Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, announced that AVI AYACHE and YARON BAR, two leaders of an Israeli lottery fraud ring, were sentenced today by Chief United States District Judge Loretta A. Preska to 13 years and 12 years in prison, respectively, on mail and wire fraud charges. All 12 members of the ring who were charged in this case have pleaded guilty. With this sentence, nine of the twelve defendants have been sentenced. Before today’s sentencing, the sentences have ranged from 40 to 144 months in prison. Three remaining sentencings are scheduled for July and August, 2014.

Manhattan U.S. Attorney Preet Bharara said: “Avi Ayache and Yaron Bar were leaders of a predatory group that targeted elderly people in the U.S., conning them into believing they were lottery winners. Preying on their victims’ dreams of financial comfort, Ayache and Bar bilked them out of substantial portions of their life savings. Now Ayache and Bar will spend a substantial portion of their lives in prison.”

According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case:

From approximately 2005 through 2009, the defendants participated in a phony “lottery prize” scheme that targeted victims, mostly elderly, in the United States. The defendants identified victims, or “leads,” by purchasing from list brokers the names and contact information of U.S. residents who subscribed to sweepstakes lotteries. Then, operating out of telemarketing boiler rooms run by “Managers,” “Qualifiers” called the victims and, using a script, falsely told the victims they had won a substantial cash prize, and asked them about their assets. If the victim had sufficient assets, the victim was transferred to a “Shooter,” who purported to be an attorney in the U.S., and who told the victims that to obtain the prize, they had to pay several thousands of dollars in fees and taxes. Victims who complied were typically contacted again by Shooters and induced to send additional funds, amounting to tens and sometimes hundreds of thousands of dollars. In reality, there was no lottery prize and the victims were ultimately bilked out of an estimated total of more than $8 million.

The defendants operated multiple boiler rooms that used the names of various sham law firms purportedly located in New York, including law firms named “Abrahams Kline,” “Bernstein Schwartz,” “Steiner, Van Allen, and Colt,” “Bloomberg and Associates,” and “Meyer Stevens.” The defendants further used various aliases and call forwarding telephone numbers to mask the fact that the defendants were located in Israel. The defendants also possessed bank accounts in Israel, Cyprus, and Uganda, to which illegal proceeds were wired. In furtherance of the fraudulent scheme, the defendants even sent shipments of flowers and gift baskets to various victims in the United States in order to “congratulate” them on their purported lottery winnings.

In addition to the prison terms, Judge Preska also ordered AYACHE and BAR to forfeit $8.2 million and pay restitution of $8.2 million.

Eleven of the twelve defendants were arrested in Israel in July 2009. All 11 were extradited to the United States. A twelfth defendant, Matthew Getto, was arrested in July 2009 at Newark International Airport as he attempted to board a flight for Israel.

The earlier sentencings of the members of the lottery fraud scheme included the following:

• On June 5, 2012, Avi Perov was sentenced by the Honorable Barbara S. Jones to 51 months in prison on wire fraud charges;
• On August 4, 2011, Yulia Rayz was sentenced by the Honorable Barbara S. Jones to 40 months in prison on wire fraud charges;
• On December 15, 2011, Naor Green was sentenced by the Honorable Barbara S. Jones to 40 months in prison on wire fraud charges;
• On June 7, 2012, Ian Kaye was sentenced by the Honorable Barbara S. Jones to 51 months in prison on wire fraud charges;
• On April 18, 2013, Limor Cohen was sentenced by the Honorable Loretta A. Preska to 97 months in prison on wire fraud charges;
• On December 12, 2013, Matthew Getto was sentenced by the Honorable Harold Baer to 144 months in prison on wire fraud charges.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorney Peter M. Skinner is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., Special Agent-in-Charge of the New York Office of U.S. Immigration

and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the return to the Mongolian government of the fossilized remains of over 18 dinosaur skeletons, including two Tyrannosaurus bataar skeletons that were unlawfully taken from Mongolia. The Office already returned one Tyrannosaurus bataar, fully prepared for display, to Mongolia in a ceremony held in May 2013.

The repatriation represents the culmination of a two-year effort to return numerous dinosaur fossils that were unlawfully taken from Mongolia, some of which were illegally smuggled into the United States using false customs importation documents, and some of which were voluntarily forfeited to the United States for return to Mongolia despite never having been brought into the country. That two-year effort included two successful civil forfeiture law suits, a successful criminal investigation and prosecution, and separate civil actions undertaken to secure the transfer of the groups of fossils.

The Mongolian dinosaur fossils being returned today include:

• Two additional Tyrannosaurus bataar skeletons;
• A skeleton of a Saurolophus angustirostris, a duckbilled, plant-eating dinosaur, and a partial skeleton of an additional Saurolophus;
• Two freestanding Oviraptors, dinosaurs known (perhaps apocryphally) for eating the eggs of other dinosaurs;
• A rock matrix containing at least four Oviraptors;
• A rock slab containing two Gallimimus skeletons, which were large, ostrich-like dinosaurs;
• Two additional Gallimimus skeletons;
• The partial skeleton of an Ankylosaurus, a dinosaur known for having a heavily armored body and a bony club-like tail;
• The skeleton of a Protoceratops, a dinosaur about the size of a large dog with a distinctive neck frill;
• One restored composite “egg nest” display piece made of composite dinosaur egg fossils;
• Several small, unidentified prehistoric lizards and turtles; and
• Numerous partial skeletons.

Manhattan U.S. Attorney Preet Bharara said: "Today, we return a veritable nest of dinosaurs that includes two additional Tyrannosaurus bataar skeletons, along with numerous other examples of fossils of dinosaurs native to the Gobi Desert. This is a historic event for the U.S. Attorney’s Office, in addition to being a pre-historic event, and we are proud to participate in the return of these dinosaur skeletons to their rightful home.”

HSI Special Agent-in-Charge James T. Hayes, Jr., said: “The fossils returned today do not belong in the hands of any private collection or one owner. They belong to the people of Mongolia where they will be displayed in their national museum alongside the Bataar ICE repatriated last year. HSI will not allow the illicit greed of some to trump the cultural history of an entire nation.”

According to the Criminal Complaint and Information, related Civil Complaints and related filings, and statements made in Court:

Civil and Criminal Actions

In March 2012, the Government initiated a civil forfeiture action in order to recover a nearly complete Tyrannosaurus bataar skeleton (the “First Bataar”), which was sold at auction for over $1 million. Tyrannosaurus bataar was a carnivorous dinosaur that lived during the late Cretaceous period, approximately 70 million years ago. The Tyrannosaurus bataar, which has only been found in what is now Mongolia, was first discovered in 1946 during a joint Soviet-Mongolian expedition to the Gobi Desert in the Mongolian Ömnögovi Province. Mongolian law enacted in 1924 declares dinosaur fossils to be the property of the Government of Mongolia, and criminalizes their export from the country.

The First Bataar had been taken from Mongolia and sent to Great Britain without permission from the Mongolian government. It was then imported into the United States from Great Britain in a fashion contrary to federal law, using customs importation documents that contained numerous false statements.

By 2012, Texas-based Heritage Auctions, Inc., offered the First Bataar at an auction conducted in New York City. Prior to the sale, the Government of Mongolia sought, and was granted, a Temporary Restraining Order prohibiting the auctioning, sale, release, or transfer of the Tyrannosaurus Bataar Skeleton by a Texas State District Judge. Notwithstanding the state court order, Heritage Auctions completed the auction and the Tyrannosaurus Bataar Skeleton sold for over $1 million. However, the sale was contingent upon the outcome of any court proceedings instituted on behalf of the Mongolian Government.

On May 22, 2012, the President of Mongolia, Tsakhia Elbegdorj, sent a letter to the United States Attorney’s Office for the Southern District of New York formally requesting the Office’s “assistance in preserving Mongolia’s cultural heritage in this rare national treasure by . . . seeking forfeiture of . . . the Tyrannosaurus bataar skeleton.”

On June 5, 2012, at the request of the President of Mongolia, several paleontologists specializing in Tyrannosaurus bataars examined the First Bataar and concluded that it is in fact a Tyrannosaurus bataar skeleton that was unearthed from the western Gobi Desert in Mongolia between 1995 and 2005. Shortly thereafter, on June 18, 2012, the United States Attorney’s Office filed a civil action seeking the forfeiture of the Bataar skeleton and the District Court issued a warrant authorizing ICE’s Homeland Security Investigations (HSI) to seize the Bataar skeleton.

On September 24, 2012, the United States Attorney’s Office filed an amended civil forfeiture Complaint which included the original paleontological reports as well as additional reports from those same paleontologists and other paleontologists. The additional reports definitively stated that given the particularized coloring of the bones of the First Bataar skeleton, the First Bataar skeleton undoubtedly came from Mongolia’s Gobi Desert.

On October 17, 2012, Eric Prokopi, a self-described “commercial paleontologist” who had imported the First Bataar, was arrested on one count of conspiracy to smuggle illegal goods, possess stolen property, and make false statements, one count of smuggling goods into the United States, and one count of interstate sale and receipt of stolen goods. Prokopi owned and ran a business out of his Florida home in which he bought and sold whole and partial fossilized dinosaur skeletons. The charges stemmed from Prokopi’s illegal importation of the Bataar and other dinosaur fossils into the United States, including the remains of a small, flying dinosaur from what is now China that had previously been administratively forfeited.

Not long after his arrest, on December 27, 2012, Prokopi pled guilty to engaging in a scheme to illegally import the fossilized remains of numerous dinosaurs that had been taken out of their native countries illegally and smuggled into the United States. As part of his plea agreement, Prokopi consented to the forfeiture of the First Bataar. Prokopi also agreed to forfeit other Mongolian dinosaur fossils that the investigation had uncovered, including a second nearly complete Tyrannosaurus bataar skeleton (the “Second Bataar”), a Saurolophus Angustirostris skeleton (the “Saurolophus,” a duckbilled dinosaur that lived during the Cretaceous period), and an Oviraptor skeleton, all of which had been in his possession but have since been recovered by the U.S. Attorney’s Office. He further agreed to forfeit his interest in a third Tyrannosaurus bataar skeleton (the “Third Bataar”), which was located in Great Britain.

On February 2, 2013, the Government filed a second civil action against several of the dinosaur fossils that had been in Prokopi’s possession. These included the Saurolophus, possession of which had been transferred to a California auction house, and a matrix containing at least five Oviraptor skeletons (the “Raptor Matrix”), which the California auction house had, at one point, put up for sale.

Recovery and Repatriation of Dinosaur Skeletons

On May 6, 2013, and May 9, 2013, the civil actions concluded when U.S. District Judge P. Kevin Castel signed judgments forfeiting the First Bataar, the Second Bataar, the Saurolophus, two Raptors, and the Raptor Matrix for the purpose of their return to the Government of Mongolia. The California auction house agreed to assist in facilitating the return of the Saurolophus and the Raptor Matrix to Mongolia, consenting to the forfeiture of both items and agreeing to furnish the United States Attorney’s Office with a metal stand used to display the Saurolophus.

Separately, on May 1, 2013, U.S. District Judge Harold Baer signed a stipulation arranging for the return of, among other fossils, the Third Bataar; a rock slab containing two Gallimimus skeletons (the “Gallimimus slab”), two additional Gallimimus skeletons, an Ankylosaurus skeleton and Ankylosaurus skull, a Protoceratops skeleton, and one restored composite egg nest display piece made of composite dinosaur egg fossils (together, the “Moore dinosaurs”) provided to the United States Attorney’s Office by Christopher Moore, a British citizen and onetime business partner of Eric Prokopi. During the U.S. Attorney’s Office’s investigation, Moore informed the Government of his possession of the Moore dinosaurs. Upon being advised that the Moore dinosaurs had been stolen from Mongolia, Moore agreed to send them to the United States Attorney’s Office for their return to Mongolia.

On July 3, 2014, Prokopi was sentenced to a term of three months in prison by U.S. District Judge Alvin K. Hellerstein.

The First Bataar was formally returned to the Government of Mongolia in a Repatriation Ceremony held in New York on May 6, 2013. The remaining dinosaur fossils will be returned to the Government of Mongolia today.

Mr. Bharara praised the investigative work of HSI. Mr. Bharara also thanked Mongolian authorities for their assistance in the case.

The forfeiture actions were handled by the Money Laundering and Asset Forfeiture Unit of the U.S. Attorney's Office. Assistant U.S. Attorneys Sharon Cohen Levin and Martin S. Bell were in charge of the litigation. The criminal case was handled by the Complex Frauds Unit. Martin S. Bell was in charge of the prosecution.

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 BNP Paribas S.A. (BNPP), a global financial institution headquartered in Paris, pled guilty today before U.S. District Judge Lorna G. Schofield to a one-count Information charging the bank with conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA), for its role in processing billions of dollars of U.S. dollar transactions through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions from 2004 through 2012.

At today’s proceeding, Judge Schofield accepted the plea agreement that had been entered into by the Government and BNPP on June 30, 2014, under which BNPP agreed to forfeit a total of $8.8336 billion, pay a criminal fine of $140 million, cooperate with U.S. authorities, and be subject to a five-year term of probation, during which BNPP must enhance its compliance policies and procedures in accordance with settlement agreements BNPP has entered into with its principal U.S. regulators, the Board of Governors of the Federal Reserve System, and the New York State Department of Financial Services. Judge Schofield set a sentencing date of October 3, 2014, at 2:00 p.m.

In accepting the bank’s guilty plea, Judge Schofield said: “The defendant’s actions not only flouted U.S. foreign policy, but also provided support to governments that threaten both our regional and national security. And in the case of Sudan, a government that has committed flagrant human rights abuses and has known links to terrorism. I find that the severity of the defendant’s conduct more than warrants the criminal charge to which it has pleaded. . . . The forfeiture amount will surely have a deterrent effect on others that may be tempted to engage in similar conduct, all of whom should be aware that no financial institution is immune from the rule of law.”

According to the plea agreement, statements made during today’s plea proceeding, and the Statement of Facts containing further admissions by BNPP, BNPP knowingly and willfully moved more than $8.8 billion through the U.S. financial system on behalf of entities subject to U.S. embargo from 2004 through 2012, including more than $4.3 billion in transactions involving entities that were specifically designated by the U.S. Government as being cut off from the U.S. financial system.

BNPP admitted that the majority of illegal payments were made on behalf of sanctioned entities in Sudan, which was subject to U.S. embargo based on the Sudanese government’s role in facilitating terrorism and committing human rights abuses. BNPP processed approximately $6.4 billion through the United States on behalf of Sudanese sanctioned entities from July 2006 through June 2007, including approximately $4 billion on behalf of a financial institution owned by the government of Sudan, even as internal emails showed BNPP employees expressing concern about the bank’s assistance to the Sudanese government in light of its role in supporting international terrorism and committing human rights abuses during the same time period. Indeed, in March 2007, a senior compliance officer at BNPP wrote to other high-level BNPP compliance and legal employees reminding them that certain Sudanese banks with which BNPP dealt “play a pivotal part in the support of the Sudanese government which . . . has hosted Osama Bin Laden and refuses the United Nations intervention in Darfur.”

One way in which BNPP processed illegal transactions on behalf of Sudanese sanctioned entities was through a sophisticated system of “satellite banks” set up to disguise both BNPP’s and the sanctioned entities’ roles in the payments to and from financial institutions in the United States. As early as August 2005, a senior compliance officer at BNPP warned several legal, business, and compliance personnel at BNPP’s subsidiary in Geneva that the satellite bank system was being used to evade U.S. sanctions: “As I understand it, we have a number of Arab Banks (nine identified) on our books that only carry out clearing transactions for Sudanese banks in dollars. . . . This practice effectively means that we are circumventing the US embargo on transactions in USD by Sudan.”

Similarly, BNPP admitted that it provided Cuban sanctioned entities with access to the U.S. financial system by hiding the Cuban sanctioned entities’ involvement in payment messages. From October 2004 through early 2010, BNPP knowingly and willfully processed approximately $1.747 billion on behalf of Cuban sanctioned entities. In the statement of facts, BNPP admitted that it continued to do U.S. dollar business with Cuba long after it was clear that such business was illegal in order to preserve BNPP’s business relationships with Cuban entities. BNPP further admitted that its conduct with regard to the Cuban embargo was both “cavalier” and “criminal,” as evidenced by the bank’s 2006 decision, after certain Cuban payments were blocked when they reached the United States, to strip the wire messages for those payments of references to Cuban entities and resubmit them as a lump sum in order to conceal from U.S. regulators the bank’s longstanding, and illicit, Cuban business.

BNPP also admitted to engaging in more than $650 million of transactions involving entities tied to Iran, and this conduct continued into 2012 – nearly two years after the bank had commenced an internal investigation into its sanctions compliance and had pledged to cooperate with the Government. The illicit Iranian transactions were done on behalf of BNPP clients, including a petroleum company based in Dubai that was effectively a front for an Iranian petroleum company and an Iranian oil company.

This case is being prosecuted by the Money Laundering and Asset Forfeiture Unit of the U.S. Attorney’s Office for the Southern District of New York, and the Money Laundering and Bank Integrity Unit of the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS). Assistant United States Attorneys Andrew D. Goldstein, Martin S. Bell, Micah W.J. Smith, and Christine I. Magdo of the Southern District of New York, and Trial Attorneys Craig Timm and Jennifer E. Ambuehl of AFMLS, are in charge of the prosecution.

This case was investigated by the Internal Revenue Service-Criminal Investigation’s Washington Field Division and the Federal Bureau of Investigation’s New York Field Office. The New York County District Attorney’s Office also conducted its own investigation alongside the Department of Justice on this investigation. The Department of Justice expressed its gratitude to the Board of Governors of the Federal Reserve, the Federal Reserve Bank of New York, the New York State Department of Financial Services, and the Treasury Department’s Office of Foreign Assets Control for their assistance with this matter.

“While we are disappointed with the verdict on the sole count that the jury was permitted to consider, we respect the jury trial system whatever the outcome, and we thank the jury for their service. This Office maintains its faith in the criminal justice system, a system that has resulted in the convictions by trial or guilty plea of 85 other defendants on insider trading charges. We will continue to seek justice in the investigation and prosecution of those who violate the securities laws of the United States.”

Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, Administrator of the U.S. Drug Enforcement Administration (“DEA”), announced terrorism, narcotics, and weapons charges against FLORINDO ELEUTERIO FLORES-HALA, a/k/a “Comrade Artemio,” VICTOR QUISPE-PALOMINO, a/k/a “Comrade José,” and JORGE QUISPE-PALOMINO, a/k/a “Raul.” As set forth in the Indictment, FLORES-HALA, VICTOR QUISPE-PALOMINO, and JORGE QUISPE-PALOMINO are leaders of the Peruvian-based terrorist organization Sendero Luminoso, or “Shining Path,” which has engaged in cocaine-trafficking and terrorist acts against Peruvian civilians and military, including bombings and massacres, since approximately 1980. FLORES-HALA is in the custody of Peruvian law enforcement. VICTOR QUISPE-PALOMINO and JORGE QUISPE-PALOMINO remain at large. The three are accused of facilitating international narcotics trafficking in order to provide support for the terrorist organization. The case has been assigned to United States District Judge Richard J. Sullivan.

U.S. Attorney Preet Bharara stated: “As alleged, these defendants are leaders of a murderous paramilitary organization, and they themselves ordered ambushes that killed nearly two dozen Peruvian soldiers and police officers. The product of the Peruvian cocaine trade they plied and protected sometimes ends up for sale in the United States. Such a path is anything but shining; it is the path to prison.”

DEA Administrator Michele M. Leonhart stated: “For decades, the Shining Path has fueled terror, addiction and instability across the globe using the proceeds of their drug trafficking. This investigation and our ongoing global efforts reflect DEA’s unwavering commitment to protecting our citizens from these violent and brutal narco-terror organizations. The DEA, along with our outstanding Peruvian law enforcement counterparts, will continue to attack this terrorist organization until they are completely dismantled.”

According to the Indictment:

For more than 30 years, the Shining Path has been an international terrorist group ostensibly committed to Maoist ideals and dedicated to the violent overthrow of the democratically elected Government of Peru. Initially founded and conceived as a political movement and an outgrowth of the Peruvian Communist Party, the Shining Path became a terrorist army engaged in bombings, massacres, and other acts of violence within Peru. The Shining Path has been designated by the United States Secretary of State as a foreign terrorist organization since the designation was first established in U.S. law in October 1997, and has remained on the list of designees ever since.

The Shining Path is styled as a military organization whose armed combatants in recent years have been concentrated in two geographically distinct factions in South Central Peru: the Upper Huallaga Valley (the “UHV”) and the territory bounded by the Apurimac and Ene River Valleys (the “VRAE”). The UHV and VRAE factions have in the recent past been led, respectively, by FLORES-HALA and VICTOR QUISPE-PALOMINO. Within each of the UHV and VRAE factions, the Shining Path’s members are divided into armed columns. JORGE QUISPE-PALOMINO has served as a column leader in the VRAE faction of the Shining Path.

The Shining Path funds its terrorist activities, at least in part, with proceeds from the cocaine trade. For approximately the past decade, the Shining Path has sought to control all aspects of the cocaine trade in the UHV and the VRAE, which contain some of the world’s most fertile coca leaf producing areas. In addition to cultivating and processing its own cocaine for sale, the Shining Path levies a system of taxes called “cupos” on the cultivation, processing, and transit of cocaine in and through the UHV and the VRAE. The Shining Path also provides transport and armed security to drug trafficking organizations moving large loads of cocaine through and out of the VRAE and the UHV. FLORES-HALA, VICTOR QUISPE-PALOMINO, and JORGE QUISPE-PALOMINO knew and understood that at least some of the cocaine the Shining Path grew, taxed, and transported was destined eventually to be sold in the United States.

For at least the past 10 years, the Shining Path has directed violent acts against Peruvian National Police (“PNP”) and Peruvian Army installations and personnel, and has conducted numerous violent attacks on counter-narcotics patrols, killing scores of soldiers and policemen. These acts of violence were intended to protect the Shining Path’s financial interests in the cocaine trade, to serve as reprisal for law enforcement efforts to eradicate illegal cocaine trafficking, and to arm itself by forcefully taking weapons from dead and wounded targets of its violent ambushes.

In Count One of the Indictment, FLORES-HALA, 52, VICTOR QUISPE-PALOMINO, 54, and JORGE QUISPE-PALOMINO, 56, all Peruvian citizens, are charged with conspiring to provide material support to a foreign terrorist organization, specifically, the Shining Path.

In Count Two, FLORES-HALA, VICTOR QUISPE-PALOMINO, and JORGE QUISPE-PALOMINO are charged with conspiring to distribute cocaine with the intent to support terrorist activity.

In Count Three, FLORES-HALA is charged with aiding and abetting the discharge of firearms during and in relation to the terrorism offense charged in Count One. Specifically, Count Three charges that, on December 22, 2005, in Aucayacu, Peru, FLORES-HALA directed Shining Path members to fire automatic weapons at a passing PNP convoy, resulting in the killing of eight PNP officers.

In Count Four, VICTOR QUISPE-PALOMINO, and JORGE QUISPE-PALOMINO are charged with aiding and abetting the discharge of firearms during and in relation to the terrorism offense charged in Count One. Specifically, Count Four charges that, on April 9, 2009, in Ayacucho, Peru, VICTOR QUISPE-PALOMINO and JORGE QUISPE-PALOMINO ordered and planned an ambush in which a group of Shining Path members, armed with assault rifles, detonated a series of mines on a road where a Peruvian Army patrol was passing, and followed with gunfire, killing 15 soldiers, wounding more than a dozen, and seizing 13 assault rifles.

Count One carries a maximum term of life in prison and a maximum fine of $250,000. Count Two carries a maximum term of life in prison, a mandatory minimum term of 20 years in prison, and a maximum fine of $250,000. Counts Three and Four each carry a maximum term of life in prison, a mandatory minimum term of 10 years in prison, and a maximum fine of $250,000. 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.

These historic charges are the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York and the DEA, including the DEA’s Lima Country Office and Special Operations Division. The United States Government also worked closely with Peruvian Government authorities – the Peruvian National Police, the combined Peruvian armed forces and the Peruvian National Prosecutors Office; this Indictment would not have been possible without their ongoing cooperation and assistance. Mr. Bharara also thanked the U.S. Department of Justice’s Office of International Affairs and National Security Division, the United States Department of State, and the United States Department of Defense for their ongoing assistance.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorney Michael Ferrara is in charge of the prosecution.

The allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

U.S. v. Flores-Hala et al., Shining Path Indictment

Preet Bharara, United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office and Andrew W. Vale the Special Agent in Charge of the Albany Division of the Federal Bureau of Investigation ("FBI"), and Shantelle P. Kitchen, the Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service - Criminal Investigation ("IRS"), announced today that a grand jury sitting in White Plains has returned an Indictment charging New York State Senator THOMAS W. LIBOUS with making false statements to the FBI in connection with a federal grand jury investigation about payments he allegedly caused an Albany lobbying firm to funnel to his son, Matthew Libous. Matthew Libous, an attorney, was also separately charged with tax crimes, including his failure to identify the source of payments he received from the lobbying firm.

Manhattan U.S. Attorney Preet Bharara stated: "As alleged, Thomas Libous took advantage of his position as Senator and Chairman of the Transportation Committee by corruptly causing lobbyists, who wanted Libous's influence to benefit their clients, to funnel money through a law firm to his son where Libous has gotten his son a position. He then tried to cover up his corrupt conduct by lying to FBI Agents about his knowledge of his son's arrangement with the firm, as the Indictment describes. Public servants should serve the public first, not themselves and their families. This Office will continue to pursue elected officials who attempt to take corrupt advantage of their positions."

Assistant FBI Director George Venizelos stated: “As alleged, rather than serve the public he took an oath to serve, Senator Libous used his political position to garner favorable treatment for himself and his son. Lying to FBI Agents is a serious offense and his alleged criminal conduct is an injustice to the community he represents. The investigation and indictment of Senator Libous demonstrates the FBI’s ongoing commitment to weed out public corruption at all levels of government and bring to justice those who betray the public’s trust.”

Acting Special Agent in Charge of IRS – Criminal investigation Shantelle P. Kitchen stated: “IRS-Criminal Investigation will thoroughly investigate those who wilfully violate the income tax laws and obstruct tax administration and we will work with the Department of Justice to see that they are prosecuted. While prosecuting violators is essential to making the tax system work, such prosecutions also reassure the confidence of honest taxpayers in the tax system. We are committed to ensuring that everyone pays their fair share.”

According to the allegations in the Indictment:

A federal grand jury in White Plains was investigating allegations that THOMAS LIBOUS had obtained a job for a family member at a Westchester law firm (“the Law Firm”) in exchange for a promise to refer business to the firm and had arranged for an Albany lobbying firm that regularly lobbied him to secretly pay the law firm $50,000 per year to defray the cost of Libous’s son’s salary and lease of a Range Rover. The lobbying firm specialized in transportation issues and THOMAS LIBOUS served as the Chairman of the Senate's Transportation Committee at the time. The Indictment further alleges that THOMAS LIBOUS told a partner of the Law Firm that the firm would have to "build a new wing" to accommodate the business he would refer to it if it hired his son.

Special Agents of the FBI interviewed THOMAS LIBOUS on June 24, 2010, as part of the grand jury's investigation. According to the Indictment, THOMAS LIBOUS made the following false statements to the agents during the interview:

a. he could not recall how his son began to work at the Law Firm;

b. no deals were made to get his son the job at the Law Firm;

c. he was not aware that the lobbying firm had paid any part of his son's salary at the Law Firm;

d. he never promised to refer work to the Law Firm;

e. he was not involved in his son's decision to work at the Law Firm;

f. he had no business or personal relationship with the Law Firm; and

g. he did not know of any relationship between the lobbying firm and the Law Firm.

THOMAS LIBOUS, 61, of Binghamton, New York, faces a maximum sentence of 5 years' imprisonment. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes, as any sentencing of the defendant will be determined by the judge.

Also announced today is the return of a second Indictment, returned by a grand jury sitting in White Plains, charging MATTHEW LIBOUS with obstructing the IRS in its administration of the tax laws and subscribing to false tax returns.

According to the allegations in the Indictment:

MATTHEW LIBOUS, 32, was employed at a Westchester law firm in early 2006. At the same time, MATTHEW LIBOUS received legal fees directly from clients for whom he provided legal services without the law firm's knowledge. After the law firm terminated MATTHEW LIBOUS' employment, MATTHEW LIBOUS continued to receive legal fees from clients which he failed to report on his federal income tax return. The Indictment alleges that MATTHEW LIBOUS failed to accurately identify the source of payments he received from an Albany lobbying firm that were funneled to him through the Westchester law firm. The Indictment also alleges that MATTHEW LIBOUS failed to report a total of $57,580 in legal fees and other income on his 2006, 2007 and 2008 tax returns.

In 2008, MATTHEW LIBOUS became an owner of Wireless Construction Solutions, LLC ("WCS"), a Westchester-based company that installed and serviced cellular telephone towers. The Indictment alleges that from 2008 through 2011, MATTHEW LIBOUS caused WCS to pay personal expenses on his behalf, including expenses for multiple casino trips, vacations, iTune purchases, a gym membership, an internet dating subscription, spa treatments, visits to tanning salons, clothing, food and student loan payments. According to the Indictment, MATTHEW LIBOUS caused WCS to pay $244,218 in personal expenses from 2008 through 2011. The Indictment alleges that MATTHEW LIBOUS failed to report any of this income on his tax return.

The Indictment charges MATTHEW LIBOUS with one count of obstructing the administration of the tax laws, which carries a maximum sentence of three years' imprisonment, and five counts of subscribing to false tax returns, each of which carries a maximum sentence of three years' imprisonment. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes, as any sentencing of the defendant will be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and the IRS.

These prosecutions are being handled by the Office's White Plains Division. Assistant U.S. Attorneys Perry A. Carbone and James McMahon are in charge of the prosecutions.

The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Libous Thomas.Indictment
Libous Matthew.Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Michael P. Stephens, Acting Inspector General for the Federal Housing Finance Agency Office of Inspector General (“FHFA-OIG”), announced today that the United States has settled civil fraud claims under the False Claims Act against HSBC BANK USA, N.A., HSBC FINANCE CORPORATION, HSBC MORTGAGE CORPORATION (USA), and HSBC MORTGAGE SERVICES, INC. (collectively, “HSBC”), related to HSBC’s failure to oversee the reasonableness of foreclosure-related charges HSBC submitted to HUD’s Federal Housing Administration (“FHA”) and the Federal National Mortgage Association (“Fannie Mae”) for reimbursement, contrary to program requirements and HSBC’s certifications that it had done so.

In the settlement, approved for release yesterday in Manhattan federal court by U.S. District Judge Thomas P. Griesa, HSBC accepted responsibility for failing to create or maintain systems to review fees and charges submitted by outside counsel and other third-party providers to HSBC during 2009 and 2010, fees and charges which HSBC then submitted to FHA and Fannie Mae for reimbursement without the requisite oversight and review. HSBC agreed to pay the Government $10 million to resolve its liability to the United States for this conduct.

Manhattan U.S. Attorney Preet Bharara said: “HSBC failed to live up to its legal obligation to monitor and review fees and expenses it was submitting to FHA and Fannie Mae for reimbursement, and in the process, cost the public millions of dollars. With today’s settlement, HSBC publicly admits to its failures and agrees to pay the Government $10 million. Civil actions like these serve as an important tool that our Office can and will continue to use in holding financial institutions responsible for misconduct.”

FHFA-OIG Acting Inspector General Michael P. Stephens: “HSBC had a responsibility, as a servicer, to have controls in place which ensured the fees and charges submitted to Fannie Mae were appropriate and reasonable. Their lack of controls showed gross neglect and an abject failure to serve their customers, FHA and Fannie Mae, and therefore the taxpayers. We are proud to have worked with our partners on this case.”

According to the settlement filed in Manhattan federal court:

As a residential mortgage loan servicer, HSBC performs or oversees the performance of certain administrative activities in connection with residential mortgage loans, such as collecting mortgage payments and pursuing foreclosure when borrowers become delinquent. In pursuing foreclosure on behalf of HSBC, outside counsel and other third-party providers of foreclosure-related services, such as title companies and process servers, incur fees and expenses. HSBC has routinely submitted reimbursement requests to FHA and Fannie Mae for these foreclosure-related fees and expenses.

Pursuant to the National Housing Act, FHA offers mortgage insurance programs whereby it insures lenders against losses on mortgage loans, including expenses related to mortgage servicing, and specifically, expenses incurred in foreclosure proceedings. HSBC has been an approved servicer of FHA-insured loans for many years. In order to obtain and maintain FHA approval to service FHA-insured loans, HSBC was required to submit and did submit annual certifications stating that it adhered to all FHA handbooks, regulations and policies. One such handbook requires servicers to create and maintain a quality control program that reviews all aspects of servicing operations, including foreclosure fees and charges.

HSBC has also been an approved servicer of loans held by Fannie Mae. Fannie Mae is a government sponsored enterprise that purchases mortgage loans as part of its mission to promote liquidity in the housing market. Fannie Mae has been under the conservatorship of the Federal Housing Finance Agency since September 2008. As part of its obligations as a loan servicer for Fannie Mae, HSBC was required to create and implement audit and control systems to ensure compliance with Fannie Mae’s requirements. Specifically, as a servicer of Fannie Mae loans, HSBC was required to ensure that all costs submitted to Fannie Mae for reimbursement were reasonable, customary and necessary.

As set forth in the settlement, during certain years, contrary to program requirements and HSBC’s certifications, HSBC failed to implement and maintain the requisite quality controls, failed to oversee the foreclosure-related charges it submitted to FHA and Fannie Mae for reimbursement, and caused millions of dollars in losses to FHA and Fannie Mae as a result.

Specifically, as part of the settlement, HSBC admitted, acknowledged, and accepted responsibility for the following conduct:

• Notwithstanding HUD requirements and HSBC’s annual certifications to FHA, prior to 2011, HSBC failed to create or maintain an adequate FHA quality control program to review the fees and charges submitted by outside counsel and other third-party providers to HSBC, which HSBC then submitted to FHA for reimbursement.
• Because, prior to 2011, HSBC lacked an adequate quality control program to oversee the fees and charges charged by outside counsel and other third party providers handling foreclosure-related services for FHA-insured mortgages, it failed to sufficiently oversee these fees and charges, despite certifying to FHA that it had done so.
• Between May 1, 2009, and December 31, 2010, HSBC failed to create or maintain Fannie Mae audit and control systems sufficient to ensure that the fees and expenses submitted by outside counsel and other third-party providers to HSBC, which HSBC then submitted to Fannie Mae for reimbursement, were reasonable, customary, or necessary.
• Because, between May 1, 2009, and December 31, 2010, it lacked sufficient audit and control systems to oversee the fees and expenses charged by outside counsel and other third party providers handling foreclosure-related services for HSBC as to Fannie Mae mortgages, HSBC failed to sufficiently oversee these fees and expenses, despite being required by Fannie Mae to do so.

In the settlement agreement, HSBC also agreed to comply with all rules applicable to servicers of mortgage loans insured by FHA and to servicers of loans held or securitized by Fannie Mae and the Federal National Mortgage Corporation (“Freddie Mac”). This includes compliance with all rules, requirements, or guidelines regarding implementation and maintenance of quality control programs, oversight of outside counsel and other third-party vendors, and submissions of fees and expenses for reimbursement by FHA, Fannie Mae, and/or Freddie Mac.

In connection with this settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act. The whistleblower suit remains under seal as the Government continues its investigation.

Mr. Bharara thanked the FHFA-OIG and the U.S. Department of Housing and Urban Development for their support and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit. Assistant United States Attorneys Cristine Irvin Phillips and Andrew E. Krause are in charge of the case.

Libous Thomas.Indictment
Libous Matthew.Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, 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”),

Shantelle Kitchen, the Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CID”), and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that OSCAR HUACHILLO, the former operator of multiple HIV/AIDS clinics in New York City, pled guilty to orchestrating a scheme to defraud Medicare out of more than $31 million by billing Medicare for expensive treatments that were administered at a highly diluted dose or never administered at all, and were often medically unnecessary. HUACHILLO also pled guilty to evading more than $3.4 million in federal income taxes by falsely underreporting his income. HUACHILLO pled guilty before U.S. District Judge Katherine Polk Failla.

Manhattan U.S. Attorney Preet Bharara said: “Oscar Huachillo has admitted guilt in defrauding Medicare out of tens of millions of dollars, and then literally compounding the felony by evading millions of dollars in taxes on the illegal windfall. In the process, his schemes put patients at risk, financially burdened the Medicare program, and cheated honest taxpayers. Now he awaits sentencing for his crimes.”

HHS-OIG Special Agent-in-Charge Thomas O’Donnell said: “Mr. Huachillo engaged in an elaborate scheme that resulted in poor patient care and millions defrauded from Federal health care programs. We will not tolerate such greed-fueled fraud, which undermines our health care system and the vulnerable individuals it serves.”

IRS-CI Acting Special Agent-in-Charge Shantelle P. Kitchen said: “IRS Criminal Investigation is pleased to work with our law enforcement partners in the fight against healthcare fraud, ready to follow stolen proceeds back to the orchestrators of schemes. It is clear how Medicare fraud, in particular, takes resources away from citizens with legitimate financial needs. However, money obtained through illegal sources, such as healthcare fraud, forms the backbone of the untaxed, underground economy. Such crimes pose threats to the nation’s tax system and the public’s confidence in it.”

FBI Assistant Director-in-Charge George Venizelos said: “Huachillo treated our American health care system as a vehicle to fuel his greed and line his own pockets when he organized a Medicare fraud of more than $31 million. The FBI, in conjunction with our law enforcement partners, will continue to investigate and bring to justice criminals who bilk the system and defraud the American taxpayer.”

According to the criminal complaint, superseding information, and other documents filed in Manhattan federal court, as well as statements made at related court proceedings:

HUACHILLO set up and operated multiple health care clinics in New York City that purported to provide injection and infusion treatments to Medicare-eligible HIV/AIDS patients, but that were, in reality, health care fraud mills (the “Clinics”) that routinely billed Medicare for medications that were never provided or were provided at highly diluted doses and that were often unnecessary because the person being “treated” did not medically need the treatments.

HUACHILLO and his co-conspirators executed the fraudulent scheme by recruiting HIV/AIDS patients who were eligible for Medicare to come to the Clinics multiple times per week, for multiple months, to undergo expensive “treatments” that were often unnecessary. The purported treatments included drugs costing hundreds of dollars each to administer and typically reserved for cancer and anemia patients. HUACHILLO and his co-conspirators paid the patients cash kickbacks of up to $300 per week in exchange for coming to the Clinics and agreeing to undergo the treatments. Patients were also offered approximately $50 for each additional patient they referred to the Clinics. HUACHILLO and his co-conspirators then used these patients’ status as Medicare beneficiaries to submit claims to Medicare for reimbursement for the treatments purportedly administered to the patients, often receiving tens of thousands of dollars in reimbursements per patient. However, in truth, the treatments typically were provided in highly diluted doses or not provided at all, and were often medically unnecessary. As a result of the scheme, from 2009 through 2013, HUACHILLO and his co-conspirators defrauded the Medicare system out of at least $31 million.

In addition, HUACHILLO willfully evaded over $3.4 million in taxes owed to the IRS during the tax years 2009 through 2011 by falsely underreporting his taxable income, including income he had obtained through fraudulent Medicare claims.

HUACHILLO, 54, of Manhattan, pled guilty to one count of conspiracy to commit health care fraud, which carries a maximum sentence of 10 years in prison, and one count of tax evasion, which carries a maximum sentence of five years in prison. 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. As part of his plea, HUACHILLO agreed to forfeit more than $31 million in proceeds of his crime, including over $14 million of assets that were seized at or around the time he was arrested, and to pay back taxes of more than $3.4 million. HUACHILLO is scheduled to be sentenced by Judge Failla on October 15, 2014, at 3:00 p.m.

George Juvier, 56, of Manhattan, has been charged separately in connection with the Medicare fraud scheme. The charges against Juvier are merely allegations, and he is presumed innocent unless and until he is proven guilty beyond a reasonable doubt.

Mr. Bharara praised the outstanding efforts of HHS-OIG, IRS-CID, and the FBI in the investigation, which he noted is ongoing. Mr. Bharara also thanked the 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. Attorney Jonathan Cohen is in charge of the prosecution. Assistant United States Attorney Micah Smith of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

US v. Oscar Huachillo and George Juvier Complaint
US v. Oscar Huachillo S1 Information (Signed)

BNP Paribas Information
BNP Paribas Statement of Facts
BNP Paribas Notice of Intent
BNP Paribas Plea Agreement
BNP Paribas Consent Preliminary Order of Forfeiture

"BNPP banked on never being held to account for its criminal support of countries and entities engaged in acts of terrorism and other atrocities. But that is exactly what we do today. BNPP, the world's fourth largest bank, has agreed to plead guilty and pay penalties of almost $9 billion for performing the hat trick of sanctions violations, unlawfully opening the doors of the U.S. financial markets to three sanctioned countries, Sudan, Iran, and Cuba. For years, BNPP provided access to billions of dollars to these sanctioned countries, as well as to individuals and groups specifically identified and designated by the U.S. government as being subject to sanctions. The bank did so deliberately and secretly, in ways designed to evade detection by the U.S. authorities. For its years-long and wide-ranging criminal conduct, BNPP will soon plead guilty in a federal courthouse in Manhattan."

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MARK GOLDBERG, a Bronx-based tax preparer, was sentenced today in Manhattan federal court to 57 months in prison for his participation in a scheme to file fraudulent tax returns on behalf of thousands of clients, falsely claiming more than $7 million in bogus deductions, including false school tuition credits and expenses. GOLDBERG pled guilty in August 2013 before Chief U.S. District Judge Loretta A. Preska, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Mark Goldberg prepared thousands of fraudulent tax returns that resulted in over $2.5 million in fraudulent refunds for his clients. Now he has to surrender the ill-gotten gains and his liberty.”

According to the Indictment, statements made during court proceedings, and other documents filed in Manhattan federal court:

GOLDBERG ran a tax preparation and multi-service business named E&M Multi-Services, Inc. (“E&M”) out of a storefront building in the Bronx. Through that business, he prepared, and oversaw the preparation of, thousands of federal and New York State tax returns that claimed false deductions, expenses, and credits, including tuition credits and expenses, unreimbursed employee business expenses, medical and dental expenses, charitable gifts, and earned income tax credits. Between 2005 and 2012, GOLDBERG caused the preparation and filing of tax returns for his clients that included over $7 million of fabricated and fraudulently-inflated deductions, resulting in over $2.5 million in refunds being paid to his clients to which they were not lawfully entitled. GOLDBERG also failed to report any of the income derived from his tax preparation activities, and further submitted fraudulent personal returns claiming bogus refunds and tax credits.

In addition to the prison term, Chief Judge Preska ordered GOLDBERG, 40, of the Bronx, to pay restitution in the amount of $2,597,419 to the United States and the State of New York for the losses caused as a result of his scheme, and to forfeit $500,000 in fees generated by GOLDBERG as part of his tax fraud scheme. Chief Judge Preska also sentenced GOLDBERG to three years of supervised release, and ordered him to pay a special assessment of $300.

Mr. Bharara praised the investigative efforts of the Internal Revenue Service-Criminal Investigation and the New York State Department of Taxation and Finance. Mr. Bharara also thanked the U.S. Department of Justice’s Tax Division and the Bronx District Attorney’s Office for their assistance.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Stanley J. Okula, Jr., and Paul Monteleoni, and Special Assistant United States Attorney Jorge Almonte of the Tax Division are in charge of the prosecution.

BNP Paribas Will Pay Total Financial Penalties In Excess Of $8.9 Billion

Attorney General Eric H. Holder, Deputy Attorney General James M. Cole, Criminal Division Assistant Attorney General Leslie Caldwell, United States Attorney for the Southern District of New York Preet Bharara, Internal Revenue Service Criminal Investigation Chief Richard Weber, Federal Bureau of Investigation Director James B. Comey, and District Attorney Cyrus R. Vance Jr. of New York County announced that BNP Paribas S.A. (BNPP), a global financial institution headquartered in Paris, has agreed to plead guilty to conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) by processing billions of dollars of U.S. dollar transactions through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions. The agreement by the French bank to plead guilty is the first time a financial institution has agreed to plead guilty based on large-scale, systematic violations of U.S. economic sanctions.

Attorney General Holder said: “BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities. These actions represent a serious breach of U.S. law. Sanctions are a key tool in protecting U.S. national security interests, but they only work if they are strictly enforced. If sanctions are to have teeth, violations must be punished. Banks thinking about conducting business in violation of U.S. sanctions should think twice because the Justice Department will not look the other way.”

Deputy Attorney General Cole said: “BNP ignored US sanctions laws and concealed its tracks. And when contacted by law enforcement it chose not to fully cooperate. This failure to cooperate had a real effect -- it significantly impacted the government’s ability to bring charges against responsible individuals, sanctioned entities and satellite banks. This failure together with BNP’s prolonged misconduct mandated the criminal plea and the nearly $9 billion penalty that we are announcing today.”

Assistant Attorney General Caldwell said: “By providing dollar clearing services to individuals and entities associated with Sudan, Iran, and Cuba – in clear violation of U.S. law – BNPP helped them gain illegal access to the U.S. financial system. In doing so, BNPP deliberately disregarded U.S. law of which it was well aware, and placed its financial network at the services of rogue nations, all to improve its bottom line. Remarkably, BNPP continued to engage in this criminal conduct even after being told by its own lawyers that what it was doing was illegal.”

U.S. Attorney Preet Bharara said: "BNPP banked on never being held to account for its criminal support of countries and entities engaged in acts of terrorism and other atrocities. But that is exactly what we do today. BNPP, the world's fourth largest bank, has agreed to plead guilty and pay penalties of almost $9 billion for performing the hat trick of sanctions violations, unlawfully opening the doors of the U.S. financial markets to three sanctioned countries, Sudan, Iran, and Cuba. For years, BNPP provided access to billions of dollars to these sanctioned countries, as well as to individuals and groups specifically identified and designated by the U.S. government as being subject to sanctions. The bank did so deliberately and secretly, in ways designed to evade detection by the U.S. authorities. For its years-long and wide-ranging criminal conduct, BNPP will soon plead guilty in a federal courthouse in Manhattan."

According to documents released publicly today, over the course of eight years, BNPP knowingly and willfully moved more than $8.8 billion through the U.S. financial system on behalf of sanctioned entities, including more than $4.3 billion in transactions involving entities that were specifically designated by the U.S. Government as being cut off from the U.S. financial system. BNPP engaged in this criminal conduct through various sophisticated schemes designed to conceal from U.S. regulators the true nature of the illicit transactions. BNPP routed illegal payments through third party financial institutions to conceal not only the involvement of the sanctioned entities but also BNPP’s role in facilitating the transactions. BNPP instructed other financial institutions not to mention the names of sanctioned entities in payments sent through the United States and removed references to sanctioned entities from payment messages to enable the funds to pass through the U.S. financial system undetected.

FBI Director James Comey said: “The significant financial penalties imposed on BNP Paribas sends a powerful deterrent message to any company that places its profits ahead of its adherence to the law. We will continue to work closely with our federal and state partners to ensure compliance with U.S. banking laws to promote integrity across financial institutions and to safeguard our national security.”

IRS-CI Chief Weber said: “Today’s outcome is a testament to U.S. efforts to stem the exploitation of the American financial system and ensure that if you chose to do business in our country you must abide by our laws. BNP Paribas will forfeit the historic figure of almost $8.9 Billion representing the proceeds of criminal activity. BNPP had many opportunities to take corrective action and abide by the law, and yet, despite warnings from American regulators and other banks, consciously chose to ignore those warnings and commit literally thousands of flagrant violations. IRS-CI, and our domestic and international law enforcement partners, will continue to pursue these cases and follow the money trail – wherever it may lead.”

District Attorney Vance said: “The most important values in the international community – respect for human rights, peaceful coexistence, and a world free of terror – significantly depend upon the effectiveness of international sanctions. Today’s guilty plea marks the seventh major case involving sanctions violations by a large international bank that my Office has pursued and resolved since 2009. These cases are critically important for international public safety and the security of our banking system, which is put at risk when it is used to further criminal activity. The seven investigations have revealed a series of widespread schemes to falsify the business records of financial institutions in Manhattan and have resulted in the forfeiture of approximately $12 billion in total. But, more importantly, they have resulted in a fundamental change in the way all banks conduct their business, have heightened vigilance worldwide with respect to dealing with sanctioned entities, and have increased the integrity of our Manhattan-based financial institutions.”

BNPP will waive indictment and be charged in a one-count felony criminal information, filed in federal court in the Southern District of New York, charging BNPP with knowingly and willfully conspiring to commit violations of IEEPA and TWEA, from 2004 through 2012. BNPP has agreed to plead guilty to the information, has entered into a written plea agreement, and has accepted responsibility for its criminal conduct. BNPP is scheduled to formally enter its guilty plea before United States District Judge Lorna Schofield on July 9, 2014 at 4:30 p.m.

The plea agreement, subject to approval by the court, provides that BNPP will pay total financial penalties of $8.9736 billion, including forfeiture of $8.8336 billion and a fine of $140 million.

In addition to the joint forfeiture judgment, the New York County District Attorney’s Office is also announcing today that BNPP has pleaded guilty in New York State Supreme Court to falsifying business records and conspiring to falsify business records. In addition, the Board of Governors of the Federal Reserve System is announcing that BNPP has agreed to a cease and desist order, to take certain remedial steps to ensure its compliance with U.S. law in its ongoing operations, and to pay a civil monetary penalty of $508 million. The New York State Department of Financial Services (DFS) is announcing BNPP has agreed to, among other things, terminate or separate from the bank 13 employees, including the Group Chief Operating Officer and other senior executives; suspend U.S. dollar clearing operations through its New York Branch and other affiliates for one year for business lines on which the misconduct centered; extend for two years the term of a monitorship put in place in 2013, and pay a monetary penalty to DFS of $2.2434 billion. In satisfying its criminal forfeiture penalty, BNPP will receive credit for payments it is making in connection with its resolution of these related state and regulatory matters. The Treasury Department’s Office of Foreign Assets Control has also levied a fine of $963 million, which will be satisfied by payments made to the Department of Justice.

According to documents released publicly today, including a detailed statement of facts admitted to by BNPP, BNPP has acknowledged that, from at least 2004 through 2012, it knowingly and willfully moved over $8.8 billion through the U.S. financial system on behalf of Sudanese, Iranian and Cuban sanctioned entities, in violation of U.S. economic sanctions.

The majority of illegal payments were made on behalf of sanctioned entities in Sudan, which was subject to U.S. embargo based on the Sudanese government’s role in facilitating terrorism and committing human rights abuses. BNPP processed approximately $6.4 billion through the United States on behalf of Sudanese sanctioned entities from July 2006 through June 2007, including approximately $4 billion on behalf of a financial institution owned by the government of Sudan, even as internal emails showed BNPP employees expressing concern about the bank’s assisting the Sudanese government in light of its role in supporting international terrorism and committing human rights abuses during the same time period. Indeed, in March 2007, a senior compliance officer at BNPP wrote to other high-level BNPP compliance and legal employees reminding them that certain Sudanese banks with which BNPP dealt “play a pivotal part in the support of the Sudanese government which . . . has hosted Osama Bin Laden and refuses the United Nations intervention in Darfur.”

One way in which BNPP processed illegal transactions on behalf of Sudanese sanctioned entities was through a sophisticated system of “satellite banks” set up to disguise both BNPP’s and the sanctioned entities’ roles in the payments to and from financial institutions in the United States. As early as August 2005, a senior compliance officer at BNPP warned several legal, business and compliance personnel at BNPP’s subsidiary in Geneva that the satellite bank system was being used to evade U.S. sanctions: “As I understand it, we have a number of Arab Banks (nine identified) on our books that only carry out clearing transactions for Sudanese banks in dollars. . . . This practice effectively means that we are circumventing the US embargo on transactions in USD by Sudan.”

Similarly, BNPP provided Cuban sanctioned entities with access to the U.S. financial system by hiding the Cuban sanctioned entities’ involvement in payment messages. From October 2004 through early 2010, BNPP knowingly and willfully processed approximately $1.747 billion on behalf of Cuban sanctioned entities. In the statement of facts, BNPP admitted that it continued to do U.S. dollar business with Cuba long after it was clear that such business was illegal in order to preserve BNPP’s business relationships with Cuban entities. BNPP further admitted that its conduct with regard to the Cuban embargo was both “cavalier” and “criminal,” as evidenced by the bank’s 2006 decision, after certain Cuban payments were blocked when they reached the United States, to strip the wire messages for those payments of references to Cuban entities and resubmit them as a lump sum in order to conceal from U.S. regulators the bank’s longstanding, and illicit, Cuban business.

Further according to court documents, BNPP engaged in more than $650 million of transactions involving entities tied to Iran, and this conduct continued into 2012 – nearly two years after the bank had commenced an internal investigation into its sanctions compliance and had pledged to cooperate with the Government. The illicit Iranian transactions were done on behalf of BNPP clients, including a petroleum company based in Dubai that was effectively a front for an Iranian petroleum company, and an Iranian oil company.

This case was investigated by the IRS-Criminal Investigation’s Washington Field Division and the FBI’s New York Field Office. This case is being prosecuted by the Money Laundering and Bank Integrity Unit of the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), and the Money Laundering and Asset Forfeiture Unit of the U.S. Attorney’s Office for the Southern District of New York. Trial Attorneys Craig Timm and Jennifer E. Ambuehl of AFMLS and Assistant United States Attorneys Andrew D. Goldstein, Martin S. Bell, Christine I. Magdo, and Micah W.J. Smith of the Southern District of New York are in charge of the prosecution.

The New York County District Attorney’s Office also conducted its own investigation alongside with the Department of Justice on this investigation. The Department of Justice expressed its gratitude to the Board of Governors of the Federal Reserve, the Federal Reserve Bank of New York, the New York State Department of Financial Services and the Treasury Department’s Office of Foreign Assets Control for their assistance with this matter.

BNP Paribas Information
BNP Paribas Statement of Facts
BNP Paribas Notice of Intent
BNP Paribas Plea Agreement
BNP Paribas Consent Preliminary Order of Forfeiture

Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas P. DiNapoli, the New York State Comptroller, today announced the filing and unsealing of a civil fraud lawsuit against CONTINUUM HEALTH PARTNERS, INC. (“CONTINUUM”), BETH ISRAEL MEDICAL CENTER d/b/a MOUNT SINAI BETH ISRAEL (“BETH ISRAEL”), and ST. LUKE’S-ROOSEVELT HOSPITAL CENTER d/b/a MOUNT SINAI ST. LUKE’S and MOUNT SINAI ROOSEVELT (“SLR”) for the hospitals’ fraudulent delay in fully repaying nearly $1 million in Medicaid overpayments for almost two years after it had discovered the overpayments. Federal law requires that when a recipient of Government funds discovers it has been overpaid, it must repay the Government within 60 days, but the hospitals in this case did not complete their repayments for nearly two years, and then only after repeated Government inquiries.

Manhattan U.S. Attorney Preet Bharara said: “The law requires hospitals that receive federal funds to which they are not entitled to promptly return them. They cannot just keep the money – after learning that they should not have received it – in the hopes that the government will not figure it out. To do so is fraud. I want to thank the office of New York State Comptroller Thomas DiNapoli, a frequent partner in these types of cases, for their excellent work in this investigation.”

New York State Comptroller Thomas P. DiNapoli said: “New York State’s Medicaid program costs taxpayers more than $50 billion annually. Fraud in the Medicaid program affects all New Yorkers and will not be tolerated. Audits and investigations by my office have found billions of those dollars lost to waste, fraud and abuse. We will continue to work with federal and state law enforcement to combat Medicaid fraud statewide. I thank U.S. Attorney Preet Bharara for his efforts to prosecute this case, which stemmed from the work of my office, and bring unscrupulous providers to justice.”

According to the allegations in the Government’s Complaint filed in Manhattan federal court:

CONTINUUM submitted hundreds of improper claims to Medicaid in 2009 and 2010 on behalf of BETH ISRAEL and SLR, totaling nearly $1 million, due to a software problem. These claims arose from care provided to patients enrolled in a Medicaid Managed Care Organization (the “MCO”), which contracted with healthcare providers. Under the applicable Medicaid regulations, these providers were entitled to receive as payment for care rendered to the enrolled patients only the amount paid by the MCO and were not entitled to obtain additional payments. A computer glitch caused the MCO erroneously to indicate to its contracted providers, including BETH ISRAEL and SLR, that they should seek additional reimbursement from Medicaid for the healthcare services they provided to the enrollees. CONTINUUM, on behalf of BETH ISRAEL and SLR, thus submitted the improper claims to Medicaid, and received payment for most of them.

Despite becoming aware of the software issue in late 2010 and, further, being provided in early February 2011 with a spreadsheet by a CONTINUUM employee who had identified virtually all of the claims affected by the issue, CONTINUUM and the hospitals failed to take appropriate steps to timely repay the claims. Instead, their repayments occurred only as the Office of the New York State Comptroller brought groups of potentially affected claims to CONTINUUM’s attention, over the course of more than a year. CONTINUUM and the hospitals repaid the remaining approximately 300 affected claims only after this Office issued a Civil Investigative Demand to CONTINUUM in June 2012, and the repayments were completed only in early 2013.

The Complaint in this case was filed under the False Claims Act, which punishes violators who submit false claims to the Government or knowingly attempt to avoid an obligation to repay federal funds. The allegations of fraud stated in the Complaint were first brought to the attention of the Government by a whistleblower, who filed a lawsuit under the qui tam provisions of the False Claims Act. Those provisions allow private parties who have knowledge of fraud committed against the Government to file suit on behalf of the Government and share in any recovery. The United States may then intervene and file a complaint, as it did here.

Mr. Bharara praised the investigative work of the Office of the State Comptroller. He also thanked the U.S. Department of Health and Human Services, Office of Inspector General, for its assistance in this case.

The case is being handled by the Office’s Civil Frauds Unit. Civil Frauds Unit Co-Chief Rebecca C. Martin and Assistant U.S. Attorney Jean-David Barnea are in charge of this matter.

U.S. v. Continuum HealthPartners, Inc., et al. Complaint-In-Intervention

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that New York State Assemblywoman GABRIELA ROSA was charged with, and pled guilty to, two federal felony charges arising out of her efforts to obtain United States citizenship through fraud and fraudulently to conceal assets and income from a federal bankruptcy court. ROSA pled guilty in Manhattan federal court before United States District Judge Denise L. Cote to a two-count information (the “Information”) charging her with one count of making false statements to immigration authorities, and one count of making false declarations to a federal bankruptcy court. ROSA pled guilty pursuant to a plea agreement with the United States Attorney’s Office that requires her, among other things, to resign from office upon entry of her plea.

Manhattan U.S. Attorney Preet Bharara said: “Gabriela Rosa’s crimes cut to the heart of her legal qualification to serve the people of the State of New York as a New York State Assemblywoman. She gained the ability to run for that office only as a result of a years-long immigration fraud, and then she compounded her lack of fitness to serve by defrauding a federal bankruptcy court. Now she faces losing her position and prison time for her actions.”

According to the superseding information, the plea agreement, and statements made today in Court:

The Marriage and Naturalization Fraud Scheme

The New York State Constitution states that only United States citizens may serve as members of the New York State Legislature. In November 2012, ROSA was elected to the New York State Legislature as an Assemblywoman for Assembly District 72 in Manhattan, and is currently serving a two-year term in the Assembly.

ROSA is a citizen of the Dominican Republic and had no citizenship status in the United States until 2005. In December 2005, ROSA was naturalized as a United States citizen as a result of a scheme to obtain legal residency and ultimately citizenship through a sham marriage. ROSA paid a United States citizen (“Spouse-1”) approximately $8,000 to enter into a sham marriage with her while she maintained a relationship with another individual who later became her husband (“Spouse-2”). In numerous submissions and statements to immigration authorities made under penalty of perjury between in or about 1996 and in or about 2005, ROSA falsely represented to immigration authorities that she had entered into a bona fide marriage with Spouse-1, and that she had never given false or misleading information to a U.S. immigration official while applying for immigration benefits.

The Bankruptcy Fraud Scheme

In September 2009, ROSA filed a voluntary petition for bankruptcy, under Chapter 7 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of New York (the “Petition”). Through the Petition, ROSA sought to liquidate over $30,000 in debt that she had accumulated on, among other things, credit card charges and personal loans. In the Petition, which ROSA signed under penalty of perjury, and in subsequent documents submitted in support of the Petition, which were also signed under penalty of perjury, ROSA knowingly and willfully made several false declarations and statements. Among other things, ROSA fraudulently omitted her ownership of a cooperative apartment in Manhattan (the “Apartment”) from the Petition, which required her to list all real or personal property in which she had any ownership interest. ROSA, who worked at the time as a legislative assistant in the New York State Legislature, also failed to list outside income she earned as a political consultant and income earned by Spouse-2 in the Petition and supporting documents.

In her plea allocution today before Judge Cote, ROSA admitted that she had entered into a sham marriage in an effort to obtain citizenship and had submitted a fraudulent petition to Bankruptcy Court. ROSA also agreed, pursuant to the terms of her plea agreement, to the return of a campaign contribution unlawfully received from a representative of a foreign government.

ROSA, 47, of Manhattan, faces a total statutory maximum sentence of 10 years in prison. ROSA also faces a term of up to three years’ supervised release and a fine of up to $250,000. She also must pay restitution and forfeiture arising out of her bankruptcy fraud offenses. The maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Judge Cote set a sentencing date for ROSA of October 3, 2014 at 10am.

Mr. Bharara praised the outstanding investigative work of the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York.

The case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Howard S. Master and Jason Masimore are in charge of the investigation.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that YESID RIOS SUAREZ was sentenced today in Manhattan federal court to 54 years in prison for his role in overseeing the manufacture of tens of thousands of kilograms of cocaine in clandestine laboratories in Colombia, and the distribution and importation of tons of cocaine to the United States and other countries. RIOS SUAREZ, a citizen of Colombia, pled guilty in February 2014. He was sentenced today by U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Preet Bharara said: “Yesid Rios Suarez was a leader of a conspiracy to bring into the United States tons of Colombian cocaine. He used violence to further his aims, including ordering murders, and will now pay for his crimes with a lengthy prison term.”

According to documents filed in this case, statements made at related court proceedings, and witness testimony at a two-day evidentiary hearing in May 2014:

Between 1992 and his arrest in Venezuela in 2011, RIOS SUAREZ, along with his co-conspirators, oversaw the manufacture of thousands of kilograms of cocaine in clandestine laboratories that they operated in the Arauca department of Colombia and other areas of Colombia near the Venezuelan border. During that time, RIOS SUAREZ and his co-conspirators also oversaw the distribution of thousands of kilograms of cocaine from Colombia and Venezuela to the United States and other countries through various intermediate shipping points. Specifically, once the cocaine had been manufactured in laboratories in Colombia, RIOS SUAREZ worked with others to launch planes carrying multi-hundred-kilogram loads of cocaine from clandestine landing strips operated by RIOS SUAREZ and his co-conspirators in Colombia and Venezuela.

Throughout this time, RIOS SUAREZ also directed others to carry weapons and to use violence in furtherance of the charged narcotics conspiracy. On one occasion, RIOS SUAREZ caused those working at his direction to murder two men in order to maintain the secrecy of RIOS SUAREZ’s narcotics trafficking operation. During the course of the narcotics conspiracy, RIOS SUAREZ also oversaw the planning and preparation for an attack on an oil pipeline located in Colombia, which attack was intended to divert the Colombian military’s attention from RIOS SUAREZ’s narcotics trafficking activities being carried out in the same region. The planned attack – which was ultimately foiled by Colombian authorities – involved dropping explosives from an airplane onto an oil pipeline.

All told, prior to his arrest in 2011, RIOS SUAREZ worked for nearly two decades overseeing critical steps in the manufacture, distribution, and importation into the United States and other countries of thousands of kilograms of cocaine, and causing others to engage in violence in furtherance of his narcotics trafficking operation.

In addition to the prison term, Judge Forrest ordered RIOS SUAREZ, 46, to pay a $1 million fine and a $100 special assessment.

Mr. Bharara praised the outstanding efforts of the DEA’s Bogota Country Office and the DEA’s New York Organized Crime Drug Enforcement Strike Force; the Government of the Republic of Colombia; and the U.S. Department of Justice’s Office of International Affairs.

The prosecution of this case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Adam Fee and Sean S. Buckley are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SATNARINE SEEBACHAN, formerly a program director at Bronx Shepherds Restoration Corporation (“Bronx Shepherds”), a not-for-profit corporation in the Bronx, New York, was sentenced to six months of weekend imprisonment to be served during a five year term of probation after having been found guilty by a jury of soliciting and accepting a bribe in the form of labor and materials for the renovation of his residence from a contractor who received federally funded contracts from Bronx Shepherds. SEEBACHAN was sentenced in Manhattan federal court by U.S. District Judge George B. Daniels, who also presided over the five-day jury trial.

According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:

SEEBACHAN was employed as a program director by Bronx Shepherds, a not-for-profit corporation that provides housing restoration to low-income individuals in the Bronx, New York. As program director, SEEBACHAN was responsible for administering two federally funded home improvement programs, namely, the Weatherization Assistance Program (“Weatherization Program”) and the Home Program (“Home Program”) (collectively, the “Programs”).

The Weatherization Program is a federal program funded by the U.S. Department of Energy and the U.S. Department of Health and Human Services. The Weatherization Program provides weatherization assistance, such as improved lighting and heating systems, window caulking, and wall and ceiling insulation, to buildings with low-income residents in order to make the buildings more energy efficient. The Home Program is a federal program funded by the U.S. Department of Housing and Urban Development. The Home Program provides renovation assistance to low-income individuals who reside in small family homes, such as repairs to ceilings, bathrooms, kitchens, windows, and sidewalks. As a program director for Bronx Shepherds, SEEBACHAN was in charge of the bidding process to select the construction companies to perform the necessary work on the buildings, apartments, and houses that Bronx Shepherds had selected to participate in the Programs.

Toward the end of 2005, SEEBACHAN purchased a residence in Glen Cove, New York. In 2006, 2007, and again in 2010, at the direction of SEEBACHAN, a construction company that bid for and received contracts from Bronx Shepherds to perform renovation work under the Programs (the “Contractor”) supplied materials and labor for construction and renovation work performed at SEEBACHAN’s residence. Specifically, the Contractor paid for marble that was installed in SEEBACHAN’s residence and did extensive concrete beautification renovations to the driveway, front walkway, and back patio and pool area.

At the time the Contractor paid for the marble and performed the concrete work at SEEBACHAN’s residence, SEEBACHAN promised the Contractor that he would ensure that the Contractor received lucrative contracts to perform repairs on apartment buildings Bronx Shepherds owned and managed. The total dollar value of the labor and materials that SEEBACHAN obtained from the Contractor was more than $140,000. SEEBACHAN was found guilty of one count of bribery concerning an organization that receives federal program funds.

In addition to weekend imprisonment and probation, Judge Daniels also ordered SEEBACHAN, 52, of Glen Cove, New York, to perform 500 hours of community service, and pay a $10,000 fine and a $100 special assessment.

Mr. Bharara praised the investigative work of the New York State Inspector General’s Office.

This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEPHANIE BROWN pled guilty today to engaging in fraud in connection with federal financial aid to attend an online state college. BROWN pled guilty in Manhattan federal court before U.S. Magistrate Judge James C. Francis IV and is scheduled to be sentenced on October 8, 2014, at 10:00 a.m.

According to Information, documents filed in the case, and statements made today in court:

In 2011, BROWN forged documents, made false statements, and submitted false and fraudulent documents to the United States Department of Education (“Department of Education”) in order to obtain federal financial aid for prospective students of a State of New York online college. As a result of BROWN’s fraud, the Department of Education provided federal financial aid to individuals who otherwise would not have qualified for such aid. As part of her plea agreement with the Government, BROWN agreed to make restitution in the amount of $117,840.

BROWN, 53, of Bronx, New York, is charged with one count of federal financial aid fraud. She faces a maximum of one year in prison; one year of supervised release; and a $25 special assessment. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. In addition to the prison sentence, BROWN has agreed to restitution in the amount of $117,840.

Mr. Bharara praised the investigative work of the Department of Education’s Office of the Inspector General.

This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecution.

U.S. v. Stephanie Brown Information

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 Field Office of the Federal Bureau of Investigation (“FBI”), today announced conspiracy and securities fraud charges against BENJAMIN DURANT and DARYL PAYTON, two former stock brokers at a securities trading firm (“Securities Trading Firm-1”), for their alleged involvement in an insider trading scheme. Specifically, DURANT, PAYTON, and their co-conspirators allegedly traded on the basis of material, non-public information (“Inside Information”) concerning IBM’s acquisition of a software company, SPSS, Inc., in 2009, earning hundreds of thousands of dollars in profits. DURANT and PAYTON were arrested this morning at their homes in Manhattan, New York, and will be presented in Manhattan federal court before U.S. Magistrate Judge Michael H. Dolinger this afternoon.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Benjamin Durant and Daryl Payton not only acquired inside information about a corporate acquisition and made illegal profits from it, but they colluded with others to conceal their crime, even holding a secret meeting at a hotel the night the acquisition was announced to devise their cover-up plan. This kind of dishonesty is profitable only in the short run, ultimately leading to arrest and prosecution.”

FBI Assistant Director-in-Charge George Venizelos said: “The defendants bought SPSS stock and options before a leaked acquisition by IBM, violating the law and breaching their duty, as alleged. When Durant and Payton were asked about their trades in an internal investigation, they doubled down and lied. Today they find themselves under arrest. The integrity and fairness of our financial markets are paramount. It’s a matter of national security. We will police this type of illegal behavior and make as many arrests as necessary until people stop cheating and ripping off others to get ahead.”

In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against DURANT and PAYTON.

The following allegations are based on the Indictment unsealed today in Manhattan federal court:

The Inside Information concerning IBM’s acquisition of SPSS originated from a corporate lawyer who was part of the legal team that represented IBM in the transaction (“Attorney-1”) in 2009. On May 31, 2009, Attorney-1 shared Inside Information concerning the transaction, including the names of the parties and the fact that IBM was going to acquire SPSS for a significant premium over its market price, with his close friend, Trent Martin, a former research analyst at an international financial services firm. The information was shared in confidence and, based on their longstanding history of sharing confidences, Attorney-1 expected that Martin would not share the information or use it to trade.

However, in June and July 2009, Martin bought SPSS common stock and call option contracts based on the Inside Information he was given by Attorney-1 and, in turn, shared the tip with his roommate, Thomas Conradt, who worked as a stock broker at Securities Trading

Firm-1. In July 2009, Conradt passed along the tip to DURANT and PAYTON, his co-workers at Securities Trading Firm-1, who then bought SPSS call options based on the Inside Information. When IBM announced its acquisition of SPSS on July 28, 2009, the share price of SPSS common stock rose by 41% in one day. Thereafter, DURANT, PAYTON, Martin, Conradt and David Weishaus, whom Conradt also tipped, sold their SPSS positions, yielding total profits worth hundreds of thousands of dollars.

After IBM announced its acquisition of SPSS, DURANT and PAYTON took steps to conceal their illegal insider trading activity. On the evening the IBM/SPSS transaction was announced, DURANT and PAYTON met Conradt, Weishaus, and another co-conspirator at a hotel in Manhattan. At that meeting, DURANT, PAYTON, and the others discussed their trading in SPSS securities and how much money they made. When they were all together, DURANT suggested that if anyone asked why they had traded in SPSS securities, they should simply say that they liked technology stocks. Thereafter, prior to the sale of his call options, PAYTON transferred his options from securities accounts at Securities Trading Firm-1 to two securities accounts that he opened at a different brokerage firm. In doing so, PAYTON falsely informed the new brokerage firm during a recorded telephone call that he was a “self-employed real estate consultant,” rather than a stock broker at Securities Trading Firm-1. In that call, a representative from the new brokerage firm specifically informed PAYTON that if he worked at a broker/dealer, duplicate account statements might have to be sent to his employer. Nevertheless, PAYTON did not inform the new brokerage firm that he worked at Securities Trading Firm-1. Later, in November 2009, when Securities Trading Firm-1 conducted an investigation into the trading activity of DURANT and PAYTON in SPSS, both of them offered cover stories for their SPPS trading and neither indicated that he had heard about SPSS from, or spoken about the company with, Conradt, Weishaus, or another co-conspirator.

DURANT, 37, of New York, New York, has been charged with one count of conspiracy to commit securities fraud and two counts of securities fraud (Count Two and Three). PAYTON, 38, also of New York, New York, has been charged with one count of conspiracy to commit securities fraud and three counts of securities fraud (Count Four through Six). Count One, the conspiracy charge, carries a maximum potential penalty of five years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. Counts Two through Six each carry a maximum potential penalty of 20 years in prison and a maximum fine of $5 million. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Martin, Conradt, and Weishaus have previously pled guilty.

Mr. Bharara praised the investigative work of the FBI. He also thanked SEC for its assistance in the case.

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 Telemachus P. Kasulis and John T. Zach 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. Benjamin Durant and Daryl Payton Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that BORIS LISYANSKY was sentenced today to 20 years in prison for his role in hiring a hitman to kill two Queens businessmen, which resulted in a non-fatal shooting in May 2010. LISYANSKY was convicted of one count of murder for hire and one count of conspiracy to commit murder for hire on April 29, 2013, after a six-day trial before Judge George B. Daniels in Manhattan federal court.

Manhattan U.S. Attorney Preet Bharara stated: “Boris Lisyansky ordered the cold-blooded murder of two innocent men. Thankfully, his intended victims survived the attempt. Today’s sentence makes clear that even when you send others to do your dirty work, you will be found and held accountable for your crimes.”

According to the Indictment filed in Manhattan federal court and the evidence at trial and sentencing:

In May 2010, LISYANSKY hired an associate, Jesus Rosa, to kill the father and son owners of a catering hall (the “Catering Hall”) in Queens. Torrance Crayton, a/k/a “King Blood,” another associate of LISYANSKY’s, provided Rosa with a gun to use in the murders. LISYANSKY arranged a meeting with the intended victims at their Catering Hall under the ruse that LISYANSKY was considering booking the Catering Hall for his wedding. LISYANSKY met with the victims in the Catering Hall on a weekday during normal business hours. Acting at LISYANSKY’s direction, Rosa entered the Catering Hall during that meeting and brandished his firearm. LISYANSKY, pretending to be a victim, covertly signaled to Rosa the two intended victims of the murder. Rosa pointed the gun at the head of one of the two victims, but decided he could not go through with the murder and instead shot the victim in the leg, and fled the Catering Hall. Rosa jumped into a waiting getaway car driven by Jayson Vasquez-Soto. Vasquez-Soto and Rosa drove back to LISYANSKY’s apartment where they proceeded, at the direction of LISYANSKY, to destroy evidence from the murder plot, including wiping the car down to destroy fingerprint evidence. The police arrived at the Catering Hall soon after the shooting and LISYANSKY, still posing as a victim of the hold-up, gave false details about the shooter to the police.

In addition to the prison term, Judge Daniels sentenced LISYANSKY, 39, of Queens, New York, to three years of supervised release and ordered him to pay a special assessment of $200.

Mr. Bharara praised the outstanding efforts of the Federal Bureau of Investigation and the New York City Police Department in connection with this investigation.

A number of co-conspirators and accomplices were also prosecuted in connection with this case. Jesus Rosa pleaded guilty to murder for hire, conspiracy to commit murder for hire, and other offenses, and is awaiting sentencing. Torrance Crayton, a/k/a “King Blood,” pleaded guilty to firearms possession and was sentenced by United States District Judge Richard Sullivan to 5 years in prison. Jayson Vazquez-Soto was convicted at trial of obstruction of justice and sentenced by United States District Judge George B. Daniels to 24 months in prison.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Alexander Wilson and Harris Fischman are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that BORIS LISYANKSY was sentenced today to 20 years in prison for his role in hiring a hitman to kill two Queens businessmen, which resulted in a non-fatal shooting in May 2010. LISYANKSY was convicted of one count of murder for hire and one count of conspiracy to commit murder for hire on April 29, 2013, after a six-day trial before Judge George B. Daniels in Manhattan federal court.

Manhattan U.S. Attorney Preet Bharara stated: “Boris Lisyansky ordered the cold-blooded murder of two innocent men. Thankfully, his intended victims survived the attempt. Today’s sentence makes clear that even when you send others to do your dirty work, you will be found and held accountable for your crimes.”

According to the Indictment filed in Manhattan federal court and the evidence at trial and sentencing:

In May 2010, LISYANKSY hired an associate, Jesus Rosa, to kill the father and son owners of a catering hall (the “Catering Hall”) in Queens. Torrance Crayton, a/k/a “King Blood,” another associate of LISYANKSY’s, provided Rosa with a gun to use in the murders. LISYANKSY arranged a meeting with the intended victims at their Catering Hall under the ruse that LISYANKSY was considering booking the Catering Hall for his wedding. LISYANKSY met with the victims in the Catering Hall on a weekday during normal business hours. Acting at LISYANKSY’s direction, Rosa entered the Catering Hall during that meeting and brandished his firearm. LISYANKSY, pretending to be a victim, covertly signaled to Rosa the two intended victims of the murder. Rosa pointed the gun at the head of one of the two victims, but decided he could not go through with the murder and instead shot the victim in the leg, and fled the Catering Hall. Rosa jumped into a waiting getaway car driven by Jayson Vasquez-Soto. Vasquez-Soto and Rosa drove back to LISYANKSY’s apartment where they proceeded, at the direction of LISYANKSY, to destroy evidence from the murder plot, including wiping the car down to destroy fingerprint evidence. The police arrived at the Catering Hall soon after the shooting and LISYANKSY, still posing as a victim of the hold-up, gave false details about the shooter to the police.

In addition to the prison term, Judge Daniels sentenced LISYANSKY, 39, of Queens, New York, to three years of supervised release and ordered him to pay a special assessment of $200.

Mr. Bharara praised the outstanding efforts of the Federal Bureau of Investigation and the New York City Police Department in connection with this investigation.

A number of co-conspirators and accomplices were also prosecuted in connection with this case. Jesus Rosa pleaded guilty to murder for hire, conspiracy to commit murder for hire, and other offenses, and is awaiting sentencing. Torrance Crayton, a/k/a “King Blood,” pleaded guilty to firearms possession and was sentenced by United States District Judge Richard Sullivan to 5 years in prison. Jayson Vazquez-Soto was convicted at trial of obstruction of justice and sentenced by United States District Judge George B. Daniels to 24 months in prison.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Alexander Wilson and Harris Fischman are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that STEVEN WESSEL, a/k/a “Wes Wessels,” was arrested this morning on securities fraud and wire fraud charges. WESSEL is expected to be presented today in Manhattan federal court before United States Magistrate Judge Michael H. Dolinger.

Manhattan U.S. Attorney Preet Bharara said: “As charged, Steven Wessel was much less an investment adviser than a serial liar. He allegedly lied in telling one investor that his funds would be invested in securities, and then lied in soliciting money from a second investor to pay back the first.”

According to the two-count Complaint unsealed in Manhattan federal court:

From at least June 2013 through April 2014, WESSEL ran a fraudulent investment scheme. WESSEL, who claimed to be the Chairman and Executive Managing Member of Steeplechase USA, LLC (“Steeplechase USA”), located in New York, New York, represented to an investor (“Investor A”) that Steeplechase USA was in the business of trading securities. WESSEL personally solicited $200,000 from Investor A on the understanding that the funds would be solely invested in securities.

Contrary to WESSEL’s promise to invest Investor A’s funds in securities, WESSEL used substantially all of Investor A’s money for his own personal benefit, including for cash withdrawals and personal expenses, including making a payment of $25,000 toward a restitution obligation from a prior judgment of conviction. WESSEL did not tell Investor A about this misappropriation. Instead, WESSEL falsely represented to Investor A that his $200,000 investment had gained tens of thousands of dollars and that Steeplechase USA’s portfolio had gained approximately 167% in 2013.

When Investor A requested to withdraw his funds from Steeplechase USA, WESSEL solicited a $550,000 loan from a second investor (“Investor B”). WESSEL falsely represented that he would use Investor B’s money to provide financing for a commercial real estate project. To induce Investor B to lend him money, WESSEL, among other things, created and sent a fabricated email to Investor B. The fabricated email purported to be from a bank and made it appear as if the real estate project was legitimate.

Contrary to WESSEL’s promise to Investor B, WESSEL used substantially all of Investor B’s money for his own benefit, including to pay $251,000 to Investor A – money that, according to WESSEL, represented Investor A’s initial $200,000 investment and $51,000 in trading profits.

WESSEL is charged with one count of securities fraud and one count of wire fraud. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, 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 work of the Criminal Investigators of the United States Attorney’s Office, who investigated this case.

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 Damian Williams is in charge of the prosecution.

The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

U.S. v. Steven Wessel Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, and Ronald A. Cimino, Deputy Assistant Attorney General for the Tax Division of the Department of Justice, announced that PAUL M. DAUGERDAS, a tax attorney and certified public accountant, was sentenced today in Manhattan federal court to 15 years in prison for orchestrating a massive fraudulent tax shelter scheme in which he and his co-conspirators designed, marketed, and implemented fraudulent tax shelters used by wealthy individuals to evade over $1.6 billion in taxes owed to the IRS. The 20-year scheme, which DAUGERDAS hatched while working at the Arthur Andersen accounting firm and then continued while a partner at two law firms - Altheimer & Gray and then Jenkens & Gilchrist - generated over $7 billion of fraudulent tax losses and yielded approximately $95 million in fees to DAUGERDAS personally. DAUGERDAS was convicted in October 2013 following an eight-week jury trial, presided over by U.S. District Judge William H. Pauley III, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Paul Daugerdas used his legal and accounting expertise to cheat the system and unlawfully deprive the government of over $1.6 billion of tax revenue. With today’s sentence, Daugerdas’s giant tax fraud scheme has reached its just conclusion under the law, with a sentence of 15 years in prison.”

Deputy Assistant Attorney General Ronald A. Cimino said: “Dishonest professionals who market tax fraud schemes to their clients need to sit up and take note of today’s sentence. The Justice Department and IRS are committed to holding responsible those who would misuse their skills and expertise to help others to evade their lawful tax obligations.”

According to the evidence at trial and other documents filed in the case:

From 1994 through 2004, DAUGERDAS, a lawyer, certified public accountant, and the former head of the Chicago office of the Jenkens & Gilchrist law firm (“J&G”) and its tax practice, participated in a scheme to defraud the IRS by designing, marketing, implementing, and defending fraudulent tax shelters.

As part of the scheme, DAUGERDAS and others schemed to defraud the IRS by, among other things, corruptly endeavoring to prevent the IRS from: (i) detecting their clients’ use of these shelters; (ii) understanding how the transactions operated to produce the tax results reported by the clients; (iii) learning that, rather than serving as legitimate investment transactions, the tax shelters lacked “economic substance” in that they were designed and marketed as cookie-cutter products intended exclusively to eliminate or reduce large tax liabilities; (iv) learning that the clients were not seeking profit-making investment opportunities, but were instead seeking huge tax benefits; and (v) learning that, from the outset, all the clients intended to complete a pre-planned series of steps that had been designed to lead to the specific tax benefits sought by the clients. DAUGERDAS and others created, and assisted in creating, transactional documents and other materials that falsely and fraudulently described their clients’ motivations for entering into the tax shelters and for taking various steps in order to yield the tax benefits.

As part of the scheme to defraud the IRS, DAUGERDAS and his co-conspirators also fraudulently backdated some of the tax shelter transactions. In particular, DAUGERDAS and his co-defendants learned that certain tax shelter transactions had been implemented incorrectly during the year of the transactions, in that they failed to produce the amount or type of tax losses requested by the clients. Rather than reporting those tax shelter results as they occurred - as required by the Internal Revenue Code - DAUGERDAS and others engaged in corrupt “correcting” transactions after the close of the pertinent tax years, and then backdated the tax shelter documents to make it appear as if the amount and type of tax losses sought by the clients had in fact been generated during the pertinent tax years. DAUGERDAS also authored fraudulent tax opinion letters that falsely described when certain aspects of the transactions had actually occurred. As a result of the fraudulent backdating, DAUGERDAS and others caused tax shelter clients to file tax returns that falsely and fraudulently claimed tens of millions of dollars of tax losses to which the clients were not entitled.

As a result of the scheme, DAUGERDAS and his co-conspirators made millions of dollars in fees and bonuses. Specifically, DAUGERDAS made $95 million in profits, but used tax shelters to reduce the taxes he paid to less than $8,000; without the shelters, he would have owed over $32 million in taxes.

DAUGERDAS, 63, of Wilmette, Illinois, was convicted of conspiring to defraud the IRS, to evade taxes, and to commit mail and wire fraud, and of corruptly endeavoring to obstruct and impede the internal revenue laws. He was also convicted of four counts of tax evasion relating to the use of various tax shelters for specified clients, and of mail fraud.

In addition to the prison term, Judge Pauley ordered DAUGERDAS to forfeit $164,737,500 in proceeds of the offenses, which included certain assets of DAUGERDAS’ that had been seized and frozen at the time DAUGERDAS was indicted. The forfeited proceeds include a lakefront home on Lake Geneva in Wisconsin, and over $20 million in various securities and financial accounts. Judge Pauley also ordered DAUGERDAS to pay restitution to the IRS of $371,006,397. At sentencing, Judge Pauley said that DAUGERDAS “was at the apex of tax shelter racketeers who tapped into the greed of the super-wealthy who did not want to pay taxes.”

In connection with this same scheme, David Parse, a former broker at Deutsche Bank, was convicted of various tax fraud charges in May 2011 after an 11-week jury trial, and was sentenced in March 2013 to 46 months in prison. Donna Guerin, a former lawyer at J&G’s Chicago tax practice, pled guilty for her role in the scheme to various tax fraud charges in September 2012. She was sentenced in March 2013 to eight years in prison.

Former J&G partner Erwin Mayer, former BDO Seidman Vice Chairman and board member Charles W. Bee, Jr., former BDO principal and former member of BDO Seidman’s TSG and Tax Opinion Committee Michael Kerekes, former BDO Seidman Vice Chairman and TSG member Adrian Dicker, BDO Seidman partner Robert Greisman, and BDO Seidman partner Mark Bloom have all previously been convicted in connection with the scheme.

Mr. Bharara thanked the IRS and the Tax Division of the Department of Justice for their work on this case.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Stanley J. Okula, Jr. and Niketh Velamoor, and DOJ Tax Division Assistant Chief Nanette L. Davis are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today criminal charges against CARLOS PANIAGUA, a/k/a “Carlos,” a/k/a “Carlito,” a/k/a “Cee-lo” (“CARLOS PANIAGUA”), JOSE OSVALDO PANIAGUA JR., a/k/a “Osvaldo,” a/k/a “Calvo” (“OSVALDO PANIAGUA JR.”), JOSE RAFAEL PANIAGUA, a/k/a “Rafaelito” (“RAFAEL PANIAGUA”), JOSE OSVALDO PANIAGUA SR., a/k/a “Nano,” a/k/a “Viejo” (“OSVALDO PANIAGUA SR.”), JOAN TORRES, a/k/a “Ronco,” and JOSE BORGEN-REYES, a/k/a “Benny,” a/k/a “Benny Blanco,” a/k/a “Scar,” for operating a massive prescription drug diversion ring, including the trafficking of both oxycodone and expensive HIV medication, out of Joaquin Grocery & Deli, a grocery store in the Bronx. CARLOS PANIAGUA, JOSE OSVALDO PANIAGUA JR., and TORRES were arrested yesterday and were presented in Manhattan federal court before Magistrate Judge James C. Francis IV. JOSE OSVALDO PANIAGUA SR. surrendered to authorities last night and will appear in Manhattan federal court before Magistrate Judge Michael H. Dolinger later today. BORGEN-REYES was previously in custody in Burlington County, New Jersey, and will be transferred to federal custody at a later date. JOSE RAFAEL PANIAGUA remains at large. Concurrently with the arrests of the defendants yesterday, and with the assistance of the New York City Law Department, the doors to the Joaquin Grocery were padlocked pursuant to a judicial order from Bronx Supreme Court.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, instead of earning an honest living at their grocery store, the defendants turned it into a drug market that took advantage of impoverished Medicaid beneficiaries, spawned violence in its neighborhood, and endangered public health and safety. Today the defendants face prison time for their actions, and the Joaquin Grocery is thankfully closed for business.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, the defendants placed their own financial gain over the public’s health and safety. They defrauded Medicaid and the U.S. taxpayers while threatening the health of patients whose prescriptions were filled with diverted, mishandled and repackaged medications. We will continue to work with our law enforcement partners, including the NYPD, to prevent the illegal sale and misbranding of pharmaceuticals.”

Police Commissioner William J. Bratton said: “These individuals illegally amassed large quantities of prescription narcotics for resale and endangered the health of potential recipients using dangerous methods of repackaging and storage. Thanks to the efforts of our investigators, our federal law enforcement partners, and the prosecutors involved in this case, this illegal prescription drug ring has been shut down.”

According to the Complaint unsealed yesterday in Manhattan federal court, and statements made yesterday in court, it is alleged that:

All of the defendants except BORGEN-REYES currently operate Joaquin Grocery & Deli (the “Joaquin Grocery”), a grocery store at 598 Morris Avenue in the Bronx, New York. In addition to selling grocery products, the Joaquin Grocery has operated for years as a marketplace for Medicaid Beneficiaries to sell their Medicaid-reimbursed prescription medication, including Oxycontin, Percocet, and expensive HIV medications. The successful drug trade at the Joaquin Grocery has led to numerous acts of violence both inside the store and in its immediate vicinity. For example, in October 2010, a former competitor of the Joaquin Grocery was shot twice, including once in the head, while attempting to steal customers from the Joaquin Grocery just a few stores down. In March 2014, OSVALDO PANIAGUA SR. and RAFAEL PANIAGUA were held up at gunpoint inside the Joaquin Grocery in an apparent drug robbery.

The drug transactions at the Joaquin Grocery typically took place in a small room behind a door at the back of the store, where Medicaid Beneficiaries provided their pill bottles to the defendants for cash. With respect to non-controlled medication such as HIV medication, the defendants removed the patient labels from the medication bottles with lighter fluid, which contains toxic substances, so that the bottles appeared brand new and could eventually be re-sold to pharmacies. With respect to controlled medication such as Oxycontin, the defendants amassed large quantities of pills and re-sold them on the street.

Search warrants were executed at the Joaquin Grocery and at 532 Tinton Avenue, Apt. 1C, which is a stash-house used by the Paniaguas. Search warrants were also executed on two cars that the Paniaguas used. Approximately 1,000 bottles of prescription medication and hundreds of loose pills (both controlled and non-controlled substances) were seized in the store and the stash location. Agents also seized a machete at the store, and, from the stash location, lighter fluid and cotton balls (which are typically used to remove patient labels from the medication so it can be re-sold). Agents also seized thousands of dollars in cash.

CARLOS PANIAGUA, JOSE OSVALDO PANIAGUA JR., and RAFAEL PANIAGUA are brothers who were in charge of the drug business at the Joaquin Grocery. JOSE OSVALDO PANIAGUA SR. is their father, who assisted in the purchase of prescription drugs at the Joaquin Grocery. TORRES provided armed security, operated as a lookout, and also engaged in the purchase of prescription drugs at the Joaquin Grocery. BORGEN-REYES previously played the same role as TORRES until 2012.

CARLOS PANIAGUA, OSVALDO PANIAGUA JR., RAFAEL PANIAGUA, OSVALDO PANIAGUA SR., and TORRES, of the Bronx, New York, and BORGEN-REYES, of Paterson, New Jersey, are each charged with one count of engaging in a conspiracy to distribute and possess with the intent to distribute a controlled substance and one count of engaging in a conspiracy to commit the unlawful misbranding, adulteration and wholesale distribution of prescription drugs. They each face a maximum of 25 years in prison (20 years on Count One and 5 years on Count Two). 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.

Mr. Bharara praised the investigative work of the FBI and NYPD, and thanked the New York City Law Department for its assistance.

Mr. Bharara also thanked the the FBI’s Health Care Fraud Task Force for their work in this investigation, which he noted is 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 Violent and Organized Crime Unit and Narcotics Unit. Assistant U.S. Attorney Russell Capone 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. Jose Carlos Paniagua et al Complaint (signed)

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that PAUL J. KONIGSBERG – a lawyer and accountant who provided services to numerous clients of Bernard L. Madoff Investment Securities (“Madoff Securities”), and who was a personal tax and business adviser to Madoff – pleaded guilty in Manhattan federal court before United States District Judge Laura Taylor Swain. KONIGBSERG pleaded guilty to a three-count superseding information charging him with one count of conspiracy to falsify the books and records of Madoff Securities and to obstruct the administration of the tax laws, as well as two substantive books and records counts. In addition to pleading guilty, KONIGSBERG has agreed to cooperate with the Government in its ongoing investigation of the fraud at Madoff Securities.

According to the superseding information, the plea agreement, and other documents filed in connection with the case:

KONIGSBERG, a lawyer and Certified Public Accountant, was the senior tax partner of Konigsberg Wolf & Co., P.C. (“Konigsberg Wolf”) and a minority shareholder of Madoff Securities International Limited, Madoff’s London-based affiliate, making KONIGSBERG the only person outside of the Madoff family to hold an ownership interest in either Madoff Securities or Madoff International.

Beginning in at least the early 1990s, Madoff began to steer several of his investors towards KONIGSBERG’s accounting practice, particularly certain long-time investors in whose accounts Madoff executed the most glaringly fraudulent transactions. By December 2008, when the scheme collapsed, Konigsberg Wolf was providing accounting services for Madoff Securities clients who aggregately held over 300 investment advisory accounts.

For example, after the death of one long-time Madoff client – who had recruited investors and so had been promised by Madoff corresponding annual commission payments in the form of guaranteed returns and fictitious, back-dated trades – Madoff encouraged the client’s widow to use KONIGSBERG as her accountant. Madoff and Frank DiPascali, Jr. – who has previously pleaded guilty for his role in the fraud and is cooperating with the Government – devised an investment “strategy” for the widow’s account: her money would be “invested” in United States Treasury bonds and cash equivalents for the first 11 months of each year, and in December, DiPascali would fabricate back-dated options trades in order to generate the promised returns. So, for instance, one of the widow’s accounts was invested in Treasuries and money market funds in January through November of 2003, resulting in net equity at the end of November 2003 of approximately $860,000. In January 2004, however, DiPascali back-dated fake options trades purportedly executed in December 2003 to generate an additional approximately $825,000, nearly doubling the value of the account. Each December, over the course of several years, KONIGSBERG called DiPascali to ensure that the widow’s accounts reflected the promised returns.

From time to time, moreover, Madoff and certain of his employees “amended” the holdings of some of his oldest clients, replacing statements reflecting one set of securities with revised statements, for the exact same time period, reflecting entirely different holdings and values. Because the existence of multiple, vastly different account statements for the same time risked exposing the fraud, Madoff could only ask certain trusted clients to return their statements in favor of the “amended” ones. Because KONIGSBERG serviced certain of Madoff’s most important accounts, however, he frequently returned statements in favor of the “amended” ones.

For example, in early 2003, Annette Bongiorno – one of the five defendants recently convicted of participating in Madoff’s massive fraud after a nearly six-month trial – created a year’s worth of profitable, back-dated trades in the account of another Madoff Securities client, who was also a client of KONIGSBERG’s. That client had suffered losses in a number of different investments in 2002, causing the client’s net worth to decline dramatically. In order to restore the client’s wealth, KONIGSBERG and the client went to Bongiorno’s office at Madoff Securities, and sat with her as she created and back-dated an entire year’s worth of profitable securities transactions and corresponding account statements for the client’s investment advisory account at Madoff Securities. Bongiorno then instructed KONIGSBERG and his client to return the original statements before receiving the new, “amended” statements. KONIGSBERG later used these back-dated, “amended” statements to prepare his client’s tax returns. Likewise, in 2008, KONIGSBERG sent back several months’ worth of statements for a different client, in favor of new ones reflecting millions of dollars in new transactions.

In addition to being paid for his accounting services by the dozens of clients referred to him by Madoff, KONIGSBERG also received payments directly from Madoff Securities of approximately $15,000 to $25,000 per month for over a decade. In addition, beginning in approximately 1992, KONIGSBERG arranged for a relative to be put on Madoff Securities’ payroll, receiving salary and employee benefits, despite not working at the firm. KONIGSBERG arranged for the relative to be paid by Madoff in lieu of accepting payments himself, despite the fact that the payments were on account of customers that KONIGSBERG recruited to invest with Madoff.

KONIGSBERG also provided tax and business advice to Madoff personally. For example, Madoff consulted KONIGSBERG about establishing Madoff Securities, which had for years been a sole proprietorship, as a Limited Liability Company. Madoff also consulted KONIGSBERG concerning accounting and bookkeeping issues in connection with Madoff International, the firm’s London affiliate.

In or about the early 1990s, Madoff consulted KONIGSBERG about the tax consequences of transferring funds to two other employees of Madoff Securities (“CC-1” and “CC-2”). KONIGSBERG advised Madoff that if the transfers were structured as loans and if CC-1 and CC-2 paid interest on those loans and paid back the principal of the loans, no taxes would be due and owing by either Madoff or by CC-1 or CC-2. Thereafter, KONIGSBERG arranged for a lawyer he worked with to draft promissory notes documenting the loans, and KONIGSBERG provided some of the financial terms of the loans, such as the applicable interest rate. The promissory notes therefore appeared to conform to the tax law, as Madoff, CC-1, and CC-2 desired. On December 10, 2008 – the day before Madoff was arrested – Madoff called KONIGSBERG to ask whether the loans had been converted into gifts, which would have created a substantial tax liability for Madoff. In fact, Madoff and KONIGSBERG had never discussed the possibility of reclassifying the loans into gifts, and KONIGSBERG told Madoff so.

KONIGSBERG, 78, faces a total statutory maximum sentence of 30 years in prison. A chart identifying the maximum penalties for each of the charged offenses is attached to this release. The maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

KONIGSBERG is also subject to mandatory restitution and criminal forfeiture and faces criminal fines up to twice the gross gain or loss derived from the offense. Pursuant to the agreement entered into with the Government, KONIGSBERG has agreed to forfeit $4.4 million. To the extent not already paid to the ongoing Securities Investor Protection Act liquidation proceedings of Madoff Securities, the forfeited funds will be used to compensate victims of the fraud through the Madoff Victim Fund, which is the victim remission fund established by the Manhattan U.S. Attorney to compensate victims of the fraud at Madoff Securities, and which has collected approximately $4 billion to date.

Judge Swain set a sentencing date for KONIGSBERG of September 19, 2014, at 2:00 p.m.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the Internal Revenue Service-Criminal Investigations, and the United States Department of Labor. He also thanked the U.S. Securities and Exchange Commission.

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 Matthew L. Schwartz, John T. Zach, Randall W. Jackson, and Christopher D. Frey are in charge of the prosecution.

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Preet Bharara, United States Attorney for the Southern District of New York, announced today the arrest of ERIC GIVENS, a police officer with the National Railroad Passenger Corporation (“Amtrak”), and the former treasurer of the national union for Amtrak police officers, on charges of wire fraud, embezzlement of union funds, and making a false statement to a federal investigator. GIVENS was arrested this morning in East Stroudsburg, Pennsylvania, and is expected to be presented this afternoon in Manhattan federal court before U.S. Magistrate Judge Michael H. Dolinger.

According to the allegations contained in the Complaint unsealed today in Manhattan federal court:

GIVENS has been employed as a police officer with Amtrak since May 1997, and was most recently assigned to Penn Station, in New York, New York. GIVENS served as the elected treasurer of the Amtrak Police Lodge 189 Labor Committee (the “Labor Committee”), the national union for Amtrak police officers, from 2003 through January 2010. During the same period, and continuing until November 2013, GIVENS also served as the elected treasurer of Amtrak Police Lodge 189 Inc. (the “Lodge”), a fraternal organization affiliated with the Labor Committee.

Starting by at least 2008, GIVENS improperly took at least $100,000 in total from the Labor Committee and Lodge by fraudulently charging personal expenses to the Labor Committee and Lodge and by withdrawing cash for his own purposes, and took steps to hide what he had done. During this period, GIVENS used the debit card of the Labor Committee to pay for, among other things, gasoline and food, and used the debit card of the Lodge to pay for, among other things, travel, hotels in multiple cities, and entertainment in New York and New Jersey. GIVENS also withdrew thousands of dollars in cash from Labor Committee and Lodge bank accounts.

GIVENS, 52, of East Stroudsburg, Pennsylvania, is charged with one count of wire fraud, one count of embezzlement of union funds, and one count of making a false statement to a federal investigator. He faces a total maximum sentence of thirty years in prison. 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 U.S. Department of Labor’s Office of Labor-Management Standards and its Office of Inspector General’s Office of Labor Racketeering and Fraud Investigations. Mr. Bharara also thanked the Amtrak Police Department’s Office of Internal Affairs for its assistance.

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.

The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.

U.S. v. Eric Givens Complaint 14 Mag 1299

Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID HIGGS, a former Managing Director in the Investment Banking Division of Credit Suisse Group (“Credit Suisse”), was sentenced today 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, HIGGS 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. Higgs was sentenced by U.S. District Judge Alison J. Nathan.

According to the Information to which Higgs pled guilty, and statements made during court proceedings:

HIGGS was employed at Credit Suisse as a Managing Director in the bank’s London office. He 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. HIGGS oversaw and managed 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, HIGGS, Serageldin, and their co-conspirators were aware that the market for mortgage-backed securities had declined enormously. On November 28, 2007, Serageldin told HIGGS, a co-conspirator named Salmaan Siddiqui, 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., mortgage-backed bonds in ABN1. As they recognized, “[t]hose bonds are going to start trading worse than the [ABX] Index.” Serageldin, Higgs, and their 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, Serageldin, HIGGS, Siddiqui, and their 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 Serageldin, HIGGS, and their co-conspirators manipulated and inflated in connection with his scheme.

Judge Nathan also sentenced HIGGS, a citizen of the United Kingdom, to no supervised release. HIGGS also was ordered to pay forfeiture in the amount of $900,000, a $50,000 fine, 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.

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 United States Attorney Eugene Ingoglia is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MICHAEL BALBOA, formerly a portfolio manager for Millennium Global Emerging Credit Fund (“MGEC” or the “Hedge Fund”), was sentenced to four years in prison today in Manhattan federal court for carrying out a fraudulent scheme to undermine the independent valuation process relating to the Hedge Fund, and to overvalue the assets of the Hedge Fund. BALBOA was previously found guilty by a jury on December 18, 2013, following a two-and-a-half-week trial, of conspiring to commit securities fraud, conspiring to commit wire fraud, and with committing securities fraud, wire fraud, and investor adviser fraud. He was sentenced today by U.S. District Judge Paul A. Crotty.

Manhattan U.S. Attorney Preet Bharara stated: “Michael Balboa has been held to account for his blatant fraud, inflating the valuation of securities in the hedge fund and falsely representing them as independent valuations. When his employer and regulators became suspicious and began to inquire, Balboa told more lies to cover his tracks.”

According to the Superseding Indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:

From December 2006 to October 2008, BALBOA served as the portfolio manager for the Hedge Fund. The Hedge Fund’s strategy was to invest in a portfolio of corporate and sovereign debt instruments in emerging countries. The Hedge Fund utilized an independent valuation agent (the “IVA”) to determine the Hedge Fund’s “net asset value” (“NAV”), which is the value of the Hedge Fund’s assets, less liabilities and estimated costs of sale/liquidation. The Hedge Fund’s manager, the entity that employed Balboa, represented to investors that sources independent from Balboa would provide prices to the IVA for each security held in the Hedge Fund for purposes of determining the NAV on a monthly basis. For example, in one due diligence questionnaire sent on March 7, 2008, to a potential investor, the Hedge Fund noted that “[t]here are no assets valued in house” and that the “fund has appointed an independent valuation agent” to calculate the NAV of the Hedge Fund.

The proof at trial demonstrated that, contrary to representations made to investors about the independent valuation process, BALBOA provided inflated prices for a security referred to as the Nigerian Oil Warrant. These prices were used for the Hedge Fund’s monthly valuation. BALBOA accomplished this by instructing Gilles DeCharsonville (“DeCharsonville”) and Samuel Pratt (“Pratt”), two co-conspirators with whom BALBOA worked, to provide the IVA with those values while falsely representing that the values were generated independently by DeCharsonville and Pratt. For example, in 2008, although the Nigerian Oil Warrant traded at a price no higher than $239, BALBOA directed DeCharsonville and Pratt to provide the IVA with marks ranging from approximately $525 to $3,500. The IVA then used these falsely inflated marks to compute the Hedge Fund’s monthly NAV, which, in turn, as of August 2008, caused the NAV to be overstated by approximately $80 million. These false values were then sent to investors by means of monthly newsletters, among other types of communications.

The evidence at trial also showed that after Balboa’s employer, the Hedge Fund’s Bermudian court-appointed liquidator, and U.S. and foreign securities regulators all began to investigate the scheme, BALBOA took steps to conceal his involvement in this scheme. For example, BALBOA sent DeCharsonville false justifications to support the inflated valuations so that they would be conveyed to BALBOA’s employer, and later, to U.S. and foreign securities regulators.

In addition to the prison term, Judge Crotty sentenced BALBOA, 45, who currently resides in Melville, New York, and formerly resided in the United Kingdom, to three years of supervised release. BALBOA was also ordered to forfeit $2.23 million and to pay a $500 special assessment fee and restitution in excess of $390 million.

Mr. Bharara praised the work of USPIS, which investigated this case. He also thanked the U.S. Securities and Exchange Commission for its assistance in the 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. Attorneys Jason H. Cowley and David I. Miller, and Special Assistant United States Attorney William T. Conway are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that NARENDRA TULSIRAM was sentenced today in Manhattan federal court to 25 years in prison for sexually exploiting a child, as well as transporting and possessing images of child pornography. TULSIRAM pled guilty in April 2013. He was sentenced today by U.S. District Judge J. Paul Oetken.

Manhattan U.S. Attorney Preet Bharara said: “For five years, Narendra Tulsiram preyed on his minor victim – sexually abusing and extorting her. Today’s sentence ensures Tulsiram will pay for the innocence he stole and be prevented from harming others.”

According to documents filed in this case and statements made in court:

From 2006 through September 2011, TULSIRAM sexually abused a minor (the “Victim”). The abuse began when the Victim was 13 years old. From 2008 through September 2011, TULSIRAM took sexually explicit photographs of his abuse of the Victim. In November 2011, after the Victim resisted TULSIRAM’s requests for additional sexual encounters, he used his e-mail account to send sexually explicit photographs of the Victim to the Victim’s e-mail account. In those e-mails, TULSIRAM threatened to send the sexually explicit photographs of the Victim to others, including her family, in an effort to get her to accede to his demands.

Following TULSIRAM=s arrest, search warrants were executed for TULSIRAM’s cell phone and e-mail account. Forensic analysis of TULSIRAM’s cell phone recovered photographs depicting the Victim, and in some instances, the Victim and TULSIRAM, engaging in sexually explicit conduct. Forensic analysis also recovered from TULSIRAM’s cell phone the threatening e-mails sent from TULSIRAM=s e-mail account to the Victim attaching the sexually explicit photographs of the Victim.

In addition to the prison term, Judge Oetken sentenced TULSIRAM, 50, to a lifetime of supervised release. He must also register as a sex offender.

Mr. Bharara praised the investigative work of Immigration and Customs Enforcement’s Homeland Security Investigations and the New York City Police Department.

This case is being handled by the Office=s General Crimes Unit. Assistant United States Attorneys Kristy J. Greenberg, Rahul Mukhi, and Adam Fee are in charge of the prosecution.

Suspected child sexual exploitation or missing children may be reported to the National Center for Missing and Exploited Children, an Operation Predator partner, at 1-800-843-5678 or http://www.cybertipline.com.

Preet Bharara, the United States Attorney for the Southern District of New York, William V. Grady, the Dutchess County District Attorney, James J. Hunt, the Acting Special Agent-in-Charge of the New York Field Division of the United States Drug Enforcement Administration, and Adrian H. Anderson, the Dutchess County Sheriff, announced the unsealing this morning of a federal criminal complaint charging DENNIS SICA, 36, and JOHN ROHLMAN, 25, both of Dutchess County, with distributing heroin, the use of which caused the overdose deaths of three individuals. SICA and ROHLMAN are expected to be presented later today in White Plains federal court before the Honorable Lisa Margaret Smith, United States Magistrate Judge for the Southern District of New York.

U.S. Attorney Preet Bharara stated: “Three young people from our community are dead, the tragic victims of heroin peddled by the defendants under the label ‘Breaking Bad.’ Heroin and opioid abuse hurts all of our communities. It affects everyday people, people with jobs, people with families. Although the heroin and prescription painkiller epidemic may be breaking bad, we must aggressively make good on our collective obligation to stamp out this affliction. No more half-measures. The lives of our children and the vitality of our communities depend on it.”

Dutchess County District Attorney William V. Grady stated: “From the beginning stages of this investigation my office, along with the Dutchess County Drug Task Force and the DEA worked together with the ultimate goal of developing a case that could be prosecuted under Federal Law. This was done because presently, under New York Law an offender convicted of such a sale could be sentenced to a drug diversion program, the county jail or even probation. Such sentences, under these facts, are simply outrageous and unacceptable. We must send the strongest message possible to those individuals who engage in this conduct. A sentencing range of 20 years to life, from both a punitive as well as a deterrent perspective, is such a message. When similar circumstances are encountered in the future my office will not hesitate in involving Federal law enforcement. I sincerely appreciate U.S. Atty Bharara for undertaking this prosecution.”

DEA Acting Special Agent-in-Charge James J. Hunt stated: “This year DEA New York has seized 110% more heroin than in 2009. The Mexican drug trafficking organizations are flooding the Northeast market with heroin, leaving tragic overdose deaths in the cartel’s wakes. Case in point - the tragic deaths of three victims who allegedly bought heroin from two local drug dealers; Dennis Sica and John Rohlman. I applaud the prosecutors and investigators who arrested the defendants. These arrests are a message to dealers alike that behind every overdose, law enforcement is looking for the drug dealer responsible.”

Dutchess County Sheriff Adrian H. Anderson stated: “Today’s arrests are the direct result of the hard work, dedication, and cooperation between law enforcement agencies, and it’s good to see that effort pay off in the form of some justice for the victims and their families. There’s more work to be done and the battle is far from over. Let this be a warning to all of those people who sell drugs in Dutchess County and elsewhere—we’re going to do everything in our power to put a stop to their business and prosecute them to the fullest extent of the law.”

According to the allegations in the Complaint:

From at least late 2013 to February 2014, SICA and ROHLMAN worked together in Dutchess County to sell a particularly potent form of heroin, bags of which were stamped with the brand name “Breaking Bad.” At least some of the heroin distributed by SICA and ROHLMAN was laced with fentanyl, a synthetic opioid that is significantly stronger than street heroin.

On the night of December 28, 2013, SICA sold “Breaking Bad” heroin to Anthony Delello, a 20-year-old resident of Beekman, New York. Delello snorted some of SICA’s heroin and was found dead by his girlfriend the following day. The Dutchess County Medical Examiner’s report concluded that he died from “acute heroin intoxication.”

Delello’s death did not stop SICA and ROHLMAN from selling “Breaking Bad” heroin. Four days after Delello was found dead, SICA and ROHLMAN exchanged a series of text messages in which SICA urged ROHLMAN to delete the text message history in the phone they used to sell heroin and, if asked, to deny knowing anything about Delello or the manner of his death. According to one witness, during the month that followed, SICA and ROHLMAN were responsible for distributing approximately 250 grams of “Breaking Bad” heroin per day.

Slightly more than a month after Delello’s death, two more individuals died after overdosing on “Breaking Bad” heroin. On February 1, 2014, Thomas Miller, 31, was found dead by his mother at his home in Pawling, New York. A hypodermic needle, as well as several glassine bags stamped with the words “Breaking Bad” were found near his body. Some of the glassine bags were full, others were empty. A chemical analysis of the contents of the full glassine bags showed that they contained a mixture of quinine, fentanyl, and heroin. The medical examiner’s report indicates that Miller died of “acute intoxication by the combined effects of heroin and fentanyl.” Text messages between Miller and ROHLMAN on the night before Miller was found dead show that ROHLMAN arranged for Miller to purchase “Breaking Bad” heroin from SICA that night.

The same day that Miller was found dead, Laura Brown, 35, was found dead of an apparent heroin overdose in New Milford, Connecticut. Brown was found with needles and glassine bags near her body. Several of the glassine bags were stamped with the words “Breaking Bad.” The autopsy performed on Brown’s body showed that she died of “acute heroin and fentanyl intoxication.” According to Brown’s brother, he and Brown together bought “Breaking Bad” heroin from SICA two days before Brown was found dead.

On February 2, 2014, SICA was arrested in East Fishkill, New York after a car in which he was riding was stopped by law enforcement. During the stop, an East Fishkill police officer noticed several glassine envelopes lying on the car’s floorboard. Upon further inspection, the officer observed that the glassine bags were stamped with a “Breaking Bad” stamp identical to the one that appears on the envelopes recovered from Thomas Miller’s bedroom.

If convicted of the offense charged in the Complaint, SICA and ROHLMAN each face a mandatory minimum penalty of 20 years in prison, a maximum penalty of life in prison, and a maximum fine of $1 million or twice the gain or loss resulting from the crime. The maximum potential sentences 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 Tactical Diversion Squad and the Dutchess County Drug Task Force. The DEA Tactical Diversion Squad is composed of agents and officers of the DEA, the NYPD, the Westchester County Police Department, and the Town of Orangetown Police Department. The Dutchess County Drug Task Force is composed of the City of Poughkeepsie Police Department, the Town of Poughkeepsie Police Department, the East Fishkill Police Department, and the Dutchess County Sheriff’s Office. Mr. Bharara also thanked the New York State Police Forensics Unit and the police department for the City of New Milford, Connecticut, for their assistance in the investigation.

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Scott A. Hartman 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.

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U.S. v. Dennis Sica and John Rohlman Complaint

U.S. v. Dennis Sica and John Rohlman Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LILIANA TRAFFICANTE was sentenced this morning in Manhattan federal court by U.S. District Judge Deborah A. Batts to 41 months in prison for her leadership role in a five-year scheme to obtain money from investors by claiming that the money would be used for a project intended to help foster children, when in fact TRAFFICANTE spent much of the money on personal expenses and other purposes. TRAFFICANTE pled guilty to charges of conspiracy to commit wire fraud in September 2010, and agreed to pay restitution to the victims of her offense, pursuant to a plan to be set by the Court.

Manhattan U.S. Attorney Preet Bharara said: “Instead of developing water parks for foster children as she said she would, Liliana Trafficante used the money to support her own lifestyle. In doing so, she exploited a worthy cause for personal gain, cheating foster kids out of an opportunity to truly benefit from the investors’ contributions.”

According to the charging documents in the case and statements made in open court today at the sentencing proceeding:

LILIANA TRAFFICANTE held herself out as the founder and Chief Executive Officer of International Dreams, a Manhattan-based entity. In addition, she is the principal of, or otherwise affiliated with, a number of entities that appear to be related to International Dreams, including GoOcean Park and Resort LLC, Bouchville Manors, The Little Water Park That Could, and Signature A (collectively, the “Trafficante Entities”). TRAFFICANTE claimed to be raising money for the purchase of land and completion of a water park for foster children (the “Water Park Project”). Among other methods, TRAFFICANTE raised money through postings on the Craigslist website. TRAFFICANTE made numerous false statements to individuals in order to induce them to make loans to and/or investments in the Trafficante Entities.

For example, according to the Complaint, TRAFFICANTE told one individual that land had been located for the Water Park Project. TRAFFICANTE claimed that the land was rich with natural resources, the exploration of which prior to construction could help fund the Water Park Project. Based on these representations, the individual loaned $100,000 to one of the Trafficante Entities. In connection with this loan, TRAFFICANTE and this individual executed a promissory note that stated that the “purpose” of the $100,000 loan was to help “GoOcean Water Park & Resort purchase excavating equipment.” In fact, no land had been purchased by TRAFFICANTE for a water park, or for any other purpose, and the money was not used for equipment of any kind. Rather, among other non-equipment payments, TRAFFICANTE made $40,000 in rent payments on behalf of family members the same day that the $100,000 was wired to an account she controlled.

In addition to the prison term, Judge Batts sentenced TRAFFICANTE to three years of supervised release. TRAFFICANTE also was ordered to pay restitution of $750,000, as well as a $100 special assessment fee.

Mr. Bharara praised the work of the FBI, which investigated this case.

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 Eugene Ingoglia is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York announced today the filing of federal charges against STEPHEN P. BROWN. The Complaint charges that BROWN communicated with an individual he believed to be an 11-year-old boy via emails and instant messages, and made plans to meet the boy at a hotel in Peekskill to engage in sexual activity and take sexually explicit photographs. In March 2014, BROWN was arrested in Peekskill, New York, by New York State law enforcement authorities when he arrived at the designated meeting-place to meet the boy. The federal charges filed today follow state charges against BROWN in Manhattan, Westchester County, Sullivan County and Albany County. BROWN, who is currently in jail in Albany County, is scheduled to be presented in federal court on Wednesday, June 18.

According to the allegations of the Complaint:

Between January 14, 2014 and March 4, 2014, STEPHEN P. BROWN, using email addresses “[email protected]” and “[email protected],” engaged in sexually explicit online communications with a New York State Police Investigator who was acting in an undercover capacity and posing as an 11-year old boy. During these communications, BROWN discussed various sexual acts he wished to perform on the boy, requested that the boy provide BROWN with sexually explicit photographs of the boy, and made a plan to meet the boy at a hotel in Peekskill, New York for the purpose of engaging in sexual activity. On March 4, 2014, BROWN was arrested at the Peekskill hotel after as he went to meet with whom he thought was the 11-year old boy.

BROWN, 62, of Manhattan is charged with one count of attempted sexual exploitation and one count of attempted enticement. With respect to the attempted sexual exploitation, he faces a minimum sentence of 15 years’ imprisonment and a maximum sentence of 30 years’ imprisonment. With respect to the attempted enticement, he faces a minimum sentence of 10 years’ imprisonment and a maximum sentence of life. 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 efforts of the Federal Bureau of Investigation, the New York County District Attorney’s Office, the Sullivan County District Attorney’s Office, the Westchester County District Attorney’s Office, the Albany County District Attorney’s Office, the City of New York Police Department, the New York State Police, and the Rockland County Computer Crimes Task Force in connection with this investigation.

Mr. Bharara stated that the investigation is ongoing. Mr. Bharara requests that any individuals who believe they may have information concerning STEPHEN P. BROWN that may be relevant to the investigation contact the Federal Bureau of Investigation in Goshen, New York at 1-845-615-1700.

The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.

The charges and allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Preet Bharara, United States Attorney for the Southern District of New York, and Jeffrey Hughes, the Special Agent-in-Charge of the Northeast Field Office of the Department of Veterans Affairs, Office of Inspector General, Criminal Investigations Division (“VA-OIG”), announced today the unsealing of a Complaint charging KENNETH CZUMAK, an Information Technology Specialist with the Northport Veterans Affairs Medical Center (the “VAMC Northport”), with accepting more than $40,000 in benefits, including meals, golf outings, and car services, from a telecommunications firm that did business with the VAMC Northport. CZUMAK surrendered to the U.S. Marshals Service this morning. He was presented today in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis.

According to the Complaint unsealed today in Manhattan federal court:

The VAMC Northport is a medical center that provides healthcare services to veterans in Long Island and surrounding areas. Throughout the relevant time period, a telecommunications firm had a subcontract for approximately $6 million to provide voice and data infrastructure and related services to the VAMC Northport (the “Telecommunications Firm”). During this same time period, CZUMAK served as an Information Technology Specialist at the VAMC Northport, and was the primary point of contact for the Telecommunications Firm at the VAMC Northport.

As alleged in the Complaint, between January 2008 and June 2013, CZUMAK accepted a total of more than $40,000 in goods and services paid for by the Telecommunications Firm. Among other things, CZUMAK received meals, golf outings, hotel rooms, car services, and other benefits. According to an account executive at the Telecommunications Firm (“Account Executive-1”), Account Executive-1 spent approximately 20% of an annual $35,000 expense budget on CZUMAK, which was more than Account Executive-1 spent on any other customer of the Telecommunications Firm.

During the same time period, CZUMAK served as a reference for other potential clients of the Telecommunications Firm. For example, in approximately 2011, another account executive from the Telecommunications Firm (“Account Executive-2”) was attempting to win a new client, and referred that potential client to CZUMAK. Subsequently, CZUMAK stated to Account Executive-1 that CZUMAK had heard that the Telecommunications Firm had won that contract with Account Executive-2’s new client, and thought that he, CZUMAK, now had a nice dinner coming his way

In an interview with law enforcement agents in March of this year, CZUMAK acknowledged that he was aware from training he had received from VAMC Northport that, as a government employee, he could not accept gifts worth more than $15 from an outside source.

CZUMAK is charged with one count of illegal salary supplementation and faces a statutory maximum sentence of five years in prison. 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 work of the VA-OIG and the criminal investigators of the U.S. Attorney’s Office in the investigation of this case.

This prosecution is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorney Brian A. Jacobs is 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. Kenneth Czumak complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that AYMAN RABADI, of Yonkers, New York, was sentenced to 37 months in prison after having pleaded guilty last May to a charge of wire fraud relating to his impersonation of a Special Agent of the Federal Bureau of Investigation (“FBI”).

U.S. Attorney Preet Bharara said: “Rabadi’s actions were both criminal and heartless, as he used the authority and prestige of the FBI to lure victims into his greedy scheme. Today he learned the price of his behavior.”

According to the Complaint and Information, and statements made in prior proceedings in this matter in White Plains federal court:

From November 2010 until his arrest on April 18, 2013, RABADI impersonated an FBI agent, and in doing so, obtained at least $180,000 and other things of value from individuals he promised that he could provide various forms of federal assistance. RABADI was arrested shortly after he accepted $10,000 in cash from an undercover agent of the FBI who was posing as the niece of one of his victims. The money was purportedly a down payment toward the $300,000 RABADI requested in exchange for obtaining the release of the victim’s relatives from jail. He was arrested immediately after leaving the Yonkers restaurant where the payment was made, and was in possession of the $10,000.

RABADI, 52, has an extensive criminal history that includes a 2008 conviction in the state of New Jersey for the felony of theft by deception. In that case, he created the false impression that there were criminal charges pending against a victim, that RABADI was connected to law enforcement, and that he could resolve the charges favorably for $75,000.

In addition to the 37-month prison sentence, Judge Kenneth M. Karas ordered RABADI to forfeit $190,000 in ill-gotten gains and to make restitution to a victim of his fraud in the amount of $180,000.

Mr. Bharara praised the work of the FBI in this investigation.

The case is being handled by the Office’s White Plains Division. Assistant United States Attorney Elliott B. Jacobson is in charge of the prosecution.

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 the unsealing of an Indictment in Manhattan federal court charging KEITH ANTHONY, the former President and owner of a company that purported to provide financing for home purchases to people with poor credit, and a former employee of the company, ANTHONY PODIAS, for their alleged participation in a scheme that victimized more than 100 financially struggling people across the country. ANTHONY PODIAS was arrested earlier today and will be presented in Manhattan federal court this afternoon before U.S. Magistrate Judge Gabriel W. Gorenstein. KEITH ANTHONY has not yet been apprehended. The case is assigned to U.S. District Judge Paul A. Engelmayer.

According to the allegations contained in the Indictment unsealed today:

From at least November 2011, up to at least March 2013, the defendants perpetrated a scheme to defraud aspiring home owners who had poor credit and who therefore could not qualify for traditional mortgages. Through a company called CIG REALTY, which was located in Long Island, New York, the defendants promised to help financially struggling individuals purchase homes by providing private financing for the purchase in exchange for small deposits or down payments. The customers were then supposed to repay CIG REALTY until the customers’ credit had improved to the point where they could obtain mortgages from a bank. Despite the defendants’ claims, however, CIG REALTY did not purchase homes for customers and instead diverted most of the customers’ deposits into the personal accounts of KEITH ANTHONY. Through their scheme, CIG REALTY obtained at least approximately $800,000 from more than 100 potential home buyers throughout the United States.

When customers contacted CIG REALTY, they were told that they could either pick a specific house for purchase or have the company help them find one. Once a house was selected, CIG told customers that they needed to send a deposit and then CIG would purchase the house using money obtained from private investors. Once the house was purchased, the customer was to repay CIG at a 10% interest rate until their credit improved and they could obtain financing through a bank. In practice, however, after the customer sent his or her deposit, CIG either did not place a bid or placed a bid that was so low, it would not be accepted. In those instances where CIG’s bid was accepted, CIG would fail to follow through and the deal would fall apart. Customers seeking refunds were typically directed to different people at CIG, who gave different explanations for the delay, before CIG stopped calling them back. Of the more than $800,000 taken in from customers by CIG, only about $44,000 was paid out in refunds.

ANTHONY was the President and owner of CIG REALTY, which closed in late 2012. PODIAS was a supervisor. Both dealt directly with the customers, telling them where to send money, updating them on the progress of negotiations, and explaining why they could not get refunds. ANTHONY also diverted more than approximately $500,000 from CIG’s accounts into his personal accounts and into the accounts of another business that he controlled.

ANTHONY, 46, of Elmont, New York, and PODIAS, 39, of Levittown, New York, are each charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

Mr. Bharara praised the FBI for its outstanding work in the investigation. Mr. Bharara also thanked the New York State Department of Financial Services for its assistance.

This matter is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Patrick Egan is charge of the case.

The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.

U.S. v. Keith Anthony and Anthony Podias Indictment

Preet Bharara, United States Attorney for the Southern District of New York, announced today that the United States Attorney’s Office settled a federal civil rights lawsuit brought on behalf of United States Army Reserve member William J. Pfunk (“Pfunk”), against COHERE COMMUNICATIONS, LLC (“COHERE”) and its president, STEVEN T. FRANCESCO (“FRANCESCO”). The lawsuit, which was filed in Manhattan federal court in December 2012, alleges that COHERE and FRANCESCO willfully violated the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”) by terminating Pfunk’s employment because of his military service obligations and refusing to reemploy Pfunk upon his return from military service. The settlement, which was approved yesterday by United States District Judge Paul A. Engelmayer, requires COHERE and FRANCESCO to pay Pfunk $35,000 in lost wages and other damages and to implement a policy for military leaves of absence.

Manhattan U.S. Attorney Preet Bharara said: “Our soldiers should not have to be concerned that answering a call to serve their country means sacrificing their civilian jobs. This Settlement Agreement demonstrates that when employers disregard their legal obligations under USERRA, our Office will use all the legal tools available to us to hold them responsible for their violations and ensure compliance with the law in the future.”

According to the Complaint and other documents filed in Manhattan federal court:

Pfunk began working at COHERE, a telecommunications company located in Manhattan, in November 2011. Pfunk has been a member of the United States Army Reserves since 2006 and currently holds the rank of staff sergeant. In early April 2012, Pfunk received military orders requiring him to report to a four-day training event on April 9, 2012. Pfunk notified FRANCESCO that – due to his military obligations – he would be absent from work during the week of April 9, 2012. In response, FRANCESCO referred to Pfunk’s military obligations as “elective activities” and terminated Pfunk’s employment effective immediately. Pfunk requested an opportunity to discuss the situation with FRANCESCO upon his return from military service, but FRANCESCO declined to meet with him. Thereafter, a representative of Employer Support for the Guard and Reserve, an agency of the Department of Defense, contacted FRANCESCO in an effort to restore Pfunk’s employment, but FRANCESCO refused to reemploy Pfunk. When Pfunk informed FRANCESCO that he believed his rights under USERRA had been violated and that he would be seeking legal counsel if FRANCESCO was not willing to resolve the matter, FRANCESCO responded, “If you want a war, I can impact your life more than you can screw with mine” and advised Pfunk that he was “not to stop by for any reason.”

On May 28, 2014, Judge Engelmayer entered an Opinion and Order granting in part Pfunk’s motion for summary judgment and rejecting the contention by COHERE and FRANCESCO that Pfunk was an intern not entitled to the protections of USERRA. The Court held that no reasonable jury could conclude on the facts presented that Pfunk was an intern, and that, as a matter of law, Pfunk was an employee of COHERE for purposes of USERRA.

In the Settlement Agreement, COHERE and FRANCESCO admit and acknowledge that, within one day of FRANCESCO receiving an e-mail from Pfunk notifying him that Pfunk was going to be absent from work due to a military obligation, FRANCESCO terminated Pfunk’s employment with COHERE. COHERE and FRANCESCO also agree to compensate Pfunk for lost wages and other damages, implement a Military Leaves of Absence Policy that explicitly states that COHERE and FRANCESCO will take no adverse action against any employee or applicant for employment because he or she has taken, or expects to take, USERRA protected leave during the course of his or her employment, and to review the policy, in person, with all COHERE employees.

This case is being handled by the Office’s Civil Rights Unit. Assistant United States Attorneys Christine Schessler Poscablo and Lara K. Eshkenazi are in charge of the case.

William Pfunk v. Cohere Communications, LLC and Steven T. Francesco Opinion and Order
William Pfunk v. Cohere Communications, LLC and Steven T. Francesco Settlement Agreement

Preet Bharara, the United States Attorney for the Southern District of New York, and 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”), announced the unsealing of a criminal Complaint against STEVEN JORDAN, a/k/a “Stevie Jordan,” a/k/a “Stevie J,” a cast member on a reality television show, for failing to pay over $1 million in child support obligations with respect to two children. JORDAN was arrested last night at his residence in Atlanta and is expected to be presented today in federal court in the Northern District of Georgia.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Steven Jordan failed to pay over $1 million in child support even while earning substantial income from his participation in a reality television show. By choosing to use the money for himself, rather than to pay his child support obligations, Jordan not only violated court orders, but committed a federal crime for which he will now be held responsible.”

HHS-OIG Special Agent-in-Charge Thomas O’Donnell said: “When individuals conduct themselves the way Steven Jordan is alleged to have done, it is an insult to those parents who struggle each day to fulfill their financial responsibilities to their children. The investigation of such offenses will continue by this office not only to hold accountable those parents who refuse to pay child support obligations, but to deter parents who may consider dodging their obligations in the future.”

According to the allegations contained in the Complaint unsealed today in Manhattan federal court:

Beginning in or about 1999, pursuant to an order of the New York County Family Court, STEVEN JORDAN was required to pay a minimum of $6,608 per month in child support for his two children. JORDAN’s child support obligation was increased in 2011 to a total of $8,557 per month. JORDAN has failed to pay over $1,107,412 in child support.

During the period in which JORDAN failed to satisfy his child support obligations, JORDAN was generating substantial income. Beginning in or about October 2012, for example, JORDAN became employed as a cast member on a reality television show for which he was paid approximately $27,000 per month. From January 2013 through August 2013, JORDAN received at least $193,000 for his work on the reality television show. Yet, during that same period, JORDAN did not make a single voluntary child support payment, and had a total of just $18,566 garnished and applied towards his child support obligations. From 2003 through 2013, JORDAN also received approximately $105,000 in royalties from a company that pays royalties to musicians.

JORDAN, 40, of Atlanta, Georgia, is charged with one count of failing to pay child support, which carries a maximum sentence of two years in prison. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as any sentencing of the defendant would be determined by the judge.

Mr. Bharara praised the work of HHS-OIG for their assistance in the investigation.

This case is being handled by the Office’s General Crimes Unit and Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Andrew DeFilippis is 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. Steven Jordan Complaint 14 Mag 1209

Preet Bharara, United States Attorney for the Southern District of New York, announced today that JOSEPH LOMBARDO, the founder and former chief executive officer of Prim Capital Corporation (“Prim”), was sentenced today to 18 months in prison for mail fraud and conspiracy to obstruct justice, arising from his scheme to defraud the National Basketball Players Association (“NBPA”) through the use of a fraudulent contract worth more than $2 million to Prim. LOMBARDO also attempted to obstruct a grand jury investigation of that fraudulent contract, including by testifying falsely and asking others to testify falsely in the grand jury. LOMBARDO, who was arrested in April 2013, along with Carolyn Kaufman, the then-chief compliance officer of Prim, pled guilty in November 2013 before U.S. District Judge Jesse M. Furman, who imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Not only did Joseph Lombardo attempt to steal millions of dollars from the National Basketball Players Association, he then tried to cover it up by creating an entirely fake agreement and asking others to lie for him under oath. Today’s sentence closes out Lombardo’s season of scam.”

According to the Complaint, Indictment, previously filed documents, and evidence presented at the trial of Kaufman:

Prim was founded by LOMBARDO. From 2001 until 2013, Prim was the primary outside investment advisory firm entrusted with the NBPA’s investments and finances. In that capacity, Prim performed various services for the NBPA, including assisting with the management of up to $250 million of the NBPA’s assets, reviewing the investments of individual NBA players, and conducting financial seminars for NBA players.

In the spring of 2012, as part of a U.S. Department of Labor (“DOL”) investigation, Prim was served with a grand jury subpoena requesting, among other things, copies of all agreements between Prim and the NBPA. In response, Prim produced a copy of a 2005 contract between the NBPA and Prim, under which Prim’s fee was $350,000 per year. That was the only contract that Prim produced at the time.

Several months later, in January 2013, after Prim learned that a law firm’s review of the NBPA was going to be made public in the near future, Prim produced to the DOL a previously undisclosed contract with the NBPA (the “Purported 2011 Contract”). Prim’s fee under this contract was $602,000 per year for a five-year term, for a total of $3,010,000. The Purported 2011 Contract also contained a provision indicating that it could not be cancelled for any reason by the NBPA. The Purported 2011 Contract was supposedly signed in March 2011 by LOMBARDO, Gary Hall, who was the former NBPA General Counsel, and another NBPA employee.

An investigation revealed that Hall’s signature was not authentic, and that the Purported 2011 Contract was actually created at Prim months after the death of Gary Hall. LOMBARDO had arranged for the creation of a signature stamp capable of stamping the signature “Gary A. Hall,” and used the stamp to falsify Hall’s signature months after his death.

In addition, the investigation revealed that LOMBARDO and Kaufman had agreed and attempted to obstruct a grand jury investigation. During the course of the investigation, both LOMBARDO and Kaufman appeared before the grand jury and provided false and misleading testimony. Kaufman testified, among other things, that she had not spoken with anyone regarding her testimony prior to testifying. However, in a recorded conversation prior to appearing before the grand jury, LOMBARDO gave her specific instructions on how to answer questions before the grand jury, and said that his “life is in [her] hands.” Kaufman also testified that she learned in March 2011 that the Purported 2011 Contract had been executed that same month. But the Purported 2011 Contract had not been fraudulently created until at least nine months later. In another recorded conversation, LOMBARDO instructed another individual that, if he provided certain false information to the grand jury about the creation of the fraudulent contract, “[w]e’re home free.” In a third recorded conversation, LOMBARDO instructed another individual to provide false information and said, “It’s important that we didn’t doctor this document up, okay?”

In addition to the prison term, LOMBARDO, 73, of Gates Mills, Ohio, was sentenced to three years of supervised release. He was also ordered to pay a $10,000 fine and a $200 special assessment.

LOMBARDO’s co-defendant Carolyn Kaufman was convicted of all counts against her—conspiracy to obstruct justice, obstruction of justice, and perjury—after an approximately two-week trial in December 2013. On May 21, 2014, Kaufman was sentenced by Judge Furman to three years’ probation with a special condition of six months’ home confinement, and was ordered to pay a $25,000 fine and a $300 special assessment, and to perform 500 hours of community service.

Mr. Bharara praised the outstanding work of the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, and the U.S. Department of Labor, Office of Labor-Management Standards.

This case is being handled by the Public Corruption Unit of the U.S. Attorney’s Office. Assistant United States Attorneys Daniel C. Richenthal and Paul M. Krieger are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States settled a federal civil rights lawsuit against the architects of 2 Gold Street, a rental apartment building in Lower Manhattan. The lawsuit, which was filed in Manhattan federal court in 2013, alleges that the architect AVINASH K. MALHOTRA and his business, AVINASH K. MALHOTRA ARCHITECTS, designed 2 Gold Street in violation of the accessible design and construction provisions of the federal Fair Housing Act, which require that new multi-family housing complexes include certain features accessible to persons with disabilities. The settlement, which was approved today by U.S. Chief District Judge Loretta A. Preska, requires MALHOTRA and his firm to retain an accessibility expert to review all their ongoing architectural designs for buildings subject to the Fair Housing Act, dedicate $45,000 to compensate people harmed by the inaccessible conditions at 2 Gold Street, and pay a $35,000 civil penalty. Previously, the United States settled with the developers of 2 Gold Street, who agreed to make extensive retrofits at the building, dedicate up to $300,000 to compensate people harmed by the inaccessible conditions at 2 Gold Street, and pay a $35,000 civil penalty.

Manhattan U.S. Attorney Preet Bharara said: “As design professionals, architects have a clear obligation under the Fair Housing Act to ensure that residential buildings are accessible to people with disabilities. When architects disregard that obligation, our Office will use all the legal tools available to us to hold them responsible for such failures and craft remedies to ensure that their designs will be accessible in the future.”

According to the allegations contained in the Complaint and the factual admissions made by MALHOTRA in the consent decree entered by the Court:

2 Gold Street is a 650-unit rental building located in Lower Manhattan. MALHOTRA, the architect of record for 2 Gold Street, provided the architectural drawings and design specifications used by the construction contractors to construct the building. As built, 2 Gold Street had multiple inaccessible features, including insufficient space in bathrooms and kitchens for people in wheelchairs; high thresholds interfering with accessible routes; sinks, ranges, outlets, and mailboxes not fully usable by people in wheelchairs; and protruding objects not detectable by canes used by people with visual impairments.

Inaccessible features at 2 Gold Street were first brought to the attention of the United States by 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 testing.

The consent decree approved today requires AVINASH K. MALHOTRA and AVINASH K. MALHOTRA ARCHITECTS to retain an accessibility expert to review and advise them on each of their new design projects that is subject to the Fair Housing Act, train employees on the requirements of the Fair Housing Act, dedicate $45,000 to compensate people who have been harmed by Fair Housing Act violations at 2 Gold Street, and pay a $35,000 civil penalty to the United States.

Under the consent decree, a person may be entitled to receive monetary compensation if he or she was:

• Discouraged from living at 2 Gold Street because of a lack of accessible features;
• Limited in the full use or enjoyment of an apartment or amenity at 2 Gold Street due to a lack of accessible features;
• Financially affected by having an apartment at 2 Gold Street made more accessible to persons with disabilities;
• Prevented from having visitors because of a lack of accessible features at 2 Gold Street; or
• Otherwise injured by the lack of accessible features or discriminated against on the basis of disability at 2 Gold Street.

People who may be entitled to compensation should file a claim by contacting the Civil Rights Complaint Line at (212) 637-2987 (a TDD line is available at (212) 637-0039), using the Civil Rights Complaint Form available on the U.S. Attorney’s Office’s website, www.usdoj.gov/usao/nys, or sending a written claim to:

U.S. Attorney’s Office, Southern District of New York

Attn: Chief, Civil Rights Unit

86 Chambers Street, 3rd Floor

New York, New York, 10007

This case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Carina H. Schoenberger, Li Yu, Emily E. Daughtry, and Jessica J. Hu are in charge of the case.

U.S. v. 2 Gold LLC, et al. Consent Decree.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SETH BEOKU BETTS, a principal of Betts and Gambles Global Equities, LLC (“Betts and Gambles”), was sentenced today to 51 months in prison by the Honorable Shira A. Scheindlin in connection with his role in a scheme to defraud a public university (the “University”) in the Midwest of more than $8 million. BETTS solicited money from the University for the purposes of trading in collateralized mortgage obligations (“CMOs”). He then misappropriated the funds, including at least $2 million to purchase luxury automobiles and a personal residence in Florida. BETTS previously pled guilty to committing securities fraud before Magistrate Judge Gabriel W. Gorenstein on February 18, 2014.

Manhattan U.S. Attorney Preet Bharara said: “Seth Betts purported to invest more than $8 million of a public university’s money in mortgage-backed securities. Instead he invested the university’s money in his own extravagant lifestyle, including luxury Italian automobiles and a beachfront Florida residence. With today’s sentence, Betts will trade in his life of luxury for life in a federal prison.”

According to a Complaint filed in Manhattan federal court, the defendant’s guilty plea, and sentencing:

Between July 2008 and December 2008, BETTS presented himself to the University as a principal of Betts and Gambles. In that capacity, he solicited the University’s investment in CMOs, which he claimed he would then sell to third-party buyers in short order at predicted profits. CMOs are fixed income mortgage-backed securities, in which Betts claimed he had expertise. As a result of his solicitation, the University invested approximately $8.165 million dollars of the University’s money with BETTS. BETTS never delivered any CMOs to the University or returned any funds prior to his arrest. Instead, he converted millions of dollars to his own use to purchase beachfront property, pay personal expenses, and buy multiple high-end automobiles, including a Ferrari and a Maserati.

In addition the prison term BETTS, 38, of Boynton Beach, Florida, was sentenced to three years of supervised release. He was also ordered to pay $8,165,000 in forfeiture and restitution, and a $100 special assessment fee.

Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney's Office and the Federal Bureau of Investigation, which jointly investigated this case.

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 Michael A. Levy and Telemachus P. Kasulis are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and John Dalrymple, Deputy Commissioner for Services and Enforcement for the Internal Revenue Service (IRS), announced today that the United States filed a civil injunction complaint in Manhattan federal court alleging that HAROLD LEVINE, an attorney in New York, has promoted abusive tax shelters while serving as a partner and head of the tax practice group in the New York office of the law firm Herrick Feinstein LLP. LEVINE currently is a partner and chair of the tax practice group in the New York office of the law firm Moritt Hock & Hamroff LLP.

The Complaint asserts that LEVINE promoted, implemented and/or participated in at least 90 unlawful tax schemes designed to cheat the Government out of hundreds of millions of dollars in tax liability. According to the Complaint, LEVINE, operating together with other known tax-shelter promoters, used companies with phony losses on their books to shield millions of dollars of income garnered by other companies disposing of their assets. The Complaint alleges that, in an attempt to disguise the illegitimacy of these transactions, LEVINE knowingly told lies or caused the corporations involved in these unlawful transactions to tell lies concerning the supposed tax benefits of the transactions. As set forth in the Complaint, LEVINE received more than $5 million in fees as a result of his participation in these unlawful tax avoidance schemes. The Complaint seeks to bar LEVINE from organizing, promoting or selling any tax shelters that allegedly use an intermediary-type transaction or state tax credits designed to reduce or eliminate tax liabilities in the future, as well as any other plans or arrangements intended to secure tax benefits or unlawfully evade tax liabilities in exchange for fees. LEVINE may be subject to penalties in the future based on the fraudulent tax shelter conduct alleged in the Complaint.

Manhattan U.S. Attorney Preet Bharara said: “Those who promote illegal tax avoidance schemes are not simply committing a fraud on the United States Government. They are taking advantage of the hard-working, honest Americans who pay their share in taxes when the bill comes due. This Office will not tolerate those who unlawfully seek to game the system in order to evade their tax obligations.”

IRS Deputy Commissioner for Services and Enforcement, John Dalrymple, said: "This action demonstrates that the IRS will pursue those who cheat the tax system no matter how sophisticated or intricate the transactions may be. The vast majority of U.S. taxpayers pay their fair share. We owe it to them to stop tax cheating in whatever form it takes."

According to the allegations contained in the Complaint:

The abusive tax shelter transactions promoted by Levine include “intermediary transactions,” in which the corporate income taxes on the gains received from the sale of corporate assets are illegally avoided for the benefit of shareholders, and “state tax credit transactions,” in which a real estate project owner avoids paying taxes on the gains from the sale of the transferable state tax credits it earns or receives. Levine formed and/or used five corporations – termed “promoter entities” – to carry out these schemes. These promoter entities would acquire the asset-selling corporations and eliminate their capital gains tax using the promoter entities’ phony losses. With respect to the 90 unlawful transactions charged in the complaint, the promoter entities improperly deducted over $515 million in bad debt losses on their tax returns. The government estimates that the tax loss resulting from their promotion of the tax schemes at issue in this case exceeds $129 million, not including penalties and interest, virtually all of which may now be uncollectible due to the lack of assets remaining in the tax-avoiding corporations.

In particular, LEVINE promoted, implemented, and/or participated in over a dozen intermediary transactions, notwithstanding public IRS notices and regulations warning that the IRS considers such transactions “tax avoidance transactions,” and may challenge the tax results of any such transaction and assert penalties on those who promote or participate in them. LEVINE therefore attempted to disguise the true nature of the transactions to avoid IRS enforcement efforts. In addition, LEVINE also promoted, implemented, and/or participated in about 75 abusive state tax credit transactions which, similar to the intermediary transactions, were structured to permit real estate project owners to evade substantial tax liability while allowing LEVINE and others to profit from a portion of the tax savings.

This case is being handled by the Office’s Tax and Bankruptcy Unit. Assistant U.S. Attorneys Alicia M. Simmons and Tara M. La Morte are in charge of the case.

U.S. v. Harold Levine

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that GREGG PIERLEONI pleaded guilty to fraud and tax evasion charges arising from his embezzlement of more than $5.7 million from his employer. PIERLEONI pleaded guilty to one count of mail fraud and one count of tax evasion today in White Plains federal court before U.S. District Judge Vincent L. Briccetti, who set a sentencing date for September 18, 2014.

U.S. Attorney Preet Bharara stated: “Gregg Pierleoni indulged in an opulent lifestyle, at the expense of his employer and the American taxpayer. With his guilty plea today, he will now have to pay for that decision.”

According to the allegations in court documents filed in White Plains federal court:

PIERLEONI was the Chief Financial Officer (“CFO”) of a privately held moving and storage company that maintained its headquarters in Westchester County. As CFO, Pierleoni was authorized to write checks drawn on, and transfer funds from, bank accounts held by the moving company and a related entity. From about October 2006 to about April 2013, PIERLEONI paid more than $5.7 million in personal expenses with the moving company's funds. These personal expenses included collectible items, sports memorabilia, airline tickets and other travel expenses, artwork, tickets to sporting events, and meals in restaurants.

PIERLEONI also failed to report the $5.7 million he embezzled from the moving company as income on his personal tax returns for 2007 through 2011 and failed to file a U.S. Individual Income Tax Return Form 1040 for 2012. The resulting loss to the Internal Revenue Service was more than $1.4 million.

PIERLEONI, 59, of New Fairfield, CT, faces sentences of 25 years’ imprisonment on the mail fraud and wire fraud counts. The maximum statutory sentences are prescribed by Congress and provided here for informational purposes, as any sentencing of the defendant would be determined by the judge.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the Internal Revenue Service - Criminal Investigation.

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney James McMahon is in charge of the criminal prosecution.

U.S. v. Gregg Pierleoni Superseding Information

Preet Bharara, the United States Attorney for the Southern District of New York, and Brian A. Swain, the Acting Special Agent-in-Charge of the New York Office of the United States Secret Service, announced criminal charges against five New York City residents for their participation in a large-scale counterfeit credit card scheme involving over 150 stolen credit card numbers and over half a million dollars in losses to victims. The defendants – LUIS GUSTAVO TAVAREZ, ANTHONY REYNOSO, PLINIO PINEDA LOPEZ, VINCENT D. ESPINAL, and WARNER ALVAREZ ALMANZAR – obtained victims’ credit card numbers from illicit “carding” websites in which cybercriminals sell stolen credit card numbers and other information. TAVAREZ, REYNOSO, and LOPEZ were arrested this morning and will be presented later today in Manhattan federal court before U.S. Magistrate Judge Debra Freeman. ESPINAL and ALMANZAR remain at large.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants bought stolen credit card information from cybercriminals to go on a year-long shopping spree with other people’s money. We commend the U.S. Secret Service for their work in putting an end to the shopping spree.”

U.S. Secret Service Acting Special Agent-in-Charge Brian A. Swain said: "As today’s technology continues to evolve, cybercriminals use these advances and enhancements to perpetrate an expanding range of crimes. The Secret Service is committed to deploying cutting edge investigative practices and technology in order to bring these offenders to justice."

According to the allegations in the Criminal Complaint unsealed today:

From at least April 2013 through April 2014, the defendants and their co-conspirators obtained stolen credit card information from “carding” websites, which are Internet-based forums in which users sell and exchange stolen credit card numbers, and/or directly from computer hackers. The defendants encoded that stolen account information onto counterfeit credit cards, which they subsequently 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 more than 150 credit card accounts and used that stolen information to make more than $500,000 in unauthorized purchases.

TAVAREZ, 34, REYNOSO, 25, LOPEZ, 24, and ESPINAL, 25, of Bronx, New York, and ALMANZAR, 20, of New York, New York, are each charged with one count of conspiracy to commit access device fraud, which carries a maximum penalty of seven-and-a-half years in prison, and one count of aggravated identity theft, which carries a mandatory sentence of two 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 praised the outstanding investigative work of the Secret Service. He also thanked the Office of 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.

The charges contained in the Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.

U.S. v. Tavarez, Luis Gustavo, et al. complaint 14 mag 1160

Preet Bharara, the United States Attorney for the Southern District of New York, announced that BONIFACIO FLORES-MENDEZ, 34, of Queens, New York, was sentenced today in Manhattan federal court to life in prison in connection with his co-leadership, along with his brother Isaias Flores-Mendez, of a long-running sex trafficking conspiracy that employed force, fraud, and coercion to make young women work as prostitutes against their will. FLORES-MENDEZ was also ordered to forfeit approximately $1.7 million, and to pay $84,000 in restitution to a victim of his crime. He was sentenced by U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Preet Bharara said: “Bonifacio Flores-Mendez waged a decade-long campaign of terrorizing women, coercing them into prostitution, assaulting them, even attempting to run a victim over in his car and threatening the health of her infant child. He has no doubt caused his victims grave physical and psychological harm. The long prison sentence he has received today cannot undo that harm, but it will ensure that Bonifacio Flores-Mendez does not prey on more women or children.”

In sentencing BONIFACIO FLORES-MENDEZ, Judge Forrest said: “We have to refuse to be a people who will allow such conduct to go unpunished, and the punishment must be severe. On those mornings when the victims woke up – perhaps under a table, perhaps in a windowless room, perhaps in a basement – they may have wondered whether one day the nightmare would end and that somehow justice would be done. Today, in holding you responsible for your crimes, some justice is done.”

According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case, including today’s sentencing:

Since at least 2001, when he was first arrested for promoting prostitution, BONIFACIO FLORES-MENDEZ, a Mexican national, has been engaged in the business of sexually exploiting vulnerable women for his own financial gain.

BONIFACIO FLORES-MENDEZ played an active role in the trafficking of at least one young woman (“Victim-1”), who was forced to engage in prostitution against her will by Isaias Flores-Mendez. At the age of 17, Victim-1 was romanced by Isaias Flores-Mendez and lured to the U.S. with the promise of a better life for her and her baby. BONIFACIO FLORES-MENDEZ and Isaias Flores-Mendez arranged for Victim-1 to travel to New York, where she was met by BONIFACIO FLORES-MENDEZ. Once in New York, BONIFACIO FLORES-MENDEZ made Victim-1 sleep on a floor with her child without any blankets. BONIFACIO FLORES-MENDEZ later locked Victim-1 in a windowless basement and deprived her and her child of sufficient food. Victim-1 was then forced to work as a prostitute against her will. When Victim-1 attempted to resist, Isaias Flores-Mendez repeatedly beat and verbally abused her. After she escaped, BONIFACIO FLORES-MENDEZ and his brother continued to torment Victim-1, on one occasion trying to run her over with their car.

BONIFACIO FLORES-MENDEZ also caused at least one other woman (“Victim-A”) to work for him as a prostitute, and on at least one occasion, BONIFACIO FLORES-MENDEZ beat Victim-A.

In addition to his role in the direct sex trafficking of women by force, fraud, and coercion, BONIFACIO FLORES-MENDEZ, together with his brother Isaias Flores-Mendez, also owned and operated a sprawling network of brothels in and around New York City that sexually exploited at least five women per day, each of whom saw up to 20 customers per day. Many of the victims of this sex trafficking-prostitution enterprise were forced to engage in prostitution against their will under abhorrent conditions.

The Indictment filed on May 23, 2013 charged 17 defendants. Sixteen of those defendants, including BONIFACIO FLORES-MENDEZ, have pled guilty, and one has entered into a deferred prosecution agreement. The defendants who have pled to date have agreed to forfeit, in total, more than $1.7 million. The following defendants have pled guilty, and have been sentenced as described below:

• Carlos Garcia-De La Rosa pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise and possession of child pornography on January 9, 2014, and was sentenced on May 29, 2014, to 48 months in prison.
• Pedro Degante-Galeno pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on November 13, 2013, and was sentenced on May 16, 2014, to the statutory maximum term of 60 months in prison to be followed by two years of supervised release.
• Isaias Flores-Mendez pled guilty to conspiring to engage in sex trafficking by force, fraud, and coercion on January 7, 2014, and was sentenced on May 14, 2014, to life in prison.
• Sergio Degante-Ortiz pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on January 6, 2014, and was sentenced on May 8, 2014, to time served and one year of supervised release.
• Valentin Jiamez-Dolores pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on December 10, 2013, and was sentenced on April 25, 2014, to the statutory maximum term of 60 months in prison to be followed by two years of supervised release.
• Mario Pedro Martinez-Barrera pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on December 12, 2013, and was sentenced on April 25, 2014, to 33 months in prison to be followed by two years of supervised release.
• Javier Leon-Chavez pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on December 18, 2013, and was sentenced on April 11, 2014, to 48 months in prison to be followed by two years of supervised release.
• Alberto Jesus Martinez-Miranda pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on October 29, 2013, and was sentenced on April 9, 2014, to the statutory maximum term of 60 months in prison and two years of supervised release.
• Miguel Angel Che-Veliz pled guilty to obstructing justice on January 22, 2014, and was sentenced on April 4, 2014, to time served.
• Isidro Degante-Galeno pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on December 3, 2013, and was sentenced on April 1, 2014, to the statutory maximum term of 60 months in prison followed by three years of supervised release.
• Alejandro Degante-Galeno pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on October 24, 2013, and was sentenced on March 6, 2014, to the statutory maximum term of 60 months in prison followed by two years of supervised release.
• Manuel Gomez-Batana pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on September 25, 2013, and was sentenced on February 20, 2014, to the statutory maximum term of 60 months in prison to be followed by two years of supervised release.
• Margarito Degante pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on October 29, 2013, and was sentenced on February 14, 2014, to the statutory maximum term of 60 months in prison followed by two years of supervised release.
• Marcos Mendez Perez pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on October 10, 2013, and was sentenced on January 31, 2014, to the statutory maximum term of 60 months in prison to be followed by three years of supervised release.
• Francisco Mendez Ramirez pled guilty to conspiring to engage in a sex trafficking-prostitution enterprise on October 21, 2013, and was sentenced on January 31, 2014, to the statutory maximum term of 60 months in prison to be followed by three years of supervised release.

Mr. Bharara praised the outstanding investigative work of the Department of Homeland Security, Homeland Security Investigations.

This prosecution of this case is being overseen by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Amanda Kramer and Rebecca Mermelstein are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, 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”), Brian M. Hickey, the Special Agent-in-Charge of the U.S. Department of Education Office of Inspector General’s Eastern Regional Office (“ED-OIG”), and David J. Schnorbus, the Special Agent-in-Charge of the New York Field Office of the U.S. Department of State’s Diplomatic Security Service (“DSS”), announced charges today against five individuals for their participation in a scheme to fraudulently represent that their for-profit schools were complying with immigration and financial aid regulations. Defendants SURESH HIRANANDANEY, a/k/a “Sam Hiranandaney,” LALIT CHABRIA, ANITA CHABRIA, and SEEMA SHAH are charged with student visa fraud and wire fraud, and defendants SURESH HIRANANDANEY, LALIT CHABRIA, ANITA CHABRIA, and SAMIR HIRANANDANEY are charged with student financial aid fraud. All of the defendants were arrested today and presented before U.S. Magistrate Judge Gabriel W. Gorenstein in Manhattan federal court this afternoon.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, through their for-profit schools, the defendants defrauded the government and exploited their students. For their personal financial gain, the defendants allegedly made false certifications about the schools’ compliance with visa and financial aid regulations when, in fact, they were not. I want to thank our law enforcement partners at ICE-HIS, the State Department and the Department of Education for their excellent work in investigating this case.”

ICE HSI Special Agent-in-Charge James T. Hayes, Jr., said: "The defendants arrested today allegedly orchestrated a wide ranging fraud scheme, which included the falsification of student and financial aid files and failure to report to the government students who were non-compliant with the terms of their student visas, that victimized American taxpayers. HSI leads the Document Benefit Task Force to protect the interests of legitimate educational institutions seeking to enrich our culture through the education of foreign students and to close vulnerabilities in the visa approval and school certification processes.”

ED-OIG Special Agent-in-Charge Brian Hickey said: “Federal student aid exists so that individuals can make their dream of a higher education a reality, it’s not a personal slush fund for corrupt school owners. Ensuring that anyone who steals student aid or games the system for their own selfish purposes, as today’s actions allege these individuals did, are stopped and held accountable for their criminal actions is a big part of our mission.”

DSS Special Agent-in-Charge David J. Schnorbus said: “The United States Department of State supports international education and welcomes foreign students. In situations where foreign students do not fulfill their responsibilities of properly maintaining their non-immigrant status or purposefully ignore their visa status regulations, and school owners place financial greed above education by exploiting the student exchange and visitor visa system, our national security becomes compromised. The Diplomatic Security Service works tirelessly, both domestically and overseas, to strengthen our national security and play a vital role in securing our nation’s borders through combatting this and other types of visa fraud.”

As alleged in the Complaint unsealed today in Manhattan federal court:

Each of the defendants was associated with the Micropower Career Institute (“MCI”), a for-profit school with five campuses in New York and New Jersey, or the Institute for Health Education (“IHE”), a for-profit school located in New Jersey. SURESH HIRANANDANEY, a/k/a “Sam Hiranandaney,” was MCI’s President; his sister, ANITA CHABRIA, was MCI’s Vice President; and his brother-in-law, LALIT CHABRIA, was MCI’s Vice President and IHE’s President. SURESH HIRANANDANEY’s son, SAMIR HIRANANDANEY, was the director of MCI’s Hauppauge campus. SEEMA SHAH was a high-level employee at MCI’s Manhattan campus.

Student Visa Fraud Conspiracy

(SURESH HIRANANDANEY, LALIT CHABRIA, ANITA CHABRIA, and SAMIR HIRANANDANEY)

(SURESH HIRANANDANEY, LALIT CHABRIA, ANITA CHABRIA, and SEEMA SHAH)

The named defendants are charged with failing to report to immigration authorities that foreign citizens were not attending classes at MCI and IHE, as required. Foreign citizens are granted F-1 student visas to remain in the United States as long as they are pursuing full courses of study at approved schools. If a student fails to attend classes as required, the school is required to inform immigration authorities, so that the authorities may terminate that student’s visa.

The defendants represented to immigration authorities that MCI and IHE were legitimate institutes of higher learning where foreign students carried full course loads. In reality, the majority of foreign students at MCI and IHE did not attend the required number of classes. Rather than reporting this to authorities, as required, the defendants remained silent and continued to collect approximately $10,000 in annual tuition from each of these students. When a campus of MCI came under regulatory scrutiny, the defendants would simply transfer students with delinquent attendance to an affiliated school (such as another MCI campus or IHE) that was not under scrutiny.

Wire Fraud Conspiracy

(SURESH HIRANANDANEY, LALIT CHABRIA, ANITA CHABRIA, and SEEMA SHAH)

The defendants named above are charged with using wire communications to commit the student visa fraud described above.

Student Financial Aid Fraud Conspiracy

(SURESH HIRANANDANEY, LALIT CHABRIA, ANITA CHABRIA, and SAMIR HIRANANDANEY)

The defendants named above are charged with fabricating and manipulating documents in student financial aid files at MCI to hide MCI’s widespread non-compliance with ED regulations. ED provides financial aid to eligible low-income post-high school students to assist them in affording higher education. MCI did not comply with federal laws and regulations governing the administration of such financial aid. When ED reviewed MCI’s administration of financial aid in 2011, rather than admit its non-compliance, the defendants instead “fixed” student files by altering documents in the files, or in some cases creating entirely fabricated documents. The defendants engaged in this manipulation so that ED would not terminate MCI’s eligibility for financial aid funds.

Attached are charts containing the charges against the defendants and the maximum penalties they face, as well as the defendants’ ages and residences. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Mr. Bharara praised the investigative work of ICE HSI, ED-OIG, and DSS.

Assistant United States Attorneys Samson Enzer and Margaret Graham of the Office’s General Crimes Unit are in charge of the prosecution. Assistant United States Attorneys Andrew Adams and Christine Magdo of the Office’s Money Laundering and Asset Forfeiture Unit are handling the asset forfeiture portion of the case.

The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Click here to view chart(s)

U.S. v. Suresh Hiranandaney, et al., Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the United States Drug Enforcement Administration (“DEA”), announced today that 21 citizens of the Dominican Republic have been charged with conspiring to impersonate United States law enforcement officers, extortion, and wire fraud. Beginning two weeks ago, authorities in the Dominican Republic, acting on requests from the United States, located and arrested 17 of the defendants in the Dominican Republic, who are now awaiting extradition proceedings in that country. Four defendants remain at-large.

The defendants are alleged to have engaged in a scheme to extort money from individuals located in the United States by posing as DEA Agents or other representatives of the United States Government. The defendants targeted individuals who they believed had illicitly purchased prescription pharmaceuticals through call centers located in the Dominican Republic. As part of the defendants’ scheme, a member of the conspiracy would call a victim located in the United States and identify him- or herself as a DEA agent or representative of another United States agency. The victim would then be told that he or she was under investigation for illegally purchasing prescription drugs, and that the only way to avoid arrest and jail would be to pay a “fine” or some other fee to the DEA. In total, the defendants and others who participated in this scheme and copy-cat schemes demanded at least $3.5 million, and received at least $880,000, in extortionate payments from victims in the United States.

United States Attorney Preet Bharara said: “These defendants generated untold millions of dollars in illicit profits by posing as DEA Agents or other U.S. law enforcement officers. They carried out the internet or telephone equivalent of displaying phony badges to rip off their victims. In the process, the defendants assaulted the good name of the DEA. We commend the DEA for putting a stop to this criminal charade.”

DEA Administrator Michele M. Leonhart said: “These alleged criminals not only bilked thousands of dollars from unsuspecting Americans but they also called into question the integrity and honor of the DEA and all law enforcement. The DEA, with the assistance of our Dominican Republic counterparts, have worked diligently to identify, target and, ultimately, dismantle this group of alleged scam artists. We urge anyone who receives a similar threatening phone call to hang up and contact local or federal law enforcement immediately.”

According to the Indictment, which was unsealed today in Manhattan federal court:

From at least 2008, up to and including March 2013, JULIO SANTANA JOSEPH, FRANCISCO RUBIO MONTALVO, ANGEL PEREZ AVILES, a/k/a “Mike,” DEIVY BURGOS FELIX, CHENGY PADILLA GARO, GEURY GUZMAN ROSA, DANTE CAMINERO VASQUEZ, SAUL HERNANDEZ BATISTA, MOISES DE LA CRUZ DECENA, CELSO MIGUEL SARITA, EDWARD CUEVAS ESCANO, SANTIAGO GUZMAN GONZALEZ, JOSE ARISMENDY CUESTA ABREU, CARLOS PERDOMO ROSARIO, a/k/a “El Depo,” ELINSON REYES ALMONTE, YEURY AMARANTE ROSARIO, MARIO ANTONIO PLACIDO, YGNACIO ESTEVEZ MESSON, BORIS GIL GUERRERO, VICTOR VELASQUEZ ROCHTTIS, a/k/a “Vitico,” and RAFAELA MEDINA, a/k/a “Carolina,” the defendants, and others known and unknown, engaged in a scheme to extort money from individuals located in the United States by posing as DEA Agents or other representatives of the United States Government (the “Impersonation and Extortion Scheme”). Each of the defendants made extortionate calls and/or received money from victims who had been extorted. The Impersonation and Extortion Scheme targeted individuals who the defendants believed had purchased prescription drugs unlawfully over the internet or through call centers. The illicit websites and call centers at issue sold pills to customers that would typically require a doctor’s prescription to purchase. The illicit websites and call centers did not require consumers to obtain the required prescriptions before purchase (hereinafter, the pills sold in this manner are referred to as the “Prescription Drugs”).

The DEA Impersonation and Extortion Scheme typically operated as follows: First, certain of the defendants and other individuals not named as defendants who engaged in the Impersonation and Extortion Scheme (the “Extorters”) purchased, or otherwise obtained, lists of individuals who the Extorters believed had previously purchased Prescription Drugs over the internet on illicit websites or through illicit call centers located in the Dominican Republic (“Customer Lists”). The Customer Lists generally contained the names, addresses, credit card numbers and other information for individuals located in the United States.

Second, an Extorter contacted a customer from the Customer Lists (the “victim”) and identified him- or herself as a DEA agent or representative of another United States agency. Often, the Extorter provided the name of an actual DEA supervisor from a DEA office located in the United States. The Extorters attempted to extort money from victims throughout the United States, including victims in Manhattan and the Bronx, New York.

During a call with a victim, an Extorter falsely informed the victim that authorities in the Dominican Republic or elsewhere were investigating or criminally charging the victim as a result of his or her illegal purchase of Prescription Drugs that were sent to the victim from the Dominican Republic. In a single call or series of calls and emails, the Extorter detailed the purported criminal charges and potential penalties facing the victim, including imprisonment, and the likelihood that the victim would be arrested and extradited to a foreign country for prosecution.

During a call with the victim, an Extorter also generally informed the victim that he or she could dispose of, or avoid, the criminal charges by making a cash payment. In order to do so, the Extorter had the victim transfer between several hundred and several thousand dollars either (i) through a money remitting service to a particular individual in the Dominican Republic, or (ii) via wire transfer to a particular bank account located in the Dominican Republic.

Following receipt of a payment from a victim, an Extorter typically contacted the victim again. During the follow-up conversations, the Extorter demanded additional payments and threatened to have criminal charges re-filed against the victim. If the victim refused to make, or to continue to make, extortion payments to the Extorter, the Extorter threatened the victim with his or her imminent arrest, with searches of the victim’s home in the United States by federal law enforcement officers, or with public disclosure of the victim’s prior purchases of Prescription Drugs.

The Extorters typically made extortion calls from illicit call centers located in the Dominican Republic (the “Call Centers”). In these Call Centers, the Extorters gathered together and used multiple computers equipped with Voice Over Internet Protocol (“VOIP”) technology to make extortion calls to victims listed on a Customer List. VOIP is a means of transmitting digital voice communications over the internet via a high-speed internet connection. The VOIP technology allowed the Extorters to contact their victims by using VOIP lines that made it appear as though the Extorters were calling from telephone numbers with area codes from within the United States. For example, the Extorters used VOIP lines that made it appear as though the Extorters were calling from, among other places, Washington, D.C., and New York, New York, when, in truth, the Extorters were located in the Dominican Republic. The Extorters often made hundreds of extortion calls a day from these Call Centers to victims in the United States.

Once a particular victim made an extortion payment to one of the Extorters, the Extorter who received that payment often shared that victim’s contact information with other Extorters, who then besieged the victim with additional, repeated extortion attempts via telephone. While using these lines to further the Impersonation and Extortion Scheme, the Extorters often traded tips with other Extorters in the same Call Center on the best techniques to use to extort victims.

Beginning in June 2010, the DEA established a telephone hotline (the “Hotline”), to allow victims to report extortion attempts and other contacts with the defendants and other individuals who engaged in the Impersonation and Extortion Scheme and who posed as DEA and other federal agents. Since the Hotline was established in June 2010, through January 2013, the DEA received approximately 6,500 reports from victims of extortion attempts, nearly all of which followed substantially the same pattern described above. In sum, through the Hotline, the DEA has learned of the Extorters’ efforts to obtain over $3.5 million in extortion payments from victims, and of actual extortion payments from victims to the Extorters of over $880,000. These attempted extortions and actual extortion payment amounts reflect only what was reported to the DEA through the Hotline, and thus represent only a portion of the extortion payments that the Extorters have attempted to obtain, or actually obtained, from their victims.

Each of the defendants has been charged with one count of conspiracy to commit wire fraud, and one count of conspiracy to commit extortion, each of which carries a maximum potential penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. Each of the defendants has also been charged with one count of conspiracy to impersonate a United States law enforcement officer, which carries a maximum potential penalty of 5 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Mr. Bharara praised the outstanding investigative work of the DEA’s Special Operations Division, the New York Field Office of the DEA, the DEA’s Dominican Republic Country Office, the U.S. Department of Justice's Office of International Affairs, the Department of Homeland Security’s Homeland Security Investigations, and the Dominican National Directorate for Drug Control for their work in this investigation.

This prosecution is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Ian McGinley and Adam Fee 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. Julio Joseph 13 Cr 213 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MATTHEW TEEPLE, a former analyst for a hedge fund investment adviser located in San Francisco, California (“Investment Adviser A”), pled guilty today to participating in an insider trading scheme that resulted in at least $27 million in ill-gotten gains and losses avoided. Specifically, TEEPLE admitted that in 2008 he received and passed on to Investment Adviser A illegally obtained inside information about Foundry Networks, Inc. (“Foundry”), a technology company located in Santa Clara, California. This inside information included the fact – before it became public on July 21, 2008 – that Brocade Communications, Inc. (“Brocade”) was planning to acquire Foundry. TEEPLE pled guilty today before the Honorable James C. Francis, IV, United States Magistrate Judge.

Manhattan U.S. Attorney Preet Bharara said: “Matthew Teeple admitted that he received inside information from a tech company insider and passed it on to others, who reaped a windfall of at least $27 million. Teeple, the 85th defendant to be convicted of insider trading by plea or trial in this District since 2009, has earned himself a likely prison term.”

According to the agreement pursuant to which TEEPLE entered his plea of guilty today, the underlying criminal Complaint filed March 26, 2013, the Superseding Indictment filed February 20, 2014, and statements made during court proceedings:

TEEPLE obtained material, non-public information relating to Foundry, including information relating to monthly and quarterly financial reporting, well before such information became public. More specifically, the inside information that TEEPLE received from an insider at Foundry included quarterly financial performance numbers during the first quarter of 2008, information regarding Brocade’s intended acquisition of Foundry in July 2008, and information about developments regarding the Brocade-Foundry transaction in October 2008.

TEEPLE passed the inside information to others, including another analyst at Investment Adviser A. Using the inside information TEEPLE provided about Foundry, Investment Adviser A reaped gains and avoided losses of at least $27 million in 2008.

Others TEEPLE tipped with the inside information included two acquaintances of his, John Johnson and Karl Motey. Regarding Brocade’s 2008 acquisition of Foundry, TEEPLE told both Johnson and Motey not only that Foundry was going to be acquired by Brocade, but also the approximate acquisition price, which turned out to be substantially accurate. Johnson traded on this information and profited in excess of $136,000. On March 18, 2013, he pled guilty to conspiracy and securities fraud charges before United States District Judge John F. Keenan.

TEEPLE, 42, of San Clemente, California, pled guilty to Count One of a four-count Superseding Indictment. Count One charges a conspiracy to commit insider trading and carries a maximum term of five years in prison. As part of his guilty plea, TEEPLE agreed to forfeit $553,890, and further agreed not to seek a term of imprisonment other than the statutory maximum term of five years. TEEPLE is scheduled to be sentenced by the Honorable Robert P. Patterson on September 26, 2014, at 10:00 a.m. 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.

TEEPLE’s co-defendant, David Riley, is scheduled to proceed to trial before Judge Patterson on July 7, 2014.

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.

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 Telemachus P. Kasulis and Sarah E. McCallum, and Special Assistant U.S. Attorney Michael P. Holland, are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the conviction of KHALIF PHILLIPS, a former New York City Correction Officer, in connection with his smuggling of marijuana into Riker’s Island for inmates to redistribute. Following a one-week trial, the jury convicted PHILLIPS on the second day of deliberations of each of the three counts that he faced. PHILLIPS is scheduled to be sentenced on September 25, 2014, before U.S. District Judge Richard J. Sullivan, who presided over the trial.

As alleged in the Indictment against PHILLIPS and established by the evidence admitted at trial:

PHILLIPS worked as a Correction Officer from February 2006 until his arrest in June 2013. He was assigned to the George R. Vierno Center (GRVC) on Riker’s Island. On multiple occasions in 2012, PHILLIPS smuggled marijuana into the GRVC and provided it to inmates housed in that facility, who in turn sold it to other inmates. PHILLIPS coordinated with the wives and girlfriends of his inmate co-conspirators, who met with him to supply him with marijuana and to pay him for his smuggling activities. Among the occasions where PHILLIPS brought packages of marijuana into Riker’s Island were October 8, 2012, and December 23, 2012. Typically, Phillips charged $1,000 per package that he smuggled into the GRVC.

PHILLIPS, 31, of Brooklyn, New York, was convicted of one count of conspiring to distribute and possess with intent to distribute marijuana, and two counts of distributing and possessing with intent to distribute marijuana. Each of the three counts carries a maximum term of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum 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 Drug Enforcement Administration and the New York City Department of Investigation.

The prosecution is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Russell Capone, Rahul Mukhi, and Carrie Cohen are in charge of the prosecution.

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 Field Office of the Federal Bureau of Investigation (“FBI”), announced today the indictment of JUVENCIO MARTINEZ-MARTINEZ on hostage taking and alien smuggling charges. MARTINEZ-MARTINEZ was previously arrested in the Southern District of Texas and ordered removed to White Plains, New York.

U.S. Attorney Preet Bharara stated: “As alleged, Juvencio Martinez-Martinez preyed on and held hostage an individual desperate to enter the United States from Mexico to join her family, threatening dire consequences if ransom was not paid. The woman he smuggled and held is safe, and Martinez-Martinez is now in federal custody facing federal charges.”

Assistant Director-in-Charge George Venizelos stated: “As alleged, Martinez-Martinez valued currency over human life when he abducted the victim who was attempting to enter the United States from Mexico. While he may have viewed this as an opportunity to make easy money, Martinez-Martinez did not anticipate the swift, coordinated law enforcement response committed to seeing the victim safely rescued. The FBI, along with its law enforcement partners, will continue to investigate and bring to justice those who seek to turn a profit by victimizing the innocent.”

According to allegations made in the Indictment and other publicly filed documents:

Martinez-Martinez and others held an individual hostage in Weslaco, Texas, after they smuggled her across the border. While waiting for the victim’s mother, who lives in Fallsburg, Sullivan County, New York, to send them money in order to secure her release, they threatened to continue to hold the victim hostage and harm her. During one conversation with the victim’s mother, the hostage takers threatened to cut the victim into pieces and send the pieces to the victim’s mother in Fallsburg, New York. Martinez-Martinez was apprehended at a business in Weslaco, Texas, shortly after he obtained an additional $1,500 from the victim’s mother. Law enforcement officers then discovered additional individuals at a building Martinez-Martinez controlled.

MARTINEZ-MARTINEZ, 20, of Weslaco, Texas, is charged with one count of conspiracy to commit hostage taking, which carries a maximum sentence of life in prison and one count of conspiracy to commit alien smuggling which carries a maximum sentence of five years 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 defendant will be determined by the judge.

Mr. Bharara praised the outstanding efforts of the FBI, Fallsburg (N.Y.) Police Department, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and United States Customs and Border Protection.

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney John P. Collins, Jr. is in charge of the prosecution.

The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

US v Martinez_Redacted

Preet Bharara, United States Attorney for the Southern District of New York, Robert T. Johnson, the District Attorney for Bronx County, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and William J. Bratton, Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of JOHN L. MONTANEZ, a police officer with the NYPD, on charges of access device fraud, mail fraud, and identity theft. MONTANEZ was arrested this morning at his residence in the Bronx, New York, and presented this afternoon in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Police Officer John Montanez not only violated his oath to uphold the law, but actively broke it when he himself engaged in fraud and identity theft. Corruption undermines the public’s confidence in law enforcement, particularly so when a police officer, out of greed, allegedly uses his position of authority not to stop crime, but to help commit more crime. I want to thank our partners at the Bronx District Attorney’s Office, the FBI, and the NYPD for their work in this important case.”

Bronx County District Attorney Robert T. Johnson said: “Police officers are sworn to uphold the laws, and it is most disturbing when those whose purpose is to combat crime instead engage in identity theft that not only victimizes the public, but also their fellow officers. This office will continue to work to prosecute these crimes with all due diligence.”

FBI Assistant Director-in-Charge George Venizelos said: “As a police officer Mr. Montanez was charged with enforcing the law. He was also rightfully expected to abide by the very laws he enforced. Today’s complaint tells a different story. We’ll continue to work with the New York City Police Department to investigate corruption wherever we find it.”

NYPD Commissioner William J. Bratton said: “These charges evidence not only a significant breach of trust and abuse of authority but also serious criminal conduct on the part of a public servant. I commend the well-coordinated efforts of the federal and state prosecutors, the FBI and our Internal Affairs Bureau in developing this case.”

According to the allegations contained in the Complaint unsealed today in Manhattan federal court:

In 2011, an individual, who subsequently agreed to cooperate with law enforcement, and who is referred to in the Complaint 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 electronic 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 of 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 cards that MONTANEZ believed that the CW had stolen or fraudulently obtained. In one recorded meeting between the CW and MONTANEZ, MONTANEZ explained to the CW that the CW should feel comfortable pretending to be Victim-1, stating, “It’s the best, cleanest, guaranteed name you can ever have.” In another consensually-recorded meeting between the CW and MONTANEZ, in connection with discussing the CW looking to obtain from MONTANEZ additional names and/or personal identification information of other persons, MONTANEZ stated, “I can go into the precinct in plain clothes. It’s going to take me a couple of minutes. I can go inside, and do whatever.” During one consensually-recorded meeting, MONTANEZ also stated: “I’m not the cop you think I am. I am a piece of s***.”

MONTANEZ, 28, is charged with one count of access device fraud, one count of mail fraud, and one count of aggravated identity theft. He faces a maximum sentence of 32 years in prison, with a mandatory minimum term of two years in prison. 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 Bronx County District Attorney’s Office, the FBI, and the NYPD Internal Affairs Bureau. Mr. Bharara noted that the investigation is ongoing.

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.

The charges contained in the Complaint is merely an accusation and the defendant is presumed innocent unless and until proven guilty.

U.S. v. John L. Montanez Complaint 14 Mag 1140