Southern District of New York
Press releases recorded for this federal judicial district.
NYC Contractor Sentenced in Manhattan Federal Court to One Year and One Day in Prison for Tax EvasionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that NICK A. JODHA, a/k/a “Nick Persaud,” the owner of a contracting business that provided heating, ventilation, and air conditioning (“HVAC”) services throughout the New York City metropolitan area, was sentenced in Manhattan federal court to one year and one day in prison for his role in a tax evasion scheme. JODHA pled guilty in April 2014 before U.S. District Court Judge Richard J. Sullivan, who also imposed today’s sentence.
According to the criminal Information against JODHA and statements made at the plea proceeding:
JODHA operated and was a 50% owner of United HVAC Services, Inc. (“United HVAC”), an HVAC contracting firm based in South Ozone Park, New York, with operations throughout New York City. From 2007 through 2010, JODHA cashed more than $2.3 million in checks made payable to United HVAC at a check cashing service in Manhattan, rather than depositing the business checks into the business’s corporate bank account. JODHA used the proceeds from the cashed checks for business and personal purposes.
During the same period, in order to prepare both personal and corporate income tax returns, JODHA provided his accountant with the statements from the business bank account of United HVAC. However, JODHA failed to inform his accountant of the checks he cashed at the check cashing service, which were not reflected in the statements of United HVAC’s business bank account. Moreover, JODHA failed to advise his accountant that he used a portion of the cashed checks for business and personal expenses.
JODHA admitted to filing false S-Corporation income tax returns on behalf United HVAC for the tax years 2007 through 2010, which omitted any business activity and flow-through income concerning the cashed business checks, and to filing false individual income tax returns for the tax years 2007 through 2010, which understated his true taxable income and the taxes due on that income. JODHA’s conduct caused a tax loss to the Government of approximately $214,529.
In addition to the prison term, JODHA, 43, of South Ozone Park, New York, and Kissimmee, Florida, was sentenced to two years of supervised release. JODHA was also ordered to pay $214,529 in restitution to the IRS and a $100 special assessment fee.
Mr. Bharara praised the efforts of IRS-CI in the investigation. He also thanked the U.S. Department of Justice’s Tax Division for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Special Assistant U.S. Attorney Jorge Almonte of the Department of Justice’s Tax Division is in charge of the prosecution.
Nine Lawyers in Manhattan U.S. Attorney’s Office Recognized at Annual U.S. Attorney Awards CeremonyRead the Press Release
PREET BHARARA, the United States Attorney for the Southern District of New York, announced that the Department of Justice held its 30th annual Executive Office for United States
Attorneys (EOUSA) Director’s Awards Ceremony yesterday, during which 243 award recipients from 44 districts were recognized for their dedication to carrying out the mission of the Department of Justice. Among the award recipients were Arlo Devlin-Brown, Antonia M. Apps, John T. Zach, Sharon Cohen Levin, Christine Magdo, Micah Smith, Daniel Filor, Ellen London, and Carina H. Schoenberger from the U.S. Attorney’s Office for the Southern District
of New York. Attorney General Eric Holder and Executive Office for U.S. Attorneys (EOUSA) Director Monty Wilkinson presided at yesterday’s ceremony in the Great Hall at the Robert F. Kennedy Department of Justice Building in Washington, D.C.
In his prepared remarks to awardees, Attorney General Holder said, “Locally, nationally, and internationally, you represent the very best that this Department has to offer. Your work embodies our ongoing commitment – not merely to win cases, but to do justice; to protect our fellow citizens from crime, violence, and terrorism; to empower the most vulnerable among us; and to uphold the rule of law.”
EOUSA Director Monty Wilkinson echoed those sentiments, saying to the recipients, “You have persevered, and remained focused and motivated – achieving remarkable results in work that makes a difference in the lives of citizens across our great country. The vast scope of your collective accomplishments is nothing short of exceptional.”
Manhattan U.S. Attorney Preet Bharara said: "This year’s Director’s Award winners exemplify the extraordinary intellect, determination, and dedication that are the hallmarks of this Office. I congratulate them for this well-deserved recognition. Their commitment to justice serves the interests of the citizens of New York and the entire country.”
Arlo Devlin-Brown, Antonia M. Apps, John T. Zach, Sharon Cohen Levin, Christine Magdo, and Micah Smith, working with Federal Bureau of Investigation Special Agents Matthew Callahan, B.J. Kang, James Hinkle, Matt Thoresen, Ronan Byrne, and David Makol, were recognized for Superior Performance by a Litigative Team for their successful investigation and prosecution of the entities managing the hedge fund SAC Capital, in an insider trading scheme that was on a scale without known precedent in the hedge fund industry. The criminal charges against SAC Capital, and a related civil money laundering and forfeiture action, were based on insider trading committed by numerous SAC Capital employees (eight of whom have been individually prosecuted) that was, as charged, “made possible by institutional practices that encouraged the widespread solicitation and use of insider information.” The SAC entity defendants pleaded guilty to all charges pursuant to a plea agreement, requiring the SAC Capital hedge fund to cease operating as investment advisers and to pay a historic financial penalty of $1.8 billion, the largest ever imposed in an insider trading prosecution.
Daniel Filor, Ellen London, and Carina H. Schoenberger were recognized for Superior Performance as an Assistant United States Attorney - Civil for their work in representing the United States in the In re Ambac bankruptcy proceeding, which culminated in a substantial recovery for the government. The United States had challenged Ambac's accounting for its credit default swap losses during the financial crisis, which allowed Ambac to obtain a $700 million tax refund from the Internal Revenue Service. AUSAs Filor, London, and Schoenberger led efforts to recover $101.9 million in cash and secured a $1 billion reduction of Ambac's net operating losses.
EOUSA provides oversight, general executive assistance, and direction to the 94 United States Attorneys’ offices around the country. For more information on EOUSA and its mission, visit http://www.justice.gov/usao.
New York City Employee Pleads Guilty in Manhattan Federal Court to Million-Dollar Medicaid FraudRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, announced today that AKIM MURRAY, an employee of the Medicaid Reimbursement Unit of the New York City Human Resources Administration (“HRA”), pled guilty before U.S. District Judge Richard M. Berman to a Medicaid fraud scheme in which MURRAY, whose job involved issuing reimbursements for Medicaid-eligible expenses, manipulated the system in order to have over one million dollars’ worth of checks issued to his friends and criminal associates. Those co-conspirators, in turn, gave MURRAY a substantial cut of the proceeds.
Manhattan U.S. Attorney Bharara said: “For over a year, Akim Murray used his job within New York City government to essentially embezzle funds intended to benefit low-income people entitled to reimbursements for certain of their health care payments. He stole from a program for people in need and gave the money to his friends and himself. Today, what Murray has earned is a felony conviction and the prospect of serious prison time."
According to the allegations in the Information, a previously filed Complaint, other documents filed in Manhattan federal court, and statements made at today’s guilty plea:
Medicaid is a federally funded program designed to provide low-income families with affordable health care. The HRA oversees the program and processes applications from New York City residents. Under Medicaid, individuals who successfully apply for Medicaid coverage can be reimbursed for eligible expenses submitted in the approximate three-month period prior to the application (“Pre-Enrollment Services”). In order to be reimbursed for Pre-Enrollment Services, the successful Medicaid applicant requesting reimbursement must provide proof that he or she made eligible health care payments out of pocket before applying for Medicaid. City employees known as Eligibility Specialists, working for HRA’s Medicaid Reimbursement Unit, receive and process requests for reimbursement using a computer system, and make recommendations for HRA supervisors as to whether a request should be approved.
From at least July 2009 until September 2010, MURRAY, an HRA Eligibility Specialist, exploited loopholes in HRA’s systems to both recommend and then separately approve the issuance of Medicaid reimbursement checks without meaningful oversight. MURRAY used the personal identifying information of his co-conspirators to create and unilaterally approve requests for reimbursement checks in their names. When the checks were sent to his friends and other associates, MURRAY demanded that they cash the checks and give him a substantial portion of the proceeds, often between 50 and 70 percent. MURRAY approved over $1.3 million in illicit Medicaid reimbursement requests during the course of the fraud.
MURRAY, 52, of New York, New York, pled guilty to one count of conspiracy to commit health care fraud, which carries a maximum sentence of 10 years. Sentencing is scheduled for December 17, 2014, before Judge Berman.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the FBI’s Health Care Fraud Task Force and the DOI for their assistance in this investigation, which he noted remains ongoing. The New York FBI Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force comprises agents, officers, and investigators from the FBI, NYPD, the New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management Inspector General, U.S. Food and Drug Administration, New York State Attorney General’s Office, New York State Office of Medicaid Inspector General, New York State Health and Hospitals Inspector General, and the National Insurance Crime Bureau.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.
U.S. v. Akim Murray Complaint
Chief Technology Officer of Liberty Reserve Pleads Guilty in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced that MARK MARMILEV, the former chief technology officer of Liberty Reserve, pled guilty today in Manhattan federal court to conspiring to operate an unlicensed money transmitting business that he knew involved the transmission of funds derived from criminal activity. MARMILEV was principally responsible for designing and maintaining the technological infrastructure for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services. MARMILEV was arrested in Brooklyn, New York, in May 2013 and pled guilty today before U.S. District Judge Denise L. Cote.
Manhattan U.S. Attorney Preet Bharara said: “As the chief technology officer of Liberty Reserve, Mark Marmilev was responsible for the infrastructure of a global payment processor and money transfer system that catered largely to criminals. With his guilty plea today, we are one step closer to holding to account everyone integrally involved in this sprawling Internet enterprise that served as a central financial institution for cyber criminals and illegal transactions of numerous kinds.”
Assistant Attorney General Leslie R. Caldwell said: “Marmilev designed and maintained a massive criminal infrastructure in cyberspace for one of the world’s most widely used digital currency systems, which laundered billions in criminal proceeds. This is the third conviction in the largest international money laundering case ever brought by the department, and we will continue to ensure that virtual currencies are not misused to enable criminals to hide from the U.S. justice system.”
According to allegations contained in the Indictment filed against Liberty Reserve, MARMILEV, and six other individual defendants, and statements made in related court proceedings:
Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. It emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.
Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking, and other crimes.
MARMILEV was an associate of Liberty Reserve founder Arthur Budovsky and served as Liberty Reserve’s chief technology officer. In that role, MARMILEV was principally responsible for designing and maintaining Liberty Reserve’s technological infrastructure.
MARMILEV, 35, of Brooklyn, New York, pled guilty to one count of conspiring to operate an unlicensed money transmitting business that failed to comply with federal registration requirements and that MARMILEV knew involved the transmission of funds derived from criminal activity, which carries a maximum sentence of five years in prison. A sentencing date has not yet been scheduled. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Marmilev and Budovsky were among seven individuals charged in the indictment, which was unsealed on May 28, 2013, and two co-defendants – Vladimir Kats and Azzeddine el Amine – previously pleaded guilty and await sentencing. The indictment also charged Liberty Reserve with conspiracy to commit money laundering and operation of an unlicensed money transmitting business, and the charges remain pending.
Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for their extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.
This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Andrew Goldstein, and Christine Magdo of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
The charges contained in the Indictment against certain of MARMILEV’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.
Former Consultant to New York Democratic Senate Campaign Committee Found Guilty of Tax and Fraud ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, the Acting Special Agent in Charge of the New York Office of the Internal Revenue Service – Criminal Investigation (“IRS”), announced that a former consultant to the New York State Democratic Senate Campaign Committee ("DSCC"), MELVIN LOWE, was found guilty today in White Plains federal court of conspiring with New York State Senator John Sampson to defraud the DSCC of $100,000. Lowe was also found guilty of one count of wire fraud arising out of his scheme to defraud the DSCC; three counts of subscribing to false tax returns; three counts of failing to file tax returns; and one count of causing a bank employee to make a false report of a federally insured bank. LOWE was found guilty after a one-week trial before U.S. District Judge Vincent L. Briccetti.
Manhattan U.S. Attorney Preet Bharara stated: "This conviction is another step in restoring the public's trust in New York State politics. As the jury found, Lowe participated in a series of backroom deals in which the bridge of corruption extended between the world of elected officials and their complicit consultants. Consultants, like elected officials, need to be held accountable in order to clean up our political system."
IRS-Criminal Investigation Acting Special Agent in Charge Shantelle P. Kitchen stated: “The public expects that politicians and those who work in the public arena be held to the same standards as they are, especially when it comes to matters of basic citizenship, like paying taxes, and applying for loans. This jury has held Mr. Lowe accountable to these standards.”
According to the Complaint and the Indictment filed in federal court and the evidence presented at trial:
LOWE was retained as a consultant by the DSCC after New York State Senator John Sampson was appointed as the Senate's Democratic Conference Leader following the June 2009 "coup" that temporarily shifted the balance of power in the New York Senate from the Democrats to the Republicans. In early June 2010, Sampson asked LOWE to arrange for a covert payment of $20,000 to Michael Nieves, a Queens-based political operative who had previously worked for former New York State Senator Hiram Monserrate and who had helped engineer the resolution of the Senate coup that had brought Sampson to power. LOWE then arranged for a New Jersey-based political consultant to submit a false invoice to the DSCC for $100,000 in printing services. Sampson approved payment of the invoice and the DSCC sent $100,000 to the New Jersey-based consultant. LOWE instructed the consultant to send $20,000 of the proceeds to Nieves, $75,000 of the proceeds to LOWE's consulting company and to keep $5,000 for himself. The jury heard evidence that LOWE and Senator Sampson had a close relationship of trust that included LOWE giving Sampson an envelope of cash.
LOWE received more than $2.1 million in consulting income from 2007 to 2012. He reported less than $25,000 in income in each of his returns for 2007 through 2009, which he did not file until late 2010. LOWE never filed returns for 2010 through 2012. He never made any payments toward his taxes for the years 2000 through 2012.
LOWE also caused an assistant manager of his bank to make a false statement to his mortgage lender regarding the balance in his checking account. When the mortgage lender sent his bank a Verification of Deposit form to verify LOWE's claim that he had $65,000 in his checking account, LOWE caused the assistant manager to claim that LOWE'S account had a balance of more than $80,000. At that time, the balance in LOWE'S checking account was $2,156.
LOWE, 53, of Manhattan, was found guilty of one count of conspiracy, which carries a maximum sentence of 20 years in prison; one counts of wire fraud, which carries a maximum sentence of 20 years in prison; three counts of subscribing to false tax returns, each of which carries a maximum sentence of 3 years in prison; three counts of failing to file tax returns, each of which carries a maximum sentence of 1 year in prison; and one count of causing a bank employee to make a false statement in a report and statement of a federally insured bank, which carries a maximum sentence of 30 years in prison. The conspiracy, wire fraud and tax charges each carry a maximum fine of $250,000, while the false statement charge carries a maximum fine of $1 million. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.
Mr. Bharara praised the outstanding investigative work of the Internal Revenue Service - Criminal Investigation and the investigators from the U.S. Attorney's Office for the Southern District of New York.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Perry A. Carbone and James McMahon are in charge of the prosecution.
Lowe, Melvin Indictment
Manhattan U.S. Attorney Announces Charges in Manhattan Federal Court Against Former Physician’s Assistant for Minor League Hockey Team and Former Player for Team Relating to the Distribution of OxycodoneRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, James J. Hunt, the Acting Special Agent-in-Charge of the New York Field Division of the U.S. Drug Enforcement Administration (DEA), and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment
charging JORDAN HART, a former player for a minor league hockey team (“Team-1”), and OSCAR JOHNSON, a physician’s assistant who formerly provided medical services to Team-1, with various offenses principally relating to the distribution of oxycodone. As alleged, JOHNSON wrote medically unnecessary Percocet prescriptions for HART on a monthly basis from June 2009 through July 2011, despite never once conducting any treatment or diagnosis of HART for any injuries or illnesses over that time period. From at least December 2010 through April 2011, HART sold at least some of the oxycodone he obtained from JOHNSON’s prescriptions to Derek Boogaard, who was a professional hockey player for an NHL team in New York, New York (“Team-2”), and who suffered from an addiction to prescription painkillers and Ambien. On May 13, 2011, two weeks after last purchasing oxycodone from HART in New York, Boogaard died of an overdose of oxycodone and alcohol in Minneapolis, Minnesota.
HART and JOHNSON were arrested this morning. HART will be presented in Manhattan federal court before U.S. Magistrate Judge Michael H. Dolinger later this afternoon. JOHNSON will be presented in federal court in Salt Lake City, Utah, later this afternoon. The case has been assigned to U.S. District Judge Naomi Reice Buchwald.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, for more than two years, Oscar Johnson casually provided Percocet prescriptions to a former minor league hockey player without once treating or examining that player during that period. The minor league player, Jordan Hart, then filled those prescriptions and sold the corresponding drugs to Derek Boogaard, an NHL player, feeding Boogaard’s growing, debilitating addiction. Ultimately, that addiction, fueled at least in part by the drugs that Johnson illegally prescribed, and Hart peddled for cash, culminated in Boogaard’s tragic overdose death. We have seen far too many tragedies from prescription drug overdoses. This Office will continue to warn people of the dangers of prescription drug abuse and investigate and prosecute those who illegally deal in pain medications wherever we find them. And finally, the sports world is not exempt from federal narcotics law and should not expect to be.”
DEA Acting Special Agent in Charge James J. Hunt said: “Like a sad story of lost potential, Derek Boogaard fell victim to prescription drug addiction ending in the most tragic consequence – a fatal overdose. His death in Minneapolis led law enforcement on a trail to Long Island and Utah that identified two people who allegedly supplied him diverted oxycodone, Jordan Hart and Oscar Johnson. Let this be another warning to the athletes across America about the fatal dangers of prescription drug abuse and a warning to those who distribute diverted prescription medication throughout our communities – law enforcement will track you down.” Acting SAC Hunt would like to extend his condolences to the Boogaard family for their loss.
NYPD Commissioner William J. Bratton said: “The NYPD will continue to work with our law enforcement partners to stop the illegal drug trade in any form of distribution. Thanks to the investigators and prosecutors involved in this case, this illegal supply of prescription narcotics was shut down before it could destroy another life.”
According to the allegations contained in the Indictment unsealed today in Manhattan federal court:
Oxycodone is a prescription narcotic-strength opioid used to treat severe and chronic pain conditions. Oxycodone is typically dispensed in five to 30 milligram tablets to patients suffering from conditions such as post-operative pain, severe back and orthopedic injuries, as well as pain associated with certain forms of cancer treatments and terminal illnesses. Oxycodone is a highly addictive opioid which, along with other controlled substance prescription medications, is abused by almost seven million Americans, resulting in more deaths from prescription drug overdoses than auto accidents. Because of its extremely addictive properties, oxycodone is heavily regulated, and should be prescribed with care. Indeed, the standard of care for properly prescribing oxycodone and other opioids requires monthly to quarterly in-person evaluation of a patient, including a full discussion of the degree of pain relief the patient is obtaining, the degree of improvement from the medication, an assessment of side effects, scrutiny for aberrant behavior, physical examination, compliance monitoring, and the development and implementation of a treatment plan utilizing all possible alternatives.
JOHNSON was a physician’s assistant for a medical services group in Utah (the “Medical Group”) that provided contract medical services to Team-1, which played in the East Coast Hockey League (“ECHL”). JOHNSON worked for the Medical Group between 2007 and July 2011, and was the primary medical liaison to Team-1 during that time. As a physician’s assistant, JOHNSON, under the supervision of a physician or surgeon, was able to diagnose and treat illnesses, and prescribe medications including oxycodone.
HART played for Team-1 during the 2007-2008 and 2008-2009 ECHL seasons. During those two seasons, JOHNSON did not regularly prescribe oxycodone for HART. Indeed, JOHNSON wrote HART a total of four prescriptions for medications containing oxycodone during HART’s entire tenure with Team-1. However, after the 2008-2009 ECHL season ended in April 2009, and after HART had stopped playing for Team-1 and retired from the ECHL, JOHNSON began a practice of writing oxycodone prescriptions for HART approximately every month. The prescriptions began in June 2009 and continued until July 2011 – the last month JOHNSON worked for the Medical Group. In total, between June 2009 and July 2011 JOHNSON wrote HART 26 prescriptions for Percocet, which contains oxycodone, for a total of 2,920 pills.
JOHNSON did not conduct any in-person treatment or examination of HART prior to writing any of the 26 prescriptions issued between June 2009 and July 2011. Instead, JOHNSON simply signed the prescriptions and provided them to a medical assistant to mail to HART in New York, where all 26 of the prescriptions were filled. When questioned, JOHNSON told the medical assistant that HART had shoulder pain and was looking for a doctor in New York. JOHNSON continued to write prescriptions for HART without any treatment or examination for 26 months.
HART, in turn, began selling the Percocet he obtained from prescriptions written by JOHNSON beginning in at least December 2010. HART sold some or all of the painkillers to Derek Boogaard, a professional hockey player for Team-2, an NHL team in New York, New York. Boogaard, who had previously played for a professional hockey team in Minneapolis, Minnesota, had a documented history of addiction to prescription painkillers and Ambien. In December 2010, Boogaard suffered a severe concussion after an on-ice fight during a game, and never played again. Boogaard subsequently suffered severe migraines and began spending most of his time in his New York apartment with the lights off, abusing oxycodone and Ambien. At least some of the oxycodone was purchased from HART, to whom Boogaard had been introduced by a teammate. Boogaard regularly traveled to Huntington, New York, where HART lived, to purchase the pills.
In April 2011, Boogaard was sent to a rehabilitation facility in California to deal with his addiction to painkillers. Boogaard was given permission to leave the facility in late April 2011 to travel to New York and then Minneapolis. When Boogaard arrived in New York on April 29, 2011, he met with HART and wrote HART a $4,000 check to buy prescription drugs. Boogaard then traveled to Minneapolis and met his brother. While unpacking his belongings from the trip to New York, Boogaard provided a bag of prescription drugs to his brother for safekeeping, before ultimately returning to the rehabilitation facility in California.
On May 12, 2011, during another reprieve from the rehabilitation facility, Boogaard consumed one of the painkillers he had brought from New York to Minneapolis two weeks earlier. After a late night of drinking with friends at bars in downtown Minneapolis, Boogaard went to sleep during the early morning hours of May 13, 2011. He was found dead later that day. Boogaard’s cause of death was determined to be a mixed oxycodone and alcohol toxicity.
HART, 31, of Huntington, New York, is charged with one count of conspiracy to distribute and possess with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison. JOHNSON, 59, of Salt Lake City, Utah, is charged with 26 counts of distributing and possessing with intent to distribute oxycodone, each of which carries a maximum sentence of 20 years in prison, and one count of making a false statement, which carries a maximum sentence of five years in prison. The maximum statutory sentences are prescribed by Congress and are provided here for informational purposes, as any sentencing of the defendants would be determined by the judge.
Mr. Bharara thanked the DEA Tactical Diversion Squad New York (TDS-NY) comprising agents and officers from the DEA, the New York City Police Department, the Town of Orangetown Police Department, and the Westchester County Police Department, as well as the Drug Enforcement Administration Field Offices in Minneapolis, Minnesota, and Salt Lake City, Utah, and the Minneapolis Police Department for their work in the investigation, which he noted is ongoing.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorneys Russell Capone and Jessica Lonergan are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Jordan Hart and Oscar Johnson Indictment
SAC Capital Portfolio Manager Mathew Martoma Sentenced in Manhattan Federal Court to Nine Years for Insider TradingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MATHEW MARTOMA, a former portfolio manager of CR Intrinsic Investors, LLC, a division of SAC Capital, was sentenced today in Manhattan federal court to nine years in prison based on his participation in the most lucrative insider trading scheme ever charged, involving approximately $275 million in illegal profits and avoided losses. Martoma was convicted of one count of conspiracy to commit securities fraud and two counts of securities fraud after a four-week jury trial presided over by U.S. District Judge Paul G. Gardephe in January and February of this year.
Manhattan U.S. Attorney Preet Bharara said: “SAC Capital portfolio manager Mathew Martoma received a bonus of more than $9 million for the $275 million he made for his hedge fund through the most profitable insider trading scheme ever charged. Today, Martoma was sentenced to nine years in prison, and financial penalties that strip him of the ill-gotten millions in proceeds of his crime. Today’s sentence of a lengthy prison term is well-suited to the audacity of the illegal trading in this case. The long and short of Mathew Martoma’s trading is that he traded his liberty, his name and his time with his family for what in the end is nothing.”
According to the allegations in the Superseding Indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:
During the period of the insider trading scheme, MARTOMA was an SAC Capital portfolio manager responsible for investment decisions in public companies in the health care sector, including pharmaceutical companies Elan and Wyeth, that were involved in the development of experimental drugs to combat Alzheimer’s Disease. At the time, scientists and investors alike were awaiting the results of a clinical trial being conducted by Elan and Wyeth of a drug called bapineuzumab, which offered a novel but untested approach to the treatment of Alzheimer’s Disease (the “Drug Trial”).
In order to obtain material non-public information (the “Inside Information”) about the Drug Trial, MARTOMA, shortly after starting his employment at SAC Capital in the summer of 2006, began using expert networking firms to try to speak to doctors involved in the Drug Trial who had access to confidential information. Through these efforts, MARTOMA arranged dozens of paid consultations with one of the Drug Trial’s principal investigators, Dr. Joel Ross, and the chairman of the Drug Trial’s Safety Monitoring Committee (“SMC”), Dr. Sidney Gilman. Through an exploitation of MARTOMA’s personal and financial relationships with these doctors, MARTOMA was able to obtain Inside Information about the Drug Trial.
The information that MARTOMA initially received from Dr. Ross included anecdotal reports concerning patients under the care of Dr. Ross. The Inside Information MARTOMA initially received from Dr. Gilman included generally positive safety data about which Dr. Gilman was aware through his chairmanship of the SMC. In fact, Martoma arranged a paid consultation shortly after each and every SMC meeting in part to ensure that he would be among the first to learn if any substantial safety issues were emerging from the Drug Trial that could lead to the cancellation of the Drug Trial and decreases in the price of Elan and Wyeth stock. Based in part on the positive safety information, MARTOMA purchased and held shares of Elan and Wyeth, and further recommended that the owner of the Hedge Fund (the “SAC Capital Owner”) purchase and hold Elan and Wyeth securities, which the SAC Capital Owner did. By the spring of 2008, SAC Capital held approximately $700 million worth of Elan and Wyeth equity securities.
Elan and Wyeth planned to release the full results of the Drug Trial to the investing public at the International Conference on Alzheimer’s Disease (the “ICAD Presentation”) on July 29, 2008. Dr. Gilman was selected to present the results on behalf of both drug companies and was “unblinded” to the full safety and efficacy results of the drug trial on July 15, 2008. Until that time, Dr. Gilman had only been privy to the safety results of the Drug Trial. On July 17, 2008, Dr. Gilman received a draft PowerPoint presentation that had been created for the ICAD meeting and that was marked “Confidential, Do Not Distribute.” The draft PowerPoint presentation showed that the Drug Trial results were negative, particularly in comparison with market expectations.
Later on July 17, 2008, MARTOMA called Dr. Gilman from his home and spoke to Dr. Gilman in detail about the negative news in the draft PowerPoint presentation during a phone call that lasted one hour and forty-five minutes. Then, on Saturday, July 19, 2008, MARTOMA flew roundtrip from New York City to Detroit, Michigan, to meet Dr. Gilman in his University of Michigan office and review the negative news in the draft PowerPoint presentation further.
The next day, Sunday, July 20, 2008, MARTOMA sent the SAC Capital Owner an email in which he wrote that “…It’s important [that we speak,]” which they did, for approximately 20 minutes. The SAC Capital Owner then directed SAC Capital to sell Elan and Wyeth securities prior to the ICAD Presentation. Over the next seven days, SAC Capital liquidated its entire equity position in Elan and almost all of its equity position in Wyeth – a total of 17.7 million shares worth approximately $700 million. SAC Capital also shorted Elan and Wyeth by approximately 7.75 million shares. This trading represented over 20% of the reported U.S. trading volume in Elan and 11% of the volume in Wyeth.
MARTOMA also received information about the ICAD presentation from Dr. Joel Ross. In particular, on the evening of July 28, 2008, after Dr. Ross had been unblinded to the Drug Trial results at a dinner for Principal Investigators, Dr. Ross met with MARTOMA in a hotel lobby to discuss the negative results. To the surprise of Dr. Ross, MARTOMA already seemed to know of the Drug Trial results.
The day after the ICAD presentation, Elan stock closed approximately 42% lower and Wyeth shares fell approximately 11%.
Through this trading activity SAC Capital earned profits and avoided losses of approximately $275 million.
In imposing the nine-year prison sentence, Judge Gardephe described Martoma’s conduct as “deeply corrosive to our financial markets,” generating cynicism among investors.
MARTOMA, 40, was also ordered to forfeit to the United States $9.3 million, representing the bonus he earned through the insider trading, as well as his interests in his Florida home and several bank accounts. Judge Gardephe also imposed a term of three years of supervised release following Martoma’s completion of this sentence.
Mr. Bharara praised the efforts of the FBI and also thanked the SEC for its assistance in the investigation. He added that the investigation is continuing.
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’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Arlo Devlin-Brown and Eugene Ingoglia are in charge of the prosecution. Assistant U.S. Attorney Christine I. Magdo of the Office’s Money Laundering and Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.
Manhattan U.S. Attorney and FBI Assistant Director Announce the Repatriation of Nine Stolen Miguel Cabrera Paintings to the Republic of PeruRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the repatriation of nine stolen 18th century paintings to the Republic of Peru.
Miguel Cabrera was an 18th century Mexican painter. He is considered one of the most important painters of his time in New Spain, an area that included present-day Mexico and Central America. Cabrera painted for the Archbishop and for the Jesuit order, and therefore many of Cabrera’s works were religious in nature. Of the nine paintings that are being returned to Peru, “Resurrection of Lazarus” is perhaps the most recognized and the finest example of Cabrera’s talent.
Manhattan U.S. Attorney Preet Bharara said: “We are pleased to return these nine Miguel Cabrera paintings. They are part of Peru’s cultural heritage, but they were stolen from a church in Lima six years ago and smuggled out of Peru to be trafficked on the international art market. Our Office is committed to ensuring that stolen artwork, especially when it is an important part of a nation’s cultural heritage, does not find a safe haven for resale in the Southern District of New York or elsewhere in the U.S.”
FBI Assistant Director George Venizelos said: “The theft of priceless artifacts deprives people of their religious and cultural heritage and corrupts the legitimate markets for works of art. The FBI will continue to commit investigative resources and work with law enforcement agencies around the world to recover these works of art and bring to justice criminals who steal these precious pieces. We are pleased to be able to return these paintings to the government of Peru.”
In 2008, nine paintings by Miguel Cabrera were reported as having been stolen from a church in Lima, Peru. Eight of the paintings were consigned to Jackson’s International Auctioneers & Appraisers in Cedar Falls, Iowa, which brought the paintings to the attention of law enforcement, assisted in identifying them as the stolen paintings, and turned them over to the FBI.
The FBI conducted an investigation and confirmed that the eight paintings were among those that had been stolen from the church in Lima. The art dealer who had consigned the paintings to the auction house was told that the paintings were stolen, and he has signed a stipulation relinquishing any right, title and interest in the paintings so they may rightfully be returned to Peru. That stipulation was approved yesterday by U.S. District Judge Denise Cote.
The ninth missing painting by Miguel Cabrera, “Resurrection of Lazarus,” was discovered to be at an auction house in New York City. The FBI took possession of the painting in early 2014, after determining it was the stolen painting. The person who had consigned that painting to the auction house was notified that the painting had been stolen from Peru, and he also agreed to relinquish any right, title and interest in the painting so it may be repatriated to Peru. The stipulation signed by the consignor of “Resurrection of Lazarus” was also approved yesterday by Judge Cote.
Mr. Bharara praised the investigative work of the FBI and thanked the Peruvian Embassy and the Peruvian Consulate in New York for their assistance in coordinating the repatriation of the paintings.
Ambassador Harold Forsyth of the Republic of Peru said: “The close cooperation between Peru, the U.S. Attorney’s Office and the FBI continues to produce concrete results. These pieces belong to the cultural heritage of Peru and their recovery shows that our two countries continue in fighting together against this evil form of international crime, because it steals our identity and denies the world the opportunity to appreciate the beauty of our history.”
The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Sharon Cohen Levin, Chief of the Money Laundering and Asset Forfeiture Unit, and Assistant U.S. Attorney Christine I. Magdo are in charge of the matter.
Provider of Services for Special Needs Preschool Students Sentenced in Manhattan Federal Court to 24 Months in Prison for Defrauding Education Programs of More Than $2 MillionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CHEON PARK was sentenced in Manhattan federal court to 24 months in prison and over $2 million in forfeiture and restitution for defrauding the New York State Education Department (“NYSED”) and the New York City Department of Education (“NYCDOE”) out of millions of dollars in connection with special education services and preschool programs provided to New York City children by a company that PARK owned and operated. PARK pled guilty in March 2014 to one count of mail fraud before U.S. District Judge J. Paul Oetken, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Cheon Park lined his pockets with millions of dollars meant to provide important services for special-needs children. Today, he was made to pay for his crimes through federal prison time and restitution in the millions of dollars. We will continue to do everything in our power to pursue and prosecute those who defraud the government, particularly those who shamelessly siphon scarce public money away from some of the city’s most vital programs.”
According to the Information, an earlier Criminal Complaint, and statements made at court proceedings:
Between 2005 and 2012, PARK deliberately inflated the amount of compensation Bilingual SEIT, a company PARK owned and operated, paid certain of its employees and contractors. He also misrepresented the type of work performed by certain employees on annual certified consolidated fiscal reports (“CFRs”) and financial statements submitted to NYSED and NYCDOE.
PARK owned and operated Bilingual SEIT from at least 2005 to 2012. During that time, Bilingual SEIT had a contract with the NYCDOE to provide publicly funded special education services and preschool programs to New York City schoolchildren aged three to five with physical, emotional, and/or developmental disabilities. Specifically, Bilingual SEIT received funding to provide: (1) special education itinerant teacher, commonly referred to as SEIT, services; (2) special education classes in a center-based setting for preschool students with special needs; (3) individual evaluations for preschool students with disabilities; and (4) physical, occupational, and/or speech therapy for preschool students who qualified for such services. As of September 2012, Bilingual SEIT operated out of five locations in Manhattan, Queens, and Brooklyn.
During the seven-year period that Bilingual SEIT was under contract with the NYCDOE, it claimed reimbursement for and received approximately $94.5 million in federal, New York State, and New York City funds to provide the services described above. In order to receive such money, PARK was required to file a CFR on behalf of Bilingual SEIT supported by audited financial statements with the NYSED. The CFR and audited financial statements represented the costs that Bilingual SEIT had incurred the previous year and the justification for those costs, and included compensation Bilingual SEIT purported to pay its employees and contractors. Each year, PARK signed the certification pages for the CFRs filed with the NYSED, which relied on the CFR and audited financial statements in determining the amount of public funds to pay Bilingual SEIT per student for the services Bilingual SEIT provided to New York City preschool students.
Beginning in approximately June 2011, the New York State Comptroller’s office (the “Comptroller”) conducted an audit of Bilingual SEIT to determine whether the costs reported by Bilingual SEIT on the CFRs for the years July 2007 through 2009 were properly calculated, justified, and allowable under guidance issued by the NYSED. In July 2012, the Comptroller issued a report that concluded that nearly $1.5 million of the costs that PARK certified for the two-year audit period should have been disallowed, including money paid to 26 employees whose time and attendance could not be substantiated. As a result of the Comptroller’s report, the NYCDOE cancelled Bilingual SEIT’s classes and declined to renew its contract with Bilingual SEIT.
In fact, PARK engaged in several schemes designed to inflate the costs Bilingual SEIT represented it incurred, resulting in more public money for Bilingual SEIT, much of which, as set forth below, was kicked back to PARK. PARK fraudulently received funds from New York State and New York City to pay multiple individuals who performed little or no work for Bilingual SEIT. At PARK’s request and direction, these individuals then kicked back as much as 50% of the salary they fraudulently received from Bilingual SEIT to PARK. PARK also fraudulently received funds from New York State and New York City to deliberately overpay other individuals who worked for Bilingual SEIT. At PARK’s request and direction, these individuals also kicked back a portion of the overpayment to PARK on a regular basis.
Further, in addition to receiving kickbacks, PARK used Bilingual SEIT funds for his personal benefit in other ways. PARK arranged for Bilingual SEIT to pay his ex-wife and ex-sister-in-law for work they did not perform, and also arranged for Bilingual SEIT to pay for tutoring for PARK’s children and for a Bilingual SEIT employee to clean PARK’s home twice a week.
In addition to his prison term, PARK, 46, of Manhasset, New York, was ordered to forfeit $1,924,318, representing the proceeds of the crime, as well as pay restitution in the amount of $2,151,318. Last week, PARK paid to the United States Marshals Service the entirety of the forfeiture amount. PARK was also sentenced to pay a $100 special assessment.
Mr. Bharara praised the investigative work of the Office of the State Comptroller, the Special Commissioner of Investigation for New York City’s Department of Education, and the Office of Inspector General for the United States Department of Education. He also thanked the Queens County District Attorney’s Office for its assistance.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Paul Krieger and Martin Bell are in charge of the prosecution.
Bitcoin Exchangers Plead Guilty in Manhattan Federal Court in Connection with the Sale of Approximately $1 Million in Bitcoins for Use on the Silk Road WebsiteRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT M. FAIELLA, a/k/a “BTCKing,” an underground Bitcoin exchanger, and CHARLIE SHREM, formerly the Chief Executive Officer and Compliance Officer of a Bitcoin exchange company, both pled guilty today before U.S. District Judge Jed S. Rakoff to operating an unlicensed money transmitting business, through which they knowingly transmitted money intended to facilitate criminal activity – specifically, drug trafficking on “Silk Road,” a black-market website designed to enable its users to buy and sell illegal drugs anonymously and beyond the reach of law enforcement.
Manhattan U.S. Attorney Preet Bharara said: “Robert Faiella and Charlie Shrem opted to travel down a crooked path – running an illegal money transmitting business that catered to criminals bent on trafficking narcotics on the dark web drug site, Silk Road. The approximately $1 million in Bitcoins Faiella and Shrem sold to these outlaws cost them a lot more than they bargained for and bought them today’s convictions.”
According to the Complaint, the Indictment, the Superseding Information unsealed today against SHREM, and statements made in related court proceedings:
From about December 2011 to October 2013, FAIELLA ran an underground Bitcoin exchange on the Silk Road website, a website that served as a sprawling and anonymous black market bazaar where illegal drugs of virtually every variety were bought and sold regularly by the site’s users. Operating under the username “BTCKing,” FAIELLA sold Bitcoins – the only form of payment accepted on Silk Road – to users seeking to buy illegal drugs on the site. FAIELLA never registered his business as a money transmitting business with the U.S. Treasury Department, as required under federal regulations, even though he knew that he was required to do so.
Upon receiving orders for Bitcoins from Silk Road users, FAIELLA filled the orders through a company based in New York, New York (the “Company”). The Company enabled customers to exchange cash for Bitcoins anonymously, that is, without providing any personal identifying information, and it charged a fee for its service. FAIELLA obtained Bitcoins with the Company’s assistance, and then sold the Bitcoins to Silk Road users at a markup.
SHREM was the Chief Executive Officer of the Company, and from about August 2011 until about July 2013, when the Company ceased operating, he was also its Compliance Officer, in charge of ensuring the Company’s compliance with federal anti-money laundering (“AML”) laws. SHREM was also the Vice Chairman of a foundation dedicated to promoting the Bitcoin virtual currency system.
SHREM was fully aware that Silk Road was a drug-trafficking website, and through his communications with FAIELLA, SHREM also knew that FAIELLA was operating a Bitcoin exchange service for Silk Road users. Nevertheless, SHREM knowingly facilitated FAIELLA’s business with the Company in order to maintain FAIELLA’s business as a lucrative source of revenue. SHREM knowingly allowed FAIELLA to use the Company’s services to buy Bitcoins for his Silk Road customers; personally processed FAIELLA’s orders; and gave FAIELLA discounts on his high-volume transactions. Even though it was SHREM’s job to enforce the Company’s AML restrictions and even though the Company had registered with the Treasury Department as a money services business, SHREM failed to file a single suspicious activity report with the U.S. Treasury Department about FAIELLA’s illicit activity, as he was required to do in his role as the Company’s Compliance Officer, and deliberately helped FAIELLA circumvent the Company’s AML restrictions.
Working together, SHREM and FAIELLA exchanged nearly $1 million in cash for Bitcoins for the benefit of Silk Road users, so that the users could, in turn, make illegal purchases on Silk Road.
In late 2012, when the Company stopped accepting cash payments, FAIELLA ceased doing business with the Company and temporarily shut down his illegal Bitcoin exchange service on Silk Road. FAIELLA resumed operating on Silk Road in April 2013 without the Company’s assistance, and continued to exchange tens of thousands of dollars a week in Bitcoins until the Silk Road website was shut down by law enforcement in October 2013.
FAIELLA, 54, of Cape Coral, Florida, pled guilty to one count of operating an unlicensed money transmitting business through which he knowingly transmitted funds intended to be used to promote or support unlawful activity, which carries a maximum sentence of five years in prison. SHREM, 24, of New York, New York, pled guilty to aiding and abetting FAIELLA in the operation of his unlicensed money transmitting business, which also carries a maximum sentence of five years in prison. FAIELLA and SHREM will be sentenced by Judge Rakoff on January 20, 2015, at 4:00 p.m. and 4:30 p.m., respectively. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the U.S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement - Homeland Security Investigations, the New York State Police, the U.S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshal Service, New York National Guard, Office of Foreign Assets Control and the New York Department of Taxation and Finance. Mr. Bharara also thanked the FBI’s New York Field Office.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Serrin Turner is in charge of the prosecution, and Assistant United States Attorney Andrew Adams of the Money Laundering and Asset Forfeiture Unit is in charge of the forfeiture aspects of the case.
U.S. v. Charlie Shrem S1 Information
U.S. v. Robert Faiella and Charlie Shrem IndictmentTwo Employees of Veterans Affairs Hospital, Including Logistics Warehouse and Mail Center Supervisor, Charged with Conspiracy to Distribute CocaineRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), Jeffrey G. Hughes, Special Agent-in-Charge, Northeast Field Office, of the Department of Veterans Affairs, Office of Inspector General (“VA-OIG”), and Albert Aviles, Chief of the Department of Veterans Affairs Police Detachment in Bronx, New York, announced that ROBERT TUCKER, of Bronx, New York, and ERIK CASIANO, of West Orange, New Jersey, were arrested yesterday for allegedly engaging in a conspiracy to distribute more than five kilograms of cocaine. The defendants will be presented in Manhattan federal court this afternoon before U.S. Magistrate Judge Ronald L. Ellis.
U.S. Attorney Preet Bharara said: “As alleged, the defendants used the cover of a facility dedicated to caring for our nation’s heroes to further a scheme to distribute large amounts of cocaine. I would like to thank the United States Postal Inspection Service, the Department of Veterans Affairs, Office of Inspector General, and the Department of Veterans Affairs Police for their outstanding work on this case.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “These employees allegedly took advantage of the trust placed in them by their employer and the US Government. Criminals involved in drug trafficking should take note, U.S. Postal Inspectors will vigorously pursue, arrest and bring to justice anyone who uses the US Mail to facilitate the transport of illegal drugs, firearms or drug proceeds.”
VA-OIG Special Agent-in-Charge Jeffrey G. Hughes said: “The arrest of two VA Medical Center employees comes as a result of an outstanding collaborative effort of all the federal agencies involved. The Department of Veterans Affairs, Office of Inspector General is committed to uncovering illegal activities at VA facilities and assisting in the prosecution of those who place their own interest ahead of the safety of both veterans receiving treatment and dedicated VA employees.”
VA Police Chief Albert Aviles said: “Drug abuse is a national epidemic and communities everywhere must be vigilant to suspicious activities. Thanks to vigilance and good police work, we can report today that these drugs are off the street and that the alleged perpetrators of this activity are under arrest. We are grateful to the Postal Inspection Service and our own VA Police staff, for their diligence and professionalism. We are grateful to our community law enforcement partners, for their significant involvement in this investigation. This was truly a team effort and a strong 'win' for law enforcement. Through this effort we can continue to assure a safe environment of care for all of our Veterans.”
According to the Complaint filed today in Manhattan federal court:
Since at least November 2013, the defendants used the United States Postal Service and the mailroom at the Veterans Affairs Medical Center in the Bronx, New York (the “Medical Center”), to receive and distribute narcotics, including cocaine. TUCKER has been employed by the Medical Center since 1997, and has served as the Supervisor of the Logistics Warehouse and Mail Center since 2012. CASIANO has been employed by the Medical Center since 2012 as a pipefitter in the Plumbing Department.
In December 2013, Postal Inspectors in San Juan, Puerto Rico, seized a suspicious package that was addressed to the Medical Center, to the attention of “Warehouse,” and discovered approximately two kilograms of cocaine inside the package.
On four separate occasions in July and August 2014, TUCKER was observed by undercover law enforcement personnel retrieving packages similar in size and weight to the aforementioned package from the Medical Center mailroom. The packages had been sent from San Juan, Puerto Rico, to the Medical Center, to the attention of “Logistic[s] Warehouse.” On each occasion, TUCKER brought the package to his office, and CASIANO subsequently went into TUCKER’s office and retrieved the package’s contents before carrying them out of the Medical Center building. Two of the four packages handled by CASIANO and TUCKER were examined by drug-sniffing dogs prior to delivery and tested positive for the presence of narcotics.
On September 2, 2014, TUCKER was observed on video surveillance retrieving another similarly addressed package from the Medical Center mailroom. TUCKER then brought the package to his office and met in the office with CASIANO, who provided $500 in cash to TUCKER. Thereafter, CASIANO brought the package to his car. As CASIANO attempted to drive out of the Medical Center facility, he was arrested by Postal Inspectors, VA-OIG agents, and DEA agents who seized one kilogram of cocaine from the car.
TUCKER, 64, and CASIANO, 29, are each charged with one count of conspiracy to distribute and possess with intent to distribute a controlled substance, in violation of 21 U.S.C. § 846. They each face a mandatory minimum of 10 years in prison and a maximum of life in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the investigative work of the USPIS, the Department of Veterans Affairs OIG, the Veterans Affairs Police, the DEA New York Organized Crime Drug Enforcement Task Force, and the Port Authority of New York and New Jersey Police, and thanked the Veterans Affairs Medical Center for its assistance. The DEA’s New York Organized Crime Drug Enforcement Strike Force comprises agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement’s Homeland Security Investigations, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshals Service, New York National Guard, Office of Foreign Assets Control, and the New York Department of Taxation and Finance.
This case is being prosecuted by the Office’s Narcotics Unit. Assistant United States Attorney Andrew DeFilippis is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Robert Tucker & Erik Casiano Complaint
Staten Island Physician’s Assistant and Two Other Individuals Arrested for Illegal Distribution of Oxycodone PillsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, James J. Hunt, the Acting Special Agent-in-Charge of the New York Field Division of the U.S. Drug Enforcement Administration (“DEA”), Thomas O’Donnell, the Special Agent-in-Charge of the New York Field Office of the United States Department of Health and Human Services Office of the Inspector General (“HHS-OIG”), and William J. Bratton, the Commissioner of the New York City Policy Department (“NYPD”), announced today the unsealing of an Indictment in Manhattan federal court charging LEONARD MARCHETTA, a physician’s assistant, WILLIAM TAGLIAFERRO, and GREGORY ZACCAGNINO with federal drug offenses in connection with an oxycodone distribution ring they operated out of a Staten Island-based medical clinic run by MARCHETTA. As alleged, MARCHETTA wrote medically unnecessary prescriptions for large quantities of oxycodone in exchange for cash and on a number of occasions, MARCHETTA issued prescriptions in the names of fictitious individuals or individuals whom MARCHETTA had never seen. TAGLIAFERRO and ZACCAGNINO recruited and paid individuals to pose as “patients” in order to obtain medically unnecessary prescriptions of oxycodone from MARCHETTA, according to the Indictment. The prescriptions were then allegedly filled at pharmacies, and TAGLIAFERRO and ZACCAGNINO collected the resulting pills, in part for distribution, as charged in the Indictment.
MARCHETTA, TAGLIAFERRO, and ZACCAGNINO were arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis later this afternoon. The case has been assigned to U.S. District Judge P. Kevin Castel.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Leonard Marchetta exploited his position as a physician’s assistant by doling out thousands of unnecessary prescriptions for oxycodone pills to phony patients, recruited by his co-defendants. Thanks to our law enforcement partners, Marchetta and his team were caught and they will now face justice for their alleged crimes, which come amidst an epidemic of prescription pill abuse now plaguing our area.”
DEA Acting Special Agent-in-Charge James J. Hunt said: “These three arrests are a stepping stone to removing one of the contributing factors of the opiate problem in Staten Island and throughout the United States – those who abuse our health care system and illegally prescribe pain medication which ultimately is sold throughout our streets. Identifying and arresting those who divert prescription medication, community outreach and treatment combined are the ultimate weapons to fight opiate abuse.”
HHS-OIG Special Agent-in-Charge Thomas O’Donnell said: “Today’s arrests reaffirm our commitment to working with our law enforcement partners to protect federally-funded health care programs as well as patients who rely on those programs from the dangers of America's prescription drug fraud epidemic.”
NYPD Commission William J. Bratton said: “These individuals allegedly operated an illegal pill mill, profiting with a drug that is responsible for numerous overdose deaths and tragedies. But thanks to the investigators and prosecutors involved in this case, this criminal enterprise has been dismantled and the persons responsible for the operation can no longer endanger lives by contributing to the supply of illegal narcotics in our communities.”
According to the allegations contained in the Indictment unsealed today in Manhattan federal court:
Oxycodone is a highly addictive, prescription narcotic-strength opioid used to treat severe and chronic pain conditions. Almost seven million Americans abuse controlled-substance prescription medications, including opioid painkillers, resulting in more deaths from prescription drug overdoses than auto accidents. Oxycodone prescriptions have enormous cash value to street level drug dealers, who can fill the prescriptions at most pharmacies and resell the resulting pills at vastly inflated rates. Indeed, a single prescription for 180 30-milligram oxycodone pills can net the distributor as much as $7,200 in cash.
As a physician’s assistant, MARCHETTA, under the supervision of a physician or surgeon, is able to diagnose and treat illnesses and prescribe medications. At all relevant times, MARCHETTA has been employed by and overseen the day-to-day operations of a Staten Island- based medical clinic (the “Clinic”), which advertises itself to the public as a family medical clinic.
MARCHETTA prescribed oxycodone to “patients” who had no medical need for oxycodone and no legitimate medical record documenting an ailment for which oxycodone would be prescribed. MARCHETTA’s fee for his participation in the scheme was typically approximately $250 in cash for “doctor visits” that usually lasted just a minute or two, involved no actual physical examination, and consistently resulted in the issuance of a prescription for large doses of oxycodone, typically 150 30-milligram tablets. MARCHETTA also received a separate fee of approximately $500 in cash for each medically unnecessary oxycodone prescription he issued. On a number of occasions, MARCHETTA issued prescriptions in the names of fictitious individuals or individuals whom MARCHETTA never saw in exchange for cash.
TAGLIAFERRO and ZACCAGNINO recruited and paid individuals to pose as “patients” in order to receive medically unnecessary prescriptions from MARCHETTA. TAGLIAFERRO and ZACCAGNINO made appointments directly with the Clinic for the “patients” they sent to see MARCHETTA. On a number of occasions, TAGLIAFERRO and ZACCAGNINO obtained prescriptions issued by MARCHETTA in the name of the “patient” without the “patient” setting foot in the Clinic.
After MARCHETTA issued a medically unnecessary oxycodone prescription in the name of the “patient,” TAGLIAFERRO or ZACCAGNINO then took or referred the “patient” to a pharmacy to fill the oxycodone prescription – that is, to obtain the oxycodone tablets – of which TAGLIAFERRO or ZACCAGNINO took possession, in part for distribution. TAGLIAFERRO and ZACCAGNINO paid the “patients,” typically $150 to $200 in cash, for obtaining and handing over the oxycodone tablets that had been prescribed to them by MARCHETTA. At times, ZACCAGNINO paid the “patients,” some of whom were addicted to oxycodone, with oxycodone tablets for their services.
At TAGLIAFERRO’s direction, certain “patients” of MARCHETTA billed Medicaid or private health insurance carriers for filling the medically unnecessary oxycodone prescriptions that MARCHETTA issued.
MARCHETTA, 47, TAGLIAFERRO, 41, and ZACCAGNINO, 49, all of Staten Island, New York, are each charged with one count of conspiracy to distribute and possess with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison. TAGLIAFERRO is also charged with conspiracy to commit health care fraud, which carries a maximum sentence of 20 years in prison. The maximum statutory sentences are prescribed by Congress and are provided here for informational purposes, as any sentencing of the defendants would be determined by the judge.
Mr. Bharara thanked the United States Department of Health and Human Services, the New York State Department of Financial Services, and the DEA Tactical Diversion Squad New York (TDS-NY) comprising agents and officers from the DEA, the New York City Police Department, Town of Orangetown Police Department and Westchester County Police Department for their work in the investigation, which he noted is ongoing.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Leonard Marchetta, et al. Indictment
Member of Guinea Bissau-Based International Narcotics Trafficking Conspiracy Sentenced in Manhattan Federal Court to 78 Months in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that PAPIS DJEME, a citizen of Guinea Bissau, was sentenced today in Manhattan federal court to 78 months in prison for participating in a conspiracy to import narcotics into the United States. DJEME was arrested on April 2, 2013, by the Drug Enforcement Administration’s (“DEA”) Special Operations Division, Bilateral Investigative Unit Narco-Terrorism Group, and the DEA’s Foreign-deployed Advisory Support Team (“FAST”) off the coast of West Africa while onboard a vessel under DEA control in international waters. On April 29, 2014, DJEME pled guilty before U.S. District Judge Richard M. Berman, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “From start to finish, this case has shown that US law enforcement will bring to justice traffickers who bring illegal drugs into this country, even when their criminal acts span four continents. Djeme and his codefendants conspired to transport drugs between South America and West Africa and sell them in Europe and the US. Now he faces 78 months in federal prison here.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at DJEME’s guilty plea and today’s sentencing:
Beginning in the summer of 2012, DJEME and his co-defendants, former Guinea Bissau Naval Admiral Jose Americo Bubo Natchuto and Tchamy Yala, engaged in a series of recorded meetings in Guinea Bissau with confidential sources (the “CSs”) working with the DEA who purported to be representatives and/or associates of South American-based narcotics traffickers.
In an early meeting in which Natchuto and Yala discussed the shipment of ton-quantities of cocaine from South America to Guinea Bissau by sea, Natchuto noted that the Guinea Bissau government was weak in light of the recent coup d’état and that it was therefore an ideal time for the proposed cocaine transaction. At an October 2012 meeting, DJEME advocated using “go-fast” boats to transport the cocaine into Guinea Bissau, because such boats could more easily navigate the waters of Guinea Bissau, and provided a photograph of the type of “go-fast” boat that could be used to transport the cocaine, as well as information for the purchase of such boats.
In further meetings, DJEME, Natchuto, and Yala agreed to assist the CSs by receiving a two-ton load of cocaine that would be transported to Guinea Bissau by boat and stored in Guinea Bissau for distribution to Europe and the United States. For example, on November 17, 2012, DJEME and his co-defendants met with two of the CSs in Guinea Bissau and discussed importing 1,000 kilograms of cocaine into the United States. Also during the meeting, Natchuto offered to utilize a company that he owned to facilitate the shipment of cocaine out of Guinea Bissau. DJEME agreed to provide the two CSs with business documents for Natchuto’s company, and additionally confirmed that he and Yala would handle the security of the drugs in Guinea Bissau, with only DJEME, Natchuto, and Yala knowing the precise location of the drugs.
At a meeting the following day at which DJEME was present, Natchuto confirmed that he would charge a fee of $1,000,000 per 1,000 kilograms of cocaine received in Guinea Bissau. DJEME provided the confidential source who was posing as the cocaine supplier with a Skype account and two email addresses. The CSs later received emails from the accounts provided by DJEME, including a December 2012 email with longitude and latitude coordinates for where the boat transporting the cocaine from South America could meet the “go fast” boat off the west coast of Africa, so the cocaine could then be brought to Guinea Bissau on the “go fast” boat.
In addition to his prison term, DJEME, 31, was sentenced to three years of supervised release and was ordered to pay a $100 special assessment.
On April 28, 2014, DJEME’s co-defendant, Tchamy Yala, pled guilty to participating in a conspiracy to import narcotics into the United States. Yala’s sentencing is scheduled to take place before Judge Berman on November 17, 2014, at 11:00 a.m.
Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA. Mr. Bharara also thanked DEA’s FAST, Lisbon Country Office, and Bogota Country Office, as well as the U.S. Department of Justice’s Office of International Affairs and the U.S. Department of State.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorney Aimee Hector is in charge of the prosecution.
U.S. v. Papis Djeme S1 Indictment
Defendant Who Supplied Three Rocket-Propelled Grenade Launchers Sentenced in Manhattan Federal Court to 120 Months for Attempting to Provide Material Support to A Terrorist OrganizationRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that IOANNIS VIGLAKIS, a/k/a “Pablo,” was sentenced today in Manhattan federal court to 120 months for attempting to provide material support to the Fuerzas Armadas Revolucionarias de Colombia (“FARC”), a Colombian terrorist organization. VIGLAKIS, who was arrested in Panama City, Panama, in August 2012 and subsequently turned over to the custody of the United States, pled guilty on December 10, 2013, to attempting to provide material support to the FARC, which has been designated a foreign terrorist organization by the U.S. Secretary of State. VIGLAKIS pled guilty before U.S. District Judge Katherine B. Forrest, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Ioannis Viglakis attempted to sell military-grade weapons to the FARC, a terrorist organization, which has used such weapons to shoot down American aircraft in Colombia. For attempting to provide material support to a terrorist organization in this way, Viglakis has been sentenced to 120 months in prison.”
According to the Indictment, other public filings in this case, and statements made at VIGLAKIS’s guilty plea and at today’s sentencing:
Beginning in November 2011, VIGLAKIS had a series of meetings with a DEA confidential source (the “CS”) who represented himself as an associate of the FARC. During those meetings, which took place in Europe and Central America, the CS informed VIGLAKIS that he was seeking weapons for use by the FARC to attack American forces in Colombia. VIGLAKIS offered to provide the FARC with functional, bona fide, military-grade weapons – including assault rifles, rocket-propelled grenade (“RPG”) launchers and surface-to-air missiles – in exchange for cocaine and cash. During the meetings, VIGLAKIS and the CS discussed the FARC’s use of these weapons to fight the Colombian and American governments, including by shooting down American aircraft in Colombia.
Over the following months, VIGLAKIS indicated that he would provide the CS with several RPG launchers as a sample. On July 18, 2012, VIGLAKIS successfully arranged for the delivery of six live RPGs and three working RPG launchers in Europe, which were received by a DEA undercover agent.
Then, in August 2012, during meetings in Panama, VIGLAKIS gave the CS approximately 8,500 euros as a partial payment to the FARC to transport a multi-kilogram shipment of cocaine to Spain on his behalf, and further offered to provide the CS with approximately 200 hand grenades in exchange for additional kilograms of cocaine.
In addition to his prison term, VIGLAKIS, 54, a citizen of Greece, was to pay a $100 special assessment fee.
Mr. Bharara praised the outstanding work of the Special Operations Division of the DEA, as well as the DEA’s Panama Country Office, Madrid Country Office, and Copenhagen Country Office. Mr. Bharara also thanked the U.S. Department of Justice’s Office of International Affairs and National Security Division, the U.S. Department of State, and the Government of the Republic of Panama.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Christian R. Everdell, Aimee Hector, and Michael Lockard are in charge of the prosecution.
U.S. v. Ioannis Viglakis S1 Superseding Indictment
Former Head of Suriname’s Counter-Terrorism Unit Pleads Guilty in Manhattan Federal Court to Attempting to Support Hezbollah, Narcotics Trafficking, and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DINO BOUTERSE, who is the son of the President of Suriname and reportedly served previously as the head of Suriname’s Counter-Terrorism Unit, pled guilty today in Manhattan federal court in connection with his attempt to provide material support and resources to Hezbollah, a designated terrorist organization, along with narcotics trafficking and firearms offenses. BOUTERSE, who was arrested in Panama on August 29, 2013, and arrived in the United States on August 30, 2013, pled guilty before U.S. District Judge Shira A. Scheindlin.
Manhattan U.S. Attorney Preet Bharara said: “Today, a supporter of terrorism, who was in a position of national power in Suriname and presented himself as an opponent of terrorism, has pled guilty. In addition to conspiring to import cocaine into the United States, Dino Bouterse has acknowledged that he attempted to provide material support to Hezbollah. Now he faces, at a minimum, 15 years in prison.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at today’s guilty plea:
In 2013, BOUTERSE used his position to assist individuals he believed were members of Hezbollah who intended to conduct terrorist attacks against American interests. In exchange for a multimillion-dollar pay-off, BOUTERSE agreed to allow large numbers of purported Hezbollah operatives to use Suriname as a permanent base for, among other things, attacks on American targets. In furtherance of his efforts to assist Hezbollah, BOUTERSE supplied a false Surinamese passport to a purported Hezbollah operative, who in actuality was an undercover law enforcement officer, for the purpose of clandestine travel, including travel to the United States, began determining which heavy weapons he could provide to Hezbollah, and indicated how Hezbollah operatives, supplied with a Surinamese cover story, could enter the United States.
In June 2013, BOUTERSE and his co-defendant, Edmund Quincy Muntslag, met in Suriname with DEA confidential sources (the “CSs”), in a local government office, to discuss importing cocaine into the United States using commercial airline flights. During the meeting, BOUTERSE showed the CSs a rocket launcher and a kilogram of cocaine.
Approximately one month later, BOUTERSE and Muntslag worked to provide transportation and security for cocaine being sent through Suriname to the United States. As a test run, BOUTERSE and Muntslag sent 10 kilograms of cocaine on a commercial flight departing from Suriname. BOUTERSE personally verified the arrangements for the 10-kilogram cocaine shipment in a text message. The cocaine was intercepted by law enforcement officials after it departed Suriname.
In July 2013, BOUTERSE met with one of the CSs to discuss opening Suriname to the CSs’ purported Hezbollah associates.
Later that month, BOUTERSE met in Europe with one of the CSs and with two other men who purported to be associated with Hezbollah. During this meeting, BOUTERSE discussed initially hosting 30 to 60 Hezbollah members in Suriname for training and operations. He also indicated that he wanted a Hezbollah cell in Suriname, in part, to act as a personal armed force. BOUTERSE confirmed his understanding that the purported Hezbollah operatives would operate in South America against American targets, and he agreed to supply Surinamese passports to the operatives—and to assist with their applications for visas to travel from South America into the United States. In addition, in response to a request for surface-to-air missiles and rocket-propelled grenades, BOUTERSE stated that he would need “two months” and that he would provide a list of what he could supply. Finally, at the July 2013 meeting in Europe, BOUTERSE agreed to create a false Surinamese passport for one of the purported Hezbollah operatives, so that BOUTERSE and the Hezbollah operative could travel to Suriname to inspect the facilities that BOUTERSE had agreed to prepare for the Hezbollah contingent.
At a subsequent meeting in August 2013, BOUTERSE delivered a Surinamese passport with false identifying information to a purported Hezbollah operative. As had been discussed at the July 2013 meeting in Europe, the purported Hezbollah operative was to use the fraudulent passport to travel to Suriname. BOUTERSE indicated that everything was ready in Suriname for the arrival of the purported Hezbollah members, and that some “toys,” or weapons, would be available for inspection.
Muntslag was arrested on August 29, 2013, in Trinidad and Tobago, and is pending extradition to the United States to face a narcotics importation charge in the Indictment.
BOUTERSE, 41, pled guilty to one count of attempting to provide material support to Hezbollah, a designated foreign terrorist organization, one count of conspiring to import cocaine into the United States, and one count of carrying a firearm in connection with the conspiracy to import cocaine. Those charges carry a maximum term in prison of life, and a mandatory minimum term in prison of 15 years.
The charge against the remaining defendant, Edmund Quincy Muntslag, is merely an allegation, and he is presumed innocent unless and until proven guilty.
Mr. Bharara praised the outstanding efforts of the Special Operations Division of the Drug Enforcement Administration (“DEA”). Mr. Bharara also thanked the DEA’s Miami Field Division, Panama City Country Office, Port-of-Spain Country Office, and Bogota Country Office; the Government of the Republic of Panama; and the U.S. Department of Justice’s Office of International Affairs and its National Security Division.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael D. Lockard, Adam Fee, Michael Ferrara, and Edward Y. Kim are in charge of the prosecution.
U.S. v. Dino Bouterse S2 Indictment
Manhattan U.S. Attorney Announces Agreement by Former New York City Council Member to Forfeiture of Pension Benefits and Motion Seeking Forfeiture of Former New York State Assemblyman’S Pension ContributionsRead the Press Release
Filing Seeks Order Forfeiting Pension Contributions Made by Former New York State Assemblyman Eric Stevenson, Convicted of Corruption Offenses
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the agreement of MIGUEL MARTINEZ, a former New York City Council member convicted of corruption offenses, to forfeit pension benefits to satisfy the forfeiture order against him, and the filing of an application for an order forfeiting pension contributions made by ERIC STEVENSON, a former New York State assemblyman convicted of corruption offenses.
Manhattan U.S. Attorney Preet Bharara said: “Today’s actions represent a substantial step towards preventing corrupt elected officials from benefiting from pensions paid for by the people they betrayed in office. As I announced last year, this Office is committed to using every available legal means to prevent taxpayers’ money from being used to pay for the comfortable retirement of officials who betray those taxpayers while in office.”
As alleged in the applications seeking forfeiture, the agreement to forfeit MARTINEZ’s pension benefits, and other court documents:
Former New York City Council member MIGUEL MARTINEZ was convicted of corruption offenses on July 16, 2009. On December 15, 2009, MARTINEZ was sentenced to five years in prison and ordered to forfeit $106,000. MARTINEZ is currently a vested member of the New York City Employee Retirement System and will be eligible to receive benefits when he reaches the age of 57. On December 17, 2013, the Office filed an application for an order forfeiting MARTINEZ’s right to pension benefits until his forfeiture judgment is fully paid. In an agreement submitted to Judge Paul A. Crotty today, MARTINEZ agreed to forfeit his right to pension benefits until his forfeiture judgment is fully paid. In satisfying this forfeiture judgment, MARTINEZ will receive credit for payments he makes towards restitution. This agreement is subject to approval by the Court.
Former New York State Assemblyman ERIC STEVENSON was convicted of corruption offenses in January 2014 after a six-day trial. On May 21, 2014, STEVENSON was sentenced and ordered to forfeit $22,000. This forfeiture judgment remains unpaid. STEVENSON is not a vested member in the New York State & Local Employee Retirement System but is entitled to a refund of the contributions he made into the system. Today, the Office filed an application to Chief Judge Loretta A. Preska seeking to forfeit these pension contributions.
Additionally, on December 17, 2013, the Office sought the forfeiture of pension benefits by Larry Seabrook, a former New York City Council member who was convicted of corruption offenses, and filed discovery requests seeking to locate benefits paid to convicted former New York City Council member Hiram Monserrate and convicted former Yonkers City Council member Sandy Annabi to satisfy the outstanding forfeiture judgments against them. These matters remain pending.
The prosecutions of these officials were handled by the Office’s Public Corruption Unit and its White Plains Division. The forfeiture of the defendants’ pensions is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant United States Attorney Paul Monteleoni is in charge of the forfeitures.
U.S. v. Miguel Martinez - Govt's Letter to Judge Crotty, Forfeiture Stipulation
U.S. v. Eric Stevenson - Govt's Motion for Forfeiture of Substitute AssetsBronx Man Pleads Guilty in Manhattan Federal Court to Managing A Large-Scale Counterfeit Credit Card SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LUIS GUSTAVO TAVAREZ pled guilty in Manhattan federal court to managing a large-scale counterfeit credit card scheme involving nearly 200 stolen credit card numbers and over $600,000 dollars in losses to victims. TAVAREZ was charged in May 2014, and pled guilty today before U.S. District Judge Richard J. Sullivan.
Manhattan U.S. Attorney Preet Bharara said: “Luis Tavarez bought stolen credit card information from cybercriminals, and spent the next year lining his pockets with other people’s money. Today’s guilty plea ensures that he will spend time paying for that decision.”
According to the allegations in the Criminal Complaint and Information, and statements made at related court proceedings:
From April 2013 through April 2014, TAVAREZ and his co-conspirators obtained stolen credit card information from computer hackers and “carding” websites, which are Internet-based forums in which users sell and exchange stolen credit card numbers. TAVAREZ encoded that stolen account information onto counterfeit credit cards, which he and a team of accomplices used to make hundreds of unauthorized purchases of store gift cards and merchandise at national retail chains in New York, New Jersey, Pennsylvania, Connecticut, Rhode Island, and Massachusetts. The gift cards and retail items were then sold to others or returned to the stores for a cash refund.
As part of the scheme, the defendants and their co-conspirators obtained stolen account information for almost 200 credit card accounts and used that stolen information to make more than $600,000 in unauthorized purchases.
TAVAREZ, 34, of Bronx, New York, pled guilty to one count of conspiracy to commit access device fraud, which carries a maximum sentence of seven and a half years in prison. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the judge.
TAVAREZ is scheduled to be sentenced on December 17, 2014 before Judge Sullivan.
Four other defendants were charged alongside TAVAREZ in connection with the scheme. Two of the defendants, Anthony Reynoso and Plinio Pineda Lopez, previously pled guilty to participating in the fraud. The charges against the remaining defendants, Vicente D. Espinal and Warner Alvarez Almanzar, are merely allegations, and they are presumed innocent unless and until proven guilty.
Mr. Bharara praised the outstanding investigative work of the U.S. Secret Service. He also thanked Immigration and Customs Enforcement’s Homeland Security Investigations for their assistance with this case.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Alexander Wilson is in charge of the prosecution.
U.S. v. Luis Tavarez Information
Lawsuit Filed in Manhattan Federal Court Seeks Forfeiture of Seven Dutchess County Properties Allegedly Purchased Using Proceeds of Long-Running Human Smuggling OperationRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the filing in Manhattan federal court of a civil forfeiture action targeting seven properties alleged purchased in Dutchess County, New York, by Greek national NIKOLAOS PANAGIOTOPOULOS using the proceeds of a long-running human smuggling operation.
Manhattan U.S. Attorney Preet Bharara said: “With today’s civil complaint seeking forfeiture of seven Dutchess County properties allegedly purchased with the proceeds of a sprawling, lengthy human smuggling operation, we continue our work to take the profit out of crime whenever it touches the Southern District of New York. I would like to thank ICE HSI for helping our office to carry out that objective on this case.”
ICE HSI Special-Agent-in-Charge James T. Hayes, Jr., said: “These seizures are an important step in our efforts to dismantle the alleged worldwide human smuggling operation run by Panagiotopoulos. Criminal organizations should be on notice that the United States will not allow proceeds of criminal activity from anywhere in the world to be laundered in our country. HSI New York partners with HSI Attaché offices in Athens and around the world to work closely with U.S. Attorney’s offices to strip criminal organizations of their illicitly obtained assets.”
According to the allegations contained in the Complaint filed today in Manhattan federal court:
Since 2013, ICE HSI, in coordination with Greek law enforcement authorities, investigated the human smuggling and visa fraud activities of Greek national NIKOLAOS PANAGIOTOPOULOS. PANAGIOTOPOULOS is believed to have participated in human smuggling, passport fraud, and visa fraud since at least 2003. As part of this scheme, PANAGIOTOPOULOS facilitated the smuggling of foreign nationals, principally Albanian citizens, into the United States, Australia, the United Kingdom, and Canada, in exchange for payments of thousands of dollars per smuggled person. He received payment for his illegal services principally in cash or money orders that he would then launder through bank accounts in the United States and, ultimately through the purchase of real estate, including real estate in Dutchess County, New York.
PANAGIOTOPOULOS has recently been arrested and charged by Greek authorities with crimes relating to false applications for passports, and is currently awaiting trial in Athens.
The Complaint includes claims for the forfeiture of seven properties located in the Town of Wappinger, New York, each of which is alleged to have been purchased with PANAGIOTOPOULOS’s fraud proceeds. The Complaint further seeks civil money laundering penalties in the amount of at least $373,297.93.
Mr. Bharara thanked ICE HSI for their work on the investigation.
This civil forfeiture and money laundering case is being overseen by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorney Andrew C. Adams is in charge of the suit.
Former Studio Assistant to Jasper Johns Pleads Guilty in Manhattan Federal Court to Engaging in $6.5 Million Scheme to Sell Stolen Johns WorksRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JAMES MEYER, a former assistant to artist Jasper Johns, pled guilty in Manhattan federal court in connection with his sale of 22 works that he stole from Johns’ studio in Sharon, Connecticut. MEYER pled guilty today before U.S. District Judge J. Paul Oetken.
Manhattan U.S. Attorney Preet Bharara said: “James Meyer made millions by stealing and selling the valuable artworks that he was entrusted with maintaining. With his guilty plea today, Meyer will now have to pay for that decision.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at today’s guilty plea:
MEYER was a studio assistant for Johns for over 25 years, and was responsible for, among other things, maintaining a studio file drawer containing pieces of art that were not yet completed by Johns and not authorized by Johns to be placed in the art market.
Between September 2006 and February 2012, MEYER removed 22 individual pieces of art from the studio file drawer he was responsible for maintaining, and from elsewhere in Johns’ studio, and transported those pieces from the studio in Sharon to an art gallery located in Manhattan for the purpose of selling those works without Johns’ knowledge or permission. MEYER represented both to the owner of the gallery (the “Gallery Owner”) and to potential purchasers that these pieces had been given to him as gifts by Johns when, in fact, that was not true.
As part of his scheme, MEYER provided sworn, notarized certifications both to the Gallery Owner and to buyers stating that each piece was an authentic Johns work, that the art had been given to him directly by Johns, that he was the rightful owner of the piece, and that he had the right to sell that particular work. In addition, MEYER conditioned the sale of each of these works on the signed agreement by the purchaser that the art would be kept private for at least eight years, during which time the piece would not be loaned, exhibited, or re-sold.
MEYER also created fictitious inventory numbers for these pieces to give the impression that they were finished works that were authorized by Johns to be sold in the art market. Additionally, to facilitate certain sales MEYER created fake pages that he thereafter inserted into a ledger book of registered pieces of art maintained at Johns’ studio, and which he subsequently photographed, to give additional assurances to prospective buyers about the provenance, or history of ownership, of a particular piece.
During the course of the almost six-year scheme, the Gallery Owner sold 22 works of art on MEYER’s behalf for a total of approximately $6.5 million, of which $3.99 million was remitted directly to MEYER.
MEYER, 52, of Salisbury, Connecticut, pled guilty to one count of interstate transportation of stolen property, which carries a maximum sentence of 10 years in prison. Sentencing is scheduled for December 10, 2014, before Judge Oetken.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the FBI.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Christopher D. Frey is in charge of the prosecution.
U.S. v. James Meyer Indictment
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Insider Trading Charges Against Director of Market Intelligence at Investor Relations FirmRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that MICHAEL A. LUCARELLI, the Director of Market Intelligence at Lippert/Heilshorn & Associates, Inc. (“LHA”), an investor relations firm, was arrested this morning on 13 counts of insider trading. LUCARELLI is expected to be presented today in Manhattan federal court before United States Magistrate Judge James L. Cott.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, and despite the well-known parade of convicted insider trading perpetrators over the past several years, Michael Lucarelli was not deterred and violated both his company’s policies and his responsibility to its clients by trading on material nonpublic information for his personal financial gain. For the over $500,000 he earned from his illicit trades he is charged with 13 counts of securities fraud.”
FBI Assistant Director-in-Charge George Venizelos said: “Instead of doing his job, Lucarelli spent his days setting up brokerage accounts to make illegal trades using inside information from unwitting clients. He violated the responsibility he had to both company and clients. He also broke the law and today finds himself under arrest and charged in a thirteen count complaint.”
According to the Complaint unsealed in Manhattan federal court:
From at least August 2013 through at least August 2014, LUCARELLI engaged in an insider trading scheme to use and trade upon material non-public information that he acquired during his employment at LHA, an investor relations firm based in Manhattan. Specifically, LUCARELLI, as an LHA employee, had access to working drafts of press releases prepared by LHA for its clients prior to their issuance to the investing public. Those draft press releases contained material, non-public information about business events and announcements relating to LHA’s clients.
In violation of LHA’s policies and in breach of his duties to LHA and its clients, on multiple occasions, LUCARELLI took positions in the stock of LHA clients shortly before the announcement by these companies of material information through press releases prepared by LHA. Shortly following the issuance of the press releases drafted by LHA, LUCARELLI exited the positions in these securities that he had acquired prior to the issuance, thereby profiting on the movement in the stock price.
LUCARELLI repeatedly traded in LHA client securities despite LHA’s written code of conduct, which strictly prohibited LHA employees from trading in any security issued by an LHA client. LUCARELLI carried out his scheme in at least four different brokerage accounts. When opening new brokerage accounts through which to conduct his illegal trades, LUCARELLI did not reveal his affiliation with LHA. And, on two occasions, LUCARELLI opened new brokerage accounts soon after his ability to trade in other accounts had been suspended by the respective brokerage firms.
On or about July 24, 2014, the FBI obtained a search warrant to search LUCARELLI’s office at LHA for evidence of his insider trading activities. During that search, which was conducted without LUCARELLI’s knowledge, the FBI located a locked briefcase which, when opened, contained a draft press release for LHA client, TREX Company (“TREX”). That press release was marked “DRAFT” and contained TREX’s second fiscal quarter 2014 financial results. The following day, after the FBI completed the search, LUCARELLI started purchasing shares of TREX. Between July 25, 2014 and August 1, 2014, LUCARELLI took a net position of 37,400 shares of TREX. Then, on August 4, 2014, shortly before the market opened, TREX issued a press release announcing its second fiscal quarter 2014 financial results. Among other things, TREX announced that sales and earnings before taxes had increased 23 percent and 62 percent, respectively, in comparison with the comparable period in 2013. TREX also issued revenue guidance for the third fiscal quarter of 2014, which was a 27 percent increase over the comparable period in 2013. Within two hours of the announcement, LUCARELLI sold 35,058 of the 37,400 TREX shares he previously purchased. Those sales yielded a profit of almost $90,000.
As a result of the 13 instances of insider trading alleged in the Complaint, LUCARELLI earned at least $538,215.32 in illicit proceeds. Furthermore, the FBI has discovered numerous additional trades that LUCARELLI conducted in LHA client securities and that exhibit a similar pattern of fraud. The FBI’s investigation is ongoing.
LUCARELLI is charged with 13 counts of securities fraud. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Bharara praised the investigative work of the FBI and thanked the SEC, which has filed civil charges in a separate action.
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’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brian Blais and Damian Williams are in charge of the prosecution. Assistant U.S. Attorney Carolina Fornos of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture of assets.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Michael Lucarelli Complaint
Three Individuals Found Guilty in Manhattan Federal Court of the 2010 Murder of Jeffrey Henry in Newburgh, New YorkRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that RAYMOND CHRISTIAN, GLENN THOMAS, and TYRELL WHITAKER were found guilty last Friday in Manhattan federal court of the December 15, 2010, murder of Jeffrey Henry. Jeffrey Henry was killed when the defendants attempted an armed robbery of individuals selling crack cocaine from an apartment located at 54 Chambers Street, Newburgh, New York. CHRISTIAN, THOMAS, and WHITAKER were convicted after a three-week jury trial before U.S. District Judge Edgardo Ramos.
Manhattan U.S. Attorney Preet Bharara stated: “This case is the embodiment of how drug trafficking begets violence, and why we and our law enforcement partners are determined to stop both. In the mayhem of a shootout that came out of the deadly mix of drugs, guns and men bent on robbery, the defendants committed a cold-blooded murder for drugs and cash. Now they will pay the price for their crime.”
According to the Indictment filed in federal court and the evidence presented at trial:
On December 15, 2010, CHRISTIAN, WHITAKER, and THOMAS, along with at least five other individuals, participated in the gunpoint robbery of a house at 54 Chambers Street in Newburgh, New York. The house was well-known throughout Newburgh for its prolific crack cocaine trafficking. During the robbery, CHRISTIAN lost his firearm to one of the victims, which resulted in a shoot-out between robbers and victims. As the robbers attempted to flee the house, they encountered Jeffrey Henry, who had just arrived. Henry attempted to pull the door shut, to lock the robbers in the house, while calling 911. The robbers, including WHITAKER and THOMAS, were ultimately able to pry the door open and, through the opening, shoot Henry. Henry was shot twice, and died shortly thereafter.
All three of the defendants, CHRISTIAN, 21, THOMAS, 25, and WHITAKER, 20, are from Newburgh, New York. They were each found guilty of one count of robbery, one count of use of a firearm during the robbery, and one count of murder through the use of a firearm during the robbery. In addition, CHRISTIAN and THOMAS were also found guilty of one count of conspiracy to commit robbery. CHRISTIAN and THOMAS were found not guilty of one count of conspiring to distribute narcotics. The defendants each face a maximum sentence of life in prison, and a mandatory minimum sentence of 10 years of in prison. The potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation, the New York State Police, the Newburgh Police Department, the Orange County District Attorney’s Office, and the Orange County Sheriff’s Office.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Andrew Bauer and Kan M. Nawaday are in charge of the prosecution.
U.S. v. Raymond Christian, et al. Indictment
New York City Police Department Officer Pleads Guilty in Manhattan Federal Court to Fraud and Identity Theft ChargesRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, announced today that JOHN L. MONTANEZ, a police officer with the New York City Police Department (“NYPD”), pleaded guilty in Manhattan federal court to credit card fraud and identity theft offenses. MONTANEZ, who was arrested late May 2014, entered his plea today before U.S. District Judge Katherine Polk Failla.
Manhattan U.S. Attorney Preet Bharara said: “John Montanez summed it up well when he told a cooperating witness ‘I am not the cop you think I am.’ In fact, he’s a criminal who dishonored himself, the NYPD and the public he serves, and by doing so, made every other honest police officer’s job that much harder. I want to thank the Bronx District Attorney’s Office, the Federal Bureau of Investigation, and the NYPD Internal Affairs Bureau for working with my office to investigate, and snuff out, this conduct.”
According to the Complaint, Information, and today’s plea proceeding:
In 2011, an individual, who subsequently agreed to cooperate with law enforcement, and who is referred to in the case as the “CW,” informed MONTANEZ that the CW had a suspended and/or revoked driver’s license. In response, MONTANEZ offered to provide the CW with the name and driver’s license number of a real person – so that if the CW were stopped by law enforcement, the CW could pretend to be someone else – in return for items that the CW would purchase for MONTANEZ with fraudulently obtained or stolen credit cards. After that, in return for the CW purchasing merchandise for MONTANEZ, and providing to MONTANEZ credit card/debit card numbers that MONTANEZ understood were stolen or fraudulently obtained, MONTANEZ provided to the CW multiple names, dates of birth, and driver’s license identification numbers of other people. One such person, referred to in the Complaint as “Victim-1,” was a fellow police officer with the NYPD, serving in the same precinct as MONTANEZ.
The CW was arrested in June 2013 and later began recording meetings with MONTANEZ in connection with the CW’s cooperation with law enforcement. During these meetings, MONTANEZ offered to provide additional identities to the CW in return for merchandise purchased with credit/debit cards that MONTANEZ believed the CW had stolen or fraudulently obtained. In one recorded meeting, MONTANEZ observed to the CW: “I am not the cop you think I am. I am a piece of s***.”
MONTANEZ, 28, of the Bronx, New York, pleaded guilty to one count of access device fraud and one count of aggravated identity theft. He faces a maximum sentence of 17 years in prison, with a mandatory minimum term of two years. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
MONTANEZ is scheduled to be sentenced by Judge Failla on January 14, 2015.
Mr. Bharara thanked the Bronx County District Attorney’s Office, who worked with the CW to develop evidence implicating MONTANEZ and assisted in the prosecution. Mr. Bharara also praised the investigative work of the Federal Bureau of Investigation and the NYPD Internal Affairs Bureau.
The case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorney Daniel C. Richenthal is in charge of the prosecution.
U.S. John Montanez Information
Statement on the Manhattan U.S. Attorney’s Office Review of the Shooting of 18-Year-Old Ramarley GrahamRead the Press Release
“Last fall, this Office began an independent review of the evidence regarding the death of Ramarley Graham after the local authorities completed their investigation and ultimately were not able to bring any charges arising out of the shooting. Today we received a letter from the mother of Ramarley Graham and other materials, which we are reviewing. This Office is acutely aware of how painful it is to lose a child in an encounter with law enforcement under any circumstances. In addition to reviewing evidence obtained from local authorities, this Office has been conducting its own independent investigation of this tragic incident. There are many reasons that a federal civil rights investigation should be conducted confidentially, including grand jury secrecy rules, as well as prudential and other reasons, including fairness to all the parties involved. Above all, a proper investigation must be thorough, fair and independent so that in the end justice is done, and we are absolutely committed to that. Finally, it should be understood that this Office has repeatedly been in communication with the attorneys for the mother of Mr. Graham and we will continue to do so,” said James Margolin, a spokesman for the U.S. Attorney's Office for the Southern District of New York.
Manhattan U.S. Attorney Charges 19 Members of Bronx Gang and Their Narcotics Supplier with Narcotics Trafficking and the Gang’S Former Leader with A Firearms OffenseRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and William J. Bratton, the Commissioner of the New York City Police Department (“NYPD”), announced charges against 19 members of a criminal organization known as the “River Park Towers Young Gunnerz” (“RPT YGz”), which operates out of the River Park Towers housing complex, located on Richman Plaza in the vicinity of Sedgwick Avenue in the Bronx, New York. The RPT YGz members, along with their primary narcotics supplier, are all charged with narcotics trafficking. The gang’s former leader, TYRONE FELDER, is also charged with a firearms offense. These charges follow those announced on August 15 and 16, 2014, against RPT YGz members TYRONE FELDER, JAMAL WALKER, and TOMMY SMALLS, for the carjacking and murder of a livery cab driver in the Bronx.
13 of the defendants, including the three who are currently in federal custody on the murder-related charges, will be presented in Manhattan federal court this afternoon. Two of the defendants are currently in state custody on unrelated state charges and will be presented upon their arrival to the Southern District of New York. Five defendants are still at large.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants were associated with a violent gang that claimed an entire housing complex as its territory and held residents captive to their drug dealing and violent acts. Thanks to the outstanding work of the NYPD, the residents of River Park Towers are safer today, and these 20 suspected gang members and drug dealers are being brought to justice.”
NYPD Commissioner William J. Bratton said: “These individuals conducted their illegal operation inside of the River Park Towers development, causing alarm to the law abiding residents that live in the area. Thanks to the investigators and prosecutors who built and investigated this case, the message is clear, the NYPD will continue to target gangs who threaten the safety and well-being of all New Yorkers.”
According to the Indictment unsealed today in Manhattan federal court:
From at least 2010 through August 2014, River Park Towers has been plagued by drug dealing and violence, driven in large part by the activities of the RPT YGz. During that time period, the RPT YGz gang has distributed crack cocaine and marijuana, among other drugs, in and around the RPT complex. RPT YGz members have also engaged in robberies and various other acts of violence to protect their territory, assert their identity, and further their illegal activities, including threatening, intimidating and assaulting the security guards who are assigned to protect the River Park Towers complex and who have tried to prevent the RPT YGz members from selling drugs in the area.
TYRONE FELDER was the leader of RPT YGz until his arrest on August 15, 2014. Members of RPT YGz would pay money to FELDER in exchange for permission to sell drugs in and around the River Park Towers complex. FREDERICK ALLEN was recently designated the new leader of the RPT YGz by TYRONE FELDER following FELDER’s arrest.
NICOMEDES FRASQUERI serves as the primary supplier of narcotics for the RPT YGz, operating out of his own apartment within the River Park Towers complex. FRASQUERI has sold quantities of crack cocaine to members of the RPT YGz, among others, for distribution to customers.
TYRONE FELDER, JAMAL WALKER, NICOMEDES FRASQUERI, FREDERICK ALLEN, ANGEL AMERZQUITO, KEVIN ANTHONY, KELVIN DOUGLAS, DERRICK FELDER, ANTHONY GIVENS, KERI GIVENS, BRIAN HALL, ELIJAH HUBBARD, TERRELL JOHNSON, TYRONE MARGWOOD, SHANEQUA MASCALL, LAMONT OBEY, TOMMY SMALLS, GEORGE STONE, JEROME THOMAS, and JOHNA THOMAS are all charged with conspiring to distribute and to possess with intent to distribute crack cocaine and marijuana, a charge that carries a mandatory minimum sentence of 10 years in prison and a maximum penalty of life in prison. In addition, TYRONE FELDER is charged with one count of brandishing a firearm in relation to a narcotics and racketeering conspiracy, which carries a mandatory minimum sentence of seven years in prison, which must run consecutive to any other sentence, and a maximum penalty of life in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
A chart containing the names, ages, and residences for the defendants is attached to this release.
The case is assigned to U.S. District Judge Colleen McMahon.
Mr. Bharara praised the outstanding investigative work of the NYPD Bronx Narcotics Division – Major Case Unit. He added that the investigation is continuing.
The Office’s Narcotics Unit is overseeing the case. Assistant U.S. Attorneys Amy Garzon, Andrew DeFilippis, and Patrick Egan are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Tyrone Felder et al.
Florida Man Pleads Guilty in Manhattan Federal Court to Hiding over $1 Million in Secret Bank Accounts in Switzerland and IsraelRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, the Acting Special Agent-in-Charge of the New York Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that BERNARD KRAMER pled guilty to conspiring to conceal from the IRS over one million dollars he had hidden in Swiss and Israeli bank accounts, and willfully failing to disclose those accounts on his U.S. tax returns. KRAMER, who is cooperating with the Government, entered his guilty plea today before U.S. District Judge Alvin K. Hellerstein.
According to the criminal Information filed today in Manhattan federal court:
Between approximately 1987 and 2010, KRAMER maintained an undeclared bank account at a Swiss private bank headquartered in Zurich, Switzerland (the “Swiss Bank”). With the assistance of others at the Swiss Bank, KRAMER took steps to conceal the existence of, and his interest in, the undeclared account. KRAMER and certain individuals at the Swiss Bank used the coded phrase “Hot Lips” to refer to KRAMER’s undeclared account at the Swiss Bank. Periodically, KRAMER met with a representative of the Swiss Bank (“Swiss Bank Representative-1”) in the United States to discuss KRAMER’s undeclared account at the Swiss Bank and to review statements related to the account. With the assistance of the Swiss Bank, KRAMER repatriated funds to the United States from his undeclared account in a manner designed to ensure that U.S. authorities did not discover the account, including by requesting and receiving checks from the account in amounts just under $10,000 each.
In approximately 2008, it became publicly known that the Swiss bank UBS AG (“UBS”) was being investigated by United States authorities for helping U.S. taxpayers maintain undeclared accounts. Around that time, KRAMER chose to maintain his undeclared account at the Swiss Bank after being assured by Swiss Bank Representative-1 that KRAMER’s undeclared account would remain safe at the Swiss Bank despite the UBS investigation. In approximately March of 2010, however, with the assistance of Swiss Bank Representative-1 and others at the Swiss Bank and an Israeli bank headquartered in Ramat Gan, Israel (the “Israeli Bank”), KRAMER transferred the remaining assets in his undeclared account at the Swiss Bank to a new undeclared account at the Israeli Bank. KRAMER maintained the new undeclared account at the Israeli Bank from 2010 to 2012.
From approximately 1987 through 2012, KRAMER filed false tax returns with the IRS that failed to report his interest in his undeclared accounts at the Swiss Bank and the Israeli Bank, and the income generated in these undeclared accounts, which had a high value of at least $1.1 million.
KRAMER, 83, of Del Ray Beach, Florida, faces a maximum sentence of eight years in prison. As part of his plea, KRAMER has agreed to cooperate with the Government and to pay a civil penalty of $588,042, along with back taxes. He is scheduled to be sentenced by U.S. District Judge Alvin K. Hellerstein on February 6, 2015.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation, which he noted is ongoing. Mr. Bharara also thanked U.S. Department of Justice’s Tax Division for their assistance in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. Paul and Jason H. Cowley are in charge of the prosecution.
U.S. v. Bernard Kramer Information
Three Men Charged in White Plains Federal Court with Carjacking Resulting in DeathRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), William J. Bratton, the Commissioner of the Police Department for the City of New York (“NYPD”), and Charles Gardner, Commissioner of the Yonkers Police Department (“Yonkers PD”) announced that TAKIEM EWING, a/k/a “Mulla,” TYRONE FELDER, a/k/a “Man Man,” and KAREEM MARTIN, a/k/a “Jamal Walker,” were arrested and charged with carjacking in connection with the August 12, 2014, murder of a livery cab driver in the Bronx, New York. All three men were presented this afternoon in White Plains federal court before United States Magistrate Judge Lisa Margaret Smith and were ordered detained.
U.S. Attorney Preet Bharara stated: “As alleged in the complaint, this was a senseless and heinous murder that took the life of a man who was working as a livery cab driver in the Bronx. The arrests today are a testament to the perseverance and cooperation of the FBI and our local partners, the NYPD and the Yonkers Police Department.”
FBI Assistant Director-in-Charge George Venizelos stated: “As alleged, the defendants were as reckless as they were ruthless, indiscriminately assassinating an innocent livery driver trying to earn a living. This alleged conduct is beyond deplorable. Agents, detectives, and prosecutors worked around-the-clock to make these arrests and to stop this scourge on our community. I commend them for their relentless drive in pursuit of justice.”
NYPD Commissioner William J. Bratton stated: “The victim in this case was a hard-working livery driver who provided an essential service to New Yorkers. His death was senseless and motivated by greed. Thanks to the detectives, agents, and prosecutors pursuing this case, the suspects will now be held accountable for this heinous crime.”
Yonkers PD Commissioner Charles Gardner stated: “This investigation is a prime example of inter-agency cooperation and how it can be used to take violent suspects off of our streets. I would like to thank all the investigators and prosecutors from the FBI, U.S. Attorney’s Office, NYPD and Yonkers PD for their professionalism, which ultimately led to these important arrests.”
According to the Complaint, the FBI, the NYPD, and the Yonkers PD were investigating two commercial robberies, two carjackings, and two murders that took place on August 5, 2014, and August 12, 2014, respectively. The first murder took place in the early morning hours of August 5, 2014, when the body of a livery cab driver (the “Hunter Avenue Homicide Victim”) was found shot in the vicinity of Hunter Avenue in the Bronx, New York.
Later that day, the Yonkers PD received a report that a minimart located on McLean Avenue in Yonkers had been robbed at gunpoint. The robbers took cash, bleach, and a cellular telephone. Video footage from outside the minimart revealed that the robbers arrived in a black sedan the looked like the sedan belonging to the Hunter Avenue Homicide Victim. Also on August 5, 2014, at approximately 5:27 a.m., the Yonkers PD received a report that a Dunkin’ Donuts franchise at Central Park Avenue in Yonkers had been robbed at gunpoint.
According to the Complaint, later on the night of August 5, 2014, the black sedan belonging to the Hunter Avenue Homicide Victim was found abandoned near Exterior Street in the Bronx. The vehicle was doused in bleach. Inside was the cellular telephone that was stolen from the Yonkers minimart.
According to the Complaint, on or about August 12, 2014, at approximately 6:00 a.m., the body of a livery cab driver (the “Bryant Avenue Homicide Victim”) was found shot in the head in the street on Bryant Avenue in the Bronx, New York. He was later pronounced dead.
On or about August 12, 2014, at approximately 8:10 a.m., the livery cab belonging to the Bryant Avenue Homicide Victim (the “Victim’s Cab”) was found abandoned on Underhill Avenue in the Bronx, New York.
According to the Complaint, a ballistics examination has shown that different guns were used to murder the Hunter Avenue Homicide Victim and the Bryant Avenue Homicide Victim. Ballistics evidence shows, however, that both of those guns were used in a single shooting on May 29, 2014, on the corner of Ogden Avenue and West 162nd Street in the Bronx, New York.
According to the Complaint, video footage (“Video-1”) from inside and outside an apartment building on Third Avenue between 167th and 168th Streets in the Bronx, New York (the “Third Avenue Building”), on August 12, 2014, from approximately 5:00 a.m. to 5:01 a.m., shows two men (“Suspect-1” and “Suspect-2”) getting into an elevator on the ninth floor of the Third Avenue Building, taking the elevator downstairs, leaving the building, and turning left onto Third Avenue. Suspect-1 is wearing a dark Adidas sweatshirt and is wearing a knapsack. Suspect-2 is wearing a dark Brooklyn Nets sweatshirt. Additional video footage (“Video-2”) from Third Avenue between 166th and 167th Streets in the Bronx, New York, on August 12, 2014, from approximately 5:34 a.m. to 5:36 a.m., shows four individuals approaching a car from different directions and getting in a car. Two of the individuals are wearing clothing that is consistent with the description of Suspect-1 and Suspect-2.
According to the Complaint, an NYPD detective (“Detective-1”) spoke with a witness (“Witness-1”) who is a livery cab driver who knows the Bryant Avenue Victim. On the morning of August 12, 2014, Witness-1 had been at a mosque on Third Avenue between 166th and 167th Streets (the “Mosque”). At approximately 5:15 a.m., Witness-1 left the Mosque and got into his livery cab. Before Witness-1 left the Mosque, Witness-1 saw the Bryant Avenue Victim at the Mosque. Witness-1 also saw the Victim’s Cab parked on Third Avenue near the Mosque. At approximately 5:20 a.m., an individual wearing a knapsack approached Witness-1’s car and asked for a ride. Witness-1 saw two other individuals nearby, felt uncomfortable, and left.
According to the Complaint, an NYPD detective (“Detective-2”) spoke with a witness (“Witness-2”), who is a livery cab driver who knows the Bryant Avenue Victim. On the morning of August 12, 2014, Witness-2 had been at the Mosque. Sometime after 5:00 a.m., Witness-2 left the Mosque. Before Witness-2 left the Mosque, Witness-2 saw the Bryant Avenue Victim at the Mosque. Witness-2 got into Witness-2’s car, and observed four individuals separated from one another. At approximately 5:25 a.m., one of those individuals asked Witness-2 for a ride, and informed Witness-2 that it was a ride for four people. Witness-2 declined and drove away.
Additional video footage (“Video-3”) from Bryant Avenue in the Bronx, New York, on August 12, 2014, at approximately 6:00 a.m., shows the Victim’s Cab rolling down Bryant Avenue and making contact with at least one parked car. Video-3 shows Suspect-1, Suspect-2, and two other individuals (“Suspect-3” and “Suspect-4”) (collectively, the “Suspects”) running after the Victim’s Cab. They got into the Victim’s Cab, dumped a body onto Bryant Avenue, and drove away in the Victim’s Cab.
Additional video footage (“Video-4”) from the vicinity of Underhill Avenue between Lafayette and Story Avenues, and Bolton Avenue between Lafayette and Story Avenues, in the Bronx, New York, on August 12, 2014, from approximately 6:03 a.m. to 6:05 a.m., shows that the Victim’s Cab pulled up, and the Suspects got out of the Victim’s Cab. The Suspects wiped the outside of the Victim’s Cab, and then ran across a walkway to Bolton Avenue between Lafayette and Story Avenues. They took off their sweatshirts and left their sweatshirts and Suspect-1’s knapsack in a dumpster. The Suspects then walked toward Lafayette Avenue.
Additional video footage (“Video-5”) from Lafayette Avenue in the Bronx, New York, on August 12, 2014, from approximately 6:08 a.m. to 6:09 a.m., shows Suspect-1 and Suspect-3 getting into a car. Suspect-2 and Suspect-4 walked toward Seward Avenue.
According to the Complaint, an NYPD detective (“Detective-3”) spoke with a livery cab driver (“Driver-1”). Driver-1 informed Detective-3, in substance and in part, that at approximately 6:10 a.m. on August 12, 2014, Driver-1 picked up two individuals from the vicinity of the intersection of White Plains Road and Seward Avenue in the Bronx, New York. Driver-1 drove the two individuals in his livery cab (“Cab-1”) to the vicinity of the Third Avenue Building. Driver-1 saw those individuals walking toward the Third Avenue Building.
Additional video footage (“Video-6”) from inside and outside the Third Avenue Building on August 12, 2014, from approximately 6:17 a.m. to 6:21 a.m., shows that Suspect-1 and Suspect-3 got out of a car, entered the Third Avenue Building, and went up in the elevator to the ninth floor. Approximately two minutes later, Suspect-2 and Suspect-4 got out of a car, entered the Third Avenue Building, and went up in the elevator to the ninth floor. Detective-3 has reviewed portions of Video-6. Detective-3 has seen Cab-1. He informed me that, on Video 6, Suspect-2 and Suspect-4 got out of a car that appears to be Cab-1.
The Complaint alleges that a cooperating witness (“CW-1”) was shown portions of Video-1. CW-1 said that Suspect-1 looked like “Mulla,” and identified Suspect-2 as “Kareem.” CW-1 was shown, among other things, portions of Video-6. CW-1 identified Suspect-1 as “Mulla.” CW-1 identified Suspect-2 as “Kareem.” CW-1 identified Suspect-3 as TYRONE FELDER, a/k/a “Man Man,” the defendant. CW-1 previously identified a picture of TAKIEM EWING as “Mulla.” CW-1 previously identified a picture of TYRONE FELDER as “Man Man.” CW-1 previously identified a picture of KAREEM MARTIN as “Kareem.”
The Complaint alleges that an NYPD sergeant (“Sergeant-1”) spoke with an individual in the management office for the Third Avenue Building, and learned that a certain individual (“Person-1”) leases an apartment with Person-1’s daughters on the ninth floor of the Third Avenue Building (the “Apartment”). Also according to the Complaint, the superintendent of the Third Avenue Building identified Suspect-1 as a person who lives in the Apartment with Suspect-1’s mother. Following his arrest in this case, TAKIEM EWING, a/k/a “Mulla,” the defendant, identified Person-1 as his mother.
Mr. Bharara praised the outstanding work of the FBI, the Yonkers Police Department, and the New York City Police Department.
The case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Michael Gerber and Scott Hartman are in charge of the prosecution.
The charges in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
TAKIEM EWING, a/k/a “Mulla,” 21, TYRONE FELDER, a/k/a “Man Man,” 25, and KAREEM MARTIN, a/k/a “Jamal Walker” 26, all of the Bronx, are each charged with one count of carjacking with intent to cause death and serious bodily harm in which a death resulted, which carries a maximum sentence of life in prison, or the death penalty. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
U.S. v. Takiem Ewing, Tyrone Felder, Kareem Martin complaint
Deputy to Liberty Reserve Founder Pleads Guilty to Money Laundering in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced that AZZEDDINE EL AMINE pled guilty today in Manhattan federal court to money laundering and operating an unlicensed money transmitting business for his role in running Liberty Reserve, a company that operated one of the world’s most widely used digital currency services and allegedly laundered more than $6 billion in suspected proceeds of crimes. EL AMINE was arrested in Madrid, Spain, in May 2013 and pled guilty today before U.S. District Judge Denise L. Cote.
According to allegations contained in the Indictment filed against Liberty Reserve, EL AMINE, and six other individual defendants, and statements made in related court proceedings:
Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes, and it emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.
Before being shut down by the Government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system and laundered more than $6 billion in suspected proceeds of crimes, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking. EL AMINE served as a principal deputy to Liberty Reserve founder Arthur Budovsky and operated a prominent Liberty Reserve “exchanger” service, from which he shared the profits with Budovsky.
EL AMINE, 47, of San José, Costa Rica, pled guilty to one count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison; one count of conspiring to operate an unlicensed money transmitting business, which carries a maximum sentence of five years in prison; and one count of operating an unlicensed money transmitting business, which carries a maximum sentence of five years in prison. A sentencing date has not yet been scheduled. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for their extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.
This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner and Andrew Goldstein of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
The charges contained in the Indictment against certain of EL AMINE’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.
HUD Section 8 Housing Manager Sentenced in Manhattan Federal Court to One Year and One Day in Prison in Connection with Bribery and False Statements ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that NOVELETTE “PAT” CAMPBELL, a former manager of the federally subsidized Tricham Houses in Manhattan, was sentenced today in Manhattan federal court to one year and one day in prison for accepting bribes in connection with federal program funds. CAMPBELL was convicted in April 2014 of six counts – one count of accepting bribes in connection with federal program funds, one count of conspiracy to accept bribes in connection with federal program funds, and four counts of making false statements to the U.S. Department of Housing and Urban Development (“HUD”). She was convicted after a one-week jury trial before U.S. District Judge George B. Daniels, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “For concocting and carrying out a scheme to trade spots on the waiting list for the Tricham Houses apartments in exchange for bribes of up to $9,000, Novelette ‘Pat’ Campbell has earned herself a spot in the housing of a federal prison. I would like to thank the investigators at the HUD-OIG and ICE-HSI for their hard work on this case.”
According to the Indictment, as well as evidence presented at CAMPBELL’s trial:
From April 2000 through October 2011, CAMPBELL accepted bribes and engaged in a conspiracy to accept bribes from individuals who were not on a waiting list for subsidized housing at the Tricham Houses. Rather than maintain the integrity of the waiting list and process applications on a first-come, first-serve basis as required by HUD, CAMPBELL sold spots on the waiting list for bribes. The people who paid bribes took apartments away from people who were on the waiting list for years. CAMPBELL accepted bribes ranging from $2,000 through $9,000, depending on the size of the apartment.
In addition, CAMPBELL falsified HUD certifications by falsely representing that all administrative procedures had been followed, when they had not, and, on two occasions, forged the signature of a tenant. CAMPBELL also altered original tenant applications for Section 8 housing to falsely add bribe payers as relatives of original applicants.
In addition to her prison term, CAMPBELL, 55, of the Bronx, New York, was sentenced to three years of supervised release, and was ordered to pay $35,500 in forfeiture and a $600 special assessment fee.
Mr. Bharara praised the investigative work of HUD Office of the Inspector General and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. He noted that the investigation is continuing.
This case is being handled by the Office’s General Crimes Section. Assistant U.S. Attorneys Carolina A. Fornos and Rahul Mukhi are in charge of the prosecution.
Connecticut Man Pleads Guilty in White Plains Federal Court to Seven Bank Robberies and A Convenience Store RobberyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigaion (“FBI”), and Joseph A. D’Amico, Superintendent of the New York State Police (“NYSP”), announced that ANDREW RENDFLASH, 36, pleaded guilty today to seven bank robberies and a commercial robbery. The robberies occurred in New York, Connecticut, Massachusetts, and Rhode Island between April 2013 and January 2014.
U.S. Attorney Preet Bharara stated: “Andrew Rendflash engaged in a robbery spree, across four states and over many months. Now, thanks to the collaborative efforts of the FBI and our state and local partners, he has pled guilty to his crimes. I want to especially thank the officers of the Ridgefield Police Department for their assistance in the investigation and prosecution of this case.”
FBI Assistant Director-in-Charge George Venizelos stated: “The defendant’s guilty plea is a result of a cooperative investigative effort by federal, state and local authorities. This case should remind other criminals that the FBI and its law enforcement partners will vigorously pursue you and prosecutors will ensure you face justice for your crimes. We will continue to combine the skills of multiple law enforcement agencies to keep our streets safe and hold accountable those who break the law.”
NYSP Superintendent Joseph A. D’Amico stated: "The conclusion of this case is a direct result of the dedication and effort put forth by State Police investigators in Putnam and Westchester counties, and our partner agencies. Once again, good police work put a suspect behind bars whose crimes hurt not only the businesses he targeted, but also innocent customers. I thank our law enforcement partners for their cooperation and hard work during this lengthy investigation that spanned multiple states."
RENDFLASH, who was previously arrested on Connecticut state charges and detained, was arraigned on an eight-count Information on August 11, 2014, before U.S. Magistrate Judge Lisa Margaret Smith, and pleaded guilty to all counts before Judge Smith today. The Information charges RENDFLASH with the robbery of a branch of First Niagara Bank in Ridgefield, Connecticut, on or about January 24, 2014; the robbery of a branch of Citizen’s Bank in Coventry, Rhode Island, on or about December 26, 2013; the robbery of a branch of People’s United Bank in Brewster, New York, on or about December 23, 2013; the robbery of a branch of People’s United Bank in Holyoke, Massachusetts, on or about December 16, 2013; the robbery of a branch of Chase Bank in Somers, New York, on or about November 19, 2013; the robbery of a branch of TD Bank in Waterbury, Connecticut, on or about November 9, 2013; the robbery of a branch of Naugatuck Savings Bank in Southbury, Connecticut, on or about April 3, 2013; and the robbery of a convenience store in Waterbury, Connecticut, on or about November 16, 2013.
The defendant faces a maximum possible sentence of 20 years in prison for each of the eight counts to which he pleaded guilty. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. RENDFLASH is scheduled to be sentenced by U.S. District Court Judge Nelson S. Román in White Plains federal court on November 14, 2014, at 10:30 a.m.
Mr. Bharara praised the outstanding investigative work of the FBI; the New York State Police; the Connecticut State Police; the Ridgefield, Connecticut, Police Department; the Waterbury, Connecticut, Police Department; the Holyoke, Massachusetts, Police Department; and the Coventry, Rhode Island, Police Department.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Michael Gerber is in charge of the prosecution.
Civil Rights Settlement in Manhattan Federal Court Creates More Accessible Housing Opportunities for New YorkersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the settlement by consent decree of a federal civil rights lawsuit in Manhattan federal court alleging that Tower 31, a residential apartment building at 9 West 31st Street in Manhattan, is inaccessible to persons with disabilities in violation of the Fair Housing Act (“FHA”). In the settlement, developers TOWER 31, LLC and ATLANTIC 31st, LLC, agree to retrofit Tower 31 to remove obstacles to accessibility, allow inspections of a second building to ensure FHA compliance, create a fund to compensate aggrieved people, and pay a civil penalty of $35,000. The consent decree was approved on August 11 by U.S. District Judge Allison J. Nathan. The United States also sued COSTAS KONDYLIS & PARTNERS, LLP and ALAN L. GOLDSTEIN, the architects that designed Tower 31, and that case is still pending.
Manhattan U.S. Attorney Preet Bharara said: “This settlement will not only make Tower 31 a more accessible housing option, but will also ensure that federal standards of accessibility are met in future buildings. We are pleased that Tower 31’s developers promptly recognized the need to provide accessible housing to all New Yorkers. This is the ninth case of this type brought in this district, and our Office will continue to vigorously enforce the laws in place to provide full access consistent with the law for New Yorkers with disabilities to New York City’s rental housing market.”
The United States’ suit alleges that Tower 31 was designed and constructed in violation of the design and construction provisions of the FHA, which requires that new multi-family housing complexes include certain features accessible to persons with disabilities. According to the Complaint, Tower 31, a 283-rental unit building located at 9 West 31st Street in Manhattan, has multiple inaccessible features, including high thresholds interfering with accessible routes, insufficient space within bathrooms and kitchens for people in wheelchairs, a lack of appropriate signage for people with visual impairments, and lobby features that cannot accommodate people using wheelchairs.
Inaccessible features at Tower 31 were first brought to the Government’s attention through testing performed by the Fair Housing Justice Center. The U.S. Attorney’s Office frequently relies on testers to determine whether property owners are engaging in discrimination on the basis of race, disability, or other protected characteristics, and frequently files lawsuits based on the results of such testing.
The claims against ALAN L. GOLDSTEIN and the architectural firm COSTAS KONDYLIS & PARTNERS, LLP were not resolved by the consent decree and will go forward. The Government seeks a court order enjoining the architects and their successors from designing multi-family housing without the accessibility features required by federal law. The Government also seeks, among other relief, damages for persons harmed by the architects’ unlawful practices, and a civil penalty to vindicate the public interest.
Aggrieved individuals may be entitled to monetary compensation from the fund created through today’s settlement. Aggrieved individuals may include those who were:
- Injured by a lack of accessible features at Tower 31;
- Discouraged from living at Tower 31 because of the lack of accessible features;
- Required to pay to have an apartment at Tower 31 made accessible,
- Prevented from having visitors because of a lack of accessible features at Tower 31; or
- Otherwise injured or discriminated against on the basis of disability as a result of the design or construction of Tower 31.
People who may be entitled to compensation should file a claim by contacting the Civil Rights Complaint Line at (212) 637-0840, using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/civilrights.html, or sending a written claim to:
U.S. Attorney’s Office, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York 10007
Attention: Chief, Civil Rights Unit
The case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Carina H. Schoenberger, Emily E. Daughtry, Li Yu, and Jessica Jean Hu are in charge of the case.
Tower 31 LLC Complaint
Psychologist Sentenced in Manhattan Federal Court for Participation in Multi-Year No-Fault Automobile Insurance Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JAY SEITZ, a psychologist licensed to practice in the State of New York, was sentenced today in Manhattan federal court in connection with his participation in a multi-year, no-fault automobile insurance fraud scheme. SEITZ was sentenced to two years in prison by U.S. District Judge Sidney H. Stein. SEITZ was convicted in March following a six-day jury trial of one count of conspiracy to commit mail fraud and health care fraud, one count of mail fraud, and one count of health care fraud.
Manhattan U.S. Attorney Preet Bharara said: “Jay Seitz violated the ethical code he swore to uphold and committed fraud in pursuit of personal profit. With the sentence meted out today, his unscrupulous practices and flagrant violation of the law have now been justly punished.”
According to the Indictment filed in Manhattan federal court, other court documents, evidence introduced during trial and statements made at other court proceedings:
Between 2006 and 2008, SEITZ purported to provide psychological services to patients at medical clinics located in the Bronx and Brooklyn, New York. SEITZ signed treatment notes that described the diagnoses he purportedly made and the services he purportedly provided to patients treated at these clinics. These treatment notes, which often did not accurately reflect the psychological symptoms suffered by patients or the treatment they were provided, were used to generate claims that were submitted to no-fault insurance companies for reimbursement. These claims reflected that the psychological services for which reimbursement was sought were provided by SEITZ. In fact, SEITZ did not diagnose or treat any patients on whose behalf claims were submitted to no-fault insurance providers. Although the patients at the clinics with which SEITZ was associated sometimes received psychological screening and treatment, this treatment was provided by individuals who were not licensed psychologists or licensed social workers. In addition, the treatment duration and number of treatment sessions reflected on the claims forms often exceeded the actual duration of services provided or the number of sessions at which treatment was actually provided. No-fault insurance providers reimbursed over $3 million of claims submitted on behalf of two professional corporations associated with SEITZ, for patients purportedly, but not actually, treated by SEITZ.
In addition to the prison term, SEITZ, 62, of New York, New York, was sentenced to one year of supervised release. SEITZ was also ordered to pay restitution in the amount of $2,703,137.89 and forfeit $584,089.92 in assets.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.
The case is being handled by the Office=s Violent and Organized Crime Unit. Assistant U.S. Attorneys Brian Blais and Kristy Greenberg are in charge of the prosecution.
Lawyer and Three Others Charged in Manhattan Federal Court with Scheme to Obtain Immigration Visas Based on Fraudulent Advanced Degree DiplomasRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Cheryl Garcia, Special Agent-in-Charge of the United States Department of Labor, Office of Inspector General (“DOL-OIG”) and James T. Hayes, Jr., the Special Agent in Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI); announced today federal charges against RICHARD KASSEL, an immigration lawyer, and three others, in a scheme to obtain immigration visas by submitting fraudulent diplomas and transcripts representing that aliens had earned advanced degrees that they did not obtain from schools they did not attend.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants, including attorney Richard Kassel, cheated the system by engaging in a scheme to forge fraudulent diplomas and transcripts in order to obtain employment-based visas intended for professionals who had legitimately earned advanced degrees. Work visas must be earned not churned out if the system is to be valid and secure.”
As alleged in an indictment (the “Indictment”) unsealed today in Manhattan federal court, KASSEL created a scheme to obtain employment-based visas for immigration clients in exchange for a fee by pretending that these individuals possessed advanced degrees that they never earned. To perpetrate the scheme, KASSEL and ROSANNA ALMONTE, an assistant working for KASSEL, prepared and submitted fraudulent visa applications supported by fictitious diplomas and fake transcripts. JANA HALODA and VACLAV HALODA, both originally clients of KASSEL, facilitated the fraud by creating the fraudulent diplomas and supporting documents on a home computer and printer. More than a hundred fraudulent visa applications supported by these forged documents were submitted between 2008 and the present.
KASSEL (50), ALMONTE (26), JANA HALODA (32), and VACLAV HALODA (37) are all charged with conspiracy to commit immigration fraud and five substantive counts of visa fraud. If convicted, each defendant faces a maximum of five years of imprisonment on the conspiracy charge and ten years imprisonment on each of the five counts of immigration fraud. The defendants also face a maximum fine of $250,000 or twice the gross gain or loss from the offense for each count. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the agents with the U.S. Immigration and Customs Enforcement’s Department of Homeland Security Investigations and the United States Department of Labor’s Office of the Inspector General. He added that the investigation is ongoing.
The Office’s General Crimes Unit is overseeing the case. Assistant United States Attorney Andrea M. Griswold is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Richard Kassel Indictment
Former Queens District Leader and City Council Candidate Found Guilty of Obstruction of JusticeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that attorney ALBERT BALDEO, a former Queens District Leader, was found guilty today in federal court of tampering with witnesses during the investigation of his alleged campaign fraud by the Federal Bureau of Investigation (“FBI”). BALDEO was convicted of seven counts of obstruction of justice in Manhattan federal court after a two-week trial before U.S. District Judge Paul A. Crotty.
U.S. Attorney Bharara stated: “The fact that Albert Baldeo lost his election does not excuse his corrupt conduct. With today’s verdict of guilty, an impartial federal jury has found that Baldeo lied and instructed others to lie to law enforcement agents investigating the source of his campaign contributions, and threatened and intimidated others in order to conceal the truth. These practices have no place in our politics or our justice system, and there should be no doubt that this Office will prosecute such conduct while it continues to vigorously investigate and prosecute political corruption in New York City and New York State.”
According to the Complaint, Indictment, and Superseding Indictment and evidence presented at trial:
In the fall of 2010, BALDEO, then a Queens District Leader of a political party and attorney, participated in a scheme to defraud New York City that involved the funneling of multiple illegal campaign contributions to his ultimately unsuccessful campaign for City Council. On various occasions, BALDEO, and in at least one instance one of BALDEO’s employees, provided money orders or cash to individuals to contribute to the campaign in their own names, even though BALDEO supplied the funds and these individuals did not contribute any of their own money or reimburse him for these donations.
As part of this scheme, BALDEO gave each such donor, commonly referred to as a “straw donor,” a campaign contribution card in which he or she wrote his or her name, address, employment information, and the amount of money purportedly donated to the BALDEO campaign. BALDEO instructed the straw donors to sign the contribution cards falsely affirming that the contribution was being made from their personal funds and was not being reimbursed in any manner. The New York City Campaign Finance Board (“CFB”) relied upon the information contained in these fraudulent contribution forms, among other things, in order to determine whether to release public matching campaign funds to BALDEO’s 2010 campaign. Moreover, as part of this scheme, BALDEO instructed several of these straw donors to sign affidavits, at least one of which was actually provided to the CFB, that also falsely asserted that these straw donors’ contributions were made using their own funds.
After learning of the FBI’s investigation of this matter, BALDEO obstructed the investigation by repeatedly instructing certain straw donors to provide false information to, or not cooperate with, the FBI agents who were investigating contributions to his campaign.
Moreover, in response to BALDEO learning that one straw donor was going to refuse to lie as instructed by BALDEO: (1) a threatening letter was faxed from BALDEO’s office to the office of this straw donor’s attorney; (2) a co-conspirator of BALDEO’s not charged in this matter made false allegations to the New York City Administration for Children’s Services that this straw donor was abusing his grandchild; and (3) BALDEO and the same co-conspirator made at least one complaint each to the New York City Department of Buildings about properties owned by this straw donor or his wife.
BALDEO, 54, of Richmond Hill, New York, was convicted of one count of conspiracy to obstruct justice, and six counts of obstruction of justice, each relating to a separate instance of witness tampering. Each count carries a maximum sentence of 20 years in prison. BALDEO was acquitted of three fraud-related counts relating to approximately $15,000 in claims for city matching funds from the CFB which were never awarded. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. BALDEO is scheduled to be sentenced by Judge Crotty on December 16, 2014, at 11:00 a.m.
United States Attorney Bharara praised the investigative work of the FBI and expressed his appreciation for the assistance of the New York State Board of Elections, the New York City Campaign Finance Board, the New York City Administration for Children’s Services, and the New York City Department of Buildings in the investigation and prosecution of this matter.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Daniel C. Richenthal and Martin S. Bell are in charge of the prosecution.
Repair Contractor Charged in Manhattan Federal Court with Overbilling New York City Department of EducationRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Richard J. Condon, Special Commissioner of Investigation for the New York City School District (“SCI”), today announced federal charges against DERVAL LAZZARI, a/k/a “Eduardo,” for allegedly engaging in a scheme that used two companies he and others owned and controlled (the “Acme Companies”) to defraud the New York City Department of Education (the “DOE”) by submitting over $1 million of fraudulent invoices for supposed repair work. LAZZARI, a native of Argentina, was arrested at JFK Airport Thursday morning by criminal investigators from the United States Attorney’s Office after arriving on a flight from Argentina. He was presented in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn Thursday afternoon.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Derval Lazzari cheated the New York City Department of Education and the children it educates by submitting fraudulent invoices for repairs to New York City schools. Particularly now, as New York City expands pre-kindergarten education, those individuals tempted to take for themselves funds intended for children should know that they will be caught and prosecuted.”
SCI Special Commissioner Richard J. Condon said: “The arrest of Lazzari by the Southern District investigators is a significant step towards the recovery of stolen educational funds.”
According to the allegations in the Complaint unsealed yesterday in Manhattan federal court:
The Acme Companies were contracted by the DOE to repair and service kitchen equipment and electrical outlets at New York City Schools between 2006 and 2013. During this time, LAZZARI and others engaged in a scheme to systematically bill the DOE for: (a) vastly more expensive replacement parts than were actually installed; (b) parts that were never used; and (c) services that were either unnecessary and/or never performed. For example, LAZZARI caused the Acme Companies to repeatedly bill the DOE $572 for a circuit breaker estimated to cost $18. The Acme Companies also billed the DOE at least 8,000 times for expensive “leak tests” for refrigerators that were never performed.
LAZZARI, 54, of Queens, New York, is charged with wire fraud and conspiracy to commit wire fraud. If convicted, he faces a maximum of 20 years in prison on each count. LAZZARI also faces a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the Special Commissioner of Investigation for New York City’s Department of Education. Mr. Bharara also thanked the Criminal Investigators with the United States Attorney’s Office, as well as Customs and Border Protection for their assistance in tracking and apprehending LAZZARI.
The Office’s Public Corruption Unit is overseeing the case. Assistant United States Attorneys Martin S. Bell and Andrea M. Griswold are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Derval Lazzari Complaint
CEO of Broker-Dealer Charged in Manhattan Federal Court with Obstructing Regulatory Examination by Producing False Invoices to SEC Exam Team, and with Making False Statements and False Filings Related to Net CapitalRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector in Charge of the United States Postal Inspection Service (“USPIS”), and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that CHARLES J. MOORE was arrested this morning and charged with obstructing a regulatory examination and making false statements and false filings. As alleged, MOORE repeatedly caused the broker-dealer firm Crucible Capital Group, Inc. (“Crucible”), which he controlled, to report its net capital above the threshold mandated by Securities and Exchange Commission (“SEC”) regulations, when, in fact, the firm had a net capital deficiency. MOORE is also alleged to have supported these false filings by directing a Crucible employee to falsify invoices received from vendors by removing references to past-due balances, and deliver the falsified invoices to SEC employees conducting a regulatory examination of Crucible. MOORE was arrested this morning at Crucible’s offices at 27 Whitehall Street in Manhattan, and will be presented before U.S. Magistrate Judge Sarah Netburn this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “The SEC is entitled to the truth when it examines the books and records of institutions as it seeks to protect investors and our markets. Broker-dealers, from large institutions to boutique firms, have a duty to make accurate financial reports. As the charges set forth, Charles Moore attempted to blow smoke in the eyes of the SEC, which was also an attempt to deceive his clients, and such charges come with appropriately hefty maximum sentences.”
USPIS Inspector in Charge Philip R. Bartlett said: “The idea that Mr. Moore allegedly concocted a scheme to provide false documentation to a government agency and believe it would go unnoticed is a crime of great arrogance. Postal Inspectors along with their law enforcement partners have no tolerance for anyone who breaks the law.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Moore deliberately tried to hide debts on required SEC reports for almost eight months and then when the SEC was looking into it, he further tried to hide his lies and actions by directing employees to create falsified invoices and use personal email accounts to cover his trail. Lies and cover-ups are not an acceptable way for a chief executive officer to act. The FBI will continue to investigate this type of illegal conduct and prosecute those who violate our laws.”
According to the Complaint unsealed today:
MOORE was at all relevant times the Chief Executive Officer of Crucible, an SEC-registered broker-dealer that maintained no customer securities trading accounts, but held itself out as a “boutique” investment bank helping small businesses to raise capital and financing. Crucible used its status as an SEC-registered broker-dealer to solicit business.
MOORE was also at all relevant times the CEO of an affiliated company, Angelic Holdings LLC (“Angelic”), which was not registered with the SEC and conducted “due diligence” for Crucible-related business. Crucible and Angelic shared employees and office space. They also shared expenses, under an agreement that had Crucible paying Angelic a monthly fee and Angelic paying vendors of certain specified services on behalf of both Angelic and Crucible.
As an SEC-registered broker-dealer that maintained no customer accounts, Crucible was required to maintain net capital of at least $5,000 at all times. It was also required to file monthly “FOCUS” reports with the SEC reporting its net capital. Finally, Crucible was required to preserve and archive its business-related emails for review by the SEC upon request.
From in or about February 2013 through in or about September 2013, MOORE caused Crucible to file false FOCUS reports that failed to account for certain large debts. These debts, although nominally owed by Angelic, were required by SEC regulation and guidance to have been incorporated into Crucible’s net capital computation. Had they been so incorporated, Crucible would have been required to report a net capital deficiency throughout much of 2013.
In the fall of 2013, the SEC opened a regulatory examination of Crucible to explore, among other things, the accuracy of Crucible’s net capital reporting. As part of that examination, the SEC requested all 2013 invoices to Angelic for Crucible-related expenses.
MOORE, responding to this request, caused a Crucible employee to create falsified invoices to deliver to the SEC. Specifically, he directed the employee to take original invoices that had been sent to Crucible personnel, and create versions of those invoices that omitted references to large, unpaid debts appearing on the originals. MOORE then caused the employee to hand the falsified invoices to the SEC.
Finally, throughout 2013, MOORE tried to hide the truth about Crucible’s net capital and its outstanding debts by directing – in flagrant breach of regulatory requirements and his own firm’s compliance policy – that all correspondence with professionals involved in Crucible’s and Angelic’s finances take place not over Crucible’s business email accounts but instead over MOORE’s own and his employees’ personal email accounts. Many of the original invoices that MOORE directed his employee to falsify before furnishing to the SEC in the fall of 2013 had, at MOORE’s instruction, been sent by the vendor to a Gmail account belonging to a Crucible employee.
MOORE, 62, is charged with obstructing a regulatory examination, making false statements, and falsifying and failing to keep required books and records of a broker-dealer. The obstruction and falsifying records counts each carry a maximum sentence of 20 years in prison. The false statement charge carries a maximum sentence of five years in prison.
Mr. Bharara praised the investigative work of the USPIS and the FBI and thanked the SEC, which has filed civil charges in a separate action.
This case 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’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Sarah E. McCallum and Andrew B. Bauer are in charge of the prosecution.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Charles Moore Complaint
Prominent Wine Dealer Rudy Kurniawan Sentenced in Manhattan Federal Court to 10 Years in Prison for Selling Millions of Dollars of Counterfeit WineRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that prominent wine dealer RUDY KURNIAWAN was sentenced today to 10 years in prison for carrying out an elaborate scheme in which he manufactured and sold counterfeit bottles of purportedly rare and expensive wine for millions of dollars, and for fraudulently obtaining a $3 million loan from a financing company. KURNIAWAN was found guilty in December 2013 following a one-week jury trial before U.S. District Judge Richard Berman, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Rudy Kurniawan planned and executed an intricate counterfeit wine scheme, mixing cheaper, more common wines, bottling the mixture into old bottles with fake labels, and then fraudulently selling those bottles for millions of dollars. Now, Kurniawan will trade his life of luxury for time behind bars.”
According to the evidence presented at trial, documents filed in Manhattan federal court, and statements made at today’s sentencing proceeding:
The Counterfeit Wine Scheme
KURNIAWAN had been a collector of fine and rare wines, and rose to become one of the most prominent and prolific dealers in the United States of purportedly rare and expensive wine. From 2004 through 2012, he engaged in a systematic scheme to defraud wine collectors and others by selling and attempting to sell numerous counterfeit bottles of purportedly rare and expensive wine. KURNIAWAN manufactured counterfeit bottles of rare and vintage wine at his home in Arcadia, California, operating what was, in effect, a counterfeit wine laboratory.
KURNIAWAN mixed and blended lower-priced wines so that they would mimic the taste and character of rare and far more expensive wines. He then poured his creations into empty bottles of rare and expensive wines that he obtained from various sources and created a finished product by sealing the bottles with corks and outfitting the bottles with counterfeit wine labels he created. KURNIAWAN then sold and attempted to sell these counterfeit bottles of wine at auctions and in direct sales to wealthy wine collectors. KURNIAWAN earned millions of dollars through the sale of these counterfeit bottles of wine.
The Scheme to Defraud a Lender
KURNIAWAN also devised and carried out a scheme to fraudulently obtain a $3 million loan from a financing company located in New York City that specialized in extending loans that are secured by valuable collectibles, such as art and wine. KURNIAWAN obtained the loan by providing false information to, and concealing material information from, the financing company, including falsely omitting approximately $7.4 million in outstanding loans, falsely representing his annual expenses, and falsely representing that he was a permanent resident of the United States when he had no legal immigration status in the United States and had, in fact, been ordered by an immigration court to leave the country years earlier.
In addition to the prison sentence, KURNIAWAN, 37, of Arcadia, California, was ordered to forfeit $20 million and to pay restitution to his victims of $28,405,502.5.
Mr. Bharara praised the outstanding work of the FBI’s Art Crime Team and its New York and Los Angeles field offices.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Stanley J. Okula, Jr. is in charge of the prosecution. Assistant U.S. Attorney Andrew Adams is handling the forfeiture aspects of the prosecution.
U.S. v. Rudy Kurniawan indictment
Manhattan U.S. Attorney Announces Charges Against Three Individuals in Connection with $18.5 Million Mortgage Modification SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Christy Romero, Special Inspector General of the Troubled Asset Relief Program (“SIGTARP”), announced today the unsealing of charges against PED ABGHARI, a/k/a “Ted Allen,” DIONYSIUS FIUMANO, a/k/a “D,” and JUSTIN ROMANO for engaging in a mortgage modification scheme that defrauded over 8,000 homeowners in all 50 states out of over $18.5 million, in what is believed to be the largest mortgage modification scheme ever charged. Each defendant is charged with wire fraud and conspiracy to commit wire fraud. ABGHARI and FIUMANO were arrested this morning in Irvine, California, and are expected to be presented later today in federal court in Los Angeles before United States Magistrate Judge Paul L. Abrams. ROMANO was arrested this morning in Blue Point, New York and is expected to be presented later today in Manhattan federal court before United States Magistrate Judge Sarah Netburn.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants preyed on thousands of homeowners struggling to make their mortgage payments and meet their financial obligations. This Office has zero tolerance for those who target and exploit financially vulnerable people, and we will continue to work to hold these and like-minded defendants accountable.”
The Special Inspector General for TARP, Christy Romero, said “Earlier today, SIGTARP special agents arrested Abghari, Fiumano, and Romano after our investigation with the U.S. Attorney's Office uncovered an alleged massive, nationwide mortgage modification fraud scheme that purportedly targeted homeowners behind on their mortgage payments who simply wanted help from TARP's housing program, HAMP. The defendants are alleged to have stolen more than $18.5 million from more than 8,000 struggling homeowners by making empty promises that the homeowners would be preapproved for lower mortgage payments through HAMP. This was all a purported ruse used to trick vulnerable homeowners into paying the defendants thousands of dollars in up-front fees for which zero meaningful work was ever actually done. SIGTARP has aggressively pursued these allegations, working closely with Preet Bharara's office, to protect homeowners in New York and across our nation from becoming victims of this crime and to bring perpetrators to justice.”
According to the allegations contained in the Indictment:
The Home Affordable Modification Program
As a result of the financial crisis and collapse of the housing bubble in 2008, Congress enacted the Home Affordable Modification Program (“HAMP”), which was to be funded through the Troubled Asset Relief Program (“TARP”). HAMP permits qualified homeowners to obtain mortgage relief. Specifically, HAMP seeks to prevent foreclosure by modifying troubled loans to achieve monthly payments the homeowner can afford.
Pursuant to HAMP, any homeowner may apply to his or her mortgage provider by completing a short form and submitting it, along with supporting paperwork, to the homeowner’s mortgage provider. HAMP further sets guidelines for lenders to follow in determining eligibility, such as guidelines based on the homeowner’s income and the principal balance remaining on the mortgage. Pursuant to HAMP, only a homeowner’s lender may determine the homeowner’s eligibility for a modification and, if appropriate, the modified rate and monthly payment for which the homeowner is eligible.
HAMP applications are readily available online as well as in many local banks. Submitting an application is, by law, free of charge to the homeowner. Virtually all mortgage providers are required to participate in the HAMP program and accept HAMP applications.
The Defendants’ Mortgage Modification Scheme
PED ABGHARI was a co-president and owner of an Irvine, California company that offered purported mortgage modification services (the “Telemarketing Firm”). DIONYSIUS FIUMANO was a senior manager of the Telemarketing Firm, and was directly responsible for training and overseeing the Firm’s telemarketers and salespeople (the “Sales Staff”). JUSTIN ROMANO held himself out as the president of two purported law firms (the “Purported Law Firms”), based in in Holbrook, New York, and Sayville, New York, respectively, which offered purported mortgage modification services in conjunction with the Telemarketing Firm.
From at least January 2011 through May 2014, through the Telemarketing Firm and the Purported Law Firms, ABGHARI, FIUMANO, and ROMANO perpetrated a scheme to defraud homeowners in dire financial straits who were seeking relief through HAMP and other mortgage relief programs. Through a series of false and fraudulent representations, the defendants duped thousands of homeowners into paying thousands of dollars each in up-front fees in exchange for little or no service from the defendants or their companies. In total, through their scheme, the defendants obtained over $18.5 million from more than 8,000 victim-homeowners throughout the United States.
As alleged, to perpetrate the scheme, through the Telemarketing Firm, ABGHARI and FIUMANO purchased thousands of “leads,” consisting of the name, address, and other contact information of homeowners who had fallen behind in making mortgage payments on their home. Thereafter, ABGHARI and FIUMANO caused the Telemarketing Firm to send, by e-mail, false and fraudulent solicitation letters to the homeowners they identified through the “leads,” misleading these homeowners into believing that their mortgages were already under review for a HAMP modification and that new, modified rates had already been contemplated and approved by the homeowners’ lenders.
At the direction of ABGHARI, FIUMANO, and ROMANO, the Sales Staff called homeowners and/or answered telephone calls from homeowners who received the Telemarketing Firm’s fraudulent solicitations. During these calls, in an effort to convince the homeowners to pay up-front fees, the defendants, through the Sales Staff, regularly caused various false and fraudulent representations to be made to homeowners, including that (a) the homeowners were retaining a “law firm” and an “attorney” who would complete the HAMP application and negotiate aggressively on the homeowners’ behalf with banks to modify the terms of the homeowners’ mortgages; (b) the defendants would “pre-approve” the homeowners for a guaranteed modification through HAMP; (c) the defendants employed underwriters who would calculate and guarantee the homeowners a new, modified rate and monthly mortgage payment; and (d) the defendants’ mortgage modification services were free, and the up-front fees paid by the homeowners would be paid directly to the homeowners’ lenders.
In truth and in fact, and as ABGHARI, FIUMANO, and ROMANO well knew, all of these representations were false and fraudulent. As the defendants knew, neither they nor any of their employees could pre-approve the homeowners or guarantee any of the homeowners a mortgage modification or new monthly payment. Furthermore, not only were the defendants’ “services” not free, the defendants kept all of the fees paid by the homeowners, and paid none of it to the homeowners’ lenders. In addition, as the defendants knew, neither the Telemarketing Firm nor the Purported Law Firms provided the homeowners with an attorney or any sort of legal assistance, and they frequently did little more than complete the Government-sponsored HAMP application which, as noted above, the homeowners could have obtained and completed on their own, free of charge. In some cases, as the volume of homeowners paying thousands of dollars to “retain” the defendants’ services swelled, the defendants and their employees did nothing at all in exchange for the money they received from homeowners.
As customer complaints about the Telemarketing Firm and Purported Law Firms mounted, ABGHARI, FIUMANO, and ROMANO sought to cover up their fraudulent scheme by changing the names of the Telemarketing Firm and Purported Law Firms. For example, as ABGHARI emailed employees of one of the Purported Law Firms, “[t]he main reason we’re being slammed . . . is because we waited too long to change names. I normally change names every 9 months to keep things cool and have all agencies off our backs. Within the next month or so you’ll see a major slow down on complaints because we no longer do business under [the name of the Purported Law Firm] or [the name of the Telemarketing Firm].”
ABGHARI, 37, of Irvine, California, FIUMANO, 43, of Irvine, California, and ROMANO, 40, of Blue Point, New York are each charged with one count of conspiring to commit wire fraud, and one count of wire fraud, each of which carries a maximum term of 20 years in prison.
Mr. Bharara praised the investigative work of the Office of the Special Inspector General for the Troubled Asset Relief Program.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Edward B. Diskant and Joshua A. Naftalis are in charge of the prosecution.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Ped Abghari et al. Indictment
Former CEO of Luggage Manufacturer Pleads Guilty in Manhattan Federal Court to Orchestrating Multimillion-Dollar Bank Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MARVIN JEMAL, the former Chief Executive Officer of a Manhattan-based company that designed, imported and distributed luggage, business bags, backpacks, and accessories (the “Company”), pled guilty today in connection with a scheme to fraudulently obtain millions of dollars in loans from a bank by making false statements and submitting false and phony documents to the bank. JEMAL pled guilty before U.S. District Judge Valerie E. Caproni.
Manhattan U.S. Attorney Preet Bharara said: “Marvin Jemal orchestrated a scheme to line his own pockets by duping a bank into lending his luggage company more than $6 million based on lies and phony documents, and then diverting the money for his own personal uses, including the purchase of homes and luxury cars. Now Jemal stands convicted of a felony and awaits sentencing.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at today’s guilty plea:
From 2007 through October 2009, MARVIN JEMAL and Mark Bernstein, the former CEO and CFO, respectively, of the Company, engaged in a scheme to fraudulently induce a commercial bank based in New York (the “Bank”) to lend millions of dollars to the Company. Among other things, JEMAL and Bernstein knowingly made false representations to the Bank, concealed material facts from the Bank, and submitted false and fraudulent documents to the Bank, including fabricated invoices and shipping documents. In total, the Company obtained approximately $6.9 million in loans from the Bank and defaulted on approximately $6 million of those loans. Although the loans were purportedly for the benefit of the Company’s business, JEMAL diverted approximately $3.5 million of the loan proceeds to personal bank accounts and used the money to pay for various personal expenses, including mortgage payments on properties he owned, credit card bills, and payments on his Porsche.
The Factoring Agreement
The Company obtained the loans from the Bank as part of a secured credit facility, pursuant to a factoring agreement between the Company and the Bank. Under the terms of the factoring agreement, the Company would assign and sell the Company’s interest in its accounts receivable to the Bank and, in exchange, the Company could borrow from the Bank up to 85% of the value of those receivables. In addition, the Company could borrow up to 50% of the value of its inventory. In order to draw down on its secured credit facility, however, the Company was required to provide the Bank with, among other things, an accurate listing of all accounts receivable, as well as supporting documentation, including copies of (i) relevant underlying invoices and (ii) shipping documents or other proof of delivery.
The Scheme to Fraudulently Obtain Loans
To fraudulently obtain loans from the Bank under the factoring agreement, JEMAL and Bernstein made false statements and submitted false and fraudulent documents to the Bank, including the following:
- JEMAL and Bernstein sent duplicate and/or fabricated invoices to the Bank that purported to reflect the sale of certain products by the Company and, thus, an outstanding receivable for the Company. In truth, however, the sales reflected on those invoices were false, as those sales either had never occurred or had already been invoiced separately.
- JEMAL and Bernstein provided fraudulent shipping documents to the Bank to substantiate the purported sales of products by reflecting that those products had been shipped to customers. In truth, however, those shipping documents were false and fraudulent, as the products had not, in fact, been shipped to the customers as reflected in the shipping documents.
- JEMAL and Bernstein concealed material facts from the Bank, including credits that the Company had provided to certain of its customers (which thereby reduced the total accounts receivable associated with those customers) and instances in which the Company had directly collected and deposited payments from its customers on the same invoices the Company assigned to the Bank.
- JEMAL and Bernstein provided inaccurate monthly inventory spreadsheets to the Bank which overstated the Company’s existing inventory.
Further, in order to conceal the scheme, JEMAL made various oral misrepresentations to certain representatives of the Bank when those representatives confronted him about irregularities and other issues that the Bank had discovered with respect to the Company’s assignment of its accounts receivable.
JEMAL, 60, of Brooklyn, New York, pled guilty to one count of bank fraud, which carries a maximum sentence of 30 years in prison. Sentencing is scheduled for November 5, 2014, before Judge Caproni.
Bernstein, 64, of Belle Harbor, New York, pled guilty in October 2013 before U.S. District Judge Robert P. Patterson to one count of conspiracy to commit bank fraud, one count of bank fraud, and one count of making a false statement to influence bank action, each of which carries a maximum sentence of 30 years in prison. He also pled guilty to one count of wire fraud and one count of money laundering, each of which carries a maximum sentence of 20 years in prison. He is scheduled to be sentenced on November 13, 2014.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Christopher D. Frey is in charge of the prosecution.
U.S. v. Marvin Jamal Plea Agreement
Captain of Genovese Crime Family and Associate Charged in Manhattan Federal Court with RacketeeringRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), James J. Hunt, the Acting Special Agent in Charge of the New York Field Division of the Drug Enforcement Agency, James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), Thomas Zugibe, the District Attorney of Rockland County, Joseph A. D'Amico, Superintendent of the New York State Police, and William J. Bratton, the Commissioner of the Police Department for the City of New York (“NYPD”) announced today the unsealing of an Indictment charging DANIEL PAGANO, an alleged Captain of the Genovese Organized Crime Family of La Cosa Nostra (the “Genovese Crime Family”), and MICHAEL PALAZZOLO, an associate of the Genovese Crime Family, with participating in a racketeering conspiracy by, among other crimes, committing extortion and loan sharking and operating an illegal gambling business. PAGANO was taken into custody today, and PALAZZOLO surrendered today. Both defendants were presented and arraigned in Manhattan federal court this afternoon before United States Magistrate Judge Sarah Netburn. U.S. District Judge Ronnie Abrams has been assigned to the case.
Manhattan U.S. Attorney Preet Bharara said: “Just as they have for decades, members of La Cosa Nostra – as alleged in this Indictment – continue to use muscle and intimidation to threaten and extort New Yorkers. Today’s arrests of a Captain and associate of the Genovese Crime Family should serve as a reminder to all members and associates of La Cosa Nostra that you do not operate with impunity. You may bully your way into financial gain but ultimately you will pay the price. I would like to thank all of our law enforcement partners who worked so hard on this case and in particular Rockland County District Attorney Thomas Zugibe, without whose support today’s arrests would not have been possible.”
FBI Assistant Director-in-Charge George Venizelos said: “Today’s arrests mark 22 total arrests in this mob scheme. The charges, which we’ve seen time and time again, include racketeering, extortion, loan sharking, and operating illegal gambling businesses. The FBI will continue to work with our local, state, and federal partners to root out any and all organized crime activity—wherever we may find it.”
DEA Acting Special Agent in Charge James J. Hunt said: “Today’s collaborative law enforcement effort by DEA, U.S. Attorney Office, Southern District of New York, FBI, ICE HIS, Rockland County District Attorney Office, New York State Police, NYPD Police and our other state and local counterparts is a testament to the fact that we will use all resources at our disposal to target any and all organized crime groups.”
ICE HSI Special Agent-in-Charge James T. Hayes said: “The arrests today illustrate the Department of Homeland Security's clear commitment to identify and fully prosecute organized crime networks operating in our cities. HSI will continue to work jointly with our law enforcement partners to dismantle these organizations from the top down.”
Rockland County District Attorney Thomas Zugibe said: "While this case was initiated in Rockland County though our Regional Investigative Resource Center, Organized Crime Unit it quickly became apparent that the activity of these individuals impacted the metropolitan area. This is another example of how inter agency cooperation is instrumental to success and an analysis of the facts made it clear that these charges are best suited for Federal prosecution. With the arrests of Mr. Pagano and Mr. Palazzolo, both long time county residents with a long, documented history of organized criminal activity, law enforcement has dealt a significant blow to the Genovese Crime Family."
New York State Police Superintendent Joseph A. D'Amico said: "The hard work in this long term investigation has paid off with the indictments of Daniel Pagano and Michael Palazzolo. With Pagano, a known street boss, and his associate Palazzolo behind bars, this organization has suffered a huge blow to their operation. The indictments announced today and our partnerships should send a message to others involved in these types of crimes, this illegal activity and threats to others will not be tolerated by law enforcement. We thank our partners in this investigation, and look forward to continuing the fight against organized crime with them."
NYPD Police Commissioner William J. Bratton said: “Organized crime has no place in our communities. Thanks to the collaborative efforts of the investigators and prosecutors involved in this case, this illegal enterprise has been shut down and these criminals will be brought to justice.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:
The Genovese Crime Family is part of a nationwide criminal organization known by various names, including the “Mafia” and “La Cosa Nostra” (“LCN”), which operates through entities known as “Families.” The Genovese Crime Family operates through groups of individuals known as “crews” and “regimes,” most of which are based in New York City. Each “crew” has as its leader a person known as a “Caporegime,” “Capo,” “Captain,” or “Skipper,” who is responsible for supervising the criminal activities of his crew and providing “Soldiers” and associates with support and protection. In return, the Capo typically receives a share of the illegal earnings of each of his crew’s Soldiers and associates, which was sometimes referred to as Atribute.@ DANIEL PAGANO is a Caporegime or Captain in the Genovese Crime Family.
Each crew consists of “made” members, sometimes known as “Soldiers,” “wiseguys,” “friends of ours,” and “good fellows.” Soldiers are aided in their criminal endeavors by other trusted individuals, known as “associates,” who sometimes are referred to as “connected” or identified as “with” a Soldier or other member of the Family. Associates participate in the various activities of the crew and its members. In order for an associate to become a made member of the Family, the associate must first be of Italian descent and typically needed to demonstrate the ability to generate income for the Family and/or the willingness to commit acts of violence. MICHAEL PALAZZOLO is an associate of the Genovese Crime Family.
From in or about 2009 through in or about February 2012, PAGANO and PALAZZOLO, along with other members and associates of the Genovese Crime Family, committed a wide array of crimes including extortion, loan sharking, and operating an illegal gambling business. In or about 2012, PALAZZOLO and other co-conspirators, not named as defendants in the Indictment, used threats of force to attempt to collect payment from an individual who they believed robbed one of those co-conspirators of marijuana.
PAGANO, 61, of Rockland County, is charged with participating in a racketeering conspiracy. The charge carries a maximum term of 20 years in prison.
PALAZZOLO 49, of Rockland County, is charged with one count of participating in a racketeering conspiracy and one count of participating in an extortion conspiracy. These charges carry a maximum term of imprisonment of 40 years in prison.
Mr. Bharara thanked the FBI, the Rockland County District Attorney’s Office, the DEA, the U.S. Immigration and Customs Enforcement’s Department of Homeland Security Investigations, the New York City Police Department, and the New York State Police.
This investigation was a result of the Department of Justice's Organized Crime and Drug Enforcement Task Force Program, and it combined the resources and expertise of its member federal agencies in cooperation with local law enforcement. The investigation was conducted by a joint task force of the NYPD and the FBI.
The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jennifer Burns, Rahul Mukhi, Daniel Goldman, and Emil Bove are in charge of the prosecution.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Daniel Pagano & Michael Palazzolo Indictment
Manhattan U.S. Attorney Finds Pattern and Practice of Excessive Force and Violence at NYC Jails on Rikers Island That Violates the Constitutional Rights of Adolescent Male InmatesRead the Press Release
Eric Holder, the United States Attorney General, and Preet Bharara, the United States Attorney for the Southern District of New York, announced today the completion of a multi-year civil investigation pursuant to the Civil Rights of Institutionalized Persons Act (“CRIPA”) into the conditions of confinement of adolescent male inmates on Rikers Island. The investigation, which focused on use of force by staff, inmate-on-inmate violence, and use of punitive segregation during the period 2011-2013, concluded that there is a pattern and practice of conduct at Rikers Island that violates the rights of adolescents protected by the Eighth Amendment and the Due Process Clause of the Fourteenth Amendment of the United States Constitution. The investigation found that adolescent inmates are not adequately protected from physical harm due to the rampant use of unnecessary and excessive force by New York City Department of Correction (“DOC”) staff and violence inflicted by other inmates. In addition, the investigation found that DOC relies too heavily on punitive segregation as a disciplinary measure, placing adolescent inmates in what amounts to solitary confinement at an alarming rate and for excessive periods of time. Many of the adolescent inmates are particularly vulnerable because they suffer from mental illness.
Attorney General Eric Holder said: “The extremely high rates of violence and excessive use of solitary confinement for adolescent males uncovered by this investigation are inappropriate and unacceptable. The Department of Justice is dedicated to ensuring the effectiveness, safety and integrity of our criminal justice systems. Going forward, we will work with the City of New York to make good on our commitment to reform practices that are unfair and unjust, and to ensure that - in all circumstances, and particularly when it comes to our young people - incarceration is used to deter, punish, and ultimately rehabilitate, not merely to warehouse and forget.”
Manhattan U.S. Attorney Preet Bharara said: “As our investigation has shown, for adolescents, Rikers Island is a broken institution. It is a place where brute force is the first impulse rather than the last resort; where verbal insults are repaid with physical injuries; where beatings are routine while accountability is rare; and where a culture of violence endures even while a code of silence prevails. The adolescents in Rikers are walled off from the public, but they are not walled off from the Constitution. Indeed most of these young men are pre-trial detainees who are innocent until proven guilty, but whether they are pre-trial or convicted, they are entitled to be detained safely and in accordance with their Constitutional rights – not consigned to a corrections crucible that seems more inspired by Lord of the Flies than any legitimate philosophy of humane detention. These young men, automatically charged as adults despite their age under New York law, may be on an island and out of sight, but they can no longer remain out of mind. Attention must be paid immediately to their rights, their safety and their mental well-being, and in the wake of this report we will make sure that happens one way or another.”
In its report to the City of New York, made public today, the U.S. Attorney’s Office notes that “a deep-seated culture of violence is pervasive throughout the adolescent facilities at Rikers, and DOC staff routinely utilize force not as a last resort, but instead as a means to control the adolescent population and punish disorderly or disrespectful behavior.”
The following statistics are illustrative:
- In FY 2012, there were 517 reported staff use of force incidents in an average daily adolescent population of 791 in the Robert N. Davoren Center and Eric M. Taylor Center, the two facilities that house the most adolescents. These incidents resulted in 1,059 injuries.
- In FY 2013, there were 565 reported staff use of force incidents in an average daily population at these same two facilities of 682, resulting in 1,057 injuries.
- In FY 2013, there were 845 reported inmate-on-inmate fights involving adolescents in the RNDC and EMTC. This marked an increase from the 795 reported fights in FY 2012.
- During the period April 2012 through April 2013, adolescents sustained a total of 754 visible injuries, according to DOHMH data.
- Adolescents in RNDC and EMTC sustained a total of 96 suspected fractures from September 2011 through August 2012, according to DOHMH data.
- In FY 2013, adolescents were taken to get emergency medical services 459 times.
- In FY 2013, there were 1,118 emergency alarms in the RNDC and EMTC adolescent housing areas, or on average more than three alarms each day.
The report makes the following specific factual determinations:
- Force is used against adolescents at an alarming rate and violent inmate-on-inmate fights and assaults are commonplace, resulting in a striking number of serious injuries, including broken bones and lacerations requiring stitches;
- Correction officers resort to “headshots,” meaning blows to an inmate’s head or facial area, too frequently;
- Force is used as punishment or retribution;
- Force is used in response to inmates’ verbal altercations with officers;
- Use of force by specialized response teams within the jails is particularly brutal;
- Correction officers attempt to justify use of force by yelling “stop resisting” even when the adolescent has been completely subdued or was never resisting in the first place; and
- Use of force is particularly common in areas without video surveillance cameras.
The report further identifies the following systemic deficiencies that are largely responsible for the excessive and unnecessary use of force by DOC staff. Many of these systemic deficiencies also lead to the high levels of inmate-on-inmate violence. These deficiencies include:
- Inadequate reporting by staff of the use of force, including false reporting;
- Inadequate investigations into the use of force;
- Inadequate staff discipline for inappropriate use of force;
- An inadequate classification system for adolescent inmates;
- An inadequate inmate grievance system;
- Inadequate supervision of inmates by staff;
- Inadequate training both on use of force and on managing adolescents; and
- General failures by management to adequately address the extraordinarily high levels of violence perpetrated against and among the adolescent population.
Finally, DOC’s use of prolonged punitive segregation for adolescent inmates is excessive and inappropriate. Adolescent inmates, many of whom have mental illnesses, are routinely placed in what amounts to solitary confinement for weeks and sometimes months at a time. On any given day in 2013, 15-25% of the adolescent population were in punitive segregation, often for infractions involving non-violent conduct. According to census data for December 16, 2013, well over half the adolescents in punitive segregation on that day were serving sentences for rule infractions of 60 days or more.
The report also sets forth the following 10 categories of remedial measures necessary to address the Constitutional violations identified:
1. House adolescent inmates separately in a DOC jail not physically located on Rikers Island;
2. Increase the number of cameras in adolescent areas;
3. Revise use of force policy to clarify prohibited conduct;
4. Ensure that staff submit complete, accurate, and prompt use of force reports, and institute a zero-tolerance policy for failing to report;
5. Ensure that use of force incidents are investigated thoroughly and promptly, and hold staff accountable for biased or incomplete reports and investigations;
6. Ensure that inmates are adequately supervised, intervene to de-escalate fights, and transfer vulnerable or otherwise at risk inmates to alternative housing units;
7. Improve officer training programs on use of force, conflict resolution, reporting use of force, and handling of the adolescent population;
8. Ensure that staff are held accountable and disciplined for the use of excessive and unnecessary force;
9. Develop alternative disciplinary strategies that do not involve lengthy isolation, and prohibit the placement of adolescents with mental health disorders in solitary confinement;
10. Develop and implement a strategic plan to create an institutional culture that does not tolerate violence and holds staff accountable for excessive or unnecessary use of force.
This Office looks forward to engaging in discussions with the City to make system-wide changes that will safeguard the Constitutional rights of adolescents, and prevent them from continuing to suffer unnecessary harm while in City custody.
Mr. Bharara thanked the Board of Correction for the assistance it provided in connection with the Office’s investigation.
This case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Emily E. Daughtry and Jeffrey K. Powell are in charge of the case.
SDNY Rikers Report
Former Senior Managing Director of Investment Bank Sentenced in Manhattan Federal Court to 30 Months for Insider Trading and Making False Statements to FBI AgentsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York announced that FRANK PERKINS HIXON, JR., a former Senior Managing Director of Evercore Group, LLC, a subsidiary of Evercore Partners Inc. (“Evercore”), was sentenced today to 30 months’ imprisonment for insider trading and false statement offenses. In April 2014, HIXON pled guilty before U.S. District Judge Ronnie Abrams to using inside information to trade and cause others to trade in the securities of Evercore, Westway Group Inc. (“Westway”), and Titanium Metals Corporation (“Titanium”), and to making false statements to FBI agents during the course of the investigation into his insider trading. Judge Abrams also imposed today’s sentence.
According to the Information and other documents filed in Manhattan federal court, as well as statements made during court proceedings:
Between April 2010 and January 2014, HIXON was a Senior Managing Director with the Mining and Metals Group of Evercore. HIXON used material non-public information that he acquired as part of his employment with Evercore to trade and cause trades in brokerage accounts belonging to the mother of his young child (“Individual A”), who lived in Austin, Texas, and to HIXON’s father (“Individual B”), who lived in Johns Creek, Georgia.
HIXON’s Insider Trading
In 2011, HIXON led an Evercore team in advising Westway about a non-public offer from another company (“Company A”) to purchase some of its business components and, more generally, in connection with potential transactions concerning Westway’s other business components. Company A’s offer was made in early September 2011, and a Special Committee was formed around that time to consider the offer and other strategic alternatives. Those developments were not announced publicly until December 15, 2011. Meanwhile, between October 21 and December 15, 2011, HIXON purchased, and caused to be purchased, 229,000 shares of Westway for Individual A’s brokerage account by logging into Individual A’s account from various locations, including Evercore’s Manhattan office. As the negotiations for the contemplated Westway transactions became protracted, HIXON sold and caused to be sold about 140,000 of the Westway shares that had accumulated in Individual A’s account, for a profit of approximately $260,000. Later, in 2012, HIXON made additional purchases of Westway shares for Individual A’s account, in advance of a tender offer for Westway’s outstanding equity securities that was announced on December 20, 2012. Profits reaped from sales of those shares amounted to approximately $104,000.
In October 2012, HIXON was invited, along with other Evercore personnel, to meet with a Special Committee of Titanium’s board of directors to discuss a potential engagement in connection with an unspecified $3 billion transaction. At the October 23, 2012, pitch meeting, which HIXON attended by teleconference from London, England, HIXON and the rest of the Evercore team learned that the transaction being considered was an acquisition of Titanium by Precision Castparts Corp. (“PCP”), a manufacturer of complex metal components and products. HIXON also learned the approximate offer price, and that the transaction was likely to close before year’s end.
Within approximately one hour of the meeting with the Special Committee, HIXON began buying 20,000 Titanium shares for Individual A’s account from a mobile device he was using in London, England. Eight days later, after HIXON had returned from England, 20,000 more shares of Titanium were purchased for Individual A’s account, mostly through logins from Evercore’s Manhattan office. That same day, HIXON caused Individual B to buy 15,000 shares of Titanium. After market close on November 9, 2012, Titanium announced PCP’s tender offer for its shares. The next trading day, November 12, 2012, all 40,000 of Individual A’s shares of Titanium were sold for a profit of approximately $180,000. Later that month, Individual B’s Titanium shares were sold for a profit of approximately $70,000.
On January 14, 2013, HIXON attended an Evercore partnership meeting at which he learned that Evercore would be announcing record financial results for the fourth quarter of 2012. During the two days preceding the bank’s January 30, 2013, announcement, HIXON, logging into Individual A’s account from Evercore’s Manhattan offices and from his home in Manhattan, bought 27,000 shares of Evercore for the account. At the same time, HIXON caused Individual B to purchase 10,000 shares of Evercore for Individual B’s account. After Evercore’s earnings release, Individual A and Individual B sold all of their Evercore shares, and reaped a combined profit of approximately $96,000.
Lies to Evercore and the FBI
In February 2013, Evercore asked HIXON to respond to a request from the Financial Industry Regulatory Authority (“FINRA”) and to identify any known names from a list of people and entities that had traded in Titanium stock prior to PCP’s tender offer. Although Individual A and B were both on the FINRA list, HIXON responded by email: “No known relationships.”
When, following further inquiry from FINRA, Evercore confronted HIXON about his failure to identify Individual A—who, as noted above, is the mother of his young child—HIXON claimed not to know Individual A by her legal name, which was what appeared on the FINRA list, and to know her only by a different name that she uses. Documents produced by Evercore, including text messages and emails between HIXON and Individual A, make clear that HIXON had, in fact, long been aware of Individual A’s legal name. And bank records show that he wrote numerous large checks to Individual A, in her legal name, from 2009 to 2010.
Confronted by Evercore with his failure to identify his own father’s name on the FINRA list for Titanium, Hixon asserted that the associated location given for Individual B on the FINRA list, Duluth, Georgia, was inaccurate because Individual B lived in Johns Creek, Georgia. Johns Creek shares a zip code with portions of Duluth, and was only incorporated as its own city many years after Individual B had begun living there. The city listed on the brokerage account statements for Individual B’s account was Duluth, not Johns Creek.
Following Evercore’s inquiries into his conduct, HIXON agreed to swear out a declaration memorializing certain statements he had made upon having been confronted with matters related to Titanium. Among the statements to which Hixon swore was this one: “I did not share any information about Titanium Metals Corporation (‘TIMET’) with anyone outside of Evercore, and was fully aware of my obligations to keep any information I learned about any transaction involving TIMET confidential . . . .”
After swearing out this statement, HIXON called Individual B to alert him to expect an inquiry from an Evercore representative about his Titanium trades. HIXON explained to Individual B that he had provided “privileged information” to Individual B about Titanium, but that he had denied as much in a signed statement to Evercore. HIXON then coached Individual B to lie to Evercore by saying, among other things, that Individual B had researched Titanium and bought the stock on his own. Individual B followed HIXON’s instructions and lied to Evercore’s representative.
On January 27, 2014, FBI agents interviewed Individual A at her home in Austin. She told them, in sum and substance, that her own trading in Titanium and in Westway had been prompted by research she had done, rather than by HIXON. She further claimed that HIXON had never had access to, or traded in, her brokerage account.
On January 28, 2014, HIXON met with two FBI agents and told them, among other things, that he did not have access to and had never traded in Individual A’s brokerage account. HIXON also claimed that he never recommended particular stocks to either Individual A or Individual B, because he did not want to be held responsible for the performance of the stocks he might pick. Regarding Titanium, HIXON said he had been “shocked” by the news that it would be acquired by PCP, and had been surprised at the purchase price.
In addition to the prison sentence, HIXON, 55, of New York, New York, was fined $100,000 and ordered to forfeit $710,000 and to pay $1,204,777.80 in restitution to Evercore. HIXON was also sentenced to three years supervised release.
Mr. Bharara praised the investigative work of the FBI and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action. Mr. Bharara also thanked Evercore for its cooperation in this matter.
This case 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’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Sarah E. McCallum is in charge of the prosecution.
Former NYPD Sergeant Who Participated in $4.7 Million Real Estate Fraud Sentenced to 58 Months in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York announced that JAMES MONAHAN, the owner of a real estate investment company called Panam Management Group, Inc., was sentenced to 58 months in prison. MONAHAN previously pled guilty on May 29, 2013, to one count each of wire fraud, mail fraud and conspiracy to commit wire and mail fraud for operating a fraudulent real estate scheme. In connection with the scheme, MONAHAN obtained approximately $4.7 million from investors for a real estate development project he claimed to be constructing in the Dominican Republic and then misappropriated those funds. The real estate project was never developed and investors lost all of their money. He was sentenced today by U.S. District Judge John G. Koeltl.
According to the Indictment, statements made during MONAHAN’s guilty plea proceeding, and a Complaint previously unsealed in Manhattan federal court:
Beginning in early 2008, MONAHAN, a former sergeant in the New York City Police Department (“NYPD”), negotiated with another real estate investment company to solicit investors for a project he claimed to be constructing in the Dominican Republic. During the negotiations, MONAHAN repeatedly touted his prior service with the NYPD as proof of his trustworthiness and as a reason to invest in the project.
In connection with the project, MONAHAN and a co-conspirator, EDWARD ADAMS, who was a New York based attorney, executed agreements that required investor funds to be deposited into escrow accounts that were to be managed by ADAMS. The agreements required that the majority of the funds be deposited in an account to which the defendants would not have access. From October 2008 through February 2009, approximately $4.7 million in investor funds was deposited into the escrow accounts. Shortly after the deposits were made, the funds were improperly withdrawn from the account by ADAMS without disclosure to investors.
In an effort to hide the fact that the funds had been removed from the escrow account, in May 2009, MONAHAN mailed a forged letter on the stationary of a major bank to investors claiming that their money was safely deposited with that bank. In fact, by June 2009, all of the investor funds had been taken from the escrow accounts. At that point, almost no work had been performed on the purported project in the Dominican Republic and no money was returned to investors.
In addition to the prison term, Judge Koeltl sentenced MONAHAN, 44, of New York, New York, to 3 years of supervised release. MONAHAN was also ordered to forfeit $4.7 million.
Mr. Bharara praised the work of the Federal Bureau of Investigation and the Securities and Exchange Commission.
This case 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’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorney John T. Zach is in charge of the prosecution.
U.S. v. James Monahan Indictment
Former Credit Suisse Vice President Sentenced in Manhattan Federal Court in Connection with Scheme to Hide Losses in Mortgage-Backed Securities Trading BookRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that SALMAAN SIDDIQUI, a former Vice President in the Investment Banking Division of Credit Suisse Group (“Credit Suisse”), was sentenced yesterday to time served in connection with a scheme to hide more than $100 million in losses in a mortgage-backed securities trading book at Credit Suisse. On February 1, 2012, SIDDIQUI pled guilty, pursuant to a cooperation agreement, to the offense of conspiracy to falsify the books and records of the bank. The bonds at issue were composed of subprime residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”). Once discovered, the manipulation of these bond prices contributed to Credit Suisse taking a $2.65 billion write-down of its 2007 year-end financial result. Siddiqui was sentenced by U.S. District Judge Paul A. Crotty.
According to the Information to which Siddiqui pled guilty, and statements made during court proceedings:
SIDDIQUI was employed at Credit Suisse as a Vice President in the bank’s New York office. He reported to David Higgs, a Managing Director, who in turn reported to Kareem Serageldin, the Global Head of the Structured Credit Group in the Securities Department of Credit Suisse’s Investment Banking Division. The Structured Credit Group held and traded ABS (“Asset Backed Security”) cash bonds, which included RMBS and CMBS. SIDDIQUI was a trader and had, on occasion, responsibility for marking the securities in a trading book known as “ABN1.” The ABN1 book was composed primarily of several thousand individual long and short subprime-related positions, and also included other securities. The long positions consisted of, among other things, various types of cash securities, including AAA-rated and non-AAA-rated cash bonds. Until March 2008, ABN1 had a net asset value of approximately $5.35 billion, approximately $3.71 billion of which consisted of ABS cash bonds, including RMBS and CMBS positions.
Pricing of Mortgage-Backed Securities
Credit Suisse traders were required at all relevant times to price securities they held at their fair value, that is, on a “mark-to-market” basis, which was determined by reference to either the current market price of the asset or liability, or the current price for a similar asset or liability. In the absence of a liquid market, Credit Suisse traders were required to look to other indicia in order to determine the fair value of the assets on their books. During this time, the ABX Index served as a benchmark for certain securities backed by home loans. It was widely understood within Credit Suisse that traders were to consult the corresponding ABX indices when pricing RMBS bonds and related products.
The Bond Pricing Scheme
The deterioration throughout 2007 of the real estate market in the United States, including the subprime housing market, led to significant reductions in valuations of mortgage-backed securities. As mortgage delinquencies increased across the country, the value of the securities backed by these mortgages decreased and the market for them became increasingly illiquid.
By late November 2007, SIDDIQUI and his co-conspirators were aware that the market for mortgage-backed securities had declined enormously. On November 28, 2007, Serageldin told SIDDIQUI, Higgs, and another co-conspirator that “the housing market [was] going down the tubes” and that they had to “find a way to sell these bonds,” i.e., the mortgage-backed bonds in ABN1. As they recognized, “[t]hose bonds are going to start trading worse than the [ABX] Index.” SIDDIQUI and his co-conspirators did not sell the bonds because the market prices for the bonds were substantially below the inflated value at which they marked the bonds.
From August 2007 through February 2008, SIDDIQUI and his co-conspirators artificially increased the price of bonds in order to create the false appearance of profitability in the ABN1 trading book. Specifically, Serageldin directed Higgs on numerous occasions to reach specific Profit & Loss (“P&L”) targets on a daily and month-end basis. Higgs, in turn, instructed SIDDIQUI and another co-conspirator to mark the books so as to achieve the particular P&L targets specified by Serageldin, rather than to reflect the fair value of the bonds.
Credit Suisse’s ABN1 Trading Book Was Falsely Inflated as a Result of the Scheme
As a result of the scheme, there was a growing disparity between the values ascribed to the marks in the ABN1 book and the available external benchmarks, such as the ABX Index. From August 2007 through the end of that year, as ABX Index prices fell, bond prices in ABN1 that were supposed to reflect the ABX Index remained effectively stable, thereby giving the false impression to Credit Suisse senior management that the ABN1 book was profitable. On one occasion in January 2008, Serageldin expressed concern to Higgs that the overpriced bonds were at risk of being discovered: “We should mark these down because someone is going to spot this,” he said.
The February 2008 Mark-Down
On March 20, 2008, Credit Suisse issued a press release which announced completion of its internal review and stated that the fair value reduction, or write-down, of the ABS positions – which included but was not limited to the ABNl book – was approximately $2.65 billion. Approximately $540 million of this write-down was attributable to the ABN1 trading book and included ABS cash bonds for the fourth quarter 2007 that SIDDIQUI and his co-conspirators manipulated and inflated in connection with his scheme.
Judge Crotty also ordered SIDDIQUI to pay forfeiture in the amount of $150,000, and a $100 special assessment.
Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance in the investigation of this case.
Yesterday’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’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Eugene Ingoglia is in charge of the prosecution.
U.S. v. Salmaan Siddiqui Information
CEO of Steel Contractor on World Trade Center Site Charged in Manhattan Federal Court Wth Fraud in Connection with Program Designed to Encourage Participation of Minority and Women-Owned BusinessesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Michael Nestor, Acting Inspector General of the Port Authority of New York and New Jersey (the “Port Authority”), Shantelle P. Kitchen, the Acting Special Agent-in-Charge of the New York Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), Douglas Shoemaker, Regional Special Agent-in-Charge of the U.S. Department of Transportation’s Office of the Inspector General (“DOT-OIG”), and Cheryl Garcia, the Special Agent-in-Charge for the New York Regional Office of the U.S. Department of Labor’s Office of the Inspector General (“DOL-OIG”), Office of Labor Racketeering and Fraud Investigations announced that LARRY DAVIS, President and Chief Executive Officer of DCM Erectors, Inc. (“DCM”) was charged today with engaging in a fraudulent scheme to violate the Port Authority’s Minority and Women-Owned Business Enterprise Program (“M/WBE Program”), which is designed to increase the role of minority and women-owned businesses working on its projects. In addition, the principals of the MBE and WBE previously pled guilty before U.S. District Judge Robert P. Patterson for their roles in the fraudulent scheme and agreed to forfeit their crime proceeds. DAVIS surrendered today to a Complaint and was presented this afternoon in Manhattan federal court before U.S. Magistrate Judge Freeman.
Manhattan U.S. Attorney Preet Bharara said: “Larry Davis and his company had the special privilege of working on the World Trade Center Project, which is not only a major project, but is also one that holds a special place in New Yorkers’ hearts. Davis gained contracts for his company worth almost $1 billion for construction work at the World Trade Center. These contracts came with the responsibility to increase the role of minority and women-owned businesses in the project, which are important to both the community and the economy. Instead, as alleged in the Complaint, Davis committed fraud by claiming that work was going to minority and women-owned businesses when it was not. Davis allegedly tried to cheat the system and deserving businesses out of work.”
Port Authority Acting Inspector General Michael Nestor said: “The Port Authority made a commitment to prevent fraud from occurring in the rebuilding of the WTC site and implemented a robust Fraud Prevention Program, including the use of integrity monitors. Unfortunately, the defendant, despite holding nearly $1 Billion in WTC contracts, seized upon the opportunity to engage in fraudulent activity undermining the role of minority and women-owned businesses at the WTC site. His activity was detected by the Inspector General’s integrity monitor on the 1 WTC project, and then working with the US Attorney’s Office and our law enforcement partners, was thoroughly investigated making today’s announcement possible. I want to thank the Port Authority’s World Trade Center Construction Department for their assistance. The Port Authority OIG will continue to work diligently to prevent and detect fraud at the WTC site and on other Port Authority projects.”
IRS-CI Acting Special Agent-in-Charge Shantelle P. Kitchen said: “This investigation uncovered schemes that, for years, exploited a program designed to encourage minority and women-owned business to participate in Port Authority projects. IRS-Criminal Investigation is committed to using its financial investigative expertise to unravel complex frauds. We are proud to be part of the collective law enforcement effort on this investigation; it demonstrates the government’s resolve to protect public funds and its commitment to ensure the public’s trust.”
DOT-OIG Regional Special Agent-in-Charge Douglas Shoemaker said: “Fraud harms the integrity of Port Authority’s M/WBE program and hurts law-abiding, small business contractors trying to compete on a level playing field. Working with our Federal, State, and local law enforcement and prosecutorial partners, we will continue our vigorous efforts to pursue those who violate the law, and expose and shut down fraud schemes that illegally take advantage of minority and women-owned business enterprises.”
According to the Complaint, Informations, other documents filed in the case, and statements made today in Manhattan federal court:
DCM specializes in steel erection for large construction projects. Since at least March 1999, DAVIS has owned DCM and served as its President and Chief Executive Officer. In 2007, DCM was awarded an approximately $256 million trade contract for work to be performed on One World Trade Center and in 2009, DCM was awarded an approximately $330 million trade contract for work to be performed on the World Trade Center Port Authority Trans-Hudson (PATH) Transportation Hub (collectively, the “World Trade Center Project”).
The work to be performed by DCM for the World Trade Center Project included, but was not limited to, drafting and engineering, surveying, structural steel supply and erection, and supply and installation of metal decking. As a result of change orders and changes in the scope of work, among other things, DCM’s contracts for the World Trade Center Project increased during the course of the Project to almost $1 billion.
The Port Authority’s M/WBE Program is designed to ensure that M/WBEs receive work on its projects and applies to the World Trade Center Project. Pursuant to the M/WBE Program, all contractors, including trade contractors such as DCM, are obligated to make good faith efforts to enter into subcontracts with M/WBEs, the total value of which must equal at least 17 percent of the overall contract amount (12 percent for MBEs and five percent for WBEs).
In order to satisfy the M/WBE Program, DAVIS engaged in a fraudulent scheme in which he caused DCM to claim that certain work was performed by a minority-owned business, Solera/DCM Joint Venture LLC (ASolera/DCM@), and a woman-owned business, GLS Enterprises, Inc. (“GLS”), when, in truth and in fact, DCM itself performed such work or arranged for such work to be performed by other non-M/WBE subcontractors and GLS was not an independent WBE.
Solera/DCM is a joint venture between DCM and a minority owned business, Solera Construction, Inc. (“Solera”), which is owned by JOHNNY GARCIA (“GARCIA”), a qualified minority business owner who previously pled guilty for his role in the fraudulent scheme. Solera/DCM is owned 60 percent by Solera and 40 percent by DCM. DCM and DAVIS established Solera/DCM as a joint venture majority owned by Solera with the express purpose of using it to satisfy MBE requirements on public construction projects.
From 2009 through in or about August 2012, DAVIS caused DCM to misrepresent to the Port Authority that Solera/DCM performed certain work on the World Trade Center Project when, in truth and in fact, the work, including metal decking and steel procurement, was performed by a non-minority contractor or by DCM itself, respectively. To facilitate the fraud, DAVIS directed Solera/DCM to place laborers who worked for a non-minority contractor performing metal decking on Solera/DCM’s payroll and then invoice DCM for such laborers= time and also created certain invoices and directed GARCIA to sign them to make it appear as if Solera/DCM procured steel, when, in truth and in fact, DCM did so. DCM claimed MBE credit for work purportedly performed by Solera/DCM on the World Trade Center Project in the total amount of approximately $70 million. As part of the fraudulent scheme, DCM paid GARCIA a total of at least $2 million ($150,000 in annual salary and additional monthly payments).
The owner of GLS is GALE D’ALOIA (“D’ALOIA”), who served as GLS’s Chairwoman and Chief Executive Officer and previously pled guilty for her role in the fraudulent scheme. Even though GLS was nominally independent from DCM and DAVIS, GLS=s only client and source of revenue was DCM (and its affiliates) and D’ALOIA performed the same payroll management duties under the name GLS that she previously had performed in her role as an employee of DCM. D’ALOIA also reported to DAVIS whose approval was required for any major expenditures and which were paid for by DCM. Accordingly, under the WBE program, GLS was not a bona fide independent business because its viability depends on its relationship with another firm or firms, namely DCM.
From 2009 through in or about September 2012, DAVIS caused DCM to fraudulently claim WBE credit for GLS’s payroll management work and also misrepresented to the Port Authority that GLS performed surveying work on the World Trade Center Project when, in truth and in fact, the surveying work was performed by DCM itself. To facilitate the fraud, DAVIS directed GLS to place unionized surveyors who had been on DCM=s payroll on its payroll and then to certify such payroll and invoiced DCM for the workers even though DCM continued to actually supervise them. As compensation for engaging in the fraudulent scheme, DAVIS paid GLS 10 percent of each week’s total payroll for the surveyors, which totaled approximately $575,000.
DAVIS, 63, of Mississauga, Ontario, Canada, is charged in two counts with wire fraud and a conspiracy to commit wire fraud. He faces a maximum sentencing on each charge of 20 years in prison, three years of supervised release, and a $100 special assessment.
GARCIA, 48, of Ossining, New York, is charged in two counts with wire fraud and a conspiracy to commit wire fraud. He faces a maximum sentence on each charge of 20 years in prison, three years of supervised release, and a $100 special assessment. As part of GARCIA’s plea agreement, he has agreed to forfeit $669,000. A sentencing hearing date for GARCIA has not yet been scheduled.
D’ALOIA, 66, of Charleston, South Carolina, is charged in two counts with wire fraud and a conspiracy to commit wire fraud. She faces a maximum sentence on each charge of 20 years in prison, three years of supervised release, and a $100 special assessment. As part of D’ALOIA’s plea agreement, she has agreed to forfeit $575,000. A sentencing hearing date for D’ALOIA has not yet been scheduled.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the investigative work of the Port Authority’s Office of Inspector General, IRS-CI, DOT-OIG, and DOL-OIG.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecutions.
U.S. v. Larry Davis Complaint
Three Insurance Agents Sentenced in Manhattan Federal Court for Elaborate Multimillion-Dollar Life Insurance SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MICHAEL BINDAY, the president and owner of a Scarsdale-based insurance agency, JAMES KEVIN KERGIL, an insurance agent based in Peekskill, New York, and MARK RESNICK, an insurance agent based in Orlando, Florida, were sentenced today to prison terms of 12 years, nine years, and six years, respectively, for their involvement in a massive scheme to defraud life insurance companies in connection with the issuance of stranger-originated life insurance (“STOLI”) policies. BINDAY, KERGIL, and RESNICK were found guilty of mail fraud, wire fraud, and conspiracy to commit mail and wire fraud in October 2013, following a 12-day jury trial before U.S. District Judge Colleen McMahon, who also imposed today’s sentences. KERGIL and RESNICK were also found guilty of conspiring to obstruct justice.
Manhattan U.S. Attorney Preet Bharara said: “For several years, the defendants carried out an elaborate scheme to deceive life insurance providers and trick them into issuing policies for unintended beneficiaries. Based on the defendants’ web of lies, the insurance companies were misled to believe they were issuing policies for wealthy senior citizens when in reality, those seniors were straw applicants who had no ability to pay the premiums and had been recruited by the defendants who were seeking big commissions for themselves. The defendants now will have to forfeit the proceeds of their scheme and, more importantly, their liberty.”
According to the evidence at trial, documents filed in Manhattan federal court, and statements made at today’s sentencing and other court proceedings:
BINDAY ran a business in Scarsdale, New York called R. Binday Plans and Concepts, Ltd. (“R. Binday”). R. Binday purported to be a general agency that secured high face-value life insurance policies for wealthy “clients.” In truth, from 2006 through early 2009, BINDAY and his company were engaged almost exclusively in procuring STOLI policies – policies on the lives of seniors for the benefit of investors who were strangers to them – by means of false and fraudulent applications.
The various life insurance companies on whose behalf R. Binday claimed to act as agent (the “Insurers”) expressly prohibited their agents from soliciting and submitting STOLI business. In pricing and underwriting universal life insurance, the Insurers relied on the basic premise that the people applying for the policies – rather than professional investors – were the ones seeking and planning to pay for these high-face-value policies. These assumptions permitted the Insurers to offer lower prices than they could have without the assumptions. Accordingly, the Insurers asked questions on their universal life applications specifically designed to identify STOLI policies and to prevent such policies from being issued. The Insurers also required their agents to certify that all information in the life insurance applications – including the answers to these questions and the applicants’ financial information – was accurate.
BINDAY, with the help of R. Binday office workers and independent insurance agents, including KERGIL and RESNICK, prepared and submitted applications for life insurance that were riddled with lies to conceal from the Insurers that the applications were for STOLI policies and to trick the Insurers into issuing those policies. The insurance applications were designed to falsely make it appear to the Insurers that the senior citizens purportedly applying for life insurance were wealthy individuals who wanted insurance for their “estate planning” needs. In fact, unbeknownst to the Insurers, most of the seniors could not possibly afford these policies, and the financial information included in the applications was completely fabricated. In reality, the seniors were people of modest means who had been recruited by the defendants to serve as straw insureds so that investors could insure the seniors’ lives, pay the premiums until death, and then reap what BINDAY and his associates had projected would be massive profits – at the expense of the Insurers. Yet BINDAY, KERGIL, RESNICK, and others certified to the Insurers, over and over, that these were not applications for STOLI policies, and that the information on the applications was accurate to the best of their knowledge.
In addition to preparing and submitting blatantly false insurance applications, BINDAY, KERGIL, and RESNICK supported their fraud with bogus back-up documentation and supposedly “independent” verification papers, all predicated on false financial figures and other lies. And once a policy had been issued based on these falsehoods, the defendants arranged elaborate bank transactions to create the false impression that the seniors – rather than investors – were the ones paying the premiums on the policies. The defendants also instructed insureds to refuse to speak to Insurer representatives and, if conversation could not be avoided, to lie.
For every stealth STOLI policy issued, the Insurers paid out a substantial commission, usually in the six figures. The defendants split these commissions with the investors on whose behalf they were secretly operating, generally pocketing about half for themselves. Collectively, the defendants made millions in commissions over just a few years from their fraudulent STOLI applications.
To cover up and perpetuate their fraud, the defendants lied to governmental authorities and conspired to destroy evidence. First, in 2009, during sworn testimony before the New York State Insurance Department, BINDAY falsely claimed he was not involved in procuring STOLI policies and that he would never submit a life insurance application knowing it to be for a STOLI policy. Later, in 2010, after FBI agents approached RESNICK with questions about stealth STOLI policies he had submitted, all three defendants and another insurance agent conspired to destroy documents and electronic records related to their fraud.
In addition to their prison sentences, BINDAY, 50, of New York, New York, KERGIL, 59, of Peekskill, New York, and RESNICK, 58, of Orlando, Florida, were ordered to pay $39,308,305.63 in restitution, an amount for which they are jointly and severally liable. Additionally, BINDAY was ordered to forfeit $13,522,424.64; KERGIL was ordered to forfeit $15,623,737.64; and RESNICK was ordered to forfeit $14,315.868. Portions of the forfeiture judgments carry joint and several liability.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. McCallum and Eun Young Choi are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is handling the forfeiture aspects of the prosecution.
Statement of Manhattan U.S. Attorney Preet Bharara on the Penalties Imposed by the Court on Countrywide, Bank of America, and Rebecca Mairone for Engaging in Mortgage Fraud Totaling in Excess of One Billion DollarsRead the Press Release
“Today, Judge Rakoff imposed stiff penalties in a case brought by this Office to punish and deter the fraudulent and reckless lending activities of a financial institution leading up to the financial crisis in 2008.
On October 23, 2013, after a four-week trial, a jury sent a loud and clear message to Wall Street that this kind of conduct will not be tolerated, finding that Countrywide and its former executive, Rebecca Mairone, committed mail and wire fraud by selling thousands of toxic mortgages to Fannie Mae and Freddie Mac with lies that they were quality investments.
Today that message was reinforced through the imposition of tough civil penalties against Countrywide, Bank of America, which purchased Countrywide in 2008, and Mairone. Judge Rakoff ordered Countrywide and Bank of America to pay $1,267,491,770, based on the amount that Countrywide falsely induced the victims, Fannie Mae and Freddie Mac, to pay for fraudulently misrepresented loans and ordered Mairone to pay a civil penalty to the Government of $1,000,000. In determining the penalty amounts, the Court highlighted the egregious nature of the fraud, stating that ‘[the bank’s] HSSL [loan] process . . .was from start to finish the vehicle for a brazen fraud by the defendants, driven by a hunger for profits and oblivious to the harms thereby visited, not just on the immediate victims but also on the financial system as a whole.’
Throughout a year-long litigation and month-long trial, Bank of America claimed that the Government had no case. After the jury said otherwise, Bank of America claimed that it should pay no penalty at all, arguing that the victims were not harmed and that the bank did not profit from this massive fraud. Judge Rakoff’s opinion squarely and emphatically rejects the bank’s claims which, besides ignoring the victims’ out-of-pocket losses, also ignored that the fraudulent conduct required penalties to be paid for punitive and deterrence purposes as well.
This is the first case in which a bank or any of its executives has been found liable under FIRREA for mortgage fraud leading up to the financial crisis, and now it is the first case in which civil penalties have been imposed upon a bank or any of its executives following such a finding. The jury verdict and subsequent imposition of penalties make clear that mortgage fraud cannot be viewed as simply another cost of doing business in the financial world. This Office will continue to investigate and vigorously prosecute mortgage fraud in all of its forms using all of the civil and criminal tools at its disposal.”
U.S. v. Countrywide, et al. (Bank of America) Opinion and Order
Manhattan U.S. Attorney Announces Charges Against Supplier of “Molly” That Resulted in A Death at Electric Zoo ConcertRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and James J. Hunt, Acting Special Agent in Charge, Drug Enforcement Administration (“DEA”), New York Division, announced today that PATRICK MORGAN was arrested this morning in Buffalo, NY on narcotics distribution and narcotics conspiracy charges. MORGAN is expected to be presented later today in the Western District of New York before United States Magistrate Judge Hugh B. Scott.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Patrick Morgan sold drugs that, far from enabling a good time, resulted in tragedy with the death of Jeffrey Russ. It bears repeating that every time people use drugs like “Molly” they are rolling the dice with their own lives, which is a foolish and senseless wager.”
DEA Acting Special Agent-in-Charge James J. Hunt said: “Synthetic drugs such as ‘Molly’ are extremely dangerous and have grown increasingly more popular at events such as music festivals. Those who ingest it, even if for the very first time, are putting themselves at risk because they have no idea what they are putting into their bodies. DEA and our law enforcement partners will continue to investigate any and all drug trafficking organizations that place lives at risk by selling these dangerous substances.”
The following allegations are based on the Complaint unsealed in Manhattan federal court:
In early August 2013, PATRICK MORGAN sold pills commonly called “Molly,” which contained 4-methylenedioxymethaphetamine (MDMA) and 3,4-methylenedioxymethcathinone (methylone), to three individuals (the “Three Individuals”), including Jeffrey Russ, for their use at an electronic music concert in Buffalo, New York.
In mid-August 2013, the Three Individuals pooled their money in order to buy additional Molly pills from MORGAN. The Three Individuals intended to consume and distribute these Molly pills at the Electric Zoo music festival. Electric Zoo was a three-day, outdoor electronic music festival on Randall’s Island, New York, scheduled to be held from August 30, 2013 through September 1, 2013. Attendance at Electric Zoo was estimated to be over 130,000 people.
In mid-August 2013, MORGAN sold one of the Three Individuals approximately 80 Molly pills that MORGAN was told the Three Individuals intended to consume and distribute at Electric Zoo.
On August 30, 2013, the Three Individuals, including Jeffrey Russ, attended Electric Zoo and consumed some of the Molly pills that were purchased from MORGAN. Toward the end of the concert on August 30, 2013, Russ collapsed and had a seizure. Russ was treated by emergency medical technicians on Randall’s Island and ultimately taken to Harlem Hospital. When Russ arrived at Harlem Hospital, he was unresponsive. On August 31, 2013, at approximately 3:21 a.m., Russ died at Harlem Hospital from acute intoxication by the combined effect of MDMA and methylone with hyperthermia.
MORGAN, 23, of Buffalo, New York, is charged with one count of conspiring to distribute narcotics, and one count of distributing narcotics, each of which carries a maximum term of 20 years in prison.
Mr. Bharara praised the investigative work of the Drug Enforcement Administration.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorney Joshua A. Naftalis of the Narcotics Unit is in charge of the prosecution.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Patrick Morgan Complaint
Manhattan U.S. Attorney and FBI Assistant Director in Charge Announce Commodities Fraud and Related Charges Against Principals of Commodities Trading PoolRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), yesterday announced the unsealing of commodities fraud, securities fraud, wire fraud, and conspiracy charges against MICHAEL JAMES SEWARD, president of the now-defunct, unregistered commodities trading pool SK Madison Commodities, LLC (“SK Madison”). As alleged, SEWARD and his former business partner, YAN KAZIYEV, a/k/a “Ian Kaziyev,” convinced investors to part with approximately $1.3 million under false pretenses, and then pocketed approximately $700,000 of those funds for themselves. SEWARD is currently detained in Pinellas County, Florida on unrelated state felony charges.
Also unsealed yesterday were identical charges against KAZIYEV, as well as KAZIYEV’s June 25, 2014 guilty plea, pursuant to a cooperation agreement, to all counts, before the Honorable Paul A. Crotty.
Manhattan U.S. Attorney Preet Bharara said: “Yan Kaziyev and, as alleged, Michael Seward fraudulently convinced investors to put their money into an unregistered commodities trading pool, and then used that money for their personal gain. This case shows that investors should be aware of the potential for fraud in commodities trading pools, as they should be in any other securities investment.”
Assistant Director in Charge George Venizelos said: “Like we’ve seen time and time again, the defendants cooked up a scheme to defraud unwitting investors. Under the guise of a profitable commodity trading pool and an investment in a social media company, the defendants failed to do anything except steal from those who trusted them. Today the game is up. The defendants find themselves on the wrong side of the law and charged in Manhattan Federal Court.”
According to the allegations in the Indictment against SEWARD and the Information against KAZIYEV unsealed today:
From July 2011 through May 2013, SEWARD and KAZIYEV, through SK Madison, engaged in a scheme to defraud over 20 individuals by convincing them to invest approximately $1.3 million into the unregistered commodities pool they were operating. To lure investors, SEWARD and KAZIYEV made false representations about the success of their pool and, in some cases, about the very nature of the investments they were soliciting.
For example, from around July 2011 to around October 2011, SEWARD and KAZIYEV convinced two investors to pay approximately $330,000 to an entity called SK Madison Partners (“SKM Partners”), which these investors understood would be purchasing stock in an Internet social media company. SEWARD, KAZIYEV, and another individual took hefty “commissions” for themselves out of the funds and invested the remainder not in any Internet social media company but in the SK Madison commodities trading pool. From there, SEWARD and KAZIYEV withdrew yet more of funds for their own benefit.
To those investors who knew they were investing in SK Madison’s commodities pool, SEWARD and KAZIYEV lied about the success the pool had enjoyed. They mailed and emailed false “track record” reports reflecting purported trading profits in most months from August 2011 through dates in 2012 and 2013. These profit figures were fictitious, even for those months in which the SK Madison pool had turned a profit, the amount of profit bore no relationship to the figure reported in the “track record.” And the “track record” reports reflected trading profits in months in which the pool had in fact suffered significant trading losses. Similarly false profit figures were published to investors through monthly account statements.
In or about the spring and summer of 2013, when confronted by members of the National Futures Association (“NFA”) and the Commodity Futures Trading Commission (“CFTC”) with their large withdrawals from SK Madison’s trading and bank accounts for their own benefit, SEWARD and KAZIYEV sought to justify the withdrawals by citing “commissions” of either $55 or $110 per transaction that SK Madison purportedly had charged for operating the commodities pool. In fact, although SK Madison’s prospectus alerted investors that a $55 commission would be levied per completed transaction, the withdrawals that SEWARD and KAZIYEV made and caused to be made from the accounts bore no relationship to the number of trades effectuated in the accounts, and far exceeded what might have been calculated using the $55 commission figure.
SEWARD, 35, of Largo, Florida, and KAZIYEV, 36, of Queens, New York, are both charged with commodities fraud, securities fraud, wire fraud, and conspiracy to commit commodities, securities, and wire fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense. The securities fraud charge carries a maximum sentence of 20 years in prison and a fine of the greater of $5 million or twice the gross gain or loss from the offense. The commodities fraud charge carries a maximum sentence of 10 years in prison and a fine of the greater of the costs of the prosecution plus $1 million or twice the gross gain or loss from the offense. The wire fraud charge carries a maximum sentence of 20 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense.
Mr. Bharara praised the investigative work of the FBI and thanked the CFTC, which has filed civil charges in a separate action. Mr. Bharara also thanked the NFA for its assistance in this investigation.
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’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Sarah E. McCallum is in charge of the prosecution.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
CFTC v. SK Madison Yan Kaziyev Information
CFTC v. SK Madison Michael Seward IndictmentMan from Dominican Republic Sentenced in White Plains Federal Court for Identity Theft and Failure to Register as A Sex OffenderRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that RAFAEL CEPEDA, a man originally from the Dominican Republic, was sentenced yesterday in White Plains federal court to 42 months in prison for making false claims of United States citizenship, failing to register as a sex offender, and aggravated identity theft. CEPEDA was also ordered to be removed from the United States. CEPEDA pled guilty on March 18, 2014. He was sentenced by U.S. District Judge Cathy Seibel.
According to documents filed in this case and statements made in court:
For over 20 years, CEPEDA lived under an illegally assumed identity as a person who was a U.S citizen, when in fact CEPEDA was never a U.S. citizen. CEPEDA even served multiple prison sentences under the assumed identity. Among CEPEDA’s past crimes was a 2008 conviction in New York for Attempted Course of Sexual Conduct Against a Child, for which he was sentenced to two-to-four years in prison. As a result of this conviction, CEPEDA was required to register as a sex offender for life. Nevertheless, in 2013, CEPEDA moved from the State of New York to Hartford, Connecticut, and failed to register as a sex offender in Connecticut.
Also, in 2010, CEPEDA applied for a U.S. passport using the assumed identity of a true U.S. citizen, as well as a birth certificate and New York State ID card.
In addition to the prison term, CEPEDA, 52, of Hartford, Connecticut, was also sentenced to five years of supervised release, and was ordered to be removed from the United States upon completion of his sentence.
Mr. Bharara praised the investigative work of the U.S. Immigration and Customs Enforcement’s (“ICE”) Enforcement and Removal Operations (“ERO”), the U.S. Department of State, Bureau of Diplomatic Security, and the U.S. Marshals Service.
The case is being handled by the Office’s White Plains Unit. Assistant United States Attorney Daniel P. Filor is in charge of the prosecution.
Statement of Manhattan U.S. Attorney Preet BhararaOn the Conviction of Daniel HalloranRead the Press Release
“With today’s verdict of guilty reached by an impartial and independent jury, the clean-up of corruption in New York continues in courtrooms. As the jury unanimously found, Daniel Halloran played a key role in two distinct political corruption schemes: first, for $20,000, Halloran was willing and able to serve as a go-between to deliver bribes to political party officials, and second he also took nearly $25,000 in cash and illegal campaign contributions to steer $80,000 in City Council money to other bribe payers. Dan Halloran was the lone defendant in the trial that just ended in his conviction, but he is unfortunately not alone in a crowded field of New York officials who are willing to sell out their offices for self-enrichment. This Office will continue the vigorous prosecution of political corruption to secure for the people of New York – regardless of party affiliation – what they deserve: the honest labors of their elected representatives. And we will continue to partner with the FBI, whose outstanding investigative work in this case was instrumental to achieving a just result.”