Eastern District of New York
Press releases recorded for this federal judicial district.
Fund Manager and Real Estate Developer Arrested and Charged in $96 Million Securities FraudRead the Press Release
A 24-count indictment was unsealed this morning in federal court in Central Islip, New York, charging Brian R. Callahan, an investment fund manager, and Adam J. Manson, a real estate developer, with conspiracy to commit securities and wire fraud for their roles in operating a $96 million Ponzi scheme. Both defendants are in custody and will be arraigned this afternoon before United States Magistrate Judge A. Kathleen Tomlinson at the United States Courthouse in Central Islip. In addition, the government seized over $1 million of alleged criminal proceeds and moved to forfeit the defendants’ interest in the Panoramic View Resort & Residences in Montauk, New York (the “Panoramic View”).
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); and Toni Weirauch, Special Agent-in-Charge, United States Internal Revenue Service, Criminal Investigation, New York (IRS).
According to the indictment and other court filings, between December 2006 and February 2012, Callahan raised more than $118 million from at least 40 investors in connection with four different investment funds that he managed. He 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, that he owned with his brother-in-law and co-defendant, Adam Manson. He also commingled the money from the various investment funds and used it to pay tens of millions of dollars in partial redemptions to his victim investors to keep the Ponzi scheme afloat, and to purchase luxury items such as expensive cars and homes in Old Westbury and Westhampton, New York. To avoid detection and continue the scheme, Callahan sent fake account statements to investors that falsely showed that their funds were invested and performing well, and he repeatedly lied to his investors about both the nature and status of their investments.
“As alleged, the defendants used one of Long Island’s landmarks, the Panoramic View Resort, to perpetrate a wide-ranging fraud,” stated United States Attorney Lynch. “Callahan gave his word that he would invest his clients’ funds safely and responsibly in established vehicles. Instead, he simply stole the funds to prop up his partner’s failing investment. To conceal their status as business failures, the defendants employed all the tricks in the typical con man’s bag. They created fake documents, stole a person’s identity and engaged in forgery. The defendants allegedly lied to the lender, they lied to the auditor, and Callahan repeatedly lied to his investors. The lies stop now. Today’s arrests demonstrate the Office’s commitment to aggressively prosecute those individuals who commit financial crimes.” Ms. Lynch expressed her grateful appreciation to the Securities and Exchange Commission and the British Virgin Islands Financial Investigation Agency for their cooperation and assistance in the investigation.
FBI Assistant Director-in-Charge Venizelos stated, “Allegedly, Mr. Callahan and Mr. Manson violated the trust of their clients, stealing victims’ hard earned money to perpetuate their fraud. Instead of investing the funds as promised, Mr. Callahan used the deposits to perpetuate the scheme, all while buying luxury cars and an estate in Westhampton. Mr. Callahan was so indiscriminant, he even stole from a Long Island Fire Department. Today, the game is up. The FBI will continue working to protect investors and stop alleged fraudsters.
IRS Special Agent-in-Charge Weirauch stated, “The architects of Ponzi-type schemes often employ a variety of sophisticated measures to keep them operating without detection. However, the cooperation between IRS-Criminal Investigation, the U.S. Attorney’s Office, and the FBI should give the investing public confidence that such schemes will ultimately be uncovered and thoroughly investigated, and that the scammers will be prosecuted.”
In one instance, Callahan allegedly solicited a $600,000 investment from a Long Island-based fire department by promising to invest the fire department’s money in mutual funds and other securities. Instead of investing the money, Callahan fraudulently diverted the fire department’s funds to the Panoramic View, and sent bogus account statements to the fire department that falsely showed that the funds had been invested in mutual funds. Callahan also convinced a Maryland resident to invest approximately $11 million after promising to invest those funds in low-risk securities. Callahan used the investor’s money to make redemption payments to other investors whom he had previously defrauded and to keep the Ponzi scheme afloat.
According to the indictment, Manson managed the Panoramic View property and poured the money that Callahan had diverted from the investors into Manson’s struggling real estate project at the Panoramic View. To help Callahan carry out his investment scheme, Manson lied to the independent auditor of Callahan’s investment funds and, together with Callahan, provided fake documents, including bogus promissory notes and doctored balance sheets, to the independent auditor. Manson’s and Callahan’s fraudulent actions concealed the misuse of the investors’ funds and caused the auditor to overstate the value and profits of Callahan’s investment funds to the victim investors. As a result of Manson and Callahan’s fraudulent actions, investors were lulled into believing that the funds were performing, and they continued to “invest” their money with Callahan.
As alleged in the indictment, Manson also defrauded a New York-based lending institution that had loaned more than $45 million to Manson in connection with his real estate development project at the Panoramic View. While attempting to extend these loans past their maturity date, Manson misled the lender about the money that the Panoramic View had received from Callahan’s funds, and falsely told the lender that the funds were from his father. Manson engaged in this fraudulent conduct in an effort to conceal the fact that he was simultaneously telling the independent auditor of the Callahan funds that there were no other creditors or debt associated with the Panoramic View.
The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted, the defendants each face a maximum sentence of twenty years’ imprisonment on each of the securities fraud, wire fraud and conspiracy to commit wire fraud counts, five years’ imprisonment on the conspiracy to commit securities fraud count, and Callahan faces two years’ imprisonment for each of the aggravated identity theft counts. Additionally, if convicted, Callahan and Manson may be fined up to $5,000,000 for each of the securities fraud counts, $250,000 for each of the wire fraud, conspiracy to commit wire fraud and conspiracy to commit securities fraud counts, and Callahan may be fined up to $250,000 for each of the aggravated identity theft counts. In addition to seizing over $1 million in alleged criminal proceeds, the government is also seeking to forfeit all Panoramic View cooperative units held by Callahan and Manson, together with Callahan’s residence in Old Westbury, New York, and Manson’s beachfront condominium in Westhampton, New York.
The government’s case is being prosecuted by Assistant United States Attorneys David C. Woll, Jr., Christopher C. Caffarone, Brian D. Morris, and Karin Orenstein.
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 Defendants:
BRIAN R. CALLAHAN
Age: 43
Old Westbury, New YorkADAM J. MANSON
Age: 41
Old Westbury, New YorkFlorida Man Sentenced to 24 Years in Prison for Conspiring to Kill Federal JudgeRead the Press Release
BROOKLYN, N.Y.-- U.S. Attorney William J. Hochul, Jr. announced today that Dejvid Mirkovic, 38, of Lake Worth, Florida, was sentenced by U.S. District Judge John Keenan to 24 years in prison for conspiring to murder the U.S. District Judge (the “federal judge”) who presided over the boiler room fraud conviction of Mirkovic’s coconspirator, a close business associate. Mirkovic and his coconspirator agreed to pay $40,000 to an undercover police officer, who they thought was a hit-man, to kill the federal judge as well as the Assistant U.S. Attorney (the “federal prosecutor”) who successfully handled the coconspirator’s fraud prosecution. Mirkovic paid the undercover officer $22,000 in cash as a down payment for the murders of the federal judge and the federal prosecutor.
In addition to the term of imprisonment, Judge Keenan sentenced Mirkovic to five years of supervised release and the forfeiture of over $200,000, a car and four firearms.
According to case filings and statements at Mirkovic’s guilty plea proceeding, law enforcement authorities learned of the plot in August 2012, when a confidential informant reported that Mirkovic’s coconspirator stated he wanted to torture and kill the federal judge and the federal prosecutor and asked the informant for assistance in arranging for a hit-man to carry out the murders. During the subsequent investigation, two undercover law enforcement officers, posing as hit-men, met with Mirkovic and the coconspirator numerous times at locations on Long Island, including at the Nassau County Correctional Center (“NCCC”), where the coconspirator was being held. At one of the first meetings, the coconspirator offered to pay one of the undercover officers $3,000 to assault an individual with whom the coconspirator had a financial dispute. Mirkovic then met with one of the undercover officers and paid him $1,500 as a down payment for the assault. After one of the undercover officers showed proof of the purported assault of John Doe – in fact, a staged photograph and an identification card for John Doe – Mirkovic paid the undercover officer the $1,500 balance.
Later that same day, Mirkovic again met with the undercover officer, relayed the coconspirator’s instructions to murder the federal judge and federal prosecutor, and offered $40,000 for commission of the two murders. Mirkovic also gave the undercover officer a $12,000 down payment and paid an additional $10,000 the following week. Mirkovic promised payment of the final $18,000 upon confirmation of the murders. At the time of Mirkovic’s arrest at his home in Lake Worth, Florida, law enforcement officers recovered $18,000 in cash and a loaded 9mm semi-automatic handgun.
In pleading guilty on March 13, 2013, Mirkovic admitted under oath that he agreed to kill the federal judge in retaliation for the performance of the judge’s duties. Mirkovic further admitted under oath that he traveled to the Eastern District of New York in the fall of 2012 and made a down payment for the murder.
The sentence was the latest development in an investigation handled by Special Agents of the Federal Bureau of Investigation, New York Office, under the direction of Assistant Director-in-Charge George Venizelos. The government’s case is being prosecuted by Assistant United States Attorneys Marshall L. Miller, Una A. Dean, and Brian Morris of the Eastern District of New York, under the supervision of U.S. Attorney William J. Hochul of the Western District of New York.
Bricklayers Union Shop Steward Pleads Guilty to Accepting BribesRead the Press Release
Earlier today, in federal court in Brooklyn, Russell Argila, a former shop steward for Local 1 New York of the International Union of Bricklayers and Allied Craftworkers, pleaded guilty to a criminal information charging him with accepting illegal bribe payments in his capacity as a union official. As alleged in court documents, Argila accepted $7,800 in cash bribes from an employer of the bricklayers whose interests Argila represented as a shop steward for the union. Argila was arrested on April 24, 2013.
On July 26 and July 30, 2013, also in federal court in Brooklyn, Muzaffar I. Nadeem, Zainul Syed, Afzaal Chaudry, and Irfan Muzaffar, each of Brooklyn, were arraigned on a separate but related indictment charging them with various offenses involving a scheme to defraud the New York City School Construction Authority (the SCA) by falsely certifying that workers employed on SCA projects were receiving the prevailing wage, as required by law and contract. These defendants were arrested on February 21, 2013.1
The plea and indictment were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Eric T. Schneiderman, New York State Attorney General; Rose Gill Hearn, Commissioner, New York City Department of Investigation; and Toni Weirauch, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation (IRS), New York.
“Instead of fighting for the workers he promised to represent, Argila traded their right to earn a legal and a living wage for cash to line his own pockets. As alleged in the related indictment, those defendants cheated workers out of the wages they had earned by the sweat of their brows and laundered the proceeds of this conspiracy to hide their actions and fund an amusement park overseas. There was no holiday for the workers involved, only exploitation,” stated United States Attorney Lynch. “This Office and our law enforcement partners will continue to prosecute fraud and corruption throughout the construction industry.” Ms. Lynch expressed her thanks to the U.S. Department of Labor, Office of Inspector General, the New York City School Construction Authority, Office of Inspector General, the New York City Police Department, and the New York County District Attorney’s Office for their assistance in the investigation.
As charged in the indictment, Nadeem operated a construction company, SM&B Construction Co., Inc. (SM&B) in Brooklyn, which has been awarded over $72 million in contracts by the SCA since 1997 and has received over $37 million in fraud-induced payments from the SCA since 2008. Chaudry and Syed worked as a foreman and office manager, respectively, at SM&B. Muzaffar is Nadeem’s son. Both New York State Labor Law and its contracts with the SCA required SM&B to pay workers on SCA-funded projects a prevailing wage rate, which was set by the New York City Comptroller. In fact, SM&B paid cash to workers on its projects, including bricklayers and laborers, at rates far below the prevailing wage. As alleged in the indictment, Nadeem, Chaudry, and Syed falsely certified to the SCA that the workers had been paid the prevailing wage, thus committing mail fraud, wire fraud, and conspiracy to commit those crimes.
As further alleged in the indictment, Nadeem laundered over $6 million in proceeds of the charged fraud scheme by funneling it through shell companies. After running these proceeds through the shell companies, Nadeem sent more than $3.3 million from the shell companies to Pakistan, to invest in an amusement park and resort complex called “Waysgoose Park.”
To conceal the charged fraud scheme from law enforcement, and to obtain cash to pay the illegally low wages to workers, Nadeem, Syed, and Muzaffar allegedly engaged in illegal structuring, specifically, cashing multiple checks, each for less than $10,000, on a single day, for a total amount of more than $10,000, and thereby avoiding the required filing of Currency Transaction Reports (CTRs). As charged in the indictment, since January 2008, more than $3.6 million in structured checks were written on SM&B’s account. Nadeem and Syed also allegedly arranged for the payment of $30,000 in cash bribes to an undercover SCA Inspector, and allegedly paid $7,800 in cash bribes to a union official.
Argila faces a maximum sentence of five years. If convicted, the indicted defendants each face a maximum sentence of 20 years for the mail fraud, wire fraud, money laundering, and related conspiracy charges, a maximum sentence of 10 years for bribing an undercover SCA inspector and engaging in transactions over $10,000 involving the proceeds of their crime, and a maximum sentence five years for bribing a union official, structuring financial transactions, and other conspiracy charges.
The government’s case is being prosecuted by Assistant United States Attorneys Paul Tuchmann, Lan Nguyen, and Claire Kedeshian.
The Defendants:
MUZAFFAR NADEEM
Age: 57
Residence: Brooklyn, NYAFZAAL CHAUDRY
Age: 46
Residence: Brooklyn, NYZAINUL SYED
Age: 39
Residence: Brooklyn, NYIRFAN MUZAFFAR
Age: 29
Residence: Brooklyn, NYRUSSELL ARGILA
Age: 40
Mahopac, NY_____________________________
1 The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
Former Long Island Stockbroker Pleads Guilty in Connection with 17 Years of Financial Fraud SchemesRead the Press Release
Earlier today, at the federal courthouse in Central Islip, New York, Mark Hotton, a former Long Island stockbroker, pled guilty to conspiring to launder the illicit proceeds of almost two decades of fraud before United States District Judge Joanna Seybert. When sentenced, Hotton faces up to 20 years in prison, forfeiture of $1.8 million and restitution of up to $5.75 million to the victims of his frauds.
According to court filings and facts presented at the plea proceeding, between January 1995 and October 2012, Hotton used funds he obtained from a series of securities fraud schemes, mail fraud schemes and other crimes to promote his continuing illegal conduct. Throughout the conspiracy, Hotton also laundered proceeds of his frauds to pay employees cash wages, thereby avoiding federal withholding taxes intended for Social Security, Medicare and Medicaid. The defendant also laundered funds to avoid required payments to union pension and benefit funds.
The guilty plea was announced by Loretta E. Lynch, the United States Attorney for the Eastern District of New York; Toni Weirauch, Special Agent-in-Charge, New York Field Office of the Internal Revenue Service, Criminal Investigation; and Deputy Inspector General, Daniel R. Petrole of the U.S. Department of Labor, Office of the Inspector General, Office of Labor Racketeering and Fraud Investigations.
“Mark Hotton was a stockbroker who earned a substantial income, but that wasn’t enough for him. For almost two decades, he was the star of his own drama, cheating investors, partners, and his own employees to prop up the fairy tale of his success. Today the curtain has finally fallen on the tale of fraud and deception staged by this defendant, and he stands revealed as the fraud and con man that he is. He will now be held to account for his actions,” stated United States Attorney Lynch. Ms. Lynch expressed her grateful appreciation to the IRS-CI and the DOL-OIG for their investigation and participation in this case.
Hotton was arrested by federal agents on Monday, October 15, 2012, on these offenses, as well as additional fraudulent conduct in the Southern District of New York arising from the financing of the proposed Broadway play “Rebecca.” Hotton pleaded guilty to charges, arising from that conduct, yesterday in United States District Court in Manhattan.
The government’s case is being prosecuted by Assistant U.S. Attorneys Burton T. Ryan, Jr. and Melanie Hendry.
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. For more information on the task force, visit http://www.StopFraud.gov.
The Defendant
MARK C. HOTTON
Age: 47
Residence: West Islip, New YorkBrooklyn Clinic Employee Sentenced to Eight Years in Prison in Connection with $77 Million Medicare Fraud SchemeRead the Press Release
BROOKLYN, NY – Earlier today, Yuri Khandrius, 50, of Brooklyn, New York, was sentenced to eight years in prison for his role in a $77 million Medicare fraud scheme. In addition to the prison term, U.S. District Judge Nina Gershon of the Eastern District of New York sentenced Khandrius to three years of supervised release with a concurrent exclusion from Medicare, Medicaid and all Federal health programs, ordered him to forfeit $446,655 and ordered him to pay restitution in the amount of $10,000,000. Khandrius’s surrender date is September 16, 2013.
The sentence was announced by U.S. Attorney for the Eastern District of New York Loretta E. Lynch; Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Special Agent-in-Charge Thomas O’Donnell of the HHS Office of Inspector General (HHS-OIG).
Khandrius pleaded guilty on December 3, 2012 to one count of conspiracy to commit health care fraud, one count of health care fraud and one count of conspiracy to pay kickbacks. Including Khandrius, 13 individuals were convicted in this case, either through guilty plea or trial conviction.
According to court documents, from 2005 to 2010, Khandrius was an employee of a clinic in Brooklyn that operated under three corporate names: Bay Medical Care PC, SVS Wellcare Medical PLLC and SZS Medical Care PLLC (Bay Medical clinic). According to court documents, the owners, operators and employees of the Bay Medical clinic paid cash kickbacks to Medicare beneficiaries and used the beneficiaries’ names to bill Medicare for more than $77 million in services that were medically unnecessary or never provided. The defendants billed Medicare for a wide variety of fraudulent medical services and procedures, including physician office visits, physical therapy and diagnostic tests.
According to trial testimony, Khandrius, who holds no medical licenses or certifications, impersonated his co-defendant Dr. Gustave Drivas at the clinic. Dr. Drivas was the Bay Medical clinic’s “no-show” doctor. Khandrius admitted at his change of plea hearing that he signed prescriptions and medical charts in Drivas’s name, and performed medical tests and procedures on patients although he was not licensed to do so. Khandrius’s impersonation of Dr. Drivas assisted the conspirators in disguising the use of Drivas’s Medicare billing number to bill more than $20 million in claims for services that were not rendered or medically unnecessary. (Drivas was convicted of health care fraud conspiracy and health care fraud by a jury after a seven-week trial.) According to trial testimony, Khandrius also directed a phony allergy testing fraud at the Bay Medical clinic that involved giving patients bottles of tap water instead of allergy medications, wrote prescriptions for co-workers and at least one minor child using Dr. Drivas’s prescription pad and in response to a written audit from Medicare, falsely filled out medical charts in an attempt to back up the billing and deceive Medicare.
The government’s investigation included the use of a court-ordered audio/video recording device hidden in a room at the clinic, in which the conspirators paid cash kickbacks to corrupt Medicare beneficiaries. The conspirators were recorded paying approximately $500,000 in cash kickbacks during a period of approximately six weeks from April to June 2010. This room was marked “PRIVATE” and featured a Soviet-era poster of a woman with a finger to her lips and the words “Don’t Gossip” in Russian. The purpose of the kickbacks was to induce the beneficiaries to receive unnecessary medical services or to stay silent when services not provided to the patients were billed to Medicare.
This case is being prosecuted by Trial Attorney Sarah M. Hall of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Shannon Jones of the Eastern District of New York. The case was investigated by the FBI and HHS.
The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion. In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.
MS-13 Gang Leader Sentenced to 30 Years’ IncarcerationRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, Hector Aleman Lemos, the former leader of the Flushing, Queens, chapter of the violent international gang La Mara Salvatrucha, also known as “MS-13,” was sentenced to 30 years in prison following his March 7, 2013, guilty plea to racketeering and murder conspiracy. The sentence was imposed by United States District Judge Nicholas G. Garaufis, who also imposed a term of supervised release of 3 years. As a consequence of his conviction, Lemos, a citizen of El Salvador, is also subject to potential deportation at the conclusion of the prison term.
The sentence 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 (ICE), Homeland Security Investigations (HSI), New York Field Office; Raymond W. Kelly, Commissioner, New York City Police Department, and Charles Gardner, Commissioner, City of Yonkers Police Department.
“As a member and leader of MS-13, Lemos spread death and destruction throughout his community. No one in his orbit was safe from the violence that accompanied him, including an innocent bystander who paid with his life for nothing more than being in the wrong place at the wrong time, and a 13-year-old boy who thankfully survived his encounter with Lemos. Today, Lemos received the significant jail term called for by his actions, which will bring justice to the gang’s victims and their families,” said United States Attorney Lynch. “Today’s sentence represents a clear warning to the gang that we will continue to vigorously prosecute its members and work to dismantle its operations in this District.” Ms. Lynch extended her grateful appreciation to U.S. Immigration and Customs Enforcement, Homeland Security Investigations, the New York City Police Department, and the City of Yonkers Police Department.
Lemos, known in the gang as “Diablito,” was the leader of the Flushing chapter of the gang, which committed a series of violent crimes, including murder, murder conspiracy and attempted murder, in Flushing, Queens and elsewhere. Among other crimes, Lemos was charged with shooting a 25-year-old man named John Halley in Yonkers, New York, who he believed, incorrectly, was a member of a rival gang. In pleading guilty, Lemos admitted that he was a member of MS-13 and that he had participated in the murder of Halley, as well as in the shooting of a 13-year-old boy in Flushing.
Since 2002, more than 200 MS-13 members, including more than two dozen clique leaders, have been convicted on federal felony charges in the Eastern District of New York. More than 100 of those MS-13 members have been convicted on federal racketeering charges. MS-13 is a violent, transnational gang, based in El Salvador, which has engaged in narcotics trafficking, robbery, extortion, murder and other crimes in cities throughout the United States and Central America. The gang has had a strong presence in immigrant communities in Queens and Long Island.
The government’s case is being prosecuted by Assistant United States Attorneys Gina M. Parlovecchio and Darren A. LaVerne.
The Defendant
HECTOR ALEMAN LEMOS, also known as “Diablito”
Age: 32Philadelphia Money Launderer Pleads Guilty in Connection with $13 Million Brooklyn Medicare/Medicaid Fraud SchemeRead the Press Release
Leonid Zalkind, 36, of Philadelphia, Pennsylvania, pleaded guilty today to one count of conspiracy to commit money laundering before U.S. District Judge Nina Gershon of the Eastern District of New York. At sentencing, scheduled for December 2, 2013, Zalkind faces a maximum penalty of 20 years in prison and a $500,000 fine.
The guilty plea was announced by U.S. Attorney for the Eastern District of New York Loretta E. Lynch; Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Special Agent-in-Charge Thomas O’Donnell of the HHS Office of Inspector General (HHS-OIG).
According to court documents, from 2010 to 2012, Zalkind operated numerous shell companies and bank accounts through which he laundered the proceeds of health care fraud from the Brooklyn clinic Cropsey Medical Care PLLC (“Cropsey Medical”). Zalkind conspired with others to accept checks from Cropsey Medical, which were made payable to various shell companies Zalkind controlled. These checks did not represent payment for any legitimate service at or for Cropsey Medical, but rather were written to launder Cropsey Medical’s fraudulently obtained health care proceeds. Zalkind admitted at the plea proceeding that he deposited such checks into bank accounts he controlled, intending these transactions to hide and disguise the fact that these funds were proceeds of a crime. He admitted that he knew these funds were proceeds of illegal activity.
The proceeds of checks Zalkind negotiated and cashed were given to the owners and operators of Cropsey Medical, at which point they were used to pay illegal cash kickbacks to Cropsey Medical’s purported patients. According to court documents, from approximately November 2009 to October 2012, Cropsey Medical submitted more than $13 million in claims to Medicare and Medicaid, seeking reimbursement for a wide variety of fraudulent medical services and procedures, including physician office visits, physical therapy and diagnostic tests.
Eight individuals, including a doctor, owners/operators and employees of Cropsey Medical clinics, along with other individuals who paid and received kickbacks to induce the transportation and referral of patients to the clinic, as well as individuals who laundered funds for Cropsey Medical, await trial before Judge Nina Gershon. Trial has not yet been scheduled.
The government’s case is being prosecuted by Trial Attorney Sarah M. Hall and Assistant U.S. Attorneys Shannon Jones and Ilene Jaroslaw of the Eastern District of New York. The case was investigated by the FBI and HHS.
The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion. In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.
Jury Verdict Imposes Death Penalty on Ronell WilsonRead the Press Release
Following a five-week sentencing proceeding, a federal jury in Brooklyn today returned a verdict imposing the death penalty on Ronell Wilson for the murders of two New York City Police Department Detectives, Rodney J. Andrews and James Nemorin.
The verdict was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, Joseph Anarumo, Jr., Special Agent-in-Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) in New York, Raymond W. Kelly, Commissioner, New York City Police Department (NYPD), and Richmond County District Attorney Daniel M. Donovan, Jr.
In March of 2003, the NYPD Firearms Investigation Unit began an investigation of the Stapleton Crew (the “Crew”), a violent criminal enterprise whose members terrorized the borough of Staten Island for several years. On March 3, 2003, Detective Nemorin, posing as an international gun trafficker, purchased a firearm from a member of the Crew. Several days later, on March 10, 2003, Detective Nemorin and Detective Andrews, who also was working in an undercover capacity, arranged to purchase another gun from members of the Crew. On this occasion, however, members of the Stapleton Crew, including Wilson, decided to rob the officers rather than sell them another gun. In furtherance of this plan, Wilson and an associate met with the undercover officers in the vicinity of the Stapleton Houses in Staten Island. Wilson instructed the officers to drive him to a second location in Staten Island, where he received a .44 caliber revolver from other Crew associates. Later, Wilson, who had detected that the undercover detectives were police officers, used that revolver to murder both detectives, execution-style, and steal their car. When Wilson was apprehended by local police several days later, lyrics to a rap song boasting about the murders were found in his pocket.
In 2006, a federal jury found Wilson guilty of committing numerous crimes in connection with the Crew, including the murders of Detectives Nemorin and Andrews, and imposed the death penalty. In 2011, the United States Court of Appeals for the Second Circuit affirmed Wilson’s conviction, but vacated the death sentence and remanded the case for re-sentencing. As a result of today’s verdict, Wilson will receive the death penalty.
“Ten years ago, on a deserted Staten Island Street, Ronell Wilson ruthlessly executed Detectives Andrews and Nemorin, two husbands, two fathers, two heroes. Their deaths were a tragedy, not just for their families, but for all of New York City. Today, a jury of his peers looked at Ronell Wilson, everything he did and all that he is, and rendered justice. We hope that the verdict brings some measure of closure to the victims’ families, the men and women of the New York City Police Department, and to the communities Detectives Nemorin and Andrews served so well,” stated United States Attorney Lynch. Ms. Lynch extended her grateful appreciation to the ATF, the NYPD and Richmond County District Attorney’s Office for their assistance in this case.
The government’s case was prosecuted by Assistant United States Attorneys James G. McGovern and Celia Cohen.
The Defendant
RONELL WILSON
Age: 31Commodities Trader Indicted for $300,000 Ponzi SchemeRead the Press Release
Earlier today, a 28-count federal indictment was unsealed in federal court in Brooklyn charging Jeffrey Shalhoub with operating a Ponzi scheme to defraud investors in his unregistered commodities trading pool.1 The indictment alleges that Shalhoub solicited his alleged victims to invest money in his company, The 9 Group, Ltd., which purportedly pooled investor money and used the money to trade in the commodities futures markets. Shalhoub told his investors that they would receive returns of up to 10% of their principal investment every week through his investments in commodities futures. The indictment charges that after he solicited approximately $300,000 of investor money, Shalhoub lost a substantial sum of this money through his trading activities, and misappropriated much of the remaining funds by keeping the money for himself. The defendant allegedly concealed the theft and losses by sending his investors fraudulent account statements which falsely showed that his investors’ accounts were earning a rate of return of up to 5.2% each week. The indictment further alleges that because of his trading losses and theft of investor funds, Shalhoub could not pay his existing investors their expected investment returns and, therefore, had to use new investor money to pay purported earnings to the existing investors.
Shalhoub was arrested earlier today. He will be arraigned in United States District Court for the Eastern District of New York before United States Magistrate Judge Robert M. Levy. The case has been assigned to United States District Judge Sterling Johnson, Jr.
The charges were 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.
“As alleged in the indictment, Shalhoub employed fraud and deceit to take advantage of victims who sought to invest in America’s markets. His promises of high returns were all a criminal mirage, propped up by account statements that were no more than fairy tales,” stated United States Attorney Lynch. “Today’s arrest demonstrates the Department of Justice’s continuing commitment to investigate and prosecute those who commit financial crimes, particularly those who haven’t gotten the message that we will not tolerate Ponzi schemes.” Ms. Lynch thanked the United States Postal Inspection Service for its work on the investigation and also acknowledged the Commodities Futures Trading Commission for its assistance.
The government’s case is being prosecuted by Assistant United States Attorneys Tyler Smith, David C. Woll, Jr., and Brendan G. King.
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. For more information on the task force, visit http://www.StopFraud.gov.
The Defendant
JEFFREY SHALHOUB
Age: 38
Residence: Staten Island, NY_____________________________
1The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
Justice Department Obtains Comprehensive Agreement to Ensure New York City Adult Home Residents with Mental Illness Are Afforded Opportunities to Live in the CommunityRead the Press Release
WASHINGTON. – The Justice Department’s Civil Rights Division and the U.S. Attorney’s Office for the Eastern District of New York announced today that they, along with plaintiff adult home residents, entered into a comprehensive settlement agreement with the state of New York under the Americans with Disabilities Act (ADA). The settlement agreement will provide relief to thousands of people with mental illness unnecessarily segregated in 23 adult homes in New York City. Adult homes are institutional, segregated settings that house large numbers of people with mental illness.
Under the settlement agreement, New York will offer supported housing to people with mental illness currently residing in adult homes. Supported housing is apartments scattered throughout the community for which the state provides rental assistance and housing-related support services. Supported housing residents have access to community-based services and supports that promote their inclusion, independence, and full participation in community life. The settlement agreement has been filed with the U.S. District Court for the Eastern District of New York for the court’s approval.
The Supreme Court made clear in its landmark decision Olmstead v. L.C, that people with disabilities have a civil right under the ADA to receive services in the most integrated setting appropriate to their needs. The state worked cooperatively with the department and private plaintiffs to negotiate a settlement that resolves the allegations that the New York mental health service system violates the ADA by relying on large, institutional adult homes instead of supported housing units that are scattered throughout the community. A state is responsible for segregation when it designs and implements a system that unnecessarily relies on institutional facilities, regardless of whether they are privately owned and operated.
“Today’s settlement agreement reaffirms the right of people with disabilities to live independently and participate in all aspects of community life,” said Eve L. Hill, Deputy Assistant Attorney General for the Civil Rights Division. “This agreement creates opportunities for thousands of New Yorkers with mental illness to participate fully in community life, enriching local communities and ending the stigmatization of institutional life. Governor Andrew Cuomo played a crucial role in making this agreement a reality, and I commend his leadership.”
Over the next five years, New York will provide scattered-site supported housing to at least 2,000, and potentially more than 4,000, adult home residents. New York has also committed to providing people moving to supported housing with the community-based services and supports that will allow them to thrive in the community. The agreement also will ensure that adult home residents have the information they need to make an informed choice about where to live. If they choose to move to supported housing, they will participate in a person-centered, transition planning process. An independent reviewer with extensive experience in mental health systems will monitor the state’s compliance with the agreement.
Because of this agreement, people like Ilona Spiegel, one of the named plaintiffs, will get the opportunity to live independently and “become emancipated” after 15 years in an adult home. Spiegel lived independently in her own apartment until she received psychiatric treatment in a hospital in 1998. When she left the hospital, her only discharge option was to move into an adult home. In the adult home, Spiegel shares a small room with a roommate, has scheduled mealtimes and no opportunity to cook for herself, has little privacy as staff have entered her room without permission and finds living in the adult home extremely isolating. Spiegel has said that she cannot wait to live in her own apartment again and have autonomy over her life, including doing her own cooking, cleaning and shopping, have personal privacy in her home, and be free from intrusion into her personal belongings.
Loretta E. Lynch, U.S. Attorney for the Eastern District of New York stated: “With this agreement, thousands of New Yorkers will be able to leave the shadow of institutional living and instead live in and contribute to their communities. Because of this cooperative effort, their lives will be immeasurably better and our communities all the richer for their presence.”
The individual plaintiff adult home residents, on behalf of themselves and a class of adult home residents with mental illness, are represented by Paul, Weiss, Rifkind, Wharton & Garrison, LLP; Disability Advocates Inc.; Bazelon Center for Mental Health Law; New York Lawyers for the Public Interest; MFY Legal Services Inc.; and Urban Justice Center.
The Civil Rights Division enforces the ADA, which authorizes the attorney general to investigate whether a state is serving individuals with disabilities in the most integrated settings appropriate to their needs. Visit www.justice.gov/crt to learn more about the Olmstead decision, the ADA, and other laws enforced by the Justice Department’s Civil Rights Division.
This agreement is due to the efforts of the following Civil Rights Division and U.S. Attorney’s Office staff: Alison Barkoff, Special Counsel for Olmstead Enforcement; Rebecca B. Bond, Chief of the Disability Rights Section; Sheila Foran, Special Legal Counsel; Amanda Maisels and Nicholas Lee, Trial Attorneys; Lance Simon, Contractor; and Michael J. Goldberger, Chief of Civil Rights in the Civil Division of the U.S. Attorney’s Office for the Eastern District of New York.
Former High-Ranking Nassau County Housing Official Sentenced to Eighteen Months’ IncarcerationRead the Press Release
Earlier today, at the federal courthouse in Central Islip, New York, Louis Abate, the former Fiscal Director for the Nassau County Office of Housing and Community Development, previously convicted of stealing over $120,000 in federal housing benefits intended for low-income Long Islanders in need of housing financial assistance, was sentenced to eighteen months in prison by United States District Judge Sandra J. Feuerstein. Judge Feuerstein also imposed restitution of $122,250.
The sentenced was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Cary Rubenstein, Special Agent-in-Charge, U.S. Department of Housing and Urban Development, Office of Inspector General.
“The defendant had the trust of his colleagues and the County and was charged with providing much needed housing for low income families. Instead, he abused that trust to enrich himself and cooked the books to hide his deception,” stated United States Attorney Lynch. “This sentence should deter likeminded public officials from abusing their authority by embezzling money entrusted in their care.” Ms. Lynch extended her grateful appreciation to the Department of Housing and Urban Development, Office of Inspector General, for its assistance.
Qualifying low income families are eligible to receive Section 8 Program rent subsidies under a federal program funded by the United States Department of Housing and Urban Development (HUD). The Nassau County Office of Housing and Community Development (NCOHCD) is the administrative entity responsible for implementing and monitoring the programs and grants funded by HUD in Nassau County, including Section 8 grants. Once a Section 8 applicant is accepted for assistance, NCOHCD, using Section 8 HUD funds, provides rent assistance through payments that are made directly to the recipient’s landlord. The Fiscal Director of NCOHCD is appointed by the Nassau County Executive.
Between May 2009 and August 2011, the defendant stole more than $120,000 in federal rental subsidies from a Section 8 program that he oversaw, which serviced individuals residing in Island Park, New York. In order to accomplish the theft, the defendant created a fictitious landlord with no associated tenant, and for more than two years diverted the Section 8 benefits for this supposed landlord to a bank account he personally controlled. Abate was successful in concealing his fraud from the NCOHCD by systematically altering various accounting records to remove any reference to the diverted funds. During this period, Abate illegally paid himself approximately $5,000 per month – more than three times the monthly amount of federal Section 8 subsidies received by any single participating landlord in the Island Park area during that time.
The government’s case is being prosecuted by Assistant United States Attorney Lara Treinis Gatz.
The Defendant
Name: LOUIS ABATE
Age: 49
Residence: North Massapequa, New YorkFormer Special Forces Sergeant Sentenced to 24 Months’ Imprisonment for International Arms SmugglingRead the Press Release
Earlier today, in federal court in Brooklyn, New York, Joseph Debose, a resident of North Carolina and a former United States Marine and Staff Sergeant in a U.S. Special Forces National Guard Unit, was sentenced to 24 months’ imprisonment for violating the Arms Export Control Act. Debose provided multiple shipments of firearms to co-conspirators who then secreted the weapons in packages and transported them to shipping companies to be sent to customers in China. The weapons included dozens of semi-automatic handguns, rifles and shotguns.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; John Carlin, Assistant Attorney General, U.S. Department of Justice; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), New York; Joseph Anarumo, Jr., Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), New York Field Division; Toni Weirauch, Special Agent-in-Charge, Internal Revenue Service (IRS), New York Field Office; and Sidney Simon, Special Agent-in-Charge, Department of Commerce (DOC), Office of Export Enforcement, New York Field Office.
“Through his service in the U.S. Marine Corps and National Guard, the defendant swore an oath to this country and its people, and was decorated. He then traded the honor which won him medals for the easy money of illegal arms sales,” stated U.S. Attorney Lynch. “We take very seriously our responsibility to stem the flow of illegal weapons through New York and ensure our national security. This case demonstrates the tremendous effectiveness and determination of the multiple federal law enforcement agencies tasked with taking on this global challenge.” Ms. Lynch expressed her grateful appreciation to the federal agencies that worked closely together to investigate the case.
The sentence was imposed by United States District Judge Eric N. Vitaliano. In addition to the 24 months in prison, Judge Vitaliano imposed a term of three years of supervised release. To date, four individuals have been convicted of weapons trafficking and export offenses in connection with this case.
Authorities initially learned of the arms smuggling scheme in August 2011 after counter-smuggling officers in China seized a package containing firearms with defaced serial numbers, which had been shipped from Queens, New York. Upon learning of the seizure of the weapons, U.S. law enforcement officials traveled to China to examine the evidence. The types of weapons seized by the Chinese authorities have been included by the President of the United States on the United States Munitions List, and may not be exported without a license from the U.S. State Department. Using forensic techniques, agents determined that one of the weapons seized in China had originally been purchased in North Carolina. Agents then traced that gun, and others, to Debose. Agents also learned that Debose had filed a false police report, in which he claimed the weapons had been stolen from his garage. Agents arrested Debose in a sting operation when he arrived at a meeting location with a truckload of guns for the next shipment. At the time of his arrest, Debose was a staff sergeant assigned to a Special Forces National Guard unit based in West Virginia.
The government’s case was prosecuted by Assistant United States Attorney Seth DuCharme, with assistance from Trial Attorney David Recker of the Department of Justice Counterespionage Section. Assistance also was provided by the U.S. Attorneys’ Offices in the Northern District of West Virginia and the Eastern District of North Carolina.
The Defendant
JOSEPH DEBOSE
Age: 30Defendant Sentenced to 151 Months’ Imprisonment for Assaulting Correctional Counselor at the Metropolitan Detention CenterRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, New York, Ronald Atkinson was sentenced to a term of imprisonment of 151 months for his violent assault on a correctional counselor while incarcerated at the Metropolitan Detention Center in Brooklyn, New York. The sentence will run consecutively to the 86 months’ incarceration remaining on Atkinson’s 2010 sentence for bank robbery. The sentence was imposed by United States District Judge Edward R. Korman, who also imposed a term of supervised release of three years.
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 (FBI), New York Field Office.“When held to account for his criminal activity that spanned the country, the defendant sought to continue his crime spree within the walls of the correctional institution, with his unprovoked and vicious assault on a federal employee. Today, Atkinson received the significant prison sentence called for by his actions,” stated United States Attorney Lynch. “Today’s sentence represents a clear warning to all federal prison inmates that assaults on Bureau of Prisons’ staff will be met with the full force of the law.”
Atkinson was arrested by the FBI on June 17, 2009, on charges that he committed four bank robberies in Manhattan and two in Las Vegas, Nevada. He was ordered detained and incarcerated at the Metropolitan Detention Center pending trial. On June 29, 2009, Atkinson committed a brutal and utterly unprovoked assault on a correctional counselor, punching him in the head multiple times until Atkinson was restrained. As a result of the assault, the correctional counselor suffered serious injuries, including a broken nose, broken bones under his right eye, broken bones in his right eye socket, a gash in his right cheek that required several stitches to close, two black eyes, a split lip, and two slipped discs in his neck, which continue to cause pain and numbness in the counselor’s arm and hand. The counselor also now suffers from migraines, vertigo, and post-traumatic stress disorder, none of which he suffered from prior to the assault.
As a result of all of these injuries, the counselor, an 18-year veteran of the Bureau of Prisons who had also worked at the Metropolitan Correctional Center in Manhattan and the Federal Detention Center in Miami, Florida, was forced to take a medical retirement from his job with the Bureau of Prisons.
Ms. Lynch thanked the Federal Bureau of Investigation and the Federal Bureau of Prisons for their assistance in this case.
The government’s case was prosecuted by Assistant United States Attorney Douglas M. Pravda.
The Defendant:
Name: RONALD ATKINSON
Age: 40Real Estate Developer Sergio Benitez Sentenced to 22 Months’ Imprisonment for Defrauding NYC Department of Housing Preservation & DevelopmentRead the Press Release
Earlier today, Sergio Benitez, a developer of affordable housing projects in Brooklyn for the New York City Department of Housing Preservation and Development (HPD), was sentenced to a term of imprisonment of 22 months followed by three years of supervised release, including a three-year ban from applying for any other city or governmental housing contracts, based on his conviction for wire fraud conspiracy. He was also ordered to pay $228,200 in restitution to the City of New York and fined $10,000. Benitez previously paid an additional $228,200 in forfeiture to the government. The sentencing proceeding was held before United States District Judge Nina Gershon at the U.S. Courthouse in Brooklyn, New York.
The sentence 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 (FBI); Daniel R. Petrole, Deputy Inspector General, United States Department of Labor (DOL) Office of Inspector General; and Rose Gill Hearn, Commissioner, New York City Department of Investigation (DOI).
Benitez was arrested on October 6, 2011, as part of a seven-defendant case involving corruption at HPD and ultimately pleaded guilty to wire fraud conspiracy. According to the government’s filings and other public records, Benitez was a major real estate developer of affordable housing projects sponsored by HPD. Benitez defrauded HPD by demanding kickbacks from a construction contractor in return for hiring him as the general contractor on the Cooper Decatur Cluster affordable housing development in Brooklyn. From 2006 until Benitez’s arrest, the contractor paid two percent of the funds he received from HPD to Benitez, for a total of $228,200 in kickbacks. In order to cover the cost of these kickbacks, the contractor inflated his invoices to HPD by a similar amount. To disguise the kickbacks, Benitez issued sham invoices to the contractor from one of Benitez’s several companies, All Boro Painting & Repairs, Inc. In the meantime, Benitez was featured as a model real estate developer in the New Housing Marketplace Plan issued by HPD in early 2011, where he was quoted as saying, “I’m originally from Brooklyn, and I see my work as a way of giving back.”
“Sergio Benitez claimed that he was ‘giving back’ to Brooklyn, but in reality, all he gave the people of the City of New York was a hefty bill for his own corruption. In taking hundreds of thousands of dollars in kickbacks, Benitez stole from the very community he had pledged to serve, by diverting funds meant for affordable housing construction into his own pockets,” stated United States Attorney Lynch. “Today’s sentence shows that even the most influential real estate developers will be brought to justice if they steal public funds for corrupt personal gain.”
FBI Assistant Director-in-Charge Venizelos stated, “While Sergio Benitez publicly touted his community-minded commitment to Brooklyn, he was privately taking kickbacks whose cost was passed on to the city. Actions speak louder than words, and his actions were self-serving and deceitful.”
DOI Commissioner Gill Hearn stated, “This developer hurt low-income New Yorkers, fleeced the taxpayers, and is going to prison for milking the City’s affordable housing program for kickbacks. His undoing in this joint investigation should warn off anyone tempted to tack the cost of corruption onto the City’s bill.”
United States Attorney Lynch thanked the Internal Revenue Service, Criminal Investigation, New York; the United States Department of Housing and Urban Development; and the New York City Police Department for their cooperation in this case.
To date nine defendants, including HPD’s former Assistant Commissioner, two other supervisory officials at HPD, and six real estate developers and general contractors have pleaded guilty to charges including racketeering conspiracy, bribery and wire fraud conspiracy in connection with the government’s ongoing investigation of widespread corruption of the affordable housing industry. Benitez is the third defendant to have been sentenced.
The government’s case is being prosecuted by Assistant United States Attorneys Cristina M. Posa, Anthony Capozzolo and Claire Kedeshian.
The Defendant
SERGIO BENITEZ
Colts Neck, New Jersey
Age: 53Eastern District U.S. Attorney’s Office Participates in Record Settlement: Walgreens Agrees to Pay $80 Million in Civil Penalties Under the Controlled Substances ActRead the Press Release
Walgreen Co. (Walgreens), the nation’s largest drug store chain, agreed to pay $80 million in civil penalties for violations of the Controlled Substances Act resolving administrative actions by the Drug Enforcement Administration (DEA), and Department of Justice civil investigations in the Eastern District of New York, the Southern District of Florida, the District of Colorado and the Eastern District of Michigan, as well as civil investigations by DEA nationwide. Walgreens also agreed to surrender the authority of six of its pharmacies and one of its distribution centers to distribute or dispense certain controlled substances for a period of two years. Walgreens further agreed to create a Department of Pharmaceutical Integrity to ensure compliance with regulations and to prevent the diversion of controlled substances. The details of the nationwide resolution, announced by the Southern District of Florida U.S. Attorney’s Office on June 11, 2013, can be found at http://www.justice.gov/usao/fls/PressReleases/130611-01.html.
Details surrounding the Eastern District of New York’s investigation of Walgreens were made public earlier today with the guilty plea of nurse practitioner Eva MacDowall. MacDowall, who was prosecuted by the Suffolk County District Attorney’s Office, pled guilty in Suffolk County Court to one charge of criminal possession of a forged instrument in the second degree in connection with her writing a bogus prescription for oxycodone that she filled at a Walgreens pharmacy in Selden, New York, on June 8, 2012. The investigation and prosecution of MacDowall revealed that Walgreens repeatedly violated the Controlled Substances Act by filling numerous prescriptions that Walgreens employees knew, or should have known, were not issued for a legitimate medical purpose. Over a two year period from July 2010 until July 2012, MacDowall filled 94 different, illegitimate prescriptions -- primarily for two highly addictive painkillers, oxycodone and hydrocodone -- at a Walgreens pharmacy in Selden and two Walgreens pharmacies in Medford.
“The abuse of oxycodone, hydrocodone and other painkillers has become an epidemic, as overdose deaths from prescription painkillers is now more common than overdose deaths from heroin and cocaine combined,” said United States Attorney Loretta E. Lynch. “Nationwide, Walgreens repeatedly failed to live up to its obligation to safeguard highly addictive prescription drugs. Here on Long Island, these three stores allowed themselves to become a haven for prescription drug abusers, turning a blind eye as McDowall repeatedly filled one forged prescription after another. In so doing, Walgreen’s contributed to the epidemic increase in the abuse of prescription drugs that we are seeing in Long Island, and around the country.”
Suffolk County New York District Attorney Thomas J. Spota stated, “We are pleased that Suffolk County’s prosecution of this defendant aided in the exposure of improper practices at Walgreens and the successful civil action by the United States Attorneys’ Offices that ultimately forced the retailer to comply with the law and pay 80 million dollars in fines.”
Brian R. Crowell, Special Agent-in-Charge, Drug Enforcement Administration, New York Filed Office, stated, “This is the trend of a local investigation merging with a nationwide federal investigation focused on the diversion of pain medication and its harmful effects to citizens across our country. Beginning in 2010, the Suffolk County Police Department began investigating a nurse practitioner forging prescriptions for inexplicably large amounts of oxycodone and hydrocodone filled at two Walgreens Pharmacies in Long Island, New York. Subsequently, a Federal Task Force pooled their resources which led to the national civil investigation into Walgreens CSA violations. The primary threat to the New York City region is opiate abuse, ranging from diverted pain medication to heroin. Opiate abuse has spread like cancer leaving disaster and death in its wake; there was a 6% increase of people seeking treatment for heroin addiction last year, and of all prescription drug deaths, 74% are accidental deaths. Today’s announcement demonstrates law enforcement’s collaboration at its best to combat the deadly effects of opiate abuse and identify those who threaten public health and safety and violate the law at every step in the drug supply chain.”
In January 2012, the United States Attorney’s Office for the Eastern District of New York and the Drug Enforcement Administration, 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 U.S. Department of Health and Human Services’ Centers for Disease Control and Prevention has called an epidemic increase in the abuse of so-called opioid analgesics. To date, the Prescription Drug Initiative has brought over 120 federal and local criminal prosecutions, taken civil enforcement action against a pharmacy, 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.
Assistant United States Attorney Elliot M. Schachner led the civil investigation of Walgreens in the Eastern District of New York. Suffolk County Assistant District Attorney Tanya Rickoff was responsible for the criminal prosecution of Eva MacDowall.
Bay Shore Doctor Sentenced to 65 Months in Prison for Pension- Fund Looting, Health Care Fraud, and Tax EvasionRead the Press Release
Earlier today, at the federal courthouse in Central Islip, New York, Frank Lobacz, a Bayshore, New York, doctor convicted of health care fraud, tax evasion, and the looting of an employee pension fund, was sentenced to 65 months in prison by United States District Judge Dennis R. Hurley. Judge Hurley also imposed fines, restitution, and penalties on Lobacz of over $3.5 million.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York and Toni Weirauch, Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”).
On November 13, 2010, after a month-long trial, a jury convicted Lobacz on all six counts of an indictment charging health care fraud, the filing of false pension fund reports with the U.S. Department of Labor, and tax evasion during the years 2001 to 2003. In addition to his prison sentence, the district court today ordered Lobacz to pay $727,480.63 in restitution to two private insurance plans, as well as $2,886,454.60 in federal income tax.
Lobacz was a licensed New York Doctor of Osteopathic Medicine, or D.O., who maintained offices in Nassau and Suffolk counties. In the 1970’s, he created a retirement pension plan for himself and his staff, and named himself as the plan administrator in filings with the United States Department of Labor. As the administrator, Lobacz was responsible for filing annual reports on the financial health of the plan and was required to notify the IRS if he or any one else borrowed or withdrew money from the plan.
At trial, witnesses testified that in addition to running his medical practice, Lobacz engaged in highly complex and risky stock options trading. Between 2000 and 2002, he transferred over $3.5 million in money and stocks to and from the pension plan and his personal brokerage account to pay for personal expenses, including vacation home improvements, artwork, credit card debt, a home equity loan, and college tuition for a daughter. The defendant never reported this misuse of employee pension funds, and between 2000 and 2003, he failed to report over $1 million in options trading income to the IRS.
Evidence at trial also showed that starting in 2005, to compensate for trading losses, the defendant filed some 1,500 false insurance claims for medical services and procedures purportedly rendered to a retired couple, who were close friends of the defendant, as well as to Lobacz’s younger children, his wife, and himself. The couple testified at trial that although they received routine acupuncture treatments from the defendant, which would not have been covered under their insurance plans, the bulk of the bills submitted in their names were for services that they either did not receive, or for visits on dates when the couple was traveling outside of New York State. Other fraudulent bills claimed that the defendant, his wife, and two children received near daily treatments normally provided to those suffering severe respiratory conditions, among other ailments. However, public school records, as well as patient files from Lobacz’s offices, showed that no such treatments or visits actually occurred. In all, the defendant billed $727,480.62 in false health care claims to GHI and United Healthcare Insurance Company of New York.
Following imposition of the sentence, United States Attorney Lynch stated, “The defendant Lobacz had a medical practice and investment portfolio which generated significant income, but that was not enough for him. Abandoning his fiduciary obligations to his staff, he looted their pension plan to cover his own personal expenses. Continuing his pattern of using other people, the defendant used friends’ and family members’ personal information to defraud private insurance companies. Further, Lobacz also failed to pay taxes on very substantial income. He will now be held to account for these crimes.”
Ms. Lynch expressed her grateful appreciation to the IRS for its investigation and participation in this case.
The government’s case is being prosecuted by Assistant United States Attorney Michael P. Canty and James M. Miskiewicz.
The Defendant:
FRANK LOBACZ
Age: 68New Arrest: DEA agents executed a search warrant this morning in Huntington Station, Long Island. Adrian Bonilla, 34, of Huntington Station was placed under arrest. the search yielded 11 kilos of cocaine and $3 million in USC.Read the Press Release
New Arrest: DEA agents executed a search warrant this morning in Huntington Station, Long Island. Adrian Bonilla, 34, of Huntington Station was placed under arrest. The search yielded 11 kilos of cocaine and $3 million in USC.
Brooklyn Money Launderer Senteced to 37 Months in Prison in Connection with $77 Million Medicare Fraud SchemeRead the Press Release
BROOKLYN, NY – Earlier today, Anatoly Kraiter, 35, of Brooklyn, New York, was sentenced today to 37 months in prison for his role as a money launderer for a $77 million Medicare fraud scheme. In addition to the prison term, U.S. District Judge Nina Gershon of the Eastern District of New York sentenced Kraiter to three years of supervised release and ordered him to forfeit $100,000. Kraiter’s surrender date is September 16, 2013.
The sentence was announced by U.S. Attorney for the Eastern District of New York Loretta E. Lynch; Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Special Agent-in-Charge Thomas O’Donnell of the HHS Office of Inspector General (HHS-OIG).
Kraiter pleaded guilty on July 24, 2012 to one count of conspiracy to commit money laundering. Including Kraiter, 13 individuals were convicted in this case, either through guilty plea or trial conviction.
According to court documents, from 2008 to 2010, Kraiter opened and operated numerous shell companies and bank accounts through which he laundered the proceeds of health care fraud from Brooklyn clinic SZS Medical Care PLLC (“SZS Medical”). The owners and operators of SZS Medical, along with closely related medical clinics Bay Medical Care PC and SVS Wellcare Medical PLLC (collectively, “the Bay Medical clinics”) committed a $77 million Medicare fraud from 2005 to 2010. According to court documents, the Bay Medical clinics submitted more than $77 million in claims to Medicare, seeking reimbursement for a wide variety of fraudulent medical services and procedures, including physician office visits, physical therapy and diagnostic tests.
The government’s investigation included the use of a court-ordered audio/video recording device hidden in a room at the clinic, in which the conspirators paid cash kickbacks to corrupt Medicare beneficiaries. The conspirators were recorded paying approximately $500,000 in cash kickbacks during a period of approximately six weeks from April to June 2010. This room was marked “PRIVATE” and featured a Soviet-era poster of a woman with a finger to her lips and the words “Don’t Gossip” in Russian. The purpose of the kickbacks was to induce the beneficiaries to receive unnecessary medical services or to stay silent when services not provided to the patients were billed to Medicare.
To generate the large amounts of cash needed to pay the patients, the conspirators used a network of external money launderers, including Kraiter. According to court documents, Kraiter conspired with others to accept checks from the Bay Medical clinics, which were made payable to various shell companies Kraiter and his co-conspirators controlled. These checks did not represent payment for any legitimate service, but rather were written to launder the Bay Medical clinics’ fraudulently obtained health care proceeds. Kraiter admitted at his change of plea hearing that he deposited such checks into bank accounts he controlled, intending these transactions to hide and disguise the fact that these funds were proceeds of a crime. He admitted that he knew these funds were proceeds of health care fraud.
According to court documents, Kraiter and his co-conspirators negotiated and cashed these checks and provided the cash back to the owners and operators of the Bay Medical clinics. Such cash was then diverted to the personal use of the owners and operators of the Bay Medical clinics, and used to pay illegal cash kickbacks to the Bay Medical clinics’ purported patients.
This case is being prosecuted by Trial Attorney Sarah M. Hall of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Shannon Jones and William Campos of the Eastern District of New York. The case was investigated by the FBI and HHS.
The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York. The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion. In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.
Long Island Doctor Pleads Guilty to Conspiracy to Distribute OxycodoneRead the Press Release
William J. Conway, a Baldwin, New York physician, pled guilty today in United States District Court for the Eastern District of New York to conspiring to illegally distribute the highly addictive painkiller oxycodone to patients, who the defendant knew were addicts and without performing any meaningful medical examination. When sentenced, Conway faces up to 20 years in prison, a $1 million fine and loss of his license to practice medicine.
The guilty plea was announced by Loretta E. Lynch, the United States Attorney for the Eastern District of New York, Brian R. Crowell, Special Agent-in-Charge of the U.S. Drug Enforcement Administration (DEA), New York Division, and Thomas V. Dale, Commissioner, Nassau County Police Department. The plea was entered before the Honorable Leonard D. Wexler at the United States Courthouse in Central Islip, New York.
Conway was arrested on June 6, 2012 as part of the Eastern District of New York’s Prescription Drug Initiative, led by the United States Attorney’s Office and the DEA, working with the Nassau County Police Department, the New York State Police and numerous other local, state and federal law enforcement agencies. He has been held in custody since the arrest.
According to court filings and records of the New York State Bureau of Narcotics Enforcement, between January 2009 and November 2011, Conway issued 5,554 oxycodone prescriptions – for a total of 782,032 pills – to numerous individuals. During the execution of a federal search warrant at his offices on March 1, 2012, Conway surrendered his DEA registration authorizing him to prescribe controlled substances. Despite that surrender, Conway continued to engage in the conspiracy to illegally distribute oxycodone after that date.
On April 23, 2011, Giovanni Manzella, a 34 year-old man from Long Beach, New York, died of an overdose of oxycodone less than 48 hours after Conway provided him with two prescriptions totaling 450 pills. On October 27, 2011, 29 year-old Christopher Basmas of Hicksville, New York was pronounced dead of an overdose, also within two days after receiving a prescription from Conway for 180 pills of oxycodone. Patient files seized by the DEA revealed that neither man received meaningful medical examinations from Conway. The files for these and other patients typically consisted of little more than notations of a patient’s height, weight and blood pressure. After Basmas’ death, Conway attempted to alter patient files to cover his tracks, but still continued to issue prescriptions – in some instances, in the names of individuals he had never treated, or even met.
In September 2012, Conway’s office assistant, Robert Hachemeister, was charged with conspiring with Conway to illegally distribute oxycodone, and with distributing oxycodone to Conway’s patients. Hachemeister, who had worked as an office assistant for Conway since approximately 1995, distributed thousands of oxycodone pills using prescription pads that were pre-signed by Conway between 2011 and 2012. On January 9, 2013, Hachemeister pled guilty to conspiring to illegally distribute oxycodone and is currently awaiting sentencing.
“Instead of providing needed medical services to his community, Dr. Conway directly contributed to the tragedy of prescription drug abuse that has swept across our district and our nation. On Conway’s watch, oxycodone pills might as well have been mints in a candy jar. Even the death of his patients only led him to try to conceal his actions, rather than truly care for his patients. Today’s conviction should serve as a warning to those who would violate their oath as medical professionals to do no harm: if you illegally distribute prescription drugs, you will be held accountable,” stated United States Attorney Lynch. “I want to thank our partners at the DEA, Nassau County Police and the New York State Police for their effective work in investigating this case.”
DEA Special Agent-in-Charge Crowell stated, “One of DEA’s top priorities is to stop overdoses and deaths by fully identifying and prosecuting those responsible for putting diverted drugs in the hands of those abusing opiates. Dr. Conway has been tied to local overdoses that bring home the enormity of the country’s prescription pill epidemic. One out of every ten high school seniors has abused oxycodone or hydrocodone for recreational use. Investigating rogue doctors and increasing the awareness of the dangers associated with Rx abuse are two significant steps our law enforcement team takes to curtail this problem and to protect our communities.”
The Prescription Drug Initiative is a joint effort led by the United States Attorney’s Office for the Eastern District of New York, the DEA and the five District Attorneys in Kings, Nassau, Queens, Richmond and Suffolk Counties, working in conjunction with the New York City Police Department and the Nassau and Suffolk County Police Departments, as well as the Department of Health and Human Services, the Internal Revenue Service, New York/New Jersey HIDTA, the New York State Department of Health and the New York State Medicaid Inspector General. The Prescription Drug Initiative is a broad and comprehensive approach to the epidemic of prescription drug trafficking and abuse, involving not only criminal investigation and prosecution at the federal, state and local level, but also the targeted use of civil law enforcement, regulatory action and community outreach. The Initiative has expanded information-sharing among federal and state enforcement agencies to better identify and target suspected traffickers, and ensure greater use of criminal, civil, forfeiture, injunctive and other tools.
The government’s case is being prosecuted by Assistant United States Attorneys Sean C. Flynn and Michael P. Canty.
The Defendant
Name: WILLIAM J. CONWAY
Age: 70Florida Attorney Charged with Laundering Purported Stock Fraud ProceedsRead the Press Release
BROOKLYN, NY - Michael J. Scaglione, Esq., 41, an attorney in Coral Gables, Florida, was arrested this morning on charges that he laundered over $750,000, which he believed were proceeds from a penny stock fraud scheme. The money was, in fact, provided to Scaglione by an undercover law enforcement agent who posed as a criminal stock promoter as part of a sting operation. Scaglione, who is a partner at Scaglione Law Firm, P.A., in Coral Gables, Florida, was arrested after he took possession of an additional $500,000 in cash that he agreed to launder.
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); and Toni Weirauch, Special Agent in Charge, United States Internal Revenue Service, Criminal Investigation, New York (IRS).
According to the complaint unsealed this morning in the Eastern District of New York, Scaglione exploited his position as an attorney to launder money through an escrow account for an undercover law enforcement agent (“undercover agent”) who posed as a corrupt stock promoter. In his dealings with Scaglione, the undercover agent represented himself to be a middleman working with corrupt stock brokers who artificially inflated prices for worthless stock in exchange for high commissions. Scaglione agreed to launder what he believed were proceeds of this stock fraud through his attorney escrow account in order to hide that money from the United States Securities and Exchange Commission and the IRS. Scaglione then funneled over $750,000, including $88,000 in cash given to him in a Federal Express box in the lobby of a Miami Beach hotel, through the escrow account into the undercover agent’s bank account in Long Island, New York. Scaglione carefully structured the movement of these funds to avoid triggering financial reporting requirements. In exchange, Scaglione collected over $25,000 in fees. In recorded conversations, Scaglione assured the undercover agent that their conversations were “completely privileged” and that his money was “safe” with Scaglione. When the undercover agent explained to Scaglione that he did not “want to go to jail,” Scaglione stated to the undercover agent that the escrow account was “tight as can be.” Directly prior to his arrest this morning, at a hotel in Miami Beach, Florida, Scaglione accepted an additional $500,000 in cash from the undercover agent, which Scaglione believed to be proceeds from the penny stock fraud.
“As alleged in the complaint, Scaglione hid behind his license to practice law as he threw himself into the purported scheme to launder money. In so doing he crossed the line from attorney to defendant,” stated United States Attorney Lynch. “I would like to thank our partners at the FBI and the IRS for their swift action and effective work on this important investigation.”
FBI Assistant Director in Charge Venizelos stated, “As alleged, the defendant breached the code of ethics for his profession and flagrantly broke the law, in laundering what he believed to be the proceeds of criminal activity. Contrary to the counsel he gave, the attorney-client privilege is not a veil of secrecy to hide criminal conduct.”
IRS Special Agent in Charge Weirauch stated, “Criminal attempts to conceal reportable financial transactions from government agencies, including the Internal Revenue Service and the Securities and Exchange Commission, may appear to be victimless crimes to some. However, they erode our nation’s financial systems and ultimately harm the American public. In particular, the laundering of proceeds from illegitimate activities that are nevertheless taxable threatens our voluntary tax compliance system; failure to investigate and prosecute these types of crimes would erode public confidence.”
The defendant is scheduled to appear tomorrow before United States Magistrate Judge Alicia M. Otazo-Reyes at the United States Courthouse in Miami, Florida, for removal proceedings to the Eastern District of New York.
The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by Assistant United States Attorney Jacquelyn M. Kasulis..
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
Name: MICHAEL J. SCAGLIONE
Age: 41
Miami Springs, FloridaManhattan, Brooklyn, and Miami U.S. Attorneys Announce Extradition of Colombian Narcotics KingpinRead the Press Release
Preet Bharara, Loretta E. Lynch, and Wifredo A. Ferrer – the United States Attorneys for the Southern District of New York (“SDNY”), Eastern District of New York (“EDNY”), and Southern District of Florida (“SDFL”), respectively – Michele M. Leonhart, the Administrator of the U.S. Drug Enforcement Administration (“DEA”), James Dinkins, the Executive Assistant Director of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the extradition of DANIEL BARRERA BARRERA, also known as “Loco,” a citizen of Colombia, to the U.S. on charges that for decades he manufactured hundreds of tons of cocaine annually in Colombia and trafficked it to various parts of the world, including the U.S., and laundered tens of millions of dollars in proceeds from that narcotics trafficking activity. BARRERA arrived in the Southern District of New York this afternoon. He will be presented and arraigned in the Southern District of New York before U.S. District Judge Alvin K. Hellerstein on July 10, 2013, at 11:00 a.m., and in the Eastern District of New York before U.S. District Judge I. Leo Glasser on July 11, 2013, at 3:30 p.m. Following his prosecution in New York, BARRERA will be presented and arraigned in the Southern District of Florida.
In March 2010, the U.S. Department of the Treasury’s Office of Foreign Assets Control designated BARRERA as a “Special Designated Narcotics Trafficker,” pursuant to the Foreign Narcotics Kingpin Designation Act. BARRERA was arrested in Venezuela on September 18, 2012. Thereafter, he was sent to Colombia, from where the U.S. sought BARRERA’s extradition. The extradition of BARRERA is the result of an ongoing Organized Crime Drug Enforcement Task Forces (OCDETF) investigation led by DEA and HSI. The principal mission of the OCDETF program is to identify, disrupt and dismantle the most serious drug trafficking, weapons trafficking and money laundering organizations, and those primarily responsible for the nation’s illegal drug supply.
U.S. Attorney Preet Bharara said: “For more than a decade, as alleged, Daniel Barrera Barrera has operated at the center of a truly evil web spun between his narcotics trafficking organization and two violent and sworn enemy terrorist organizations – the AUC and the FARC. By purchasing raw cocaine paste from the FARC, which he processed in laboratories in areas controlled by the AUC, to whom he paid fees, Barrera’s behemoth cocaine organization reached an annual production rate of upwards of 400 tons, enriching itself and the two terrorist organizations it paid off, as the indictment describes. This was truly cocaine with blood in its background. With his arrival in the U.S., Barrera must now answer for his alleged crimes, and we will continue to work with our law enforcement partners, both here and abroad, to prosecute him and other alleged titans of the transnational drug trade.”
U.S. Attorney Loretta E. Lynch said: “As alleged in the three indictments on which he was extradited, Daniel “Loco” Barrera Barrera was the kingpin of a stunningly prolific Colombian drug cartel, which flooded the globe with its deadly product. Barrera also allegedly wrought destruction closer to home, working with not one but two terrorist organizations responsible for decades of death and destruction in Colombia, all to ensure his deadly business ran smoothly. His extradition to the United States marks the fall of the last don of an organization marked by its worldwide reach, ruthless criminality, and staggering profits. This investigation exemplifies the global cooperation necessary to combat international drug traffickers and our commitment to dismantle these criminal organizations from the highest levels down.”
U.S. Attorney Wifredo A. Ferrer said: “Daniel “Loco” Barrera Barrera’s arrest and extradition is the direct result of strong international cooperation with Colombian authorities. It also reflects the hard work and perseverance of our law enforcement partners – both at home and abroad – whose dedicated efforts led to the capture of one of the world’s most notorious drug traffickers. While Barrera evaded capture for several years, the time has finally come for him to answer for his crimes and face justice. As this case confirms, the United States will never tire in its pursuit of those who profit from the illegal drug trade.”
DEA Administrator Michele M. Leonhart said: “Daniel Barrera allegedly worked with both the FARC and AUC terrorist organizations in operating his drug trafficking syndicate, becoming one of the most prolific drug traffickers of the past twenty years. Charged with manufacturing upwards of 400 tons of cocaine a year, Barrera’s alleged impact on the global trade of cocaine was immense – but so was DEA’s response. Thanks to the cooperative efforts of our Colombian and U.S. law enforcement counterparts, Barrera’s criminal career is over as he now faces charges that may bring him a life behind bars.”
ICE HSI Executive Assistant Director James Dinkins said: “Mr. Barrera and his co-conspirators stand accused of running one of the largest cocaine trafficking operations in history. His extradition to the United States represents a major victory for the rule of law. While Mr. Barrera may have thought he was safe hiding and conducting his illicit activities in South American countries, an international team of law enforcement agencies worked tirelessly and cooperatively towards bringing him to justice.”
NYPD Commissioner Raymond W. Kelly said: “If any one case epitomizes the nexus between terrorism and drug trafficking and the destructive impact on Colombian society, this is it; not to mention the crime and suffering cocaine addiction has fueled on the demand-side of the equation in the streets of New York. Barrera’s extradition is a milestone, and we’re indebted to the detectives, agents, and prosecutors who’ve made it possible.”
As alleged in the Superseding Indictment filed in the Southern District of New York (S1 07 Cr. 862 (AKH)), the Superseding Indictment filed in the Eastern District of New York (S2 10 Cr. 288 (ILG)), the Superseding Indictment filed in the Southern District of Florida (S1 10 Cr. 20587 (DLG)), other documents filed in these cases, and information in the public record:
Since 1998, BARRERA has run a cocaine manufacturing and trafficking syndicate which each month processed approximately 30,000 kilograms of raw cocaine base into about the same amount of cocaine powder – in total, up to approximately 400 tons of cocaine annually.
BARRERA purchased the raw cocaine base or paste from the designated terrorist group Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, or the “FARC”), which has been the world’s largest supplier of cocaine and which has engaged in bombings, massacres, kidnappings, and other acts of violence within Colombia.
BARRERA converted the raw cocaine into powder at laboratories he owned and operated in an area of Colombia controlled by the since demobilized terrorist group, Autodefensas Unidas de Colombia (the “AUC”). For years, the AUC’s main political objective was to defeat the FARC in armed conflict, and it financed its terrorist activities through the proceeds of cocaine trafficking in AUC-controlled regions of Colombia.
Although BARRERA purchased raw materials for cocaine production from the FARC, he was able to maintain his network of cocaine-processing laboratories in AUC-controlled territory, in part by paying monthly “taxes” to the AUC. The fees BARRERA paid to the AUC also allowed him to safely move the processed cocaine through and out of Colombia, into locations on four continents – including into the U.S.
BARRERA reaped tens of millions of dollars of profits from cocaine trafficking, which he laundered through illicit means.
The FARC and the AUC are both designated by the U.S. Department of State as Foreign Terrorist Organizations.
BARRERA, 44, is charged in the Southern District of New York with one count of conspiring to distribute and manufacture cocaine knowing it would be unlawfully imported into the U.S. On that count, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.
BARRERA is charged in the Eastern District of New York with one count of conspiracy to launder money. On that count, BARRERA faces a maximum sentence of 20 years in prison.
BARRERA is charged in the Southern District of Florida with one count of conspiring to import cocaine into the U.S. and one count of conspiring to manufacture and distribute cocaine knowing that it would be unlawfully imported into the U.S. On those counts, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.
Mr. Bharara, Ms. Lynch, and Mr. Ferrer praised the outstanding work of the OCDETF, working in cooperation with HSI New York’s El Dorado Task Force, the DEA’s Bogota Country Office, the DEA’s Caracas Country Office, the DEA’s Miami Field Division, the DEA’s New York Drug Enforcement Task Force – which is comprised of agents and officers of the DEA, the New York City Police Department, and the New York State Police – as well as HSI Bogota. Mr. Bharara, Ms. Lynch, and Mr. Ferrer also thanked the Colombian National Police, the U.S. Marshals Service, and the U.S. Department of Justice’s Office of International Affairs for their ongoing assistance.
The Southern District of New York case is being handled by that office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Jenna Dabbs, Benjamin Naftalis, and Andrea Surratt are in charge of the prosecution. The Eastern District of New York case is being handled by that office’s International Narcotics Strike Force. Assistant United States Attorneys Justin Lerer, Soumya Dayananda, and Amir Toossi are in charge of the prosecution. The Southern District of Florida case is being handled by that office’s Narcotics Unit. Assistant United States Attorney Adam Fels is in charge of the prosecution.
The charges and allegations contained in the Indictments are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Court approves “without hesitation” HSBC DPA that imposes a record corporate forfeiture of $1.256 billion, independent monitor and important remedial measures.Read the Press Release
Court approves “without hesitation” HSBC DPA that imposes a record corporate forfeiture of $1.256 billion, independent monitor and important remedial measures.
Canadian National Pleads Guilty to Conspiring to Provide Material Support to the Tamil TigersRead the Press Release
Earlier today, defendant Suresh Sriskandarajah pleaded guilty in federal court in Brooklyn, New York, to conspiring to provide material support to a foreign terrorist organization, the Liberation Tigers of Tamil Eelam (“LTTE”), also known as the Tamil Tigers, in connection with his attempt to procure sophisticated military technology, including submarine and warship design software and night vision equipment, for the LTTE. Sriskandarajah faces a maximum term of 15 years’ imprisonment. Six of Sriskandarajah’s co-defendants were previously convicted of terrorism-related offenses in connection with their support for the LTTE.
Sriskandarajah’s guilty plea 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; Aaron T. Ford, Special Agent-in-Charge, Federal Bureau of Investigation, Newark Field Office, and Raymond W. Kelly, Commissioner of the New York City Police Department. The guilty plea was accepted by United States District Judge Raymond J. Dearie.
As detailed in court filings, between September 2004 and April 2006, Sriskandarajah and several co-conspirators assisted a principal LTTE procurement officer in researching and acquiring aviation equipment, submarine and warship design software, night vision equipment and communications technology. Sriskandarajah used students as couriers to smuggle prohibited items into territory in Sri Lanka that was controlled by the LTTE at that time. Additionally, Sriskandarajah helped the LTTE launder its proceeds in the United States and elsewhere. Following his indictment in the Eastern District of New York, Sriskandarajah, who is a Canadian citizen, was extradited to the United States from Canada, arriving in 2012.
The LTTE was founded in 1976 and uses illegal methods to raise money, acquire weapons and technology, and publicize its cause of establishing an independent Tamil state in northern Sri Lanka. The LTTE began its armed conflict against the Sri Lankan government in
1983, and utilizes a guerrilla strategy that often includes acts of terrorism. At its height, the LTTE controlled most of the northern and eastern coastal areas of Sri Lanka. Over the past 19 years, the LTTE has conducted approximately 200 suicide bombings, resulting in the deaths of hundreds of victims, and carried out numerous political assassinations, including the May 1991 assassination of former Indian Prime Minister Rajiv Gandhi, the 1993 assassination of the President of Sri Lanka, Ranasinghe Premadasa, the July 1999 assassination of Neelan Thiruchelvam, a member of the Sri Lankan parliament, the June 2000 assassination of C.V. Goonaratne, the Sri Lankan Industry Minister, the August 2006 assassination of the Sri Lankan government’s peace secretariat, Ketheshwaran Loganathan, the January 2008 assassination of Sri Lankan Minister for Nation Building, D.M. Dassanayake, and the April 2008 assassination of Sri Lankan Highways Minister, Jeyaraj Fernandopulle. In May 2009, the LTTE’s forces in Sri Lanka were defeated by the Sri Lankan government.In 1997, the LTTE was designated by the U.S. State Department as a Foreign Terrorist Organization, and the LTTE therefore may not legally raise money or procure equipment or materials in the United States.
“The defendant helped the LTTE, an organization that pioneered terrorist tactics and has killed numerous civilians in brutal terrorist attacks, obtain sophisticated military technology and equipment,” stated United States Attorney Lynch. “Claiming to fight for freedom, the LTTE instead created a climate of fear and bloodshed, systematically assassinating those who stood in the way of their terrorist goals. We will continue to locate and prosecute those who fund and support terrorist organizations, wherever they reside.” Ms. Lynch extended her grateful appreciation to the New York and Newark Field Offices of the FBI, and the New York City Police Department.
The government’s case is being prosecuted by Assistant U.S. Attorney Alexander Solomon.
The Defendant
Name: SURESH SRISKANDARAJAH
Age: 32Registered Sex Offender Sentenced to 264 Months’ Imprisonment and Lifetime Supervised Release for Transporting Child PornographyRead the Press Release
Earlier today, Edmund Ansbro, a registered sex offender, was sentenced to a term of imprisonment of 264 months and lifetime supervised release following his conviction for transporting child pornography in interstate commerce. The proceeding was held before Senior United States District Judge Denis R. Hurley at the United States Courthouse in Central Islip, New York.
The sentence 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 (FBI), New York Field Office, and Edward Webber, Commissioner of the Suffolk County Police Department (SCPD).
Ansbro was arrested in Brooklyn on June 10, 2010, as a result of an undercover investigation by a detective with the SCPD Computer Crimes Unit and a special agent with the FBI Sexual Exploitation of Children Unit. According to a complaint filed in federal court, Ansbro admitted at the time of his arrest that he had been trading child pornography for the past six years and had collected approximately 250 gigabytes of child pornography.
New York State records show that Ansbro was convicted on April 4, 2000, in Kings County Supreme Court, of two counts of Sexual Abuse in the First Degree: Sexual Conduct with an Individual Less Than 11 Years Old. Ansbro was sentenced to six months jail and five years’ probation. Following the conviction, Ansbro was required to register as a sex offender with New York State authorities.
“This sentence stands as a strong warning to prior sex offenders that we will prosecute them to the fullest extent of the law,” stated United States Attorney Lynch. “We will not accept the continuing victimization of our children.” Ms. Lynch expressed her grateful appreciation to the Federal Bureau of Investigation and Suffolk County Police Department for their assistance in this case.
The government’s case was prosecuted by Assistant United States Attorney Allen Bode.
The Defendant
EDMUND ANSBRO
Brooklyn, New York
Age: 43Ms-13 Street Gang Leader Sentenced to 365 Months’ Imprisonment for 2009 Murder and Attempted MurderRead the Press Release
Earlier today, United States District Judge Joseph F. Bianco sentenced Jose Gustavo Orellana-Torres, also known as “Diablito,” the former leader of the Coronados clique of La Mara Salvatrucha, also known as the MS-13 street gang, to 365 months’ imprisonment following his September 25, 2012 guilty plea to racketeering, including predicate acts relating to the May 26, 2009 murder of Dexter Acheampong in Central Islip, New York, and the July 5, 2009 attempted murder of a suspected rival gang member in Roosevelt, New York.
The sentence 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 Thomas V. Dale, Commissioner of the Nassau County Police Department.
According to his plea allocution and documents previously filed in the case, on May 26, 2009, Orellana-Torres attended a Coronados clique meeting in Brentwood, New York, and the MS-13 members agreed to “put in work” for the gang by killing rival gang members. Orellana-Torres and several other MS-13 members drove around Brentwood and Central Islip looking for rival gang members, and Orellana-Torres was armed with a .38 caliber revolver. While in the vicinity of East Maple Street in Central Islip, the MS-13 members observed Dexter Acheampong, whom they did not know, but believed, based on the color of his skin and the neighborhood he was walking in, to be a member of the Bloods street gang. In fact, Mr. Acheampong did not belong to any street gang. Orellana-Torres stepped out of the car and fired four shots at Mr. Acheampong with the .38 caliber revolver, striking the victim twice in the back as he tried to escape. Mr. Acheampong was found dead in the driveway of a home on East Maple Street the next morning.
Just over a month later, on July 4-5, 2009, Orellana-Torres attended another MS-13 meeting, this time in Roosevelt, New York. The MS-13 members again discussed killing rival gang members. Orellana-Torres, who possessed the same .38 caliber revolver that night, and other MS-13 members drove around Roosevelt, New York, looking for rival gang members. The MS-13 members observed a man, whose identity is known to the government but is not being disclosed in order to protect his safety, whom they believed to be a rival gang member. One of the other MS-13 members fired several shots at the man, striking him once in the hand.
“The MS-13 street gang has become infamous for its senseless and depraved acts of violence, but even for the MS-13, these vicious crimes demonstrated exceptional depravity. Orellana-Torres and his co-conspirators targeted Dexter Acheampong and another young man, whom they did not even know, because they believed them to be rival gang members,” stated United States Attorney Lynch. “This sentence should make clear that gang members will pay a heavy price for such cold, calculated acts of violence.”
FBI Assistant Director-in-Charge Venizelos stated, “We cannot overstate our commitment to investigating MS-13 and other gangs on Long Island. As the case of Orellana-Torres shows, MS-13 is not about ethnic pride, it is a violent, murderous horde. It is hard to imagine a more wanton disregard for human life than shooting a person in the back because the color of his skin makes you think a may be a rival gang member.”
Orellana-Torres’s conviction is the latest in a series of federal prosecutions by this Office targeting New York members of the MS-13, a violent international street gang comprised primarily of immigrants from El Salvador, Honduras and Guatemala. With numerous branches, or “cliques,” the MS-13 is the largest street gang on Long Island. Since 2002, more than 200 MS-13 members, including more than two dozen clique leaders, have been convicted on federal felony charges in the Eastern District of New York. More than 100 of those MS-13 members have been convicted on federal racketeering charges. Since 2010 alone, this Office has convicted more than 30 members of the MS-13 on charges relating to their participation in one or more murders. These prosecutions are the product of investigations led by the FBI’s Long Island Gang Task Force, comprising agents and officers of the FBI, Nassau County Police Department, Nassau County Sheriff’s Department, Suffolk County Probation, Suffolk County Sheriff’s Department and the Rockville Centre Police Department.
The government’s case was prosecuted by Assistant United States Attorneys John J. Durham, Raymond A. Tierney and Carrie N. Capwell.
The Defendant
JOSE GUSTAVO ORELLANA-TORRES (“Diablito”)
Age: 28Woodmere Man Pleads Guilty to Defrauding Investors of $62 Million in A Real Estate Ponzi SchemeRead the Press Release
Earlier today, Gershon Barkany pleaded guilty at the federal courthouse in Central Islip, New York, to wire fraud. The proceeding took place before United States Magistrate Judge Arlene R. Lindsay. When sentenced, Barkany faces up to 20 years in prison. As part of his plea agreement with the government, Barkany agreed to a $62 million money judgment payable to the United States.
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.
According to court filings and facts presented during the plea proceeding, between December 2009 and March 2013, Barkany induced seven investors to give him approximately $62 million by promising to use their money in “risk-free” deals to purchase, and then immediately re-sell at a profit, commercial real estate properties located in New York City and New Jersey. However, no such deals existed and the investors lost their entire investments.
In one instance, Barkany approached an investor he knew from the community and who placed his trust in the defendant. Barkany preyed on that trust to convince the investor to invest $46.5 million that was supposed to be used as a down payment to purchase an office building in Manhattan, a hotel in Atlantic City and properties in the Bronx and Queens. Barkany explained that he would find a buyer for those properties who would pay a higher price before the actual closing, resulting in a profit for Barkany and the investor. Barkany assured the investor that the real estate deals were risk free because if Barkany was unable to find a buyer before the closing, the owner of the properties would refund their monies. In fact, those real estate deals did not exist and the investment was not refunded.
On March 28, 2013, FBI special agents arrested Barkany. Shortly thereafter, two additional victims contacted the FBI and advised that they too had been defrauded by Barkany. As he had done with the other victims, Barkany induced those investors to give him approximately $7.5 million by promising to use their money in a “risk-free” deal to purchase, and then immediately re-sell at a profit, an office building located on 53rd Street in Manhattan. That deal also did not exist. In furtherance of that scheme, Barkany created fictitious documents, including a purchase agreement purportedly signed by the seller of the office building and an escrow agreement allegedly signed by a third-party escrow agent. Neither the seller of the property nor the third-party escrow agent signed or entered into those agreements. Barkany created those documents to deceive the victims.
As part of his Ponzi scheme, Barkany diverted some of the funds he received to pay investors whom he had defrauded earlier. The defendant also lost some of the funds in gambling and otherwise used the money for his own benefit.
“The defendant bilked investors out of funds that he led them to believe were to be invested in safe real estate deals. Instead, he was paying investors to keep his Ponzi scheme afloat and to gamble,” stated United States Attorney Lynch. “Barkany rolled the dice that his brazen greed and dishonesty would go unnoticed. That gamble did not pay off. Today’s conviction sends a clear message that this office is committed to vigorously investigating and prosecuting individuals who are responsible for committing financial crimes.”
FBI Assistant Director-in-Charge Venizelos stated, “Barkany has admitted to a multimillion-dollar real estate swindle where he convinced wealthy investors they were buying no-risk properties. Unbeknownst to his victims, what they were really buying were not brick-and-mortar buildings, but the smoke-and-mirror fantasy of Barkany’s fraudulent sales pitch.”
The government’s case is being prosecuted by Assistant United States Attorneys Christopher Caffarone and Diane Beckmann.
The Defendant
GERSHON BARKANY
Age: 29
Residence: Woodmere, NYNew Arrest: British citizen Christopher Gardner, residing in Farmingdale, LI, arrested by FBI agentsRead the Press Release
New Arrest: British citizen Christopher Gardner, residing in Farmingdale, LI, arrested by FBI agents and charged in the attached complaint for hacking former employer Dan’s Papers web files, and disabling company’s website. Defendant Faces up to 10 years in Prison.
Long Island Resident Pleads Guilty to Attempting to Provide Material Support to Al-Qaeda AffiliateRead the Press Release
A complaint and information were unsealed in federal court yesterday afternoon charging Justin Kaliebe, an American citizen and resident of Babylon and Bay Shore, New York, with attempting to travel to Yemen in order to join the foreign terrorist organization, al-Qaeda in the Arabian Peninsula (“AQAP”), also known as Ansar al-Sharia (“AAS”). On February 8, 2013, Kaliebe pled guilty before United States Magistrate Judge A. Kathleen Tomlinson to both counts of the information, charging him with attempting to provide material support to terrorists, in violation of 18 U.S.C. § 2339A(a), and attempting to provide material support to a designated foreign terrorist organization, AQAP/AAS, in violation of 18 U.S.C. § 2339B(a)(1). Thereafter, on March 5, 2013, United States District Judge Arthur D. Spatt reviewed and accepted Kaliebe’s guilty plea. A status conference is scheduled for June 26, 2013 at 3:00 p.m. at the United States Courthouse in Central Islip, New York, when Judge Spatt is expected to set a sentencing date. Kaliebe faces a maximum sentence of 30 years in prison when he is sentenced by Judge Spatt.
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 (FBI), New York Field Office; and Raymond W. Kelly, Commissioner, New York City Police Department (NYPD).
According to the court filings, Kaliebe attempted to travel from the United States to Yemen for the purpose of joining AQAP/AAS and waging violent “jihad.” During numerous meetings and recorded conversations and email correspondence with undercover law enforcement officers, Kaliebe explained that he had been searching for an opportunity to travel abroad and fight jihad for two years – long before Kaliebe first approached the undercover officers about his plans to join a terrorist group. Kaliebe repeatedly expressed his desire to travel to Yemen in order to join AQAP/AAS and to help carry out its violent extremist agenda. Kaliebe also demonstrated extensive knowledge of terrorist organizations, including AQAP/AAS and al-Qaeda, and current and former leaders of those terrorist organizations. For example, Kaliebe referenced, and at times quoted, Anwar al-Awlaki, a member and leader of AQAP, as well as Omar Abdel Rahman (the “Blind Sheik”), Ayman al-Zawahiri (the current leader of al-Qaeda), and Usama Bin Laden. Further, Kaliebe demonstrated detailed knowledge of various terrorist attacks that were carried out by AQAP/AAS in Yemen, as well as other attacks carried out by al-Qaeda around the world.
According to the court filings, during a recorded conversation that took place on June 4, 2012, Kaliebe observed that “the crime that they would charge people like us with” was conspiracy “to kill, maim and kidnap in foreign countries,” a reference to a federal criminal statute that has previously been used to charge other individuals who departed or attempted to depart the United States in order to fight jihad abroad. Later during that same conversation, Kaliebe stated that, once he arrived in Yemen, he expected to fight the “Yemeni army” and “those who are fighting against the Sharia of Allah . . . whether it’s the U.S. drones or the, their puppets, in the Yemeni army . . . or, who knows, if American agents or whatever, U.S. Special Forces . . . who they got over there.” When asked if he was afraid to die, Kaliebe responded “I wanna . . . . It’s what anyone would want, any believer would want.” During another recorded conversation, which took place on July 9, 2012, Kaliebe stated that he had been inspired by several sheiks, including “Sheik Usama,” “who showed how he could bring an entire nation to its knees.”
According to the court filings, beginning in approximately July 2012, Kaliebe saved money to finance his travel to Yemen, which he then used to apply for and purchase a United States passport, and to purchase an airline ticket to Oman, from where he intended to travel by land to Yemen. During a recorded meeting on July 30, 2012, Kaliebe stated explicitly that he was saving money “as a means to go to Yemen to fight jihad.”
On December 26, 2012, Kaliebe sent an email in which he swore his loyalty to the leaders of AQAP and al-Qaeda, respectively, writing, “I pledge my loyalty, allegiance and fidelity to the Mujahedeen of Al-Qaa'idah in the Arabian Peninsula and its leaders, Shaykh Abu Baseer Nasir Al-Wuhayshi and Shaykh Ayman Al-Zawahiri, hafidhahum Allah! May Allah accept this from me and may he allow me to fight in his cause til the day that I leave this dunya.”
According to court filings, on January 18, 2013 Kaliebe reaffirmed his commitment to jihad, telling an NYPD Intelligence Division undercover officer, in a recorded conversation, that he understood “there’s a way out, but for me, the only way out is [martyrdom].” Additionally, Kaliebe paid homage to several terrorist leaders, telling the undercover law enforcement officer that:
[My] standard is Abu Dujana. [M]y standard is Abu Mus’ab Al-Zarqawi. My standard is Sheik Anwar Al-Awlaki and Sheik Usama, both who bore witness to the truth for their blood.
Finally, Kaliebe stated, “Oh Allah, please allow me, please allow me and my brother [ ] to fight jihad in your cause oh Allah. Oh Allah, please give us one of the two victories, victory on the ground or victory through [martyrdom.]”
On January 21, 2013, Kaliebe’s efforts culminated in an attempt to board a flight to Muscat, Oman at John F. Kennedy Airport in Queens, New York. He was arrested at the airport by members of the FBI’s Joint Terrorism Task Force and the NYPD Intelligence Division. Thereafter, on February 8, 2013, Kaliebe waived indictment and pled guilty to attempting to provide material support to AQAP/AAS and attempting to provide material support to terrorists.
The government’s investigation is on-going.
“Kaliebe attempted to turn his back on his country and align with radical terrorists. His goal was to travel overseas to wage violent jihad against Yemeni and U.S. forces opposed to al-Qaeda. Firmly committed to this plan, he found both inspiration and guidance in the online teachings of al-Qaeda leaders, including Usama Bin Laden. While the Internet has made worlds of knowledge available to all, unfortunately it is also used as a platform for al-Qaeda and other terrorist groups to spread their poisonous propaganda. Terrorists continue to exploit this free and open medium to persuade United States citizens and others to carry out attacks, both here and abroad. We must and will use every tool to identify and disrupt potential attackers before they strike,” stated United States Attorney Lynch. United States Attorney Lynch thanked the Port Authority of New York and New Jersey Police for their assistance in this investigation.
FBI Assistant Director-in-Charge Venizelos stated, “Kaliebe was equipped to travel overseas and fight jihad abroad. He set the wheels in motion – convinced of his well-thought-out plan – but didn’t get very far. The FBI, along with our law enforcement partners, will seek out those who pledge allegiance to terrorists and terrorist organizations throughout the world, and we will continue to work together to disrupt their evil plans.”
NYPD Commissioner Kelly stated, “The NYPD is concerned about the continuing interest of some young Americans in violent jihad and their identification with terrorist organizations like AQAP. That is why the NYPD Intelligence Division continues to track individuals allegedly evincing support for terrorism, and, that is why we worked in close cooperation with the JTTF to apprehend this suspect.”
The government’s case is being prosecuted by Assistant United States Attorney John J. Durham, Seth D. DuCharme, and Sean C. Flynn, with assistance provided by Trial Attorney Kelli Andrews of the Counterterrorism Section of the Department of Justice.
The Defendant
JUSTIN KALIEBE
Age: 18Fugitive Armed Robber Who Shot at Deputy United States Marshals Sentenced to 241 Months’ ImprisonmentRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, New York, the Honorable Sandra L. Townes, United States District Judge, sentenced Derome Gray to 241 months in prison for the armed robbery of a post office in Queens, New York, and for shooting at the Deputy U.S. Marshals who ultimately tracked him down and apprehended him.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Charles G. Dunne, United States Marshal for the Eastern District of New York; Philip R. Bartlett, Postal Inspector-in-Charge, United States Postal Inspection Service; and Joseph Anarumo, Jr., Special Agent-in-Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), New York Field Division.
Early in the morning of June 8, 2007, the defendant and others subdued three Postal Service employees at gunpoint, stole cash from the victims and from several lock boxes, herded the employees into a vault, and fled. An investigation by United States Postal Inspectors quickly identified the robbers, including Gray. The other individuals involved in the robbery were apprehended shortly after the robbery and were convicted of their crimes. Gray, however, fled New York and became a fugitive, hiding in Virginia before returning to New York. For four years, Postal Inspectors and the United States Marshals Service hunted Gray before finally locating him at a residence in Queens, New York, where he had sought safe harbor and support from an associate.
On October 3, 2011, U.S. Marshals and other members of the Regional Fugitive Task Force entered the home to arrest Gray. Gray responded by firing two rounds in the Marshals’ direction, which fortunately were deflected. The Marshals immediately apprehended Gray and an associate without firing a shot. Several firearms, including a cache of semiautomatic handguns and rifles, were seized from the home. Special Agents of the ATF responded to the scene and led the investigation into the events arising from Gray’s arrest.
“With a pistol in his hand, the defendant brazenly invaded a United States Post Office and put the lives of three postal workers in jeopardy. Then, for more than four years, he led investigators on a manhunt up and down the Eastern seaboard. Finally, when confronted by the U.S. Marshals, the defendant tried to shoot his way out, again putting the lives of our public servants at risk. He has now been held to account for his crimes,” stated United State Attorney Lynch. Ms. Lynch expressed her grateful appreciation to the U.S. Marshals, Postal Inspectors and ATF agents for their outstanding work.
The government’s case was prosecuted by Assistant United States Attorneys Seth DuCharme and Justin Lerer.
The Defendant
DEROME GRAY
Alias: “Rome”
Age: 42Purported Environmental Product Inventor and Developer Pleads Guilty in $5 Million Dollar Fraud SchemeRead the Press Release
Earlier today, Theodore Sweeten, the president of Symtech International, Inc. (“Symtech”), pleaded guilty to a charge of wire fraud before United States District Judge Nicholas G. Garaufis at the federal courthouse in Brooklyn, New York. When sentenced, Sweeten faces a maximum sentence of twenty years’ imprisonment.
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.
Sweeten, who claimed he developed and patented the “Clean Air Valve,” among other environmental products, admitted at his guilty plea that he defrauded an investor of $5 million by lying to him about his expertise in their joint venture agreement. The indictment charged Sweeten, and two others, with inducing the victim to make the investment in order to “lease” a credit line of $100 million, which in turn would enable him to generate millions of dollars in profit through special investment programs.1 In furtherance of that scheme, the indictment alleges that the defendants 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, they 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.
“Theodore Sweeten defrauded an investor of his hard-earned savings through fanciful tales about his investment and environmental expertise, but the only expertise Sweeten truly had was being a con man,” stated United States Attorney Lynch. “This Office, together with our law enforcement colleagues, will vigorously pursue those who prey on unsuspecting investors.” Ms. Lynch expressed her appreciation to the Federal Bureau of Investigation, the agency responsible for leading the government’s investigation.
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:
THEODORE SWEETEN
Age: 60
Residence: Ashland, Oregon_____________________________
1 The charges against the co-defendants are merely allegations, and they are presumed innocent unless and until proven guilty.
Former Supervisory Official at Nyc Department of Housing Preservation & Development Sentenced to 18 Months’ Imprisonment for Accepting $100,000 BribeRead the Press Release
Earlier today, Luis Adorno, formerly the Supervisory Construction Project Manager of the Department of Architecture and Construction Engineering at the New York City Department of Housing Preservation and Development (HPD), was sentenced to a term of imprisonment of 18 months, followed by 300 hours of community service, for his corruption conviction for taking bribes. As part of his sentence, Adorno also was ordered to forfeit $100,000 in bribery money to the government, representing the proceeds of his crime, and fined $10,000. The sentence was imposed by United States District Judge Nina Gershon at the U.S. Courthouse in Brooklyn, New York.
The sentence 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 (FBI); Daniel R. Petrole, Deputy Inspector General, United States Department of Labor (DOL) Office of Inspector General; and Rose Gill Hearn, Commissioner, New York City Department of Investigation (DOI).
Until his arrest in June 2012, Adorno was employed by HPD, the largest municipal developer of affordable housing in the nation. Adorno was responsible for personally conducting inspections of HPD construction projects and also supervising other inspectors. During 2008 and 2009, a contractor who worked on several HPD construction projects paid Adorno what amounted to a $100,000 bribe for Adorno’s assistance in getting the contractor additional work with HPD. The bribe was structured in a sophisticated manner to ensure that actual cash did not pass through Adorno’s hands. Rather, the contractor paid $100,000 to a real estate developer who was developing several HPD projects, and in return for the $100,000, the real estate developer agreed to give Adorno a 30 percent equity stake in the developer’s company.
Today’s sentencing proceeding is the latest stemming from the government’s wide-ranging investigation into corruption involving the affordable housing industry in New York City. Four real estate developers and two other former HPD officials have pleaded guilty in this district to various charges, including racketeering conspiracy, fraud, and bribery, related to the development of affordable housing in the City. Three additional defendants await trial.
“Luis Adorno admitted that he agreed to put his finger on the scale in favor of a contractor who paid him $100,000 in bribes. By receiving payment in the form of an equity stake in a real estate development company, Adorno sought to create the bribe that would keep on giving. Today’s sentence sends a clear message that any public servant, whether an elected legislator or an appointed official, who betrays the public trust will be prosecuted to the fullest extent of the law,” stated United States Attorney Lynch. Ms. Lynch thanked the Internal Revenue Service, Criminal Investigation, New York; the United States Department of Housing and Urban Development, Office of Inspector General; and the New York City Police Department for their cooperation in this case.
DOI Commissioner Gill Hearn stated, “This ex-City employee lost his job and his bribe money and will soon take up residence in a prison cell. That was not the nest egg he bargained for when he sold his office for a hidden stake in a real estate deal. DOI thanks our federal partners for their shared determination to unearth the facts and demonstrate again that corruption is a losing strategy.”
The government’s case is being prosecuted by Assistant United States Attorneys Cristina M. Posa, Anthony M. Capozzolo, and Claire Kedeshian.
The Defendant
LUIS ADORNO
Residence: Scarsdale, New York
Age: 48Scarsdale Woman Indicted for Manufacturing MarijuanaRead the Press Release
An indictment was filed this afternoon in federal court in the Eastern District of New York charging Andrea Sanderlin of Scarsdale, New York, with manufacturing and possessing marijuana with intent to distribute it and maintaining a drug-involved premises. Sanderlin, 45, was arrested on May 20, 2013, when federal agents and detectives seized over 2,800 marijuana plants, large quantities of dried marijuana, and state-of-the-art marijuana growing equipment from a marijuana grow house in Maspeth, Queens.1
The indictment was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Brian R. Crowell, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York Division; James T. Hayes, Jr., Special Agent-in-Charge, Department of Homeland Security, Homeland Security Investigations (HSI); and Raymond W. Kelly, New York City Police Commissioner.
As charged in the indictment, Sanderlin operated a warehouse in Maspeth, Queens, which contained a sophisticated operation to grow and process marijuana. The warehouse, which was located in a mixed industrial and residential neighborhood, contained state-of-the-art lighting, irrigation, electrical, and ventilation systems to facilitate growing the marijuana. Initial estimates by the DEA indicate that the marijuana in the warehouse at the time of the search was worth in excess of $3 million. The warehouse used unusually high amounts of electricity, in some cases generating bills exceeding $9,000 a month. Law enforcement agents seized the equipment, approximately 2,800 marijuana plants, and large quantities of dried marijuana from the warehouse.
“Sanderlin could have focused her talents on building a legitimate business enterprise to support her family and serve as a role model for her children. Instead, she allegedly chose to inhabit the shadowy underworld of large-scale drug dealers, using drug proceeds to maintain her family’s façade of upper middle class stability. Sanderlin turned a commonplace warehouse in the heart of Queens into a sophisticated center for growing massive quantities of marijuana for distribution. We are committed to investigating and prosecuting organized drug activity in our communities, no matter who runs the organization or how well it is hidden. Those who use our neighborhoods to grow and introduce illegal drugs into the community will face the full force of the law,” stated United States Attorney Lynch. Ms. Lynch expressed her grateful appreciation to the agents and detectives who investigated the case, and added that the government’s investigation is ongoing.
DEA Special Agent-in-Charge Crowell stated, “Hidden in a warehouse in Maspeth, Queens, this $3 million distribution operation was uncovered as part of a Strike Force investigation. Andrea Sanderlin is alleged to have overseen this operation which produced close to 3,000 marijuana plants to be distributed throughout the New York area. Marijuana is the most abused drug in the nation with 6.5% of high school seniors smoking marijuana on a daily basis. The high THC purity continues to derail more and more teens and young adults into substance abuse programs due to its ever increasing potency. I commend the joint Strike Force team for their steadfast work in identifying and removing this threat to our kids, our families, and our communities.”
“There’s really no difference whether you’re a suburban mom growing marijuana in a warehouse in Queens, or a cartel member making cocaine in the jungles of Colombia -- manufacturing and distributing illegal narcotics comes at a hefty price when you are caught by law enforcement,” said HSI Special Agent-in-Charge Hayes. “While some may mistakenly perceive trafficking in narcotics as a path to a quick profit, this arrest demonstrates the serious consequences that await those who engage in the manufacture and sale of illegal drugs.”
The investigation was led by the DEA’s Organized Crime Drug Enforcement Task Force, which includes agents and officers from the DEA, HSI, New York City Police Department, New York State Police, Bureau of Alcohol, Tobacco, Firearms and Explosives, Internal Revenue Service, United States Marshal Service, United States Secret Service, and the Federal Bureau of Investigation.
If convicted, the defendant faces a minimum sentence of 10 years’ imprisonment and up to $10 million in fines.
The Defendant:
ANDREA SANDERLIN
Scarsdale, NY_____________________________
1 The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
Former New York City Councilman Pedro Gautier Espada Sentenced to Six Months’ ImprisonmentRead the Press Release
Earlier today, Pedro Gautier Espada (“Gautier Espada”) was sentenced before Judge Frederic Block in U.S. District Court in Brooklyn, New York, to six months’ imprisonment, to be followed by six months’ home confinement and one year of supervised release, for theft of federal funds from Bronx-based non-profit healthcare clinics, Soundview Healthcare Network (“Soundview”) and for failing to file a tax return for tax year 2009. As part of that sentence, Judge Block ordered Gautier Espada to serve 100 hours of community service, restitution to the Internal Revenue Service in the amount of $15,628, and additional restitution to the victims of his thefts in an amount to be determined by the court. Gautier Espada served the South Bronx as a New York City Councilman from 1997 to 2001 and as a New York State Assemblyman in 1996.
On June 14, 2013, Judge Block sentenced Gautier Espada’s father, former New York State Senate Majority Leader Pedro Espada, Jr. (“Espada”), to five years’ imprisonment, to be followed by three years of supervised release, for theft of federal funds from Soundview, and lying on his 2005 personal tax return. As part of that sentence, Judge Block ordered Espada to serve 100 hours of community service, restitution to the Internal Revenue Service in the amount of $118,531, restitution to the victims of his thefts in an amount to be determined, and forfeiture of $368,088. The court remanded Espada to the custody of the Bureau of Prisons.
The sentence 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 (FBI), and Toni Weirauch, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York (IRS).
On October 12, 2012, Gautier Espada pled guilty to one count of stealing federal funding from Soundview and one count of failing to file a tax return for 2009. Gautier Espada was Soundview’s Director of Environmental Care and headed Soundview’s Compliance Committee.
The government’s case was prosecuted by Assistant United States Attorneys Todd Kaminsky, Carolyn Pokorny and Claire Kedeshian.
The Defendant
PEDRO GAUTIER ESPADA
Age: 39
Fairfield, CTE.D.N.Y. Docket No. CR-10-985 (FB)
Former Corporate Executive Indicted for Executing Fraud and Money Laundering Scheme Involving over $230 Million in PurchasesRead the Press Release
An indictment was unsealed this morning in federal court in the Eastern District of New York charging Carl Fiorentino, the former president of computer and electronics seller TigerDirect, with mail fraud, wire fraud and money laundering in connection with a scheme to defraud TigerDirect and its parent company, Systemax, Inc. (“Systemax”). Systemax is a publicly traded company with headquarters in Port Washington, New York. According to the indictment, the defendant personally took over $7 million in commercial bribes and kickbacks in return for steering over $230 million in business to the Taiwanese and California companies that paid the bribes and kickbacks.
The defendant was arrested by federal agents earlier today in Coral Gables, Florida, and a search warrant was executed at his $8 million residence, purchased with fraud proceeds. Later today, the defendant will appear for arraignment before United States Magistrate Judge Edwin Torres in the Southern District of Florida. The criminal case has been assigned to the Honorable Sandra J. Feuerstein, United States District Judge for the Eastern District of New York, in Central Islip, New York.
The arrest and 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; and Michael DePalma, Acting Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation, Miami, Florida.
“As alleged in the indictment and court papers, Carl Fiorentino abused his position of trust, employing fraud and deceit to line his own pockets at the expense of his employer and its public shareholders. Fiorentino had it all – a lucrative job and a high-flying lifestyle. But as alleged in the indictment and court papers, his loyalties were neither to his employer nor its public shareholders but solely to himself. Fiorentino’s greed spanned the Pacific Ocean to pull companies from California to Taiwan into his bribery and kickback scheme,” stated United States Attorney Lynch. “We and our law enforcement partners will vigorously pursue and prosecute to the fullest extent of the law those who seek to profit by such fraud.” Ms. Lynch expressed her grateful appreciation to the FBI and IRS for their work on the investigation.
“As alleged, Fiorentino exploited his position to engage in blatant self-dealing. He accepted bribes to abuse his purchasing power and direct company business to specific suppliers. The suppliers’ lavish kickbacks helped finance Fiorentino’s multimillion-dollar home. The FBI will continue to police the kind of insider fraud that victimizes companies and their shareholders,” stated FBI Assistant Director-in-Charge Venizelos.
“IRS Criminal Investigation is committed to unraveling elaborate and complex money laundering schemes leaving no financial stones unturned,” stated Michael J. De Palma, Acting Special Agent-in-Charge of IRS-Criminal Investigation, Miami Field Office. “Those who abuse their position of trust to illegally enrich themselves will be held accountable for their actions.”
Beginning in January 2003 and continuing until April 2011, Fiorentino was the president of TigerDirect, a subsidiary of Systemax, Inc., that sold brand-name computers and its own line of Ultra computers in its retail stores and via mail-order catalogs and the Internet. In 2010 Systemax reported $3.5 billion in net sales according to its 2010 SEC 10K filing. Among his duties as company president, Fiorentino was responsible for selecting suppliers to provide computer components, peripherals and other products to TigerDirect. As alleged in the indictment, beginning in 2003, Fiorentino entered into an illegal agreement with the owner of a Taiwanese company to steer TigerDirect business to his company by directing TigerDirect to purchase the Taiwanese company’s computer components in exchange for bribes and kickbacks that totaled $6.5 million dollars over the course of the conspiracy. In addition, between 2003 and 2007, Fiorentino received another $570,000 in bribes and kickbacks from a California-based company that sold computer memory modules and flash memory products. Fiorentino received the bribes and kickbacks through checks and wire transfers payable to third party individuals and entities that he controlled. Fiorentino used the proceeds of the fraud scheme to buy, among other things, an $8 million home in Coral Gables, Florida.
As a result of the scheme, TigerDirect is alleged to have paid over $157,000,000 for the Taiwanese company’s products and $80,000,000 for the California company’s products. Fiorentino concealed the scheme and kickback payments by submitting false conflict of interest forms to Systemax and using a complex web of wire transfers and shell companies.
The charges announced today are merely allegations, and the defendant is presumed innocent unless and until proven guilty. The indictment charges Fiorentino with mail fraud, wire fraud, conspiracy to commit mail and wire fraud and money laundering conspiracy. If convicted, he faces a maximum sentence of 20 years’ imprisonment on each of those charges, forfeiture of the $8 million Coral Gables residence and over $7 million dollars, and a $250,000 fine.
The government’s case is being prosecuted by Assistant United States Attorney Demetri Jones.
The Defendant:
Name: CARL FIORENTINO
Age: 56Brooklyn Licensed Home Health Care Services Agency Pays One Million Dollars to Settle Civil Fraud Claims That It Provided Unqualified Home Health Aides to Medicaid RecipientsRead the Press Release
The United States and New York State have entered into settlement agreements with Parkshore Home Health Care, LLC, d/b/a Renaissance Home Health Care, Inc. (“Renaissance”), a Brooklyn-based licensed home health care services agency. These settlements resolve allegations that Renaissance provided unqualified home health aides to home health agencies, who in turn sent these unqualified aides into the homes of Medicaid recipients throughout New York City and then billed the Medicaid program for their services. Under the terms of the agreements, Renaissance will pay a total of $1,000,000. The settlement was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and New York State Attorney General Eric T. Schneiderman.
Under the New York State Medicaid program, home health aides – who primarily care for elderly patients, administer medication and provide services such as catheter care, colostomy care and wound care – are required to successfully complete a training program licensed by either the New York State Department of Health or the New York State Education Department. Today’s settlement resolves claims that between 2005 and 2007, Renaissance used home health aides who failed to receive the required training, resulting in Medicaid being billed for hundreds of thousands of dollars of services that these aides were not qualified to provide.
“When companies that provide home health aides fail to take the necessary steps to ensure the proper training for their aides, patients are the ones who can suffer,” said United States Attorney Lynch. “We will continue working to stop health care fraud from being committed on the Medicare and Medicaid programs, especially when the fraud can impact the care received by vulnerable patients.”
“This home health care agency hired workers with false training certificates who then went out into the community and into the homes of the vulnerable and elderly,” Attorney General Schneiderman said. “This was preventable and our investigations show that is a recurring problem in home health care. This office will continue to recover Medicaid funds from providers who do not protect the Medicaid program.”
The settlements resolve allegations that were contained in lawsuits filed under the whistleblower provisions of the Federal and New York State False Claims Acts. These provisions allow private citizens to file suit on behalf of the United States and State of New York, respectively, for fraud, and in certain circumstances to share in any recovery. 1
The United States’ case was handled by Assistant U.S. Attorneys Erin E. Argo and Kelly Horan Florio, who were assisted by Affirmative Civil Enforcement auditor Emily Rosenthal. New York State’s case was handled by Special Assistant Attorney General Jill Brenner.
_____________________________
1 In settling this case, Renaissance has not admitted liability.
Nine Individuals Indicted and Fourteen 7-Eleven Stores Secured as Federal Authorities Shut Down Multi-State Scheme to Conceal Systematic Employment of Illegal Immigrants, Victimize Immigrant Employees, and Steal IdentitiesRead the Press Release
BROOKLYN, NY – Earlier today, two indictments were unsealed charging eight men and one woman from Long Island, New York, with conspiring to commit wire fraud, stealing identities, and concealing and harboring illegal immigrants employed at 7-Eleven, Inc. (7-Eleven) franchise stores located throughout Long Island and Virginia.1 Through this scheme, the defendants, who owned, managed and controlled fourteen 7-Eleven franchise stores during the course of the conspiracies, allegedly hired dozens of illegal immigrants, equipped them with more than 20 identities stolen from United States citizens, housed them at residences owned by the defendants, and stole substantial portions of their wages. If convicted, the defendants will face 20 years’ imprisonment on wire fraud conspiracy and alien harboring charges, as well as multiple counts of aggravated identity theft, which carries a mandatory, consecutive two-year term of incarceration. In addition, all property used to facilitate the harboring of illegal immigrants, together with all proceeds of the wire fraud conspiracy and alien harboring charges, are subject to forfeiture. The defendants will be presented for arraignment later today at the United States Courthouses in Central Islip, New York and Norfolk, Virginia.
The indictments, arrests and seizures are the result of one of the largest criminal immigrant employment investigations ever conducted by the Department of Justice and the Department of Homeland Security. As set forth in court filings, the government has moved to forfeit the franchise rights to ten 7-Eleven stores in New York and four 7-Eleven stores in Virginia. In the indictments, the government has also moved to forfeit five houses in New York worth over $1.3 million. According to the Department of Homeland Security, the case announced today constitutes the largest criminal immigration forfeiture in its history. In addition, earlier today, federal agents fanned out across the country to execute multiple search and seizure warrants and inspect approximately 30 7-Eleven franchise stores. The actions taken are the initial results of an ongoing investigation into the employment and exploitation of illegal immigrants at 7-Eleven franchise stores nationwide.
The charges, arrests and seizures 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 Homeland Security Investigations, New York Field Office (HSI); Edward Ryan, Special Agent-in-Charge, Social Security Administration, Office of the Inspector General (SSA-OIG); Joseph A. D’Amico, Superintendent, New York State Police; and Edward Webber, Commissioner, Suffolk County Police.
“As set forth in the indictments, the defendants used 7-Eleven as a platform from which to run elaborate criminal enterprises. From their 7-Eleven stores, the defendants dispensed wire fraud and identity theft, along with Slurpees and hot dogs. In bedroom communities across Long Island and Virginia, the defendants not only systematically employed illegal immigrants, but concealed their crimes by raiding the cradle and the grave to steal the identities of children and even the dead. Finally, these defendants ruthlessly exploited their immigrant employees, stealing their wages and requiring them to live in unregulated boarding houses, in effect creating a modern day plantation system,” stated United States Attorney Lynch. “As this case shows, we are committed to preserving the rule of law and protecting our communities from the abuses of corrupt businessmen seeking to gain illegal advantage. I would like to thank our partners at HSI, New York State Police, Suffolk County Police and SSA-OIG for their hard work on this important investigation.”
“The 7-11 franchises seized today will be better known for their big fraud than their Big Gulp. As alleged, the franchise owners knowingly and repeatedly employed an illegal workforce and abused and exploited that workforce for more than 13 years,” said HSI Special Agent-in-Charge Hayes. “This charged criminal scheme had a vast detrimental effect on both the employees who were overworked and cheated out of wages, as well as the more than 25 American citizens whose lives were upended by the theft of their identities in furtherance of the scheme.”
New York State Police Superintendent D’Amico, stated, “As alleged in the indictment, these nine individuals took full advantage of illegal immigrants through a multi-state scheme that generated millions in profits for themselves while ignoring the common decency in the employer/employee relationship. The defendants allegedly provided the illegal immigrants with false documentation, stole significant portions of their wages and set them up in living arrangements that left the individuals completely beholden to them. I commend the unwavering dedication of the State Police Investigators who worked with our partners from federal, state and local law enforcement to make these defendants accountable for their actions.”
“As charged in the indictments, the defendants have been exploiting vulnerable individuals who, due to their immigration status, may have been afraid to come forward and report possible wrongdoing by their employers,” said Suffolk County Police Commissioner Webber. “This multi-agency investigation illustrates our commitment to fighting against employers who abuse immigrant employees for their own financial gain.”
SSA-OIG Special Agent-in-Charge Ryan stated, “The Social Security Number System within the Social Security Administration (SSA) tracks individuals’ earnings throughout their work history to later determine the SSA retirement benefit they have earned. The type of alleged actions of the individuals named in this indictment not only violates federal law, but also threatens the integrity of the Social Security Number System by causing wages to be erroneously posted to SSA’s system of records. We appreciate the cooperation of the represented law enforcement agencies here today in our ongoing initiatives to prevent fraud, waste and abuse of SSA programs.”
The Illegal Conduct
According to the indictments and court papers filed in the Eastern District of New York, the defendants Farrukh and Bushra Baig are a married couple who owned, co-owned and/or controlled twelve of the 7-Eleven franchise stores, located on Long Island, New York and in Virginia. Defendants Zahid Baig and Shannawaz Baig are Farrukh Baig’s brothers, who helped to manage and control the stores, assisted by defendants Malik Yousaf, Tariq Rana and Ramon Nanas. Brothers Ahzar Zia and Ummar Uppal, indicted separately, owned and controlled two other Suffolk County 7-Eleven franchise stores.
As franchisees of 7-Eleven, the defendants received a license from the national company to utilize the 7-Eleven trademarks, specialized equipment (such as Slurpee and hot dog machines), and the stores’ physical structures and real property, which were owned or leased by 7-Eleven. The defendants also received access to 7-Eleven’s automated payroll service, through which they inputted each employee’s personal identifying information and hours worked into the data terminals located at the stores, for electronic transmission to 7-Eleven corporate headquarters. Working with the data provided by the defendants, 7-Eleven processed the payroll and, after subtracting certain expenses, issued wages in the form of checks, direct deposits or debit cards.
According to court filings, from 2000 until the present, the defendants collectively and systematically employed more than 50 illegal immigrants at fourteen 7-Eleven franchise stores in Long Island and Virginia. Rather than transmitting the true identification information of the illegal immigrant employees to 7-Eleven headquarters for processing, the defendants allegedly used more than 20 stolen identities, submitting stolen names and Social Security numbers of United States citizens to conceal the presence of illegal immigrants on the 7-Eleven franchise store payrolls. 7-Eleven headquarters processed the payroll and sent the employees’ wages to the defendants for distribution. The defendants then allegedly stole significant portions of the illegal immigrants’ wages, rather than paying the workers in full. The defendants also required the illegal immigrant to live in residences owned by the defendants and to pay rent in cash to the defendants.
As alleged in court documents, the victims of the identity theft hail from seven states, range in age from 8 to 78 years old, and include a child, three dead people and a Coast Guard cadet. In addition, the defendants, together with others, caused the 7-Eleven payroll service to transmit this false information, including the stolen identity information, to United States regulatory agencies, such as the Internal Revenue Service and the Social Security Administration.
During the scheme, the defendants allegedly generated over $182 million in proceeds from the 7-Eleven franchise stores. Profits from those stores were shared by the defendants and 7-Eleven.
The first status conferences in this case are scheduled for Wednesday, July 17, 2013, at 11:15 A.M., before United States District Judge Sandra J. Feuerstein, at the federal courthouse in Central Islip, New York.
The government’s case is being prosecuted by Assistant United States Attorneys Christopher A. Ott, Brian Morris and Elliot M. Schachner.
Tips and Information
HSI encourages the public to report suspected labor trafficking, forced labor or the exploitation of undocumented workers through its toll-free hotline at 1-866-347-2423 (from the U.S. and Canada), or from anywhere in the world at 1-802-872-6199, or online at www.ice.gov/tips.
For questions or concerns about immigrant workers and job seekers, contact the New York State Department of Labor Division Policies and Affairs (DIPA) at its toll-free worker hotline (1-877-466-9757).
The Defendants
FARRUKH BAIG
Citizenship: Naturalized United States Citizen
Age: 57
Head of Harbor, New YorkBUSHRA BAIG
Citizenship: Naturalized United States Citizen
Age: 49
Head of Harbor, New YorkMALIK YOUSAF
Citizenship: Naturalized United States Citizen
Age: 51
South Setauket, New YorkZAHID BAIG
Citizenship: Naturalized United States Citizen
Age: 52
Chesapeake, VirginiaSHANNAWAZ BAIG
Citizenship: Naturalized United States Citizen
Age: 62
Virginia Beach, VirginiaTARIQ RANA
Citizenship: Pakistan
Age: 34
Chesapeake, VirginiaRAMON NANAS
Citizenship: Republic of the Philippines
Age: 49
Great River, New YorkAZHAR ZIA
Citizenship: Naturalized United States Citizen
Age: 49
Great River, New YorkUMMAR UPPAL
Citizenship: Pakistan
Age: 48
Islip Terrace, New York_____________________________
1 The charges contained in the indictments are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
Long Island Man Convicted in $2 Million Extortion SchemeRead the Press Release
Earlier today, at the federal courthouse in Central Islip, New York, a jury convicted the defendant Daniel Sheehan of attempting to extort Home Depot, the national home-improvement chain, and using a destructive device, specifically a pipe bomb, in furtherance of the extortion plot. Sheehan faces a 30-year mandatory minimum sentence for planting the pipe bomb at a Huntington, New York, Home Depot store in October 2012, in furtherance of the extortion plot. Sentencing is scheduled before United States District Judge Denis R. Hurley on October 2, 2013.
The conviction 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.
The evidence at trial established that in mid-October, 2012, Sheehan, a former Home Depot employee, sent an anonymous letter to the Home Depot store in Huntington, warning that a bomb had been placed in the store’s lighting department as a demonstration of his ability to place a bomb in the store without detection and demanded $2 million. Then, in a second letter, Sheehan warned that if Home Depot did not pay the extortion demand, Sheehan would shut down all of Home Depot’s Long Island stores on Black Friday, the day after Thanksgiving, by detonating three pipe bombs, each armed with a pound of roofing nails, in three separate Home Depot locations. On October 15, 2012, law enforcement authorities located a functional pipe bomb inside of a light fixture box on a shelf in the lighting department of the Huntington Home Depot. Bomb technicians from the Suffolk County Police Department moved the pipe bomb from a shelf to an area that could withstand the blast from a potential detonation, and they rendered the bomb harmless through a controlled render safe procedure.
On November 7, 2012, after an intensive federal, state and local law enforcement investigation, Sheehan was identified as the sender of the anonymous letters and arrested. At that time, agents seized from Sheehan the cellular phone he used to make two extortion calls to Home Depot.
“Though motivated by greed, not political ideology, this crime was an attempt to commit an act of terrorism, pure and simple. The swift, round the clock efforts of many law enforcement officers and agents put an end to the defendant’s plot to hold the people of our community for ransom,” stated United States Attorney Lynch. Ms. Lynch expressed her grateful appreciation to the Federal Bureau of Investigation, Suffolk County District Attorney’s Office, the Suffolk County Police Department, the Nassau County Police Department, and the Suffolk County Probation Department for their invaluable cooperation and assistance in the investigation.
The government’s case was tried by Assistant United States Attorney Lara Treinis Gatz.
The Defendant:
DANIEL SHEEHAN
Age: 50
Residence: Deer Park, New YorkFormer New York State Senate Majority Leader Pedro Espada, Jr. Sentenced to Five Years’ ImprisonmentRead the Press Release
Earlier today, Pedro Espada, Jr. was sentenced before Judge Frederic Block in U.S. District Court in Brooklyn, New York, to five years’ imprisonment, to be followed by three years of supervised release, for theft of federal funds from Bronx-based non-profit healthcare clinics, and lying on his 2005 personal tax return. As part of that sentence, Judge Block ordered Espada to serve 100 hours of community service, restitution to the Internal Revenue Service in the amount of $118,531, restitution to the victims of his thefts in an amount to be determined, and forfeiture of $368,088. The court remanded Espada to the custody of the Bureau of Prisons. Espada is a former New York State Senator for the 33rd Senate District in the Bronx, who served as the New York State Senate Majority Leader from 2009 to 2010.
The sentence 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 (FBI), and Toni Weirauch, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York (IRS).
“The people of the Bronx trusted Pedro Espada, Jr. to have their best interests at heart. Instead, he abused that trust to the tune of more than half a million dollars. Under obligation to use the funds he received for the benefit of people sorely in need of quality health care, he chose instead to benefit himself and his family at their expense. Espada embezzled funds to finance his personal lifestyle and lavish gifts on friends and family members at the expense of taxpayers and underprivileged members of the Bronx community who were deprived of needed health services and medical equipment. He continued his campaign of lying and fraud on his tax returns,” stated United States Attorney Lynch. “Espada has finally been held to account for his crimes.” Ms. Lynch expressed her grateful appreciation to the FBI and IRS, the agencies responsible for leading the government’s investigation, and thanked the Office of New York State Attorney General Eric T. Schneiderman for its assistance.
On May 14, 2012, a federal jury in Brooklyn returned a guilty verdict against Espada on four counts of stealing from non-profit medical clinics in the Bronx that received federal funding. On October 12, 2012, Espada pled guilty to making false statements on his 2005 personal tax return and agreed not to appeal or otherwise challenge the jury’s verdict. That same day, Espada’s son and co-defendant, Pedro Gautier Espada, pled guilty to guilty to one count of stealing federal funding from non-profit medical clinics and one count of failing to file a tax return in 2009, and his sentencing has been scheduled for June 18, 2013, also before Judge Block.
FBI Assistant Director-in-Charge Venizelos stated, “Over thirty years ago, Pedro Espada, Jr. helped establish the Soundview Health Center, but his own greed and self-dealing undermined that good work. Espada’s embezzlement of federal funds diverted money meant to serve the health needs of the people of the South Bronx. In lining his own pockets, he betrayed those people and stole from U.S. taxpayers in the process. There is a price to pay for these betrayals.”
The successful outcome of the collaborative effort in this investigation demon- strates the government’s resolve in investigating and prosecuting public corruption. Today’s sentences mark the end of a long period of criminal activity that harmed the patients of the not-for-profit clinics, who depended on the services the clinics provided and law abiding American taxpayers, who have to pick up the slack whenever others deliberately do not pay their fair share. IRS Criminal Investigation is proud of its partnership with the FBI and the U.S. Attorney’s Office,” stated IRS Special Agent-in-Charge Weirauch.
The government’s case was prosecuted by Assistant United States Attorneys Todd Kaminsky, Carolyn Pokorny and Claire Kedeshian.
The Defendants
PEDRO ESPADA, JR.
Age: 58
Mamaroneck, NYPEDRO GAUTIER ESPADA
Age: 39
Fairfield, CTE.D.N.Y. Docket No. CR-10-985 (FB)
Axius Ceo Roland Kaufmann Sentenced for Conspiracy to Pay Bribes in Stock SalesRead the Press Release
BROOKLYN, NY – Earlier today, at the federal courthouse in Brooklyn, Roland Kaufmann, a Swiss citizen and CEO of Axius Inc., was sentenced to 16 months’ imprisonment for conspiring to bribe stock brokers. As required by his plea agreement, Kaufmann forfeited $290,000, with a portion to be remitted to identified victims of related criminal conduct. The court also imposed a fine of $450,000 and a $100 special assessment. Previously, on January 11, 2013, Kaufmann pleaded guilty to one count of conspiracy to violate the Travel Act. The sentencing proceeding was held before the Hon. John Gleeson, United States District Judge.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.
According to court documents, Kaufmann controlled Axius, Inc., a purported holding company and business incubator located in Dubai. As part of the scheme, the defendant and his co-conspirator, Jean Pierre Neuhaus, enlisted the assistance of an individual who they believed had access to a group of corrupt stock brokers, but who was, in fact, an undercover law enforcement agent. Court documents reveal that they instructed the undercover agent to direct brokers to purchase Axius shares in return for a secret kickback of approximately 26 to 28 percent of the share price. Kaufman and Neuhaus also instructed the undercover agent as to the price the brokers should pay for the stock and that the brokers were to refrain from selling the Axius shares they purchased on behalf of their clients for a one-year period. By preventing sales of Axius stock, Kaufmann and Neuhaus intended to maintain the fraudulently inflated share price for Axius stock.
Kaufmann and Neuhaus were arrested on March 8, 2012. On October 10, 2012, Neuhaus pleaded guilty to conspiracy to commit securities fraud and violate the Travel Act. Neuhaus was in custody from his arrest through February 15, 2013, when he was sentenced to time served and a $10,000 fine.
“Roland Kaufman sought to game the system from overseas by inflating the price of his company’s stock on U.S. capital markets,” said U.S. Attorney Lynch. “Instead of riches, he reaped prison time, as well as the forfeiture of his ill-gotten gains.” Ms. Lynch extended her grateful appreciation to the FBI New York Field Office and the IRS New York Field Office, the agencies responsible for leading the government’s investigation, and Ms. Lynch and Acting Assistant Attorney General Raman thanked the Securities and Exchange Commission for its assistance in this matter.
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 case is being prosecuted by Assistant U.S. Attorney Ilene Jaroslaw and Trial Attorney Justin Goodyear of the Criminal Division’s Fraud Section, with assistance from Fraud Section Trial Attorney Nathan Dimock.
The Defendant:ROLAND KAUFMANN
Age: 60Former Long Island Bar Owner Sentenced to 60 Years in Prison for Sex Trafficking, Forced Labor and Immigration Crimes on Long IslandRead the Press Release
Earlier today, Antonio Rivera, the former owner of the bars Sonidos de la Frontera in Lake Ronkonkoma and La Hija del Mariachi in Farmingville, New York, was sentenced to 60 years’ imprisonment for his role in a sex trafficking and forced labor ring. Rivera’s co-defendants, John Whaley and Jason Villaman, were sentenced to 25 and 30 years, respectively. The sentences were imposed by United States District Judge Sandra J. Feuerstein at the United States Courthouse in Central Islip, New York. The three defendants were convicted after a four-week trial of multiple offenses including, conspiracy, sex trafficking, forced labor, alien harboring, and alien transportation.
The sentences were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Roy L. Austin, Jr., Deputy Assistant Attorney General, Civil Rights Division; James T. Hayes, Jr., Special Agent-in-Charge, U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), New York; Edward Webber, Commissioner, Suffolk County Police Department; George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office; and Toni Weirauch, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation, New York.
The government’s evidence at trial established that the defendants and others recruited, hired, and harbored in the United States scores of undocumented Latin American immigrants to work as waitresses in Rivera’s bars. The women had come to the United States from Honduras, Guatelmala, Mexico, and El Salvador. Rivera placed ads and flyers seeking waitresses in Spanish language newspapers and at local businesses frequented by Spanish-speaking immigrants. After the women agreed to work as waitresses, Rivera directed them to solicit patrons to buy them alcoholic beverages, which the women were required to consume, and eventually forced them to engage in sexual acts with the patrons in exchange for money, which Rivera kept. Several witnesses testified that Rivera and others used violence, including rapes and beatings, as well as fraud and threats of deportation to compel the victims to continue to work for him and to prevent them from reporting the illegal activity to police.
One victim testified that she was raped by a bar patron inside Sonidos during business hours in full view of patrons and employees. Another victim testified that on one occasion she was transported by Villaman to a local hotel where she was raped while unconscious by a bar patron and awoke to find Villaman watching the assault. A third victim testified that Rivera raped her on multiple occasions and subsequently ordered a security guard to brutally beat her. According to the victim, the security guard drove her to a deserted parking lot after work and, once there, viciously beat her. According to other testimony, Whaley, who assisted Rivera in hiring waitresses, maintaining the bars, and transporting the waitresses to and from the two bars, sexually assaulted one of the victims whom he was supposed to drive home. Testimony also revealed that Villaman acted as a security guard at Sonidos de la Frontera and assisted Rivera in illegal acts against victims, including dumping an unconscious victim on the lawn outside her home after the he and Rivera had assaulted her. Several victims testified that their wages were often taken from them under the guise of being placed into a short-term group savings scheme called the “Society,” but were not returned to them as promised, which forced the victims to remain in Rivera’s employ in hopes of recouping their money.
“The defendants lured vulnerable young women to the United States with the promise of a better life and the ability to earn a living to support their families. Once here, the defendants then turned their American dream into a nightmare, subjecting them to unspeakable physical violence and emotional abuse, as well as threats of deportation, in order to line their own pockets. The lengthy sentences imposed today are fair and just punishment for the intolerable crimes that these defendants committed.” stated United States Attorney Lynch. “We will continue our efforts to ensure that the full protection of the law is provided to all our residents.” Ms. Lynch expressed her grateful appreciation to HSI, Suffolk County Police Department, FBI, and the IRS for their assistance in this case.
“These defendants preyed on some of the most vulnerable members of our society – young, undocumented women and girls seeking a better life – and brutally exploited them in a scheme driven by cruelty and greed,” stated Deputy Assistant Attorney General Austin. “Human trafficking is an affront to freedom and individual rights. The sentences handed down today affirm our commitment as a nation to bringing human traffickers to justice and restoring the rights and dignity of human trafficking victims.”
“The men sentenced today lured innocent women with dreams of good paying jobs that turned into a nightmare of forced prostitution backed by threats and violence. The victims of these heinous crimes have now begun the healing process they so justly deserve,” said HSI Special Agent in Charge Hayes. “HSI agents will continue to work with the Human Trafficking Task Force and other law enforcement agencies to identify victims and to pursue the criminals who prey on them.”
“These victims and other immigrants have the rightful expectation to be protected against those that may take advantage of their vulnerability. These three predators deserve the lengthy sentences they have received for the unforgivable acts they perpetrated against their victims,” said Suffolk County Police Commissioner Webber. “The Suffolk County Police Department will continue to work jointly with federal, state and local law enforcement partners to curb forced labor, violence and sex-trafficking within the county.”
FBI Assistant Director-in-Charge Venizelos stated, “The defendants have received sentences that reflect the gravity and depravity of the crimes they committed. No human being, regardless of immigration status, can be tormented the way the victims of these defendants were without the strongest possible response from our justice system. The horrific physical violence, sexual predation and emotional torment suffered by the victims cannot be undone, but long prison terms for the defendants mean they will not be in any position to inflict such torment again.”
IRS Special Agent-in-Charge Weirauch stated, “IRS-Criminal Investigation is grateful that we were able to support our law enforcement partners in this important investigation and prosecution. The victims in this case endured incredible physical, emotional and financial hardships. We sincerely hope they will be able to heal and move forward.”
The government’s case was prosecuted by Assistant United States Attorneys Demetri M. Jones and Licha Nyiendo, and Senior Litigation Counsel John Cotton Richmond of the Department of Justice, Civil Rights Division, Human Trafficking Prosecution Unit.
The Defendants:
ANTONIO RIVERA
Age: 38
Residence: Patchogue, NYJOHN WHALEY
Age: 33
Residence: Bellport, NYJASON VILLAMAN
Age: 34
Residence: Brentwood, NYChief Executive Officer of ACI Capital Group Charged with Wire FraudRead the Press Release
BROOKLYN, NY – Fredrick Douglas Scott, 29, was arrested this morning on charges that he engaged in a wire fraud conspiracy to steal hundreds of thousands of dollars from investors. Scott was the Chief Executive Officer of ACI Capital Group LLC (ACI), an investment advisor registered with the Securities and Exchange Commission (SEC) since July 2011. To implement his scheme, Scott allegedly lied to potential investors to induce them to wire funds to one of ACI’s bank accounts, which Scott then stole. To date, investigators have identified at least $750,000 in investor losses caused by Scott. If convicted, Scott faces up to 20 years’ imprisonment on the fraud charge, as well as a fine equal to double the investors’ losses and mandatory restitution to the victims.
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 complaint unsealed this afternoon, ACI was founded by Scott in 2009, and purported to be an investment banking and advisory firm with an office located at 477 Madison Avenue, New York, New York. ACI registered as an Investment Advisor with the SEC in July 2011 and, pursuant to its most recent regulatory filing, claimed to manage $3.7 billion in assets. While Scott touted his bona fides as an investor to potential clients, including distributing the May 2010 issue of Ebony magazine, which described him as “the youngest African American hedge fund founder in history,” in reality, Scott used ACI to execute two related fraudulent schemes, causing hundreds of thousands of dollars in losses.
As detailed in the complaint, in connection with the first scheme, Scott worked with intermediaries or finders to locate potential victims. Once a potential victim was identified, Scott promised victims a high rate of return for providing short-term financing to businesses purportedly associated with ACI. In connection with the second scheme, Scott enticed his victims to make up-front deposits with ACI as collateral for favorable loans to the victims. In both schemes, once victims wired money to ACI, Scott stole the funds for his personal use. Bank records show that Scott used client funds to purchase personal items at Louis Vuitton, the Apple Store, Starbucks, Fair Bail Bonds, True Religion Jeans, Tao Restaurant, the Hampton Inn SoHo, and Dizzy's Coca-Cola Club, among others. Bank records also show that Scott wired stolen client funds to his personal checking account.
“Fredrick Douglas Scott wanted a place in history, but tried to secure that spot with stolen money rather than honest work. As alleged, instead of delivering real value to his clients, he devoted his energy to schemes to steal their money, using their investments as his own personal piggy bank. Effective law enforcement action shut down his schemes, and the defendant will now face justice. We are committed to protecting the public from the effects of fraud,” stated United States Attorney Lynch. “I would like to thank our partners at the FBI for their swift action and effective work on this important investigation.”
FBI Assistant Director-in-Charge Venizelos stated, “As alleged, the defendant was more creative in touting his own abilities as an investment strategist than he was at actually investing clients’ money. In actuality, he was a con man who induced victims to part with their money by promising high returns, and then squandered their money on himself.”
The defendant is scheduled to be arraigned this afternoon before United States Magistrate Judge Steven M. Gold at the federal courthouse in Brooklyn. The charges in the complaint are merely allegations, and the defendant is presumed innocent unless and until proven guilty.
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 government’s case is being prosecuted by Assistant United States Attorney James P. Loonam.
The Defendant:
FREDRICK DOUGLAS SCOTT
Age: 29Brooklyn Man Sentenced to 325 Months’ Imprisonment for Child Exploitation and Receipt of Child PornographyRead the Press Release
Earlier today, Micheal Ledee, a 30-year-old Brooklyn resident, was sentenced to a term of imprisonment of 325 months following his conviction for conspiracy to sexually exploit a child, sexual exploitation of a child, and receipt of child pornography. The proceeding was held before United States District Judge Nicholas G. Garaufis, at the U.S. Courthouse in Brooklyn, New York.
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.
The trial established that the defendant used Yahoo! Instant Messenger to direct the mother of a nine-year-old girl to molest her daughter while he watched the abuse live via a webcam. The government’s evidence included chat logs, the testimony of two computer forensic experts, a Yahoo! software engineer, as well as the minor victim. In determining the sentence, Judge Garaufis considered, among other things, the nature of the crimes and the impact on the victim’s life.
Ms. Lynch expressed her grateful appreciation to the New York Field Office of the FBI, the agency responsible for leading the government’s investigation.
The government’s case was prosecuted by Assistant United States Attorneys Tiana A. Demas, Hilary Ley Jager, Taryn Merkl, and Tyler Smith.
The Defendant:
MICHEAL LEDEE
Brooklyn, New York
Age: 31Cyber-sting Nets Chinese National in Attempt to Export Sensitive Defense TechnologyRead the Press Release
Earlier today, Lisong Ma, a citizen of China, pled guilty at the federal courthouse in Brooklyn, New York, to violating the International Emergency Economic Powers Act by attempting to export weapons-grade carbon fiber from the United States to China. According to court filings and facts presented during the plea proceeding, Ma was arrested after attempting to close a deal to acquire and export the specialized materials, which have applications in the defense and aerospace industries and are therefore controlled for export by the United States Department of Commerce.
The plea 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; Kenneth J. Siegler, Resident Agent-in-Charge of the Defense Criminal Investigative Service (DCIS), New York Resident Agency; and Sidney Simon, Special Agent-in-Charge, U.S. Department of Commerce (DOC), Office of Export Enforcement, New York Field Office.
During the investigation, federal agents tasked with protecting sensitive technology maintained a covert cyber-presence on web sites related to the brokering, purchase and sale of controlled commodities. In February 2013, the defendant, using the name “Ma Li,” e-mailed an undercover agent and indicated that he was interested in acquiring several different types of high-grade carbon fiber. Then, through various online communications, the defendant attempted to negotiate the purchase of five tons of carbon fiber. Based on a review of Internet Protocol log-in information, investigators discovered that the defendant was communicating from the People’s Republic of China.
On March 12, 2013, the defendant and undercover agents engaged in an online video teleconference session, which was recorded. During the teleconference, the defendant and the undercover agents discussed the license requirement to export certain types of carbon fiber from the United States. One of the agents told the defendant: “We can’t send this to China without an export license, otherwise we risk going to jail.” The defendant then told agents that he would soon be traveling to the United States, and arranged a meeting to further discuss the terms of a deal. On March 27, 2013, the defendant met with undercover agents in the United States. During the meeting, which was covertly recorded, the defendant requested a sample of carbon fiber, because it was “easier” and “safer” to ship, and later commented: “There is a greater chance that the authorities will arrest you if you get a third party involved. That is why it’s better to go directly from the U.S. to China.”
The defendant ultimately decided to ship a sample of weapons-grade, Toray-type T-800 carbon fiber from the United States to China. He paid the undercover agents and placed the material into a plain brown box. Ma falsely indicated on the waybill and invoice that the package contained “clothing.” After the defendant finished packing the box and completing the shipping forms, the package was transported to a courier service, to be shipped to China. The package was thereafter intercepted by agents before it could be exported. Agents also intercepted and arrested the defendant shortly thereafter, as he transited Los Angeles International Airport on his way to Shanghai. He was then removed in custody to Brooklyn.
Certain types of carbon fiber, such as the type defendant Ma sought to acquire in this case, are closely controlled to protect national security. The regulation of carbon fiber falls under the jurisdiction of the Department of Commerce, which reviews and controls the export of certain goods and technology from the United States to foreign countries. In particular, the Commerce Department has placed restrictions on the export of goods and technology that it has determined could make a significant contribution to the military potential or nuclear proliferation of other nations, or that could be detrimental to the foreign policy or national security of the United States.
Carbon fiber composites are ideally suited to applications where strength, stiffness, lower weight, and outstanding fatigue characteristics are critical requirements. These composites also can be used in applications where high temperature, chemical inertness, and high damping are important. The two main applications of carbon fiber are in specialized technology, which includes aerospace and nuclear engineering, and in general engineering and transportation. In addition, certain carbon fiber-based composites, such as the material sought by the defendant, are used in military aircraft and unmanned aerial vehicles. Due to the scarcity of these types of materials, they command high prices on the open market and are highly sought after.
“The defendant tried to circumvent laws that protect our national security by preventing specialized technologies from falling into the wrong hands. The defendant was bent on exporting to China up to five tons of weapons-grade carbon fiber -- enough carbon fiber to stretch from Brooklyn to the Pacific Ocean,” stated United States Attorney Lynch. “Today’s conviction should leave no doubt that the United States will use every available technique, including covert cyber operations, to maintain the superiority of our nation’s armed forces.” Ms. Lynch praised the level of inter-agency cooperation in this case, and added that the government’s investigation is ongoing.
“Today’s conviction highlights the reality that even the most relentless of efforts to unlawfully acquire sensitive American technology will be foiled,” said HSI Special Agent in Charge Hayes. “This investigation provides a great example of how HSI and federal law enforcement are meeting the threat posed by tech savvy international smugglers head-on.”
“This plea demonstrates our resolve to investigate and prosecute those who choose to violate U.S. export control laws. We are proud to work with our law enforcement partners in protecting national security and leveling the playing field for legitimate commerce,” said DOC Special Agent-in-Charge Simon.
“This investigation demonstrates the continued commitment of the Defense Criminal Investigative Service, in cooperation with our law enforcement partners and the U.S. Attorney’s Office, to aggressively pursue those intent on acquiring and illegally exporting military grade materials. Too often these sensitive items find their way into the hands of adversaries and therefore present a potential threat to National Security and America’s war fighters.” stated DCIS Resident Agent-in-Charge Siegler.
Today’s plea took place before United States Magistrate Judge Vera Scanlon When sentenced, Ma faces up to 20 years in prison, as well as forfeiture and a fine of up to $1 million.
The government’s case is being prosecuted by Assistant United States Attorney Seth DuCharme, with assistance from Trial Attorney David Recker of the Department of Justice Counterespionage Section.
The Defendant:
LISONG MA
Age: 34Alleged Rizzuto Organized Crime Family Associate Pleads Guilty to Narcotics Trafficking Crimes Carrying Sentence of 10 Years to LifeRead the Press Release
Alessandro Taloni, an alleged associate of the Montreal-based Rizzuto organized crime family of La Cosa Nostra, pled guilty earlier today before U.S. District Judge Raymond J. Dearie at the federal courthouse in Brooklyn to cocaine trafficking charges contained in a superseding indictment returned on April 3, 2013. When sentenced, Taloni will face a statutory mandatory minimum ten-year sentence and a maximum of life imprisonment, and a maximum fine of $10 million. As part of his sentence, Taloni will also forfeit $2,663,191 that federal agents seized from multiple locations in California that Taloni used to store narcotics and drug proceeds.
The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Brian R. Crowell, Special Agent-in-Charge of the Drug Enforcement Administration, New York (DEA).
Taloni was charged with narcotics and money laundering offenses as a part of an indictment in which ten members of a Montreal-based drug distribution organization affiliated with the Rizutto and Bonanno crime families, the Hells Angels, and the Sinaloa Cartel have been charged with trafficking over $1 billion worth of marijuana, cocaine, and ecstasy into the United States between 1998 and 2012. The organization allegedly 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. Taloni was personally sent from Montreal to Los Angeles, California, to receive those drug proceeds and to purchase cocaine from the Mexican sources.
During the course of the government’s investigation, federal agents seized approximately $1 million in drug proceeds and 49 kilograms of cocaine from searches of Taloni’s Mercedes Benz sedan, Beverly Hills residence and a stash house operated by Taloni in Beverly Hills. Search warrants executed at other stash houses operated by the organization in the Los Angeles area resulted in the seizure of an additional 34 kilograms of cocaine and approximately $1,600,000. In total agents seized more than $10,000,000 in narcotics proceeds from the organization.
“Taloni was a major narcotics distributor who used his connections to powerful international organized crime groups to obtain and distribute tens of millions of dollars worth of deadly narcotics. His conviction highlights this Office’s commitment to the global fight against transnational organized crime,” stated United States Attorney Lynch. Ms. Lynch thanked the Laval Police Service, Laval, Quebec; Santa Ana, Beverly Hills, and Anaheim, California Police Departments; and Nassau County Police Department for their invaluable assistance during this multi-year international investigation.
“No borders will obstruct the DEA, Nassau County Police Department, and Laval Police Service from bringing international drug traffickers to justice. This international organized crime syndicate operated on both sides of the northern border and across our southern border,” said DEA Special Agent in Charge Crowel. “This plea was a direct result of the outstanding collaboration between the US Attorney’s Office Eastern District of New York, federal, state, and local law enforcement.”
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:
ALESSANDRO TALONI
Age: 39Corrupt Colombian Government Employee and Criminal Defense Attorney Extradited in Obstruction of Justice CaseRead the Press Release
Later today, Freddy Mauricio Tellez-Buitrago and Adriana Gonzalez-Marquez will be arraigned at the federal courthouse in Brooklyn, New York, on obstruction of justice charges for stealing sensitive and confidential United States law enforcement information concerning prosecutions in the Eastern District of New York and selling that information to a narcotics trafficker. Prior to his arrest, Tellez-Buitrago was employed as an administrative services assistant at the International Affairs Office within the Attorney General’s Office in Colombia. Prior to her arrest, Gonzalez-Marquez, a former prosecutor at the Attorney General’s Office in Colombia, was practicing as a Colombian criminal defense attorney. Tellez-Buitrago and Gonzalez-Marquez were arrested in Colombia on provisional arrest warrants issued from the Eastern District of New York.1
The extradition 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 (ICE), Homeland Security Investigations (HSI), New York; and Brian Crowell, Special Agent-in-Charge, Drug Enforcement Administration (DEA), New York. The investigation was conducted by HSI in Bogota, with assistance provided by HSI in New York, DEA in Bogota and New York, and local law enforcement authorities in Colombia.
The defendants’ extradition resulted from an investigation which revealed that through his employment at the Colombian Attorney General’s Office, Tellez-Buitrago had specialized access to law enforcement materials, including requests from the United States government for the extradition of alleged Colombian drug traffickers. Typically, the Colombian authorities treat such extradition requests as sensitive and confidential until the arrest of the individual whose extradition is sought. Tellez-Buitrago is charged with accepting bribes from Gonzalez-Marquez in exchange for leaking documents relating to EDNY extradition requests for narcotics traffickers. Gonzalez-Marquez, in turn, allegedly sold the information to a narcotics trafficker in exchange for the equivalent of approximately 30,000 in U.S. dollars.
“These defendants used their insiders knowledge of the Colombian Attorney General’s Office to steal confidential information that put lives at risk. The extradition of the defendants highlights the success of the international cooperation between the United States and Colombia. We will continue to take every step to target individuals who attempt to compromise the judicial process by obstructing justice here and in Colombia, placing the lives of law enforcement personnel in jeopardy,” stated United States Attorney Lynch. Ms. Lynch extended her grateful appreciation to the Colombian National Police and the Colombian Attorney General’s Office for their assistance in this case.
“Gonzalez-Marquez and Tellez-Buitrago allegedly used their connections within the Colombian government to provide sensitive information to members of drug trafficking organizations. This type of criminal espionage greatly threatens our efforts to capture criminals abroad and threatens the safety of American and Colombian law enforcement officers alike,” said HSI Special Agent in Charge Hayes. “HSI, working with our attachés and international and federal law enforcement partners, contributes to the disruption of drug trafficking organizations that line their pockets with millions of dollars in illicit proceeds.”
DEA Special Agent in Charge Crowell stated, “Today, as the defendants in this case stepped onto American soil, Freddy Mauricio Tellez-Buitrago and Adriana Gonzalez-Marquez realized the harsh reality that there is no amount of money worth their charged criminal acts. Federal, state, local and international law enforcement united their resources to expose the defendants’ obstruction of justice and extradited them to the U.S. to face our judicial system, a system they allegedly tried to endanger by selling sensitive information and supplying it to the enemies of cops everywhere – drug traffickers.”
If convicted, Tellez-Buitrago and Gonzalez-Marquez each face a maximum sentence of twenty years’ imprisonment, criminal forfeiture, and a fine of up to $250,000.
The government’s case is being prosecuted by Assistant United States Attorney Soumya Dayananda.
The Defendants:
ADRIANA GONZALEZ-MARQUEZ
Age: 33FREDDY MARQUEZ TELLEZ-BUITRAGO
Age: 34_____________________________
1 The charges announced today are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
Staten Island Man Pleads Guilty to $82 Million Check Kiting ScamRead the Press Release
BROOKLYN, NY – Staten Island, New York, resident Saquib Khan, 51, waived indictment and pleaded guilty today to charges that he engaged in a bank fraud scheme that netted approximately $5 million from six New York City area banks insured by the Federal Deposit Insurance Corporation (“FDIC”). To implement his scheme, the defendant transferred more than $82 million among various bank accounts, using a complex web of worthless checks, which the banks initially credited, and wire transfers to cover his tracks. Khan pleaded guilty to eight counts of bank fraud and agreed to forfeit all of the proceeds of his fraud to make the banks whole. The defendant faces up to 30 years imprisonment on each count, as well as a $1,000,000 fine and restitution.
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 court documents, from November 2012 through December 2012, Khan, a businessman who owned and operated a wholesale cigarette and grocery business, as well as delicatessens in Staten Island, wrote checks for more than $82,000,000 from various bank accounts under his control. Those accounts did not have sufficient funds to cover the checks. However, upon depositing the worthless checks, the victim banks provided immediate credit for the entire amount of the checks even though the checks had not yet cleared. To cover these worthless checks, Khan wired most of the fraudulently obtained funds from the deposit accounts back to the accounts upon which they were drawn. During each round of these ever-increasing checks and wires, Khan withdrew a portion of the money. In this manner, Khan fraudulently extracted approximately $5 million from the victim banks in less than two weeks.
“As demonstrated by the bank fraud charges and the admissions at his guilty plea, Khan’s greed was matched only by his nerve. But law enforcement promptly shut down Khan’s $82 million check-kiting scheme, and he has now been brought to justice. We are committed to protecting the integrity of our banking system and protecting the public from the effects of fraud,” stated United States Attorney Lynch. “I would like to thank our partners at the FBI for their swift action and effective work on this important investigation. ”
FBI Assistant Director-in-Charge Venizelos stated, “As alleged, and as he has admitted, Khan was a con man. Taking advantage of the banks’ policy of crediting deposited checks before they clear, he stole approximately $5 million. What the scheme likely earned him in the long run is a significant prison term.”
The defendant’s guilty plea took place this morning before United States Magistrate Judge Ramon E. Reyes, Jr., at the federal courthouse in Brooklyn. Sentencing in this case is scheduled before United States District Judge Raymond J. Dearie on September 27, 2013.
The government’s case is being prosecuted by Assistant United States Attorney Christopher A. Ott.
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:
SAQUIB KHAN
Age: 51
Staten Island, New YorkMost Wanted “Deadbeat Parent” Sentenced to 31 Months’ Imprisonment for Fleeing to Evade over $1 Million in Child Support ObligationsRead the Press Release
Earlier today, at the federal courthouse in Central Islip, New York, Robert D. Sand, the nation’s “Most Wanted Deadbeat Parent” according to law enforcement, was sentenced to 31 months in prison followed by one year of supervised release by United States District Judge Joseph F. Bianco. Sand previously pleaded guilty to two counts of traveling in interstate and foreign commerce with the intent to evade court ordered child support obligations totaling over $1 million including interest and penalties. Sand was also sentenced to restitution in the amount of his unpaid support obligations – $903,789.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, Thomas O’Donnell, Special Agent in Charge of the New York Regional Office, Office of the Inspector General, United States Department of Health and Human Services (OIG-DHHS), and Charles Dunne, United States Marshal for the Eastern District of New York.
At the time of his plea, Sand admitted that he initially relocated from New York to Florida and then fled the United States in order to evade his support obligations following the issuance of arrest warrants in both state and federal court in 2000 and 2002. Sand further admitted that he had spent much of the past decade in the Kingdom of Thailand where he operated a business. Sand was arrested in late November 2012, upon entering the Republic of the Philippines from Thailand without proper identification documents, and on December 17, 2012, he was deported to Los Angeles, where he was taken into custody by deputies of the United States Marshals Service. During the time Sand was a fugitive, his support obligations continued to grow. At the time of his arrest, Sand owed more than $1 million in back child support including interest and penalties.
According to a complaint filed in federal court on April 8, 2002, the New York State Family Court in Nassau County issued an arrest warrant for Sand on November 22, 2000, following multiple contempt findings against him in child support proceedings. A federal arrest warrant was issued for Sand on April 8, 2002. On September 17, 2009, an indictment was filed in federal court in the Eastern District of New York charging Sand with two counts of failure to pay child support, and on February 17, 2010, a second federal warrant was issued for Sand’s arrest.
“Robert Sand literally fled the country to avoid his obligation to the children he brought into this world. But law enforcement did not turn their back on those children and what they were due. This Father’s Day will find Sand behind bars, finally being held to account for his abandonment. The sentence imposed today sends a message to those who would flee their lawful child support obligations that we will prosecute them to the fullest extent of the law,” stated United States Attorney Lynch. “As this investigation and prosecution demonstrate, flight from prosecution may delay, but will not deny justice.” Ms. Lynch expressed her grateful appreciation to the Office of the Inspector General, United States Department of Health and Human Services and the United States Marshals Service for their assistance in this case.
In January 2012, OIG-DHHS launched a child support enforcement web page (http://oig.hhs.gov/fraud/child-support-enforcement/) to seek the public’s help in ongoing federal efforts to bring fugitive “deadbeat parents” to justice. Sand was listed on the site as the number one “Most Wanted Deadbeat Parent” based upon his child support obligations totaling more than $1 million.
The government’s case was prosecuted by Assistant United States Attorney Allen Bode.
The Defendant:
Name: ROBERT D. SAND
Age: 51Former High-ranking Official at NYC Department of Housing Preservation and Development Sentenced to 18 Months in PrisonRead the Press Release
Earlier today, Michael Provenzano, formerly Director of Construction Services for the New York City Department of Housing Preservation and Development (HPD), was sentenced to a term of imprisonment of 18 months followed by three years of supervised release, and ordered to pay $30,000 restitution to the City of New York and a $5,000 fine following his corruption conviction for taking bribes. As part of his sentence, Provenzano also was ordered to forfeit the $30,000 in bribery money to the government, representing the proceeds of his crime. The sentence was imposed by United States District Judge Nina Gershon at the federal courthouse in Brooklyn, New York.
The sentence 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 (FBI); Robert Panella, Special Agent-in-Charge, United States Department of Labor (DOL) Office of Inspector General, Office of Labor Racketeering and Fraud Investigations; and Rose Gill Hearn, Commissioner, New York City Department of Investigation (DOI).
From approximately January 2007 through December 2009, Provenzano solicited and received $30,000 in bribe payments from a contractor who had extensive construction contracts with HPD, the largest municipal developer of affordable housing in the United States. The contractor paid Provenzano the bribes in return for, among other things, Provenzano leaking to the contractor confidential HPD inspection reports, which documented the number of workers at a given work site. The contractor was regularly and illegally employing additional workers at different work sites and paying them less than the legally-required prevailing wage. With these leaked inspection reports, the contractor was able to conform his invoices to match the reports, thereby avoiding detection by HPD for his illegal conduct in paying those additional workers less than the prevailing wage.
Today’s sentencing proceeding is the first stemming from the government’s wide-ranging investigation into fraud involving the affordable housing industry in New York City. Four real estate developers and two other former HPD officials have pleaded guilty to various charges including racketeering conspiracy, fraud, and bribery related to the development of affordable housing in New York City. Three additional defendants await trial.
“Provenzano admitted taking bribes to provide a developer with confidential information that helped that developer exploit his workers. Today’s sentence sends a clear message: any public servant, whether a legislator or an appointed official, who dips his hand in the public till will be prosecuted to the fullest extent of the law. Serving the public is a privilege, not an opportunity for unjust enrichment. We will continue to root out public corruption wherever we find it,” stated United States Attorney Lynch. Ms. Lynch thanked the Internal Revenue Service, Criminal Investigation, New York; the United States Department of Housing and Urban Development; and the New York City Police Department for their assistance in this case.
FBI Assistant Director-in-Charge Venizelos stated, “By his admission, Provenzano was for sale. For a fee, he provided information that benefitted a contractor rather than serving the interests of the city, his agency and the public.”
“Today’s sentencing highlights the Office of Inspector General’s commitment to combat fraud and corruption involving publicly funded construction contracts. The OIG will continue to work with our law enforcement partners to investigate those who facilitate the circumvention of prevailing wage laws for personal gain,” stated DOL/OIG Special Agent-in-Charge Panella.
DOI Commissioner Rose Gill Hearn said, “This defendant should have protected HPD’s construction process. Instead, he traded his integrity so he could pocket tens of thousands of dollars in bribes. Now, he reaps the serious consequences of his crimes: conviction, prison, and the loss of a valuable City job.”
The government’s case is being prosecuted by Assistant United States Attorneys Cristina M. Posa, Anthony Capozzolo, and Claire Kedeshian.
The Defendant:
MICHAEL PROVENZANO
Massapequa, New York
Age: 49Three Mexican Brothers Plead Guilty to International Sex TraffickingRead the Press Release
Earlier today, at the federal courthouse in Brooklyn, New York, Benito Lopez- Perez, Anastasio Romero-Perez and Jose Gabino Barrientos-Perez, brothers and citizens of Mexico, pled guilty to sex trafficking charges. According to the 25-count indictment and other court filings, the defendants were charged with sex trafficking, interstate prostitution, alien smuggling and money laundering offenses, involving victims as young as 14 years old.
The pleas 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. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), New York.
The defendants were extradited from Mexico in December 2012, as part of the Office’s comprehensive anti-trafficking program, which has to date indicted 52 defendants in sex trafficking cases and rescued over 100 victims, including 17 minors. At the court proceeding today before United States District Judge Carol B. Amon, each defendant pled guilty to a sex trafficking charge that carries a mandatory minimum sentence of 10 years in prison, with a maximum sentence of life in prison. As part of their agreement with the government, two of the defendants, Benito Lopez-Perez and Anastasio Romero-Perez, stipulated that they would not advocate for a sentence less than 188 months in prison.
As alleged in affidavits submitted in connection with the extradition proceedings, Benito Lopez-Perez (“Lopez-Perez”), Jose Gabino Barrientos-Perez (“Barrientos-Perez”) and Anastasio Romero-Perez (“Romero Perez”), are brothers from Tenancingo in Tlaxcala, Mexico. Between January 2003 and August 2010, as part of a family-based organization, the defendants smuggled three young Mexican women, identified in the court documents as Jane Doe 1, Jane Doe 2 and Jane Doe 3, from Mexico to the United States, and then forced them to work as prostitutes in New York City and elsewhere. The defendants recruited and enticed the victims when they were just 14 and 15 years old and living in Mexico. After forcing one victim into prostitution by forcibly raping her, and luring the remaining victims into intimate relationships through false promises of romance and marriage, the defendants forced the victims to work for the defendants as prostitutes, initially in Mexico. The defendants beat and sexually assaulted the victims to compel them to work and punish them for not earning enough money, and the victims were required to turn over all of their earnings to the defendants. The defendants also threatened violence against the victims’ family members to prevent the victims from running away.
In July 2005, Lopez-Perez, Barrientos-Perez and Romero-Perez began smuggling the victims into the United States illegally to work as prostitutes. The defendants housed the victims in New York City. Each day, the victims were driven to locations throughout New York City to engage in prostitution. The three defendants worked together, frequently relying on each other to watch over the victims when any of the brothers returned to Mexico.
After the victims arrived in the United States, the defendants directed them to send the money they earned from prostitution to the defendants’ family members in Mexico. At the defendants’ direction, the victims went to various wire transfer service companies in New York City on a regular basis and sent sums of money ranging from a few hundred to a few thousand dollars to the defendants’ family members in Mexico. The defendants also directed the victims to use fake names when sending the money.
“The defendants not only pretended to embody these young victims’ dreams of romance and security, but also used violence to recruit a victim, all for the purpose of selling the victims into a nightmare of sexual slavery. The trafficking of innocent women and girls for sex is one of the most heinous crimes that we prosecute. This case, and our Office’s comprehensive anti-trafficking program, again demonstrate our resolve to investigate and prosecute those who would profit from exploitation of others,” stated U.S. Attorney Lynch.
“Today’s guilty pleas bring an end to the horrors these traffickers committed against their innocent victims,” said HSI Special Agent in Charge Hayes. “HSI will continue to devote all necessary resources, domestic and foreign, to vigorously target and prosecute members of sex trafficking organizations who prey on the innocence and trust of young women and children in order to enslave them for profit.”
The government’s case is being prosecuted by Assistant United States Attorneys Elizabeth Geddes, Licha Nyiendo and Erik Paulsen.
The Defendants:
BENITO LOPEZ-PEREZ
Age: 34ANASTASIO ROMERO-PEREZ
Age: 40JOSE GABINO BARRIENTO-PEREZ
Age: 52Former Chief Investment Officer of Construction Supply Company Convicted on All Counts by Jury in Bank Fraud SchemeRead the Press Release
Earlier today, following three weeks of trial, a federal jury in Brooklyn, New York, returned a guilty verdict against Rodney Watts, the former Chief Investment Officer of GDC Acquisitions, LLC (“GDC”), on charges of bank fraud, false statements and conspiracy to commit bank fraud. Watts also served as the Chief Financial Officer of GDC at one time. These charges arose out of the defendant’s scheme to defraud Amalgamated Bank, GDC’s asset-based lender, of $21 million in fraudulent loans. When sentenced by United States District Judge Kiyo A. Matsumoto, the defendant faces a maximum sentence of 30 years’ imprisonment on the most serious charge. Watts’s co-defendant, Courtney Dupree, was convicted by a federal jury in December 2011, on the same charges. Dupree, who served as GDC’s Chief Executive Officer, is also awaiting sentencing.
The government has already won two appeals before the Second Circuit in the case. In one appeal, the government successfully defended its seizure of over $633,000 that Watts sought released to pay for his defense attorneys; that appeal was dismissed after a jury in the trial of Dupree determined that the funds were criminal proceeds. In the other appeal, the government successfully appealed a decision relating to evidence that Dupree committed a crime while out on bail.
The verdict was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York.
GDC, based in Long Island City, Queens, is a holding company that owns various subsidiaries, including JDC Lighting, a lighting distributor; Unalite Electric and Lighting, a lighting maintenance company; and Hudson Bay Environments Group, a furniture distributor. The evidence included the testimony of GDC’s former Chief Financial Officer and two GDC accountants, all three of whom had previously pleaded guilty to fraud charges arising from the scheme. At trial, the government proved defendant Rodney Watts and others gave Amalgamated Bank false financial information for GDC in which they had fraudulently inflated the company’s accounts receivable in order to obtain initially, and then maintain, credit lines totaling approximately $21 million. The evidence proved that the conspirators inflated the accounts receivable by a variety of means, including by recording in the corporate books fake sales that had never taken place. For example, the defendant represented to Amalgamated Bank in writing in November 2009 that GDC had $25.2 million in accounts receivable when, in fact, it had only approximately $9 million. In addition, the defendant and others defrauded Amalgamated Bank by causing GDC to acquire a company covertly, contrary to the terms of their loan agreement, and by concealing the acquisition from the bank. The defendant and others also sought to obtain an additional loan from C3 Capital, a mezzanine lender based in Kansas City, Missouri, based on GDC’s fraudulent books. According to the trial testimony, the scheme unraveled when one of the accountants turned himself into the FBI and cooperated in the government’s investigation in an undercover capacity for approximately two months.
“Using books and records that were no more than fairy tales, the defendant fleeced Amalgamated Bank of 21 million dollars. The jury saw through his creative writing and web of lies, and he will now be held to account for his crimes,” stated United States Attorney Lynch. “No matter their wealth, influence, or position, fraudsters can expect to be investigated and prosecuted to the full extent of the law.”
Ms. Lynch extended her grateful appreciation to the Federal Bureau of Investigation and the Postal Inspection Service, the agencies responsible for leading the government’s criminal investigation.
The government’s case is being prosecuted by Assistant United States Attorneys Michael L. Yaeger, Catherine M. Mirabile, David C. Woll and Brian Morris.
The 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. For more information on the task force, visit www.stopfraud.gov.
The Defendants:
COURTNEY DUPREE
Age: 41RODNEY WATTS
Age: 39