that, with this life sentence, one of the killers has now been brought to justice.” Ms. Lynch expressed her grateful appreciation to the FBI, the agency that led the government’s investigation.
“After more than 33 years evading justice, Bartolomeo “Bobby Glasses” Vernace can hide no more. Vernace made a life of being a key player in the Gambino crime family where his activities led to his convictions for heroin trafficking, robbery, loansharking, gambling, firearms, as well the vicious double murder. Today’s life sentence ensures the rest of Bobby Glasses’s life will only be seen inside of a federal facility,” stated FBI Assistant Director-in-Charge Venizelos.
The evidence at trial established that Vernace, known by various aliases including “Bobby Glasses,” had a long career in the mafia that began in the early 1970s and culminated in his rise to the rank of a captain who served on the three-member ruling panel overseeing the Gambino family. Vernace was arrested on January 20, 2011, as part of a national sweep of almost 100 members and associates of organized crime led by the U.S. Department of Justice and Federal Bureau of Investigation.
Among the crimes he committed for the mafia, Vernace, together with two Gambino family associates, murdered Richard Godkin and John D’Agnese in the Shamrock Bar in the Woodhaven neighborhood of Queens on April 11, 1981, after a dispute arose between a Gambino family associate and others in the bar over a spilled drink. The associate left the bar and picked up Vernace and a third accomplice at a nearby social club. A short time later, the three men entered the bar and gunned down Godkin and D’Agnese – the owners of the bar – as the bar’s patrons fled for cover.
In the weeks after the murders, Vernace went into hiding. He did not reemerge until years later when, having successfully avoided state charges for the murders, Vernace returned to Queens and to an active role in the Gambino family. Over the next two decades, his power within the mafia grew, as he operated a large and profitable crew from a café on Cooper Avenue in the Glendale neighborhood of Queens.
In 1998, Vernace was charged in Queens County Supreme Court with the Godkin and D’Agnese murders, but was acquitted after trial in 2002. During testimony in the federal trial in 2013, an eyewitness to the murders testified that he had lied during the state trial about Vernace’s role in the murders out of fear of retribution. The eyewitness testified in the federal case that he recognized all three assailants but that he had been afraid to testify against them because, in his words, “two men were dead over a spilled drink. I think that was reason enough to be afraid.”
The government’s case was prosecuted by Assistant United States Attorneys Evan M. Norris, Amir H. Toossi, M. Kristin Mace, and Claire S. Kedeshian.
The Defendant:
BARTOLOMEO VERNACE
Age: 65
E.D.N.Y. Docket No. 11-CR-005 (SLT)
Long Island Doctor Arrested for Illegal Distribution of Controlled SubstancesRead the Press Release
A criminal complaint was unsealed today in federal court in the Eastern District of New York charging Dr. Michael Randall with illegal distribution of thousands of prescription pain pills, including oxycodone, oxymorphone, methadone, and carisoprodol. Randall surrendered earlier today, and his initial appearance is scheduled for this afternoon before United States Magistrate Judge A. Kathleen Tomlinson at the United States Courthouse, 100 Federal Plaza, Central Islip, New York.
The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, James J. Hunt, Acting Special Agent-in-Charge, Drug Enforcement Administration, New York (DEA), and Tom F. O’Donnell, Special Agent-in-Charge, U.S. Department of Human Services, Office of Inspector General, New York Region (HHS-OIG).
This morning, as part of a continuing federal and state prescription drug abuse initiative within the Eastern District of New York, Randall was arrested upon his surrender to members of a DEA Tactical Diversion Squad1 on charges of illegally distributing prescription pain pills between January 2009 and September 2013. According to the complaint, Randall, whose family medical practice, Middle Country Family Medical, P.C., is located in Centereach, New York, wrote hundreds of prescriptions for oxycodone, oxymorphone, methadone, and carisoprodol to patients on a continuing basis outside the usual course of professional practice and not for any legitimate medical purpose.
“By prescribing thousands of highly addictive pain pills without a legitimate medical purpose, Dr. Randall ignored the law and his own patients’ well-being,” stated United States Attorney Lynch. “We are committed to vigorous prosecution of doctors who abdicate their Hippocratic Oath, participate in the illegal distribution of prescription drugs, and contribute to the rise of drug abuse and addiction in our communities.” Ms. Lynch expressed her grateful appreciation to each of the agencies that participated in the government’s investigation.
DEA Acting Special Agent-in-Charge Hunt stated, “The adverse consequences of prescription drug abuse like theft, threats of violence, opiate addiction, and overdose deaths throughout America are growing in numbers. And today’s arrest of Dr. Randall shows law enforcement’s commitment to fighting the spread of opiate use and abuse by identifying and arresting those who, as alleged in the complaint, are responsible for supplying and distributing illegally prescribed medication.”
“The U.S. Department of Health and Human Services, Office of Inspector General, will continue to investigate physicians that illegally distribute narcotics like common drug dealers,” said HHS-OIG Special Agent-in-Charge O’Donnell. “Along with our law enforcement partners, today’s arrest reaffirms our commitment to protecting public safety, as well as the federally funded health care programs intended for the nation’s most vulnerable Americans.”
The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, the defendant faces a maximum sentence of 20 years’ imprisonment and a $1 million fine.
In January 2012, the United States Attorney’s Office for the Eastern District of New York 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 Prescription Drug Initiative has brought over 160 federal and local criminal prosecutions, including the prosecution of 15 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.
The government’s case is being prosecuted by Assistant United States Attorney Charles N. Rose.
The Defendant:
MICHAEL RANDALL
Age: 47
South Setauket, New York
E.D.N.Y. Docket No. 14-MJ-464
_____________________________________________________________________________
1 The Tactical Diversion Squad comprises DEA agents and law enforcement officers with the Nassau County Police Department, the New York State Police, the Port Washington Police Department, and the Rockville Centre Police Department
Former Longshoremen Plead Guilty to Extortion Conspiracy Involving Christmastime Tribute PaymentsRead the Press Release
NEWARK, N.J. B Three former longshoremen admitted today that they conspired to extort others in Local 1235 of the International Longshoremen’s Association (ILA) for Christmastime tribute payments, New Jersey U.S. Attorney Paul J. Fishman and Eastern District of New York U.S. Attorney Loretta E. Lynch announced.
Salvatore LaGrasso, 58, of Edison, N.J.; Michael Nicolosi, 45, of Staten Island, N.Y.; and Julio Porrao, 71, of Palm Coast, Fla. – all former supervisors on the New Jersey piers – pleaded guilty today to conspiring to extort Christmastime tributes from the union members – count three of the second superseding indictment against them. LaGrasso, Nicolosi and Porrao entered their guilty pleas before U.S. District Judge Claire C. Cecchi in Newark federal court.
According to documents filed in this case and statements made in court:
During their guilty plea proceedings, LaGrasso, Nicolosi and Porrao admitted that they conspired with each other and others to compel tribute payments from ILA union members, who made the payments based on actual and threatened force, violence and fear. The timing of the extortions typically coincided with the receipt by certain ILA members of “Container Royalty Fund” checks, a form of year-end compensation. LaGrasso and Nicolosi were suspended from their positions following their arrests in this case. Porrao had already retired from his employment on the New Jersey piers at the time of his arrest.
Charges are still pending against five defendants in the superseding indictment, including a racketeering conspiracy charge against Stephen Depiro, 58, of Kenilworth, N.J. – a soldier in the Genovese organized crime family of La Cosa Nostra (Genovese family). Since at least 2005, Depiro has managed the Genovese family’s control over the New Jersey waterfront – including the nearly three-decades-long extortion of port workers in ILA Local 1, ILA Local 1235 and ILA Local 1478. Members of the Genovese family, including Depiro, are charged with conspiring to collect tribute payments from New Jersey port workers at Christmastime each year through their corrupt influence over union officials, including the last three presidents of Local 1235.
The charge to which LaGrasso, Nicolosi, and Porrao pleaded guilty carries a maximum potential penalty of 20 years in prison and a $250,000 fine. Sentencing is currently scheduled for Sept. 17, 2014, for LaGrasso and Nicolosi and for Sept. 24, 2014, for Porrao.
U.S. Attorneys Fishman and Lynch credited the FBI in New Jersey, under the direction of Special Agent in Charge Aaron T. Ford, and in New York, under the direction of Assistant Director in Charge George Venizelos, as well as the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Acting Special Agent in Charge Cheryl Garcia, with the investigation leading to today’s guilty pleas.
The government is represented by Assistant U.S. Attorney Jacquelyn M. Kasulis of the U.S. Attorney’s Office, Eastern District of New York, and Assistant U.S. Attorney Anthony Mahajan, of the U.S. Attorney’s Office, District of New Jersey.
The charges and allegations against the remaining defendants are merely accusations and they are considered innocent unless and until proven guilty.
14-184 ###
Defense counsel: Peter Till Esq., Springfield, N.J.
Arthur L. Aidala Esq., Brooklyn, N.Y.
Erik Hassing Esq., Flanders, N.J.
Unlicensed Commodities Trader Sentenced to 36 Months in Connection with $300,000 Ponzi SchemeRead the Press Release
Earlier today at the federal courthouse in Brooklyn, NY, Jeffrey Shalhoub was sentenced to 36 months’ imprisonment in connection with his operation of a $300,000 Ponzi scheme. Shalhoub solicited investors to invest money into his company, The 9 Group, Ltd., by telling them they would receive profits of up to 10% of their principal every week through investments in the commodity market. However, Shalhoub never held the required license to operate a commodities trading pool and, after receiving $300,000 from investors, Shalhoub embezzled over $150,000 and lost the remainder through bad investments. He concealed the theft and losses with fraudulent account statements showing that his investors’ accounts were earning returns of up to 5.2% each week. To perpetuate the fraud, Shalhoub used the money of new investors to pay off earlier investors.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Philip R. Bartlett, Inspector in Charge, United States Postal Inspection Service, New York.
“Shalhoub lured his victims in with promises of high returns from a business investment. All they got, however, were false promises and phony documents, as he used lies and deception to steal the money entrusted to him,” Ms. Lynch said. “While there may be no risk-free investment, all investors are entitled to honesty and fidelity.”
The sentence was imposed by the Hon. Sterling Johnson, Jr. As part of the sentence, Judge Johnson ordered Shalhoub to pay restitution of over $240,000.
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. 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 government’s case is being prosecuted by Assistant United States Attorney Tyler Smith.
The Defendant:
JEFFREY SHALHOUB
Age: 38
Residence: Staten Island, New York
E.D.N.Y. Docket No. 13-CR-434 (SJ)
USA Lynch Highlighted in Gotham Magazine's "the 50 Women Who Run New York"Read the Press Release
http://gotham-magazine.com/personalities/articles/50-most-powerful-women-in-new-york
TweetMember of the Granados-Hernandez Sex Trafficking Organization, Samuel Granados-Hernandez, Sentenced to 15 Years in PrisonRead the Press Release
Earlier today, Samuel Granados-Hernandez was sentenced before Judge Kiyo A. Matsumoto in U.S. District Court in Brooklyn, New York, to 15 years’ imprisonment, to be followed by five years of supervised release, for his involvement in sex trafficking.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York and James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), New York.
“This defendant took advantage of young women who were seeking a better life, tricking them into trusting him and then forcing them into sexual slavery. He also used violence to achieve his ends, including forcing one of his victims to have an abortion when she became pregnant,” stated United States Attorney Lynch. “This sentence sends a message to would-be traffickers that we will not tolerate trafficking of women and girls, and we stand firm in our commitment to eradicate human trafficking.” Ms. Lynch extended her grateful appreciation to the organizations that provided services and advocacy to the victims in this case, including Sanctuary for Families, Safe Horizon, My Sister’s Place, and the law firm of Steptoe & Johnson.
On July 24, 2012, Granados-Hernandez pled guilty to a superseding information charging that between October 2000 and April 2011, he smuggled three victims from Mexico illegally into the United States and forced each of them to engage in prostitution. Granados-Hernandez, who kept the prostitution proceeds earned by the victims, engaged in a pattern of abuse for over a decade.
According to court documents, Granados-Hernandez smuggled each of the victims with the intent to force then into prostitution. For example, soon after he smuggled the victim identified as Jane Doe #6 to New York from Mexico in early 2010, Granados-Hernandez insisted that she work as a prostitute. When she refused, Granados-Hernandez threatened her mother who was in Mexico. As a result of continued threats, Jane Doe #6 worked for the Granados-Hernandez in multiple states through the summer of 2010.
Similarly, in 2010, Granados-Hernandez smuggled the victim identified as Jane Doe #7 into the United States under the guise of a promise of a better life. After their arrival to New York, Granados-Hernandez told her that because of a debt owed to the smugglers, she had to work as a prostitute. Shortly after she began working as a prostitute, Jane Doe #7 became pregnant. Granados-Hernandez became violent, including choking and hitting her, and forced her to have an abortion.
In May 2010, Granados-Hernandez recruited Jane Doe #8 and smuggled her into the United States shortly thereafter. Similar to his other victims, she was forced into prostitution and worked for the Granados-Hernandez as a prostitute in New York, Maryland, and Virginia until January 2011.
At the sentencing, a letter written by a fourth victim of Granados-Hernandez was read to the Court. This victim described how Granados-Hernandez was “physically, verbally and sexually abusive,” and how Granados- Hernandez “took away my youth, my innocence and my ability to trust and caused me an immeasurable amount of pain.”
Granados-Hernandez’s brother Eleuterio Granados-Hernandez and his cousin, Angel Cortez-Granados, also smuggled young women from Mexico illegally into the United States, forced them to work as prostitutes in New York City and elsewhere, and collected profits from their activities. Both pleaded guilty to sex trafficking. In September 2013, Cortez-Granados was sentenced to 15 years in prison. In March 2014, Eleuterio Granados-Hernandez was sentenced to 22 years in prison. In total, six members of the Granados family have been prosecuted and convicted in the United States.
The government’s case was prosecuted by Assistant United States Attorney Soumya Dayananda.
The Defendant:
SAMUEL GRANADOS-HERNANDEZ
Age: 33
Mexico
E.D.N.Y. Docket No. CR-11-297 (S-5) (KAM)
Leaders of Violent Gang Convicted on All Counts in Racketeering and Murder CaseRead the Press Release
Yesterday, following more than two weeks of trial, a federal jury in Brooklyn, New York, returned guilty verdicts against Anthony Mayes Jr. and Antoine Mayes on charges of racketeering – including, against Anthony Mayes Jr., three murders as racketeering acts – as well as multiple counts based on their trafficking in crack cocaine. Earlier today, the jury also rendered a special verdict authorizing the forfeiture of almost $64,000 in cash, several firearms, and more than 500 rounds of ammunition seized from the defendants’ Queens residence.
The charges arose out of the defendants’ long-time dominance of a drug crew that operated in the East New York neighborhood of Brooklyn, New York, and in Williamston, North Carolina. When sentenced by United States District Judge Allyne R. Ross, the defendants face mandatory sentences of life imprisonment.
The verdicts were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
Between 1998 and 2010, the Mayes brothers led a group of violent drug dealers that sold crack cocaine and was based on Ashford Street in East New York. The criminal enterprise used violence and the threat of violence to maintain its source of income. Specifically, on June 18, 1999, Anthony Mayes Jr. shot and killed David Martin at a party in East New York, in retaliation for Martin having previously stabbed Mayes. This, and other acts of violence, were well known in the community and allowed the enterprise to dominate the local drug trade. After the Martin murder, Anthony Mayes Jr. moved to Williamston, North Carolina, where, using the alias Gus Rascoe Jr., he quickly came to dominate the drug trade in that area, selling crack-cocaine that he transported from New York and elsewhere. On January 27, 2003, Anthony Mayes Jr. murdered Eric Rayshawn Keel, and on February 29, 2004, he murdered Keith Cofield, both in North Carolina. Keel was murdered for purportedly stealing drugs belonging to the Mayes brothers’ criminal enterprise. Cofield was murdered because he owed a drug-related debt to the enterprise -- his corpse was dumped into a river.
Antoine Mayes was convicted of three separate counts of attempted murder based on enterprise’s drug and turf-related disputes in Brooklyn.
“For over a decade the Mayes brothers ran a violent and lucrative drug organization that held the residents of East New York hostage, forcing them to live in fear of violence. They expanded their operation to the State of North Carolina, dominating the drug trade in one corner of that state. The organization used murder as a management tool, killing those who threatened their source of income or just their stature on the street,” stated United States Attorney Lynch. “Today, their ability to earn money through crime comes to an end, and so does their rule of the streets. This verdict sends the message that that violence and drug-dealing have no place in our communities.” Ms. Lynch extended her grateful appreciation to Federal Bureau of Investigation, New York Field Office, the New York City Police Department, the North Carolina State Bureau of Investigation, the Williamston Police Department, the Martin County Sheriff’s Office, and the Edgecombe County Sheriff’s Office for their outstanding work in this case.
The government’s case was prosecuted by Assistant United States Attorneys Berit W. Berger, Richard M. Tucker, and Alicyn Cooley.
The Defendants:
ANTHONY MAYES JR.
Age: 33
Brooklyn, New York
ANTOINE MAYES
Age: 30
Brooklyn, New York
E.D.N.Y. Docket No. 12 CR 385 (ARR)
Union Officials Plead Guilty to Extortion Conspiracy Involving Christmastime Tribute PaymentsRead the Press Release
NEWARK, N.J. B Three former International Longshoremen’s Association (ILA) union officials admitted today that they conspired to extort ILA Local 1235 longshoremen on the New Jersey piers for Christmastime tribute payments, New Jersey U.S. Attorney Paul J. Fishman and Eastern District of New York U.S. Attorney Loretta E. Lynch announced.
Vincent Aulisi, 82, of West Orange, N.J., the president of ILA Local 1235 from approximately 2006 through 2007; Thomas Leonardis, 56, of Glen Gardner, N.J., the president of the union from approximately 2008 through 2011 and former ILA representative; and Robert Ruiz, 55, of Watchung, N.J., the delegate of the union from approximately 2007 through 2010 and former ILA representative, pleaded guilty today to conspiring to extort Christmastime tributes from ILA Local 1235 members – count three of the second superseding indictment against them. Aulisi, Leonardis and Ruiz entered their guilty pleas before U.S. District Judge Claire C. Cecchi in Newark federal court.
According to documents filed in this case and statements made in court:
During their guilty plea proceedings, Aulisi, Leonardis and Ruiz admitted that they conspired with each other and others to compel tribute payments from ILA union members, who made the payments based on actual and threatened force, violence and fear. The timing of the extortions typically coincided with the receipt by certain ILA members of “Container Royalty Fund” checks, a form of year-end compensation. Leonardis and Ruiz were suspended from their positions following their arrest in January 2011. Aulisi had already retired from his employment on the New Jersey piers at the time of his arrest.
Charges are still pending against eight defendants in the superseding indictment, including a racketeering conspiracy charge against Stephen Depiro, 58, of Kenilworth, N.J. – a soldier in the Genovese organized crime family of La Cosa Nostra. Since at least 2005, Depiro has managed the Genovese family’s control over the New Jersey waterfront – including the nearly three-decades-long extortion of port workers in ILA Local 1, ILA Local 1235, and ILA Local 1478. Members of the Genovese family, including Depiro, are charged with conspiring to collect tribute payments from New Jersey port workers at Christmastime each year through their corrupt influence over union officials, including the last three presidents of Local 1235.
Two of the three remaining Genovese family associates are former union officials: Albert Cernadas, 78, of Union, N.J., the president of ILA Local 1235 from approximately 1981 to 2006 and former ILA Executive vice president; and Nunzio LaGrasso, 63, of Florham Park, N.J., the former vice president of ILA Local 1478 and former ILA Representative. The third, Richard Dehmer, 78, of Springfield, N.J., is charged with illegal gambling conduct unrelated to the waterfront extortions.
The charge to which Aulisi, Leonardis and Ruiz pleaded guilty carries a maximum potential penalty of 20 years in prison and a $250,000 fine. Sentencing is currently scheduled for Sept. 4, 2014, for Ruiz and Sept. 9, 2014, for Aulisi and Leonardis.
U.S. Attorneys Fishman and Lynch credited the FBI in New Jersey, under the direction of Special Agent in Charge Aaron T. Ford, and in New York, under the direction of Assistant Director in Charge George Venizelos, as well as the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Acting Special Agent in Charge Cheryl Garcia, with the investigation leading to today’s guilty pleas.
The government is represented by Assistant U.S. Attorney Jacquelyn M. Kasulis of the U.S. Attorney’s Office, Eastern District of New York, and Assistant U.S. Attorney Anthony Mahajan, of the U.S. Attorney’s Office, District of New Jersey.
The charges and allegations against the remaining defendants are merely accusations and they are considered innocent unless and until proven guilty.
Defense counsel: Joseph Fusella Esq., Bloomfield, N.J.
Michael N. Pedicini Esq., Chatham, N.J.
Marc Agnifilo Esq., New York, N.Y.
Brooklyn Medical Equipment Providers Charged in Alleged $13 Million Scheme to Defraud Government Funded Health PlansRead the Press Release
BROOKLYN, NY – Earlier today, an indictment was unsealed charging Chikwere Onyekwere and Uchechi Onyekwere, registered owners and officers of purported durable medical equipment (“DME”) companies located in Brooklyn, New York, with executing a scheme to submit over $13 million in fraudulent claims to a New York-based, government-sponsored managed care organization. The defendants were arrested earlier this morning and will be presented for arraignment later today at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York, before United States Magistrate Judge Joan M. Azrack.
The charges and arrests were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, David O’Neil, Acting Assistant Attorney General of the Justice Department’s Criminal Division, George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office, and Thomas O’Donnell, Special Agent in Charge, Department of Health and Human Services-Office of Inspector General (HHS-OIG).
According to the indictment, beginning in approximately 2008 and continuing through at least the end of 2013, the defendants formed a series of sham DME companies which they used to submit fraudulent claims to the managed care organization for reimbursement for DME that was purportedly provided to the organization’s members, many of whom were elderly or disabled and had insurance through Medicare Part C Advantage Plans or New York Medicaid Managed Care plans. In an effort to make their sham companies appear legitimate, the defendants obtained Tax Identification Numbers from the Internal Revenue Service, opened bank accounts and established phony business addresses for the sham companies at UPS Store locations and other addresses where the defendants lived. The defendants also gave names to the sham companies similar to DME companies that were approved providers in the managed care organization’s network of DME providers.
As part of the scheme, the defendants placed telephone calls in which they impersonated representatives of the approved DME providers to obtain preauthorization codes from the managed care organization for claim submissions. The defendants later submitted claim forms to the managed care organization referencing the preauthorization codes but sought payment in the name of the sham companies that they set up. The DME identified in the claim forms was not provided to the members of the managed care organization, many of whom called the managed care organization to complain. As alleged in the indictment, the sham DME companies associated with the defendants submitted over $13 million in fraudulent claims and were paid over $4 million for those claims.
“As alleged, the defendants used fictitious companies and fraudulent claims to steal very real healthcare dollars,” stated United States Attorney Lynch. “The Medicare and Medicaid systems serve our most vulnerable citizens, and those who seek to steal those tax dollars will be prosecuted to the fullest extent of the law.”
“Using cutting-edge, data-driven investigative techniques, we are bringing fraudsters to justice and saving the American taxpayers billions of dollars," said Acting Assistant Attorney General David A. O'Neil of the Justice Department's Criminal Division. "Overall, since its inception, the Department of Justice’s Medicare Fraud Strike Force has charged nearly 1,900 individuals involved in approximately $6 billion of fraud. We are committed to using every tool at our disposal to prevent, deter, and prosecute health care fraud.”
“Fraud against the government is fraud against every American taxpayer. We’ll continue to root out corruption wherever we find it,” stated FBI Assistant Director in Charge Venizelos
“The Brooklyn Strike Force will continue to vigorously investigate Medicare fraud at all levels,” said HHS-OIG Special Agent-in-Charge O’Donnell. “Sham DME companies need to be eradicated and the fraudsters need to be held accountable for their actions.”
The investigation has been conducted by the FBI and HHS-OIG, brought as part of the Medicare Fraud Strike Force, and supervised by the U.S. Attorney’s Office for the Eastern District of New York and the Criminal Division’s Fraud Section. The case is being prosecuted by Trial Attorney Turner Buford of the Criminal Division’s Fraud Section and Assistant United States Attorney Peter Baldwin of the U.S. Attorney’s Office for the Eastern District of New York.
The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, the defendant faces a maximum sentence of ten years.
Since their inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,900 defendants who have collectively billed the Medicare program for more than $6 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, has removed over 17,000 providers from the Medicare program since 2011.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.
The Defendant:
CHIKWERE ONYEKWERE
Age: 28
Brooklyn, New York
UCHECHI ONYEKWERE
Age: 33
Queens, New York
E.D.N.Y. Docket No. 14-274
Long Island Real Estate Manager Pleads Guilty in $96 Million Ponzi SchemeRead the Press Release
Earlier today, Adam J. Manson, 42, pleaded guilty to conspiracy to commit securities fraud for engaging in a $96 million Ponzi scheme with co-defendant and former investment fund manager Brian R. Callahan. Pursuant to his plea agreement with the government, Manson has agreed to forfeit all unsold units at the Panoramic View beachfront resort and residence development in Montauk, New York, valued in excess of $60 million, and an additional $3.9 million in criminal proceeds. When sentenced on October 3, 2014, Manson faces up to five years in prison and the payment of approximately $96 million in restitution to the victims of his fraud. Callahan pleaded guilty on April 29, 2014, to one count of securities fraud and one count of wire fraud and faces up to 40 years in prison when sentenced on August 8, 2014.
The guilty pleas were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Shantelle P. Kitchen, Acting Special Agent-in-Charge, United States Internal Revenue Service-Criminal Investigation, New York (IRS).
“Adam Manson assisted his brother-in-law Brian Callahan in orchestrating one of the largest Ponzi schemes in Long Island history by lying to independent auditors and lending institutions. Today’s guilty plea, together with Callahan’s guilty plea approximately two weeks ago, demonstrates this Office’s dedication and commitment to aggressively pursue those who seek to defraud the investing public through lies and deceit. We hope that the guilty pleas provide some measure of relief and closure to the defrauded investors,” stated United States Attorney Lynch. Ms. Lynch expressed her grateful appreciation to the FBI, the IRS, Securities and Exchange Commission, and the British Virgin Islands Financial Investigation Agency for their cooperation and assistance in the investigation and prosecution of this case.
According to court filings and facts presented at the plea hearing, between December 2006 and February 2012, co-defendant Callahan raised more than $118 million from at least 40 investors in connection with four different investment funds that he managed. Callahan had assured those investors that their money would be invested in mutual funds, hedge funds, and other securities. Instead of investing the money as he promised, Callahan misappropriated approximately $96 million and began to operate the investment funds as a large-scale Ponzi scheme. Among other things, Callahan diverted millions of dollars towards the Panoramic View, an unprofitable 117-unit beachfront resort and residence development in Montauk, New York, which he owned with Manson. In furtherance of the scheme, Manson assisted Callahan in deceiving the independent auditors of the Callahan funds by submitting bogus promissory notes that overvalued the assets of the funds and by lying about the debts owed by the Panoramic View.
Today’s guilty plea took place before United States Magistrate Judge A. Kathleen Tomlinson.
The government’s case is being prosecuted by Assistant United States Attorneys Christopher C. Caffarone, Winston M. Paes, Brian D. Morris, and Karin K. Orenstein.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it 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. 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 2,900 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The Defendant:
ADAM J. MANSON
Age: 42
Old Westbury, New York
E.D.N.Y. Docket No. 13-CR-453