Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, the Acting Special Agent-in-Charge of the New York Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that VIKTOR KORDASH pled guilty today to willfully failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) with the IRS regarding a secret Swiss bank account that he maintained and controlled at Wegelin & Co. (“Wegelin”), a Swiss bank formerly headquartered in St. Gallen, Switzerland, which separately pled guilty in January 2013 to assisting U.S. taxpayers in maintaining undeclared accounts. During the time that KORDASH maintained his undeclared account at Wegelin, KORDASH received tens of thousands of dollars in cash distributions from his undeclared account. KORDASH entered his guilty plea before U.S. District Judge Ronnie Abrams.

Manhattan U.S. Attorney Preet Bharara said: “For over a decade Viktor Kordash lived in this country, shirking his legal obligation to pay his fair share of taxes from over a million dollars he kept in a Swiss bank account. With his guilty plea today, Kordash has been held to account for his crime, as was Wegelin, the Swiss bank where he kept his money, which in January 2013, became the first Swiss financial institution to plead guilty to its role in assisting U.S. taxpayers cheat on their taxes.”

IRS Acting Special Agent-in-Charge Shantelle P. Kitchen said: “Individuals who chose to hide income outside of the United States are again warned that they expose themselves to a variety of criminal charges and severe penalties when they fail to notify the government about their foreign bank accounts or report the income from them. Offshore tax enforcement remains a top priority for the Internal Revenue Service and we continue to gain access to more and more information about individuals involved in offshore tax evasion.”

According to the Information filed today in Manhattan federal court:

In the early 1980s, KORDASH opened an account at Wegelin. At that time, KORDASH was living in Russia and was a Russian citizen. In 1984, however, KORDASH emigrated to the United States, and in 1986, KORDASH applied for and was granted citizenship in the United States. After emigrating to the United States, and after becoming a United States citizen, KORDASH continued to maintain his account at Wegelin, and failed to declare it to the IRS, up until approximately November 2010. KORDASH used the undeclared account as an operating and investment account for his antique reproductions business, which he operated out of New York, New York.

During the time period that KORDASH maintained his undeclared account at Wegelin, capital gains and losses were generated in the account from KORDASH’s investments in foreign securities. Between 2007 and 2010, the high value of KORDASH’s undeclared account was over $1.5 million. Further, between at least April 2008 and June 2010, KORDASH received a series of cash distributions from the undeclared account from Wegelin’s correspondent account in Stamford, Connecticut, which totaled over $168,000. In November 2010, KORDASH closed the undeclared account and transferred the balance to his wife. The balance of the undeclared account at the time of its closure and transfer was nearly $1 million.

For each of the calendar years from at least 1986 through 2010, Kordash was required to, but failed to, file an FBAR with the IRS disclosing his signatory or other authority over his undeclared account at Wegelin. He was required to identify the financial institution with which his account was held, the type of account, the account number, and the maximum value of the account during the calendar year for which the FBAR was being filed. He willfully failed to do so.

KORDASH, 64, of Cliffside Park, New Jersey, faces a maximum sentence of five years in prison. As part of his plea, KORDASH has agreed to pay back taxes of over $268,000, and to pay a civil penalty of over $750,000. He is scheduled to be sentenced by U.S. District Judge Ronnie Abrams on September 12, 2014, at 12:30 p.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.

Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation. Mr. Bharara also thanked U.S. Department of Justice’s Tax Division for their assistance in the investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah E. Paul and Jason H. Cowley are in charge of the prosecution.

U.S. v. Viktor Kordash Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that HECTOR MONSEGUR, a/k/a “Sabu,” formerly a leading member of a group of sophisticated computer hackers known as “LulzSec,” was sentenced today in Manhattan federal court to time served and one year of supervised release for his participation in computer hacking activity that victimized media outlets, government agencies and contractors, and private corporations around the world by hacking into, disabling, and at times exfiltrating data from the victims’ computer systems. MONSEGUR pled guilty in August 2011 to computer hacking conspiracy, computer hacking, computer hacking in furtherance of fraud, conspiracy to commit access device fraud, conspiracy to commit bank fraud, and aggravated identity theft pursuant to a cooperation agreement with the Government. U.S. District Judge Loretta A. Preska imposed today’s sentence.

According to the criminal Information and related filings in Manhattan federal court, and statements made at MONSEGUR’s guilty plea:

Hacks by Anonymous, Internet Feds, and LulzSec

Since at least 2008, Anonymous has been a loose confederation of computer hackers and others. MONSEGUR and other members of Anonymous, including Jeremy Hammond, took responsibility for a number of cyber attacks between December 2010 and June 2011, including distributed denial of service (“DDoS”) attacks against the websites of Visa, MasterCard, and PayPal, as retaliation for the refusal of these companies to process donations to Wikileaks, as well as hacks or DDoS attacks on foreign government computer systems.

Between December 2010 and May 2011, members of the Internet Feds computer hacking collective similarly waged a deliberate campaign of online destruction, intimidation, and criminality. Members of Internet Feds engaged in a series of cyber attacks that included breaking into computer systems, stealing confidential information, publicly disclosing stolen confidential information, hijacking victims’ email and Twitter accounts, and defacing victims’ Internet websites. Specifically, MONSEGUR and other members of Internet Feds, including Ryan Ackroyd, a/k/a “kayla,” a/k/a “lol,” a/k/a “lolspoon,” Jake Davis, a/k/a “topiary,” a/k/a “atopiary,” Darren Martyn, a/k/a “pwnsauce,” a/k/a “raepsauce,” a/k/a “networkkitten,” and Donncha O’Cearrbhail, a/k/a “palladium,” conspired to commit computer hacks including the hack of the website of Fine Gael, a political party in Ireland; the hack of computer systems used by security firms HBGary, Inc., and its affiliate HBGary Federal, LLC, from which Internet Feds stole confidential data pertaining to 80,000 user accounts; and the hack of computer systems used by Fox Broadcasting Company, from which Internet Feds stole confidential data relating to more than 70,000 potential contestants on “X-Factor,” a Fox television show.

In May 2011, following the publicity that they had generated as a result of their hacks, including those of Fine Gael and HBGary, MONSEGUR, along with Ackroyd, Davis, and Martyn, formed and became the principal members of a new hacking group called “Lulz Security” or “LulzSec.” Like Internet Feds, LulzSec undertook a campaign of malicious cyber assaults on the websites and computer systems of business and governmental entities in the United States and throughout the world. Specifically, MONSEGUR and his co-conspirators, as members of LulzSec, conspired to commit computer hacks including the hacks of computer systems used by the Public Broadcasting System, in retaliation for what LulzSec perceived to be unfavorable news coverage in an episode of the news program “Frontline”; Sony Pictures Entertainment (“Sony”), in which LulzSec stole confidential data concerning approximately 100,000 users of Sony’s website; and Bethesda Softworks (“Bethesda”), a video game company based in Maryland, in which LulzSec stole confidential information for approximately 200,000 users of Bethesda’s website.

Among other things, at law enforcement direction, Monsegur engaged in proactive cooperation that enabled the Government to identify, locate, and arrest eight of his co-conspirators, including Hammond. In addition, as a direct result of Monsegur's cooperation, the Government was able to prevent or mitigate over 300 cyberattacks that were being planned or carried out by others, including on the computer servers of U.S. and foreign governments, international intergovernmental organizations, and private corporations. Monsegur also provided information on vulnerabilities in certain critical infrastructure, including at a U.S. water utility, that enabled law enforcement to secure that infrastructure.

In pronouncing the sentence, Judge Preska said Monsegur’s cooperation was “truly extraordinary.” She also said, “The fact that Monsegur immediately chose to cooperate and went back online . . . allowed the extraordinary cooperation.”

In addition, at today’s proceeding, Judge Preska ordered MONSEGUR, 30, of New York, New York, to pay a $1,200 special assessment fee. MONSEGUR previously served seven months in prison in connection with the crimes to which he pled guilty.

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

The investigation was initiated and led by the FBI, and its New York Cyber Crime Task Force, which is a federal, state, and local law enforcement task force combating cybercrime; with assistance from the PCeU, a unit of New Scotland Yard's Specialist Crime Directorate, SCD6; the Garda; and the U.S. Attorneys’ Offices for the Eastern District of California, the Central District of California, the Northern District of Georgia, and the Eastern District of Virginia; as well as the Department of Justice Criminal Division’s Office of International Affairs and its Computer Crime and Intellectual Property Section.

The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney James Pastore is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that LOUIS MCINTOSH, 32, was sentenced today to 60 years in prison by United States District Judge Sidney H. Stein in Manhattan federal court for his role in an armed robbery conspiracy. MCINTOSH was convicted on August 22, 2013, after a nine-day trial before Judge Stein.

Manhattan U.S. Attorney Preet Bharara stated: “Louis McIntosh led a violent armed robbery crew that victimized New York area communities for years. Not satisfied to rob at gunpoint, McIntosh even pistol-whipped and tortured his victims. Today’s 60-year sentence provides a fitting end to McIntosh’s criminal career.”

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

On September 26, 2010, MCINTOSH and other co-conspirators robbed an individual business owner in his home in Lynbrook, New York, during which robbery MCINTOSH held the victim at gunpoint, tied him up, and assaulted him repeatedly with a stun gun. On October 28, 2010, MCINTOSH and other co-conspirators robbed a card game at a men’s club in Poughkeepsie, New York, during which MCINTOSH pistol-whipped two victims and discharged a firearm.

MCINTOSH, 32, of the Bronx, New York, was convicted of the following nine counts at trial: (1) participating in a conspiracy to commit robberies from in or about 2009 through 2012: (2) using, carrying, and possessing firearms in connection with the robbery conspiracy; (3) committing a robbery on September 26, 2010, in Lynbrook; (4) using, carrying, possessing, and brandishing firearms in connection with the September 26, 2010 robbery; (5) committing a robbery on October 28, 2010, in Poughkeepsie; (6) using, carrying, possessing, and discharging firearms in connection with the October 28, 2010 robbery; (7) possessing a Cugir .223 caliber auto-loading rifle after having been previously convicted of a felony; (8) possessing a Ruger 9 millimeter handgun after having been previously convicted of a felony; and (9) possessing a Bushmaster .223 caliber rifle after having been previously convicted of a felony.

In imposing sentence, Judge Stein remarked that MCINTOSH engaged in “serious” and “vicious” conduct during the course of the charged robberies and robbery conspiracy, including the “torture” of the victim of the Lynbrook robbery.

Mr. Bharara praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and the Westchester County Department of Public Safety, and thanked the Westchester County District Attorney’s Office for its assistance in the investigation.

A number of co-conspirators were also prosecuted in connection with this case. Among other individuals, Turhan Jessamy previously pleaded guilty to using, carrying, possessing, and discharging firearms, and was sentenced by United States District Judge Kenneth M. Karas to 10 years in prison. Tyrell Rock previously pleaded guilty to using, carrying, possessing, and discharging firearms, and was sentenced by Judge Karas to 10 years in prison. Neil Morgan previously pleaded guilty to using, carrying, possessing, and discharging firearms, and was sentenced by Judge Karas to 10 years in prison. Quincy Williams previously pleaded guilty to using, carrying, possessing, and brandishing firearms, and was sentenced by Judge Karas to 7 years in prison.

The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Sarah Krissoff and Jessica Masella are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Rafael A. Medina, Special Agent in Charge of the United States Postal Service, Office of Inspector General, Northeast Area Field Office, announced the arrest of a United States Postal Service supervisor for possessing and selling professional sports cards in Westchester County that had been stolen from the mail. Defendant JOHN BU was arrested today and presented in White Plains federal court before United States Magistrate Judge Judith C. McCarthy, who ordered that BU be released on bail.

According to the allegations in the criminal Complaint unsealed today in White Plains federal court:

From at least November 2, 2013, and up to and including November 9, 2013, BU unlawfully and knowingly possessed and sold baseball cards and professional sports cards in Westchester County that had been stolen from the United States mail. BU is alleged to have received thousands of dollars from selling the professional sports cards, including cards of greats like Larry Bird, Mickey Mantle, and Thurman Munson.

BU, 38, has been charged with one count of possessing stolen mail, in violation of 18 U.S.C. § 1708. The offense, upon conviction, carries a maximum prison sentence of five years. 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 United States Postal Service, Office of the Inspector General, for its work in this investigation.

The prosecution is being overseen by the Office’s White Plains Unit. Assistant United States Attorney Daniel Filor 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. John Bu Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALFONSO PORTILLO, the former President of Guatemala, was sentenced today in Manhattan federal court to 70 months in prison for laundering millions of dollars through bank accounts located in the United States. PORTILLO, who served as the President of Guatemala from January 14, 2000, to January 14, 2004, arrived in the Southern District of New York on May 24, 2013, after being extradited to the United States by the Government of Guatemala. On March 18, 2014, Portillo pled guilty to the sole charge in the Indictment before United States District Judge Robert P. Patterson, who imposed today’s sentence.

United States Attorney Preet Bharara said: “Alfonso Portillo, the former head of state in Guatemala, used his office as a siphon to extract millions of dollars in bribes from Taiwan. Today he has been sentenced to a lengthy prison term for laundering the proceeds of his influence-peddling. The U.S. banking system is not open for business to those seeking to hide illegal funds.”

According to the Indictment, PORTILLO’s plea allocution, and the evidence at sentencing:

From December 1999 through August 2002, while serving as President of Guatemala, PORTILLO received $2.5 million in bribery payments from the Government of Taiwan. In his plea allocution, PORTILLO stated, “I understood that, in exchange for these payments, I would use my influence to have Guatemala continue to recognize Taiwan diplomatically.” Knowing that the $2.5 million was the proceeds of illegal payments from Taiwan, PORTILLO conspired with others to launder the $2.5 million through bank accounts located in the United States. PORTILLO also stated that he and others had the illegally obtained funds “carried from Guatemala to the United States” and then deposited into the U.S. accounts. The $2.5 million in payments consisted of five checks provided by the Government of Taiwan’s Embassy in Guatemala. Three of the checks, totaling $1.5 million, were issued in 2000, and were endorsed personally by PORTILLO. PORTILLO then caused the checks to be deposited in a bank account in Miami, Florida. Two additional checks totaling $1 million were issued in 2002 and were made payable to a company known as Oxxy Financial Corp. (“Oxxy Financial”). These two checks were deposited at the International Bank of Miami, in an account held by Oxxy Financial. As PORTILLO stated in his guilty plea allocution, these and other transactions were “designed, in part, to conceal and disguise the source and ownership of the money.” More than $1.5 million of the Taiwanese payments received by PORTILLO were ultimately deposited into bank accounts in the name of PORTILLO’s former wife and daughter at Banco Bilbao Vizcaya Argentaria (“BBVA”) in Paris, France. Money transferred into the BBVA accounts was further laundered through financial institutions in Luxembourg and Switzerland, among other places.

In addition to the prison term, PORTILLO, 62, was ordered to pay $2.5 million in forfeiture and a $100 special assessment fee.

Mr. Bharara praised the outstanding investigative work of the New York Field Office of the Internal Revenue Service, Criminal Investigation ("IRS-CI"), DEA’s New York Organized Crime Drug Enforcement Strike Force – which comprises agents and officers of the DEA, the New York City Police Department, Immigration and Customs Enforcement’s Homeland Security Investigations, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, and the U.S. Marshals Service – the DEA’s Guatemala Country Office, the Department of State, and the U.S. Department of Justice's Office of International Affairs for their work in this investigation. Mr. Bharara also recognized and thanked the United Nations Commission Against Impunity in Guatemala ("CICIG"), the Guatemalan Special Prosecutor's Office for the CICIG, and the Ministerio Público in Guatemala for their assistance in the investigation.

This prosecution is being handled by the Office's Terrorism and International Narcotics Unit. Assistant United States Attorneys Adam Fee and Shane T. Stansbury are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Robert T. Johnson, the District Attorney for Bronx County, announced that former Assemblyman ERIC STEVENSON was sentenced today in Manhattan federal court to three years in prison, for taking more than $20,000 in bribes from four businessmen in exchange for STEVENSON’s official acts, including drafting, proposing, and agreeing to enact legislation that favored the bribers’ business interests. Specifically, the four businessmen, who sought to operate and construct adult day care centers in the Bronx, paid STEVENSON to sponsor and introduce legislation that would declare a three-year moratorium on the construction of adult day care centers in New York City, but from which their current centers would be exempted, in effect giving the businessmen a monopoly in adult day care centers in the area. In connection with one of the defendants’ adult day care centers on Jerome Avenue in the Bronx (the “Jerome Avenue Center”), in exchange for bribes by the businessmen, STEVENSON, in his official capacity as an Assemblyman, contacted Con Edison and the New York City Department of Buildings at their request. In addition, in exchange for bribes, STEVENSON held public events paid for by the businessmen to recruit senior citizens to attend a second center on Westchester Avenue in the Bronx (the “Westchester Avenue Center”). STEVENSON was convicted in January 2014 after a six-day jury trial before U.S. District Judge Loretta A. Preska, who imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “In shameless pursuit of profit, Eric Stevenson took bribes and put his own personal interests before those of his constituents. Now instead of serving the public he will be serving time behind prison walls. I’d like to thank our partners at the Bronx County District Attorney’s Office for their collaborative efforts in exposing this corruption and successfully prosecuting this case.”

Bronx County District Attorney Robert T. Johnson said: “The betrayal of public trust is one of the most serious matters this office must confront. Stevenson’s crimes were not only that, but he also sought to deny services to a vulnerable population, the elderly. We thank the U.S. Attorney’s office for its diligent work in bringing a measure of justice. Together we will continue to trumpet the message that there is no place in New York for dishonest public officials.”

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

STEVENSON has served as a member of the New York State Assembly since 2011 representing District 79, which includes various neighborhoods in the Bronx. The four businessmen – Igor Belyansky, Rostislav Belyansky, a/k/a “Slava,” Igor Tsimerman, and David Binman – are individuals who, during 2012 and 2013, were seeking to open and manage adult day care centers in the Bronx, New York, including the Westchester Avenue Center, within STEVENSON’s Assembly District, and the Jerome Avenue Center, within another Assemblyman’s District. During that time period, they paid multiple bribes to STEVENSON in connection with efforts to open and operate both centers.

For example, at a meeting on July 23, 2012, STEVENSON, Belyansky, and Tsimerman discussed the opening of the Westchester Avenue Center. During this meeting, STEVENSON said that on the following Thursday, July 26, 2012, he was “having a night [event]” for “my reelection” and that he needed “support and help like everyone else.” Subsequently, on July 25, 2012, Rostislav Belyansky provided a cooperating witness (the “CW”) with a check for $2,000 made out to STEVENSON’s political action committee, which the CW provided to STEVENSON. STEVENSON did not disclose this check as a campaign contribution as required by New York State Law.

At a September 7, 2012, meeting at a steakhouse in the Bronx, Igor and Rotislav Belyansky offered to pay STEVENSON $10,000 in exchange for calling Con Edison to expedite the installation of a gas line and assisting with obtaining a Certificate of Occupancy from the New York City Buildings Department at the Jerome Avenue Center, and for assistance recruiting senior citizens to attend the Westchester Avenue Center. STEVENSON agreed, but when Igor Belyansky attempted to hand him the $10,000 in an envelope, STEVENSON indicated that he was concerned that there might be surveillance cameras in the restaurant, so he waited until he was outside of the restaurant to take the cash bribe. On September 18, 2012, STEVENSON gave the CW a $1,500 cut of the $10,000 bribe in exchange for the CW’s assistance, and promised to pay the CW an additional $500.

On December 27, 2012, the CW met with STEVENSON and showed STEVENSON a copy of an email dated December 26, 2012, sent from the contractor for the Jerome Avenue Center to Rostislav Belyansky and Tsimerman. In the email, the contractor stated that “[i]t is urgent . . . that we call the State Senator Eric Stevenson so that he can call the building department at once and ask them to have this application reviewed” in connection with getting “a permit to install the gas lines into the building.” After reviewing this email, STEVENSON stated, “he’s not a smart guy . . . he’s not too bright, this guy” because “he put this in writing . . . why he got to put my name in it? . . . He shouldn’t have said that.” STEVENSON said they needed to avoid creating a “paper trail.”

During that meeting, the CW and STEVENSON also discussed the possibility of STEVENSON introducing legislation that would establish a temporary moratorium on the construction and/or opening of new adult day care centers (the “Moratorium Legislation”), which would have the effect of eliminating competition with the Jerome Avenue Center and the Westchester Avenue Center, thereby substantially increasing the profits earned by those two centers. Subsequently, the CW met with Tsimerman and Igor Belyansky. Tsimerman said that as a result of the Moratorium Legislation, the value of their adult day care centers was “gonna skyrocket. . . . As long as [there’s a] moratorium, I can guarantee you at least a triple [in profits].”

On January 1, 2013, the CW and STEVENSON spoke on the telephone and STEVENSON referred to “Igor” [Belyansky] as “Santa,” in reference to the money he expected to receive. In a subsequent meeting on the same day in the CW’s car, STEVENSON sought assurances that “Igor” [Belyansky] was going to “bless everything,” meaning pay STEVENSON. He added that: “I got the inauguration, I want a blessing [payment] in place, man.” Two days later, the CW gave Belyansky and Rostislav Belyansky a copy of a document titled “Proposed Adult Day Care Center Bill,” which contained a proposal for the Moratorium Legislation. On January 7, 2013, the CW provided the same proposal to STEVENSON. Later that day, Tsimerman provided STEVENSON with another copy of the proposal containing Tsimerman’s notes. On January 9, 2013, the CW told Igor Belyansky that STEVENSON wanted $10,000 for the Moratorium Legislation, with $5,000 paid up front. Two days later, on January 11, 2013, at the Westchester Avenue Center, Igor Belyansky, Rostislav Belyansky, Tsimerman, and Binman gave the CW $5,000 cash. The CW then left the Westchester Avenue Center with the envelope of money and got in his car where STEVENSON joined him, at which time the CW gave the envelope of money to STEVENSON, after taking out his $500 cut.

On January 27, 2013, STEVENSON met with the CW and told the CW that he was concerned that Tsimerman might be cooperating with law enforcement officials and recording their conversations. STEVENSON said a concern that if “they bring me down… somebody’s going to the cemetery.”

STEVENSON had a draft of the Moratorium Legislation prepared by January 31, 2013, which he showed the CW at a meeting in his office and which was consistent with the bullet points prepared by the CW and Igor Belyansky, Rostislav Belyansky, Tsimerman, and Binman. On February 11, 2013, STEVENSON told the CW: “We got the bill [the Moratorium Legislation] back today . . . [t]he bill is done now, it’s going out to the members . . . to the committee and . . . we’re gonna . . . try to push it to get it to the floor.” On February 16, in a hotel room in Albany, Rostislav Belyansky gave $5,000 in cash to the CW, which the CW gave to STEVENSON after taking a $500 cut. While the CW took out his $500 cut, STEVENSON walked into the bathroom of the CW’s room and left the door open so that he could receive the $4,500 cash in the bathroom.

STEVENSON introduced and sponsored Bill Number A05139, which places a temporary moratorium on the construction and/or opening of new adult day care centers within New York City on February 20, 2013. The bill was not enacted.

Two days later, in a meeting between the CW and Igor Belyansky, Tsimerman, and Binman, Belyansky said that the legislation would double the value of his share in the Jerome Avenue and Westchester Avenue Centers from approximately $350,000 to $700,000.

In the course of recorded conversations between STEVENSON and the CW, STEVENSON repeatedly referenced the convictions and sentences of other New York officials for crimes of public corruption, even as STEVENSON himself requested bribes. For example, during one meeting between STEVENSON and the CW on December 27, 2012, STEVENSON observed, “if half of the people up here in Albany was ever caught for what they do . . . they . . . would probably be in [jail] . . . so who are they bullsh**ing?” During another meeting, on January 1, 2013, after discussing the convictions of former New York State Senator Carl Kruger, former New York State Senator Pedro Espada, Jr., and former New York State Comptroller Alan Hevesi, STEVENSON commented on being “careful” about “the recorders and all those things” that informants wear in order to be careful not to “put yourself in jail.”

In addition to the prison term, STEVENSON, 47, of the Bronx, New York, was sentenced to two years of supervised release. He was also ordered to pay $22,000 in forfeiture and a $400 special assessment fee.

During the sentencing proceeding, Judge Preska said that STEVENSON’s conduct amounted to a “betrayal of the responsibility bestowed on a public official by his constituents” because he engaged in “selling the core function of a legislator for his own self-aggrandizement.”

Igor Belyansky, Rostislav Belyansky, Tsimerman, and Binman all pled guilty in September 2013 to conspiring to commit honest services wire fraud in connection with their payment of bribes to Stevenson before the Honorable William H. Pauley III. On January 24, 2014, Judge Pauley sentenced Tsimerman to two years in prison and Rostislav Belyansky to 18 months in prison. On February 6, 2014, Judge Pauley sentenced Igor Belyansky to 20 months in prison and Binman to nine months in prison.

Mr. Bharara praised the work of the investigators from the United States Attorney’s Office for the Southern District of New York and the District Attorney’s Office for Bronx County.

This prosecution is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Paul M. Krieger and Brian A. Jacobs and Special Assistant U.S. Attorney Pishoy Yacoub of the Bronx County District Attorney’s Office are in charge of the prosecution.

Preet Bharara, United States Attorney for the Southern District of New York, announced today that a federal grand jury returned an Indictment against TERRENCE PENDERGRASS, a correction officer and former captain, on a civil rights charge arising out of his deliberately ignoring the urgent medical needs of a Rikers Island inmate who had ingested a corrosive disinfectant and later died, in violation of the inmate’s rights under the United States Constitution. PENDERGRASS was arrested on March 24, 2014, on a Complaint alleging the same charge.

According to the allegations contained in the Complaint and the Indictment:

Rikers Island is a jail complex, located in the Bronx, New York, maintained by the New York City Department of Correction. At the time of his death, Jason Echevarria was an inmate incarcerated on Rikers Island in the Mental Health Assessment Unit for Infracted Inmates, a unit housing inmates who have committed infractions while incarcerated and who have been identified as needing mental health treatment.

On the afternoon of August 18, 2012, Echevarria swallowed a powerful disinfectant/detergent combination in powder form, commonly referred to as a “soap ball,” sometimes provided to inmates to assist in the cleaning and disinfecting of cells. The soap ball contained, among other things, ammonium chloride, a corrosive chemical that is life threatening if ingested.

After Echevarria swallowed the soap ball, Echevarria told a correction officer what had occurred and that he needed medical attention. That correction officer in turn informed PENDERGRASS, the captain – a supervisory correction officer – on duty at that time. PENDERGRASS responded that the correction officer should only call on PENDERGRASS if he needed help with the extraction of an inmate from a cell or if there was a dead body. A second correction officer similarly informed PENDERGRASS that Echevarria needed medical help. Notwithstanding these reports, PENDERGRASS failed to contact any medical personnel about Echevarria’s condition. The next morning, Echevarria was found dead in his cell.

PENDERGRASS, 49, of Howard Beach, New York, is charged in the Indictment with one count of deprivation of rights under color of law. He faces a maximum sentence of ten 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.

PENDERGRASS is scheduled to appear before District Judge Ronnie Abrams, to whom the Indictment has been assigned, on May 29, 2014, at 3:00 p.m.

The case is being handled jointly by the Office’s Civil Rights Unit and Public Corruption Unit. Assistant U.S. Attorneys Lara K. Eshkenazi and Daniel C. Richenthal are in charge of the prosecution.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the guilty plea of DINESH D’SOUZA to violating the federal election campaign law by making illegal contributions to a United States Senate campaign in the names of others. D’SOUZA, whose trial was scheduled to start today, pled guilty this morning in Manhattan federal court before U.S. District Judge Richard M. Berman.

Manhattan U.S. Attorney Preet Bharara stated: “Following the Court's ruling denying Dinesh D'Souza's baseless claim of selective prosecution, D'Souza now has admitted, through his guilty plea, what we have asserted all along – that he knowingly and intentionally violated federal election laws. As our Office's record reflects, we will investigate and prosecute violations of federal law, particularly those that undermine the integrity of the democratic electoral process, without regard to the defendant's political persuasion or party affiliation. That is what we did in this case and what we will continue to do.”

According to the Indictment, prior court filings, and statements made in court:

The Federal Election Campaign Act (the “Election Act”) is designed to limit financial influence in the election of candidates for federal office, including the Office of United States Senator, and provides for the public disclosure of the financing of federal election campaigns. In particular, the Election Act limits the amount and source of money that may be contributed to a federal candidate or that candidate’s authorized campaign committee. The Election Act specifically prohibits any person from making any contribution in the name of another, including reimbursing a third person, before or after that third person’s contribution, as inducement to make that contribution.

In 2012, the Election Act limited campaign contributions to $5,000 from any individual to any one candidate. In March 2012, D’SOUZA contributed $10,000 to the Senate campaign of Wendy Long on behalf of himself and his wife, agreeing in writing to attribute that contribution as $5,000 from his wife and $5,000 from him. In August 2012, D’SOUZA directed other individuals with whom he was associated, namely his assistant and a woman with whom he was romantically involved (the “Straw Donors”), to make contributions to Wendy Long’s campaign for the United States Senate (the “Long Campaign”) on behalf of themselves and their spouses that totaled $20,000 with the promise that he would reimburse them for the contributions. Later that same day or the next day, D’SOUZA, as promised, reimbursed the Straw Donors $10,000 each in cash for the contributions. When confronted by Ms. Long, D’SOUZA initially misled the candidate before admitting what he had done.

During the plea proceeding today, D’SOUZA admitted before the Court that he caused two close associates to contribute $10,000 each to the Long Campaign with the understanding that he would reimburse them for their contributions and that he did reimburse them. D’SOUZA also admitted that he knew that what he was doing was wrong and something the law forbids. The Court then accepted the guilty plea.

Last week, Judge Berman denied a pretrial motion by D’SOUZA to dismiss the indictment for selective prosecution, ruling that there was “no evidence” to support D’SOUZA’s allegation.

D’SOUZA, 53, of San Diego, California, faces a maximum sentence of two years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the defendant’s sentence will be determined by the Court. He is scheduled to be sentenced by Judge Berman on September 23, 2014, at 11:00 a.m.

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

This case is being prosecuted by the Office's Public Corruption Unit. Assistant United States Attorneys Carrie H. Cohen and Paul M. Krieger are in charge of the prosecution.

“Once again the men and women of this office and the FBI have brought a notorious terrorist before the bar of American justice and once again the men and women of an American jury, having weighed the evidence, have found him guilty beyond a reasonable doubt. We are gratified that the jury has returned a unanimous verdict of guilt against Mustafa Kamel Mustafa, also known as “Abu Hamza.” The defendant stands convicted, not for what he said, but for what he did. Abu Hamza was not just a preacher of faith, but a trainer of terrorists. Once again our civilian system of justice has proven itself up to the task of trying an accused terrorist and arriving at a fair and just and swift result. As we have seen in the Manhattan federal courthouse in trial after trial – of Ahmed Ghailani, of Suleiman Abu Ghayth, and now of Abu Hamza – these trials have been difficult, but they have been fair and open and prompt. These trials demonstrate that in an American civilian courtroom, the American people and all the victims of terrorism can be vindicated without sacrificing our principles. And that is one reason our civilian court system is admired the world over.”

Charges Based on Participation in Hostage-Taking in Yemen, Support for the Establishment of a Terrorist Training Camp in the United States, and the Facilitation of Violent Jihad in Afghanistan

Preet Bharara, the United States Attorney for the Southern District of New York, today announced the conviction of MUSTAFA KAMEL MUSTAFA, a/k/a “Abu Hamza,” a/k/a “Abu Hamza al Masri,” (“ABU HAMZA”) for his participation in a hostage-taking in Yemen in 1998 that resulted in four deaths, a conspiracy to establish a terrorist training camp in Bly, Oregon, in 1999, and supporting violent jihad in Afghanistan in 2000 and 2001. Following a four-week trial and two days of deliberations, the jury convicted ABU HAMZA of each of the 11 charges that he faced. ABU HAMZA is scheduled to be sentenced on September 9, 2014 before U.S. District Judge Katherine B. Forrest, who presided over the trial.

Attorney General Eric Holder said: “In both word and deed, Abu Hamza supported the cause of violent extremism. His conviction is as just as it was swift. This case is all the more noteworthy since it continues a trend of successful prosecutions of top terrorism suspects in our federal court system. With each efficiently delivered guilty verdict against a top al Qaeda-linked figure, the debate over how to best seek justice in these cases is quietly being put to rest.”

Manhattan U.S. Attorney Preet Bharara said: “Once again the men and women of this office and the FBI have brought a notorious terrorist before the bar of American justice and once again the men and women of an American jury, having weighed the evidence, have found him guilty beyond a reasonable doubt. We are gratified that the jury has returned a unanimous verdict of guilt against Mustafa Kamel Mustafa, also known as ‘Abu Hamza.’ The defendant stands convicted, not for what he said, but for what he did. Abu Hamza was not just a preacher of faith, but a trainer of terrorists. Once again our civilian system of justice has proven itself up to the task of trying an accused terrorist and arriving at a fair and just and swift result. As we have seen in the Manhattan federal courthouse in trial after trial – of Ahmed Ghailani, of Suleiman Abu Ghayth, and now of Abu Hamza – these trials have been difficult, but they have been fair and open and prompt. These trials demonstrate that in an American civilian courtroom, the American people and all the victims of terrorism can be vindicated without sacrificing our principles. And that is one reason our civilian court system is admired the world over.”

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

Hostage-Taking in Yemen in December 1998

On December 28, 1998, in Yemen, hostage-takers stormed a caravan of sport utility vehicles carrying 16 tourists, including two United States citizens, and took the tourists hostage by force. Prior to the hostage-taking, ABU HAMZA issued a public warning to “infidels” not to travel to Yemen. In addition, five days prior to the hostage-taking, ABU HAMZA’s stepson and other associates of ABU HAMZA were arrested in Yemen. During the hostage-taking, the hostages told their victims that they were taken prisoner to free the hostage-takers’ “friends”.

Prior to the hostage-taking, ABU HAMZA provided the leader of the hostage-takers with a satellite telephone, and subsequently spoke with him on that satellite telephone the night before the hostage-taking and during the hostage-taking. During the call on the day of the hostage-taking, ABU HAMZA agreed to act as an intermediary on behalf of the hostage-takers. ABU HAMZA also provided advice to the leader of the hostage-takers over the telephone.

On December 29, 1998, the Yemeni military launched a rescue operation to free the hostages. The hostage-takers fought the Yemeni military, using the hostages as human shields. During the rescue operation, four of the hostages were killed and several others were wounded.

Subsequently, in a recorded interview with one of the surviving hostages conducted at his mosque, ABU HAMZA described the hostage-taking as “a good thing.”

Efforts To Create a Terrorist Training Camp in Bly, Oregon in 1999

In late 1999, ABU HAMZA and several co-conspirators, including Oussama Abdullah Kassir, Haroon Rashid Aswat, and others, attempted to create a terrorist training camp to support al Qaeda on property located in Bly, Oregon. The primary purpose of the Bly, Oregon, camp was to provide various types of terrorist training, including weapons training. In late November 1999, at ABU HAMZA’s direction, Kassir and Aswat traveled from London, England, to Bly to assist in setting up the camp. Kassir brought with him to the camp a manual on the use of sarin nerve gas and letters of appreciation to Usama bin Laden and ABU HAMZA. Aswat subsequently was present at an al Qaeda guest house in Pakistan.

On May 12, 2009, after a four-week jury trial in this District, Kassir was convicted of various criminal offenses, including conspiring to provide material support to terrorists and to al Qaeda, and conspiracy to kill persons overseas, as a result of Kassir’s participation in the efforts to establish the Bly terrorist training camp. On September 15, 2009, United States District Judge John F. Keenan sentenced Kassir to multiple terms of life in prison. The conviction was subsequently affirmed by the Court of Appeals.

Aswat was arrested in Zambia in July 2005 and then deported to England, where he was arrested at the request of the United States, pursuant to a warrant issued in this District. The extradition proceedings against Aswat are currently pending.

Facilitating Violent Jihad in Afghanistan 2000 and 2001

In November 2000, ABU HAMZA requested that Ernest James Ujaama, a London-based follower of Abu Hamza, escort another one of ABU HAMZA’s followers, Feroz Abassi, to Ibn Sheikh al-Libi, a commander at a terrorist training camp in Afghanistan. Thereafter, Ujaama and Abassi traveled from London to Pakistan. Ujaama and Abassi then separately entered Afghanistan. ABU HAMZA subsequently conveyed instructions for Abassi to contact Ibn Sheikh al-Libi, who was expecting Abassi. Thereafter, Abassi passed through an al Qaeda safe house in Afghanistan, attended al Qaeda’s al Faruq training camp, and met with senior al Qaeda leaders. In December 2001, United States forces took Abassi into custody in Afghanistan.

In addition, from the spring of 2000 through late 2001, ABU HAMZA provided goods and services to the Taliban by, among other things, directing Ujaama to deliver money to Taliban-controlled parts of Afghanistan.

Ujaama was arrested in 2002 and testified against ABU HAMZA as a cooperating witness for the Government.

ABU HAMZA, 56, a naturalized citizen of the United Kingdom, was extradited from the United Kingdom to the Southern District of New York in October 2012. The 11 offenses of conviction carry the following maximum penalties:

Click here to view chart(s)

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

The arrest, extradition and conviction of ABU HAMZA was the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York, the FBI, the NYPD, the United States Marshals Service, and New Scotland Yard in the United Kingdom.

Mr. Bharara expressed particular appreciation to the U.S. Department of Justice Office of International Affairs for its extraordinary assistance with the extradition in this case. Mr. Bharara also thanked the FBI’s Seattle Field Office, the Home Office of the United Kingdom, the U.S. Department of Justice National Security Division, and the United States Department of State for their assistance.

The case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys John P. Cronan, Edward Y. Kim and Ian McGinley are in charge of the prosecution.

The Charges Are Part of the Largest-Ever Global Cyber Law Enforcement Operation, Involving More than 90 Arrests and Other Law Enforcement Actions in 19 Countries

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 unsealing of an indictment charging ALEX YÜCEL, the owner of an organization known as “Blackshades,” that since 2010, has sold and distributed to thousands of people in more than 100 countries a sophisticated and pernicious form of malicious software, or “malware,” known as the Blackshades Remote Access Tool, or “RAT.” The RAT was co-created by YÜCEL and has been used to infect computers throughout the world to spy on victims through their web cameras, steal files and account information, and log victims’ key strokes. Also unsealed today were criminal complaints against BRENDAN JOHNSTON, who was paid by Blackshades to help market and sell malware, including the RAT, and provide technical assistance to its users; KYLE FEDOREK, who purchased the RAT and used it to steal online account information from hundreds of victims; and MARLEN RAPPA, who purchased the RAT and used it to spy on dozens of victims and steal online account information. YÜCEL was arrested in Moldova in November 2013 and is pending extradition to the United States. JOHNSTON was arrested yesterday in Thousand Oaks, California, and will be presented today in the Central District of California. FEDOREK and RAPPA were arrested at their residences this morning and will be presented later today before United States Magistrate Judge James L. Cott in Manhattan federal court.

MICHAEL HOGUE, the co-creator of the RAT, was arrested in June 2012 as part of the Government’s investigation known as “Operation Cardshop” and subsequently pled guilty before U.S. District Judge Kevin Castel in January 2013. A transcript of his guilty plea was unsealed this morning.

In addition to the criminal charges, a domain name associated with the Blackshades website was seized pursuant to a seizure warrant obtained in Manhattan federal court.

Manhattan U.S. Attorney Preet Bharara said: “Blackshades’ flagship product was a sophisticated program known as the Remote Access Tool, or “RAT” for short. The RAT is inexpensive and simple to use, but its capabilities are sophisticated and its invasiveness breathtaking. As today’s case makes clear, we now live in a world where, for just $40, a cybercriminal halfway across the globe can – with just a click of a mouse – unleash a RAT that can spread a computer plague not only on someone’s property, but also on their privacy and most personal spaces.”

Assistant Director-in-Charge of the FBI George Venizelos said: “Armed with $40 and a computer, an individual could easily get the Blackshades Remote Access Tool and become a perpetrator. It required no sophisticated hacking experience or expensive equipment. This tool was purchased by thousands of people in more than 100 countries. The charges unsealed today showcase the top to bottom approach the FBI takes to its cases. We tackled this malware starting with those that put it in the hands of the users- the creators and those who helped make it readily available- the administrators. We will continue to work with our law enforcement partners to bring to justice anyone who used Blackshades maliciously.”

According to the allegations contained in the indictment and criminal complaints unsealed today in Manhattan federal court:

Overview

Since at least 2010, an organization known as “Blackshades” has sold and distributed malicious software to thousands of cybercriminals throughout the world. Blackshades’ flagship product was the Blackshades Remote Access Tool, or R.A.T. (the “RAT”), a sophisticated piece of malware that enabled cybercriminals to secretly and remotely gain control over a victim’s computer. After installing the RAT on a victim’s computer, a user of the RAT had free rein to, among other things, access and view documents, photographs and other files on the victim’s computer, record all of the keystrokes entered on the victim’s keyboard, steal the passwords to the victim’s online accounts, and even activate the victim’s web camera to spy on the victim – all of which could be done without the victim’s knowledge. The FBI’s investigation has shown that the RAT was purchased by at least several thousand users in more than 100 countries and used to infect more than half a million computers worldwide.

Purchasing and Installing the Blackshades RAT

The RAT was typically advertised on forums for computer hackers and marketed as a product that conveniently combined the features of several different types of hacking tools. Copies of the Blackshades RAT were available for sale, typically for $40 each, on a website maintained by Blackshades.

After purchasing a copy of the RAT, a user had to install the RAT on a victim’s computer – i.e., “infect” a victim’s computer. The infection of a victim’s computer could be accomplished in several ways, including by tricking victims into clicking on malicious links or by hiring others to install the RAT on victims’ computers.

The RAT contained tools known as “spreaders” that helped users of the RAT maximize the number of infections. The spreader tools generally worked by using computers that had already been infected to help spread the RAT further to other computers. For instance, in order to lure additional victims to click on malicious links that would install the RAT on their computers, the RAT allowed cybercriminals to send those malicious links to others via the initial victim’s social media service, making it appear as if the message had come from the initial victim. For example, a RAT user could send an instant message, or IM, to potential victims that appeared to come from the initial victim, inviting them to click on a link that appeared to lead to a legitimate website, but that in reality would install the RAT on the potential victim’s computer.

The Capabilities of the RAT

The RAT featured a graphical user interface, which allowed its users to easily view and navigate all of the victim computers that they had infected. Among other things, the user interface listed IP address information for each infected computer, the computer’s name, the computer’s operating system, the country in which the computer was located, and whether the computer had a web camera.

Once a computer was infected with the RAT, the user of the RAT had complete control over the computer. The user could, among other things, remotely activate the victim’s web camera. In this way, the user could spy on anyone within view of the victim’s webcam inside the victim’s home or in any other private spaces where the victim’s computer was used.

The RAT also contained a “keylogger” feature that allowed users to record each key that victims typed on their computer keyboards. To help users steal a victim’s passwords and other log-in credentials, the RAT also had a “form grabber” feature. The “form grabber” automatically captured log-in information that victims entered into “forms” on their infected computers (e.g., log-in screens or order purchase screens for online accounts).

The RAT also provided its users with complete access to all of the files contained on a victim’s computer. A RAT user could use such access to view or download photographs, documents, or other files on a victim’s computer. Further, using a tool known as “file hijacker,” the RAT enabled users to encrypt, or lock, a victim’s files and demand a “ransom” payment to unlock them. The RAT even came with a prepared script demanding such a ransom.

The RAT also allowed users to exploit victims’ computers to launch other cyber attacks. Infected computers could be gathered into a network and used to launch Distributed Denial of Service (“DDoS”) attacks against particular websites by repeatedly sending requests to the website in an effort to disable the website and deny service to legitimate customers.

YÜCEL and the Blackshades Organization

YÜCEL was the co-creator of the RAT, and owned and operated the Blackshades organization. YÜCEL employed several paid administrators, including a director of marketing, website developer, customer service manager, and a team of customer service representatives; he hired and fired employees, paid employees’ salaries, and updated the malicious software in response to customers’ comments and requests. Blackshades generated sales of more than $350,000 between September 2010 and April 2014.

The Other Defendants

JOHNSTON used Blackshades malware and was a paid employee of the Blackshades organization who, among other things, marketed and sold the RAT, and provided technical assistance to users of the RAT to assist them in infecting and remotely controlling victims’ computers with the RAT. In certain online postings, JOHNSTON described himself as an “authorized seller” and “admin,” or administrator, of Blackshades.

FEDOREK was a customer of Blackshades who purchased the RAT and used it to steal financial and other account information from more than 400 victims. A search of FEDOREK’s computer conducted by the FBI showed that FEDOREK was also deploying a variety of other types of malicious software against his victims.

RAPPA was a customer of Blackshades who purchased the RAT and used it to infect victims’ computers, spy on those victims using their web cameras, and steal personal files from their computers. A search of RAPPA’s computer by the FBI showed that RAPPA was also deploying a variety of other types of malicious software against his victims.

YÜCEL, 24, of Sweden, is charged with two counts of computer hacking, each of which carries a maximum sentence of 10 years in prison, one count of conspiring to commit access device fraud, which carries a maximum sentence of seven and a half years in prison, one count of access device fraud, which carries a maximum sentence of 15 years in prison, and one count of aggravated identity theft, which carries a mandatory term of two years in prison consecutive to any other sentence that is imposed.

JOHNSTON, 23, of Thousand Oaks, California, is charged with two counts of computer hacking, each of which carries a maximum sentence of 10 years in prison.

FEDOREK, 26, of Stony Point, New York, is charged with two counts of computer hacking, each of which carries a maximum sentence of 10 years in prison, and one count of access device fraud, which carries a maximum sentence of 10 years in prison.

RAPPA, 41, of Middletown Township, New Jersey, is charged with two counts of computer hacking, each of which carries a maximum sentence of 10 years in prison.

HOGUE, 23, of Maricopa, Arizona, pled guilty in January 2013 to two counts of computer hacking, each of which carries a maximum sentence of 10 years in prison. He is awaiting sentencing before the Honorable P. Kevin Castel.

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.

The charges unsealed today are part of an unprecedented global law enforcement operation involving the participation of 19 countries. As part of the operation, more than 90 arrests have been made and more than 300 searches have been conducted worldwide. Mr. Bharara noted that the investigation is ongoing.

Mr. Bharara praised the extraordinary investigative work of the FBI. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted this investigation, including the Moldova National Investigation Inspectorate of General Police Inspectorate of Ministry of Interior; the International Relations Department of Prosecutor’s General Office of the Republic of Moldova; Eurojust; the U.S. Department of State’s Diplomatic Security Service and United States Embassy personnel in Chisinau, Moldova; the FBI's Office of the Legal Attaché to Romania and Moldova; the FBI’s Office of the Legal Attaché to the Netherlands. He also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys James Pastore and Sarah Lai are charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni with the Money Laundering and Asset Forfeiture Unit is in charge of forfeiture aspects of the case.

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

U.S. v. Alex Yucel Indictment S1 13 Cr 834
U.S. v. Kyle Fedorek Complaint 14 Mag. 1064
U.S. v. Michael Hogue Information 13 Cr. 12
U.S. v. Brendan Johnston Complaint 14 Mag 1086
U.S. v. Marlen Rappa Complaint 14 Mag. 1065

U.S. v. Alex Yucel Indictment S1 13 Cr 834
U.S. v. Michael Hogue Information 13 Cr. 12
U.S. v. Kyle Fedorek Complaint 14 Mag. 1064
U.S. v. Marlen Rappa Complaint 14 Mag. 1065
U.S. v. Brendan Johnston Complaint 14 Mag 1086

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MICHAEL STEINBERG, a portfolio manager of Sigma Capital Management, LLC (“Sigma”), a division of the Connecticut based hedge fund S.A.C. Capital, was sentenced today in Manhattan federal court to 42 months in prison for crimes stemming from his involvement in an insider trading scheme. STEINBERG was convicted of various securities fraud charges on December 18, 2013. He was sentenced today by United States District Judge Richard J. Sullivan, who presided over the trial.

Manhattan U.S. Attorney Preet Bharara said: “Michael Steinberg traded on information from company insiders at Dell and NVIDIA to reap nearly $2 million in illegal profits. Today he has learned the steep cost of those transactions.”

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

STEINBERG traded in the securities of two publicly traded technology companies, Dell, Inc. (“Dell”), and NVIDIA Corporation (“NVIDIA”), based on inside information that his research analyst Jon Horvath obtained from a circle of analyst friends at different investment firms. Horvath previously pled guilty to insider trading, as did analysts Jesse Tortora, formerly of Diamondback Capital, Spyridon “Sam” Adondakis, formerly of Level Global, Danny Kuo, formerly of Whittier Trust, and Sandeep Goyal, formerly of Neuberger Berman. STEINBERG’s trading in Dell and NVIDIA resulted in approximately $1.8 million in illegal profits for his hedge fund.

In particular, Tortora provided Horvath and others with Inside Information related to Dell’s quarterly earnings (the “Dell Inside Information”), which Tortora obtained from Goyal who, in turn, had obtained the information from an employee at Dell (the “Dell Insider”). For example, for Dell’s quarter which was announced by Dell on August 28, 2008 (the “Dell Announcement”), the Dell Inside Information indicated that Dell would report gross margins that were materially lower than market expectations. In advance of the Dell Announcement, Horvath reported this negative inside information to STEINBERG.

On August 18, 2008, after a series of calls from the Dell Insider to Goyal and from Goyal to Tortora and Horvath, Horvath then called STEINBERG. Within a minute of the telephone call between STEINBERG and Horvath, STEINBERG’s portfolio began shorting shares of Dell. One minute later, Horvath wrote an email to STEINBERG stating: “Pls keep the DELL stuff especially on the down low . . . just mentioning that because JT [Jesse Tortora] asked me specifically to be extra sensitive with the info.” By the end of the day on August 18, 2008, STEINBERG had accumulated a net short position of over 167,000 shares of Dell. On August 26, 2008, Horvath confirmed in an email to STEINBERG and another portfolio manager at Sigma that Horvath’s Dell information had been based on a “2nd hand read from someone at the company.” STEINBERG responded: “Yes normally we would never divulge data like this, so please be discreet.” And on August 27, 2008, STEINBERG sent an email to Horvath with the subject line, “Dell action,” in which he asked, “Have u double checked [with] JT this week?” Horvath responded, “Yes he [Tortora] checked in [a] couple days ago, same read no change.” The following day, STEINBERG executed additional short trades based on the Dell Inside Information.

On August 28, 2008, before Dell’s Announcement, STEINBERG executed or caused to be executed additional short trades. STEINBERG also executed or caused to be executed options trades in Dell in advance of the Dell Announcement.

After the close of the market on August 28, 2008, Dell publicly announced gross margins that were substantially below market expectations. At the end of the next trading day following Dell’s Announcement, its stock price dropped by nearly 14%. Shortly thereafter, STEINBERG covered his short position, and closed out his position in Dell option contracts, resulting in an illegal profit for Sigma of approximately $1 million.

In addition, in 2009, Kuo obtained inside information regarding NVIDIA’s financial results (the “NVIDIA Inside Information”) in advance of NVIDIA’s quarterly earnings announcements. The NVIDIA Inside Information indicated, among other things, that NVIDIA’s gross margins would be lower than market expectations. Kuo obtained the NVIDIA Inside Information from a friend, Hyung Lim, who received it from an employee at NVIDIA (the “NVIDIA Insider”). In advance of NVIDIA’s May 7, 2009, quarterly earnings announcement (the “NVIDIA Announcement”), Kuo provided the NVIDIA Inside Information, which he had obtained from Lim, to Tortora, Horvath, and others. Horvath, in turn, provided the NVIDIA Inside Information to STEINBERG, who executed or caused to be executed transactions in NVIDIA in advance of the NVIDIA Announcement.

On May 7, 2009, NVIDIA publicly announced gross margins that were substantially lower than the market expected. At the end of the trading day following the NVIDIA Announcement, NVIDIA’s stock price dropped by more than 13%. Shortly thereafter, STEINBERG caused Sigma to liquidate its position in NVIDIA, resulting in an illegal profit for Sigma of approximately $350,000.

At trial, STEINBERG, 42, of New York, New York, was convicted of conspiracy to commit securities fraud and four counts of securities fraud.

In addition to the prison term, STEINBERG was sentenced to three years of supervised release. STEINBERG was also ordered to pay $365,142.30 in forfeiture and a $2 million fine.

Mr. Bharara praised the investigative work of the FBI. 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 Antonia M. Apps and Harry A. Chernoff are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that WILLIAM CALI was sentenced in Manhattan federal court in connection with his role in a scheme to exert control over the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. CALI previously pled guilty to one count of participating in a conspiracy to commit extortion. CALI was sentenced today to 18 months in prison by U.S. District Judge P. Kevin Castel.

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

CALI was a participant in a scheme, along with other members and associates of three different Organized Crime Families of La Cosa Nostra (“LCN”) – the Genovese, Gambino, and Luchese Crime Families – to control various waste disposal businesses in the New York City metropolitan area and multiple counties in New Jersey. Members of the scheme engaged in various crimes including extortion, loansharking, mail and wire fraud, and stolen property offenses. CALI, a Genovese Crime Family associate, provided protection and “backing” to a witness cooperating with the Government who operated a waste disposal company in exchange for regular payments made under the threat of harm.

In addition to the prison term, CALI, 61, of Queens, New York, was also sentenced to two years of supervised release, and ordered to pay forfeiture in the amount of $7,900.

CALI was charged as part of a large investigation led by the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation (“FBI”), and the Westchester County Police Department. To date, 32 defendants have been charged with participating in the scheme to exert control over the commercial waste-hauling industry. Twenty-one of these defendants have been convicted for their roles in this scheme.

Mr. Bharara praised the investigative work of the FBI and the Westchester County Police Department.

The prosecution of this case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Brian R. Blais and Patrick Egan are 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.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CARMINE FRANCO was sentenced yesterday in Manhattan federal court in connection with his role in a scheme to exert control over the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. FRANCO previously pled guilty in November 2013 to participation in a racketeering conspiracy, conspiracy to commit mail and wire fraud, and conspiracy to transport stolen cardboard across state lines. FRANCO was sentenced to one year and one day in prison by U.S. District Judge P. Kevin Castel.

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

FRANCO, who is an associate of the Genovese Crime Family, participated in a criminal enterprise, along with other members and associates of three different Organized Crime Families of La Cosa Nostra (“LCN”) – the Genovese, Gambino, and Luchese Crime Families – to control various waste disposal businesses in the New York City metropolitan area and multiple counties in New Jersey. Members of the enterprise engaged in various crimes in furtherance of the enterprise’s aims, including extortion, loansharking, mail and wire fraud, and stolen property offenses. As part of his guilty plea, FRANCO, who had been barred by the State of New Jersey from participating in the waste hauling industry, acknowledged his membership in the criminal enterprise and his agreement with others to undertake at least two racketeering acts in furtherance of the enterprise. Specifically, FRANCO acknowledged that he committed mail and wire fraud by overbilling customers of a waste transfer station that he controlled in West Nyack, New York. He also acknowledged that he and his associates transported large volumes of stolen cardboard across state lines.

In addition to the prison term, FRANCO, 78, of Ramsey, New Jersey, was also sentenced to two years of supervised release, and ordered to pay a $5,000 fine and restitution in the amount of $5,600, and to forfeit $2.5 million to the United States.

FRANCO was charged as part of a large investigation led by the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation (“FBI”), and the Westchester County Police Department. To date, 32 defendants have been charged with participating in the scheme to exert control over the commercial waste-hauling industry. Twenty-one of these defendants have been convicted for their roles in this scheme.

Mr. Bharara praised the investigative work of the FBI and the Westchester County Police Department.

The prosecution of this case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Brian R. Blais and Patrick Egan are 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.

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 that RENE CARDONA, a former employee of an afterschool program in the Bronx, was indicted today on two counts of production of child pornography, two counts of receiving and distributing child pornography, and one count of possessing child pornography. CARDONA, who was previously arrested on April 30, 2014, has been detained since his arrest.

Manhattan U.S. Attorney Preet Bharara said: “Crimes involving the alleged exploitation of children are always distressing, but they are especially so where, as here, the defendant was entrusted to work with and mentor children.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, during various times between 2011 and 2014, Cardona repeatedly exploited and jeopardized the well-being of innocent children. It is particularly disturbing when a crime like this is committed by an individual like Cardona who is entrusted to care for our children. Cardona’s acts are inexcusable and together with our law enforcement partners, the FBI remains committed to vigorously investigating and bringing to justice those who prey upon and harm our youngest members of society.”

According to the Indictment and the Complaint filed in Manhattan federal court:

In February 2014, CARDONA engaged in multiple chats over the Internet with an eleven-year-old male located in Guam. In those chats, CARDONA, who was aware of the victim’s age, induced the youth to take sexually explicit photographs of himself and to send the photographs to CARDONA. CARDONA also sent sexually explicit photographs of himself to the youth.

CARDONA, 22, faces a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison for each count of production of child pornography. For each count of receipt and distribution of child pornography, CARDONA faces a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison, and for the one count of possession of child pornography, he faces a maximum sentence of 20 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.

For information about the status of these federal criminal proceedings, victims may call the Victim Witness Coordinator for the United States Attorney’s Office at (866) 874-8900.

CARDONA is believed to have worked at the Betances Summer Camp and Afterschool Programs in the Bronx from 2012 to approximately 2014, and thereafter as a mentor for youths at the Youth Men’s Initiative at Betances Community Center from January to April 2014. CARDONA is also believed to have worked as a volunteer at the Betances Community Center at various times starting in 2011. As alleged in the federal Criminal Complaint, CARDONA admitted to having had inappropriate sexual contact with children, including children he had encountered through these programs.

Persons with information about children with whom CARDONA may have had inappropriate sexual contact, or from whom he may have solicited sexually explicit images or videos, are urged to contact the FBI hotline established for this investigation at (212) 384-1600, as well as the Manhattan District Attorney’s Office Sex Crimes Hotline at (212) 335-9373. The Manhattan Child Advocacy Center is available to provide services to children who may be victims of CARDONA’s conduct, including both inappropriate sexual contact and sexually explicit images. The Manhattan Child Advocacy Center can provide information about obtaining immediate medical treatment, testing for sexually transmitted diseases, and mental health counseling. The Manhattan Child Advocacy Center can be contacted at:

Manhattan Child Advocacy Center

1753 Park Avenue

New York, NY 10035

(646) 695-6100

The investigation and prosecution of CARDONA’s conduct relating to production and distribution of child pornography is being handled by the United States Attorney’s Office for the Southern District of New York. The investigation of CARDONA’s conduct relating to inappropriate sexual contact with youths is being handled by the Manhattan District Attorney’s Office.

Mr. Bharara thanked and praised the investigative work of the FBI and the New York City Police Department in this matter, as well as the Manhattan District Attorney’s Office and the U.S. Attorney’s Office for the Districts of Guam and the Northern Mariana Islands.

This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Andrew DeFilippis is in charge of prosecution.

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

U.S. v. Rene Cardona Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SAMUEL PIERRE, who was employed by a Member of Congress at the time of his offense, was sentenced yesterday in Manhattan federal court to three months home confinement for accepting an illegal gratuity in return for promising to provide immigration-related assistance that never was provided. PIERRE’s co-defendant, KENOL JANVIER, previously was sentenced to four months home confinement for his role in the offense. PIERRE and JANVIER both were sentenced by U.S. Magistrate Judge Kevin N. Fox.

According to court filings and statements made in court:

From 2007 to July 2009, PIERRE was employed by a Member of Congress as a Brooklyn South Liaison in the Congressman's District Office in Brooklyn, New York. As the Brooklyn South Liaison, PIERRE's job responsibilities included helping the Congressman's constituents with immigration-related issues, by, for example, inquiring about the status of constituents' immigration-related matters pending before the Department of Homeland Security (“DHS”).

In the late spring or early summer of 2008, PIERRE was a guest on a radio show hosted by JANVIER and they discussed, among other things, PIERRE’s job with the Congressman and issues related to the Haitian community, including immigration. During the radio show, listeners were invited to call in with any questions, but rather than help certain listeners who called the show seeking immigration-related advice, JANVIER and/or PIERRE instructed them to call "the office" for free assistance. The “office” phone number, however, was JANVIER’s cellphone number and when listeners called it, JANVIER arranged to meet them in person. JANVIER then met with these individuals and promised that PIERRE and he would be able to assist them with their immigration-related matters in exchange for a set fee. JANVIER took hundreds of dollars from the individuals as a down payment for the promised help with their immigration-related matter.

Thereafter, PIERRE and JANVIER spoke to the individuals on the phone, including using a landline phone at the Congressman’s District Office, regarding the remainder of the fee due, which some of them later paid to JANVIER. In connection with the scheme, PIERRE sent e-mails using his Congressional e-mail account in which he, on behalf of the Congressman’s Office, inquired about the status of these individuals’ immigration-related matters and claimed that the individuals were constituents of the Congressman when, in truth and in fact, they were not. The individuals were unaware that these e-mails had been sent and never received any actual assistance with their immigration-related matters from either PIERRE or JANVIER.

When the individuals who had paid JANVIER to help them tried to contact PIERRE and JANVIER to inquire about the status of their immigration matters, including visiting PIERRE at the Congressman’s Office, PIERRE and JANVIER either did not return the calls or continued to promise to help them but did not. Later, when the individuals demanded the return of their money, PIERRE and JANVIER ignored their requests and never paid them back. In connection with the scheme, PIERRE took money and things of value from JANVIER. In addition, PIERRE took money from JANVIER in connection with JANVIER’s own immigration matter and sent e-mails from his Congressional e-mail account to DHS and wrote a letter from the Congressman’s Office to a federal government immigration office about JANVIER’s immigration application.

In addition to home confinement, Judge Fox sentenced PIERRE, 29, of Brooklyn, New York, to three years of probation and ordered him to pay a $5,000 fine and a $25 special assessment fee. In addition, PIERRE was ordered to pay restitution in the amount of $11,300 joint and several with JANVIER.

JANVIER, 45, of Brooklyn, New York, previously was sentenced on April 24, 2014, by Judge Fox to four months home confinement and three years of probation and was ordered to pay a $25 special assessment fee. In addition, JANVIER was ordered to pay restitution in the amount of $11,300 joint and several with PIERRE.

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

These prosecutions are being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecutions.

U.S. v. Samuel Pierre and Kenol Janvier Complaint
U.S. v. Samuel Pierre Complaint
U.S. v. Kenol Janvier Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, Cheryl Garcia, Acting Special Agent-in-Charge of the New York Office of the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations (“USDOL-OIG”), and Peter M. Rivera, Commissioner of the New York State Department of Labor (“NYDOL”), announced today that MAGDALENA VILLALOBOS pled guilty today in Manhattan federal court to orchestrating a scheme in which she facilitated the filing of fraudulent claims for millions of dollars in unemployment insurance benefits provided by states across the country. VILLALOBOS was charged in October 2013, and pled guilty today before U.S. Magistrate Judge Debra C. Freeman.

Manhattan U.S. Attorney Preet Bharara said: “Magdalena Villalobos facilitated an unemployment benefit scheme that injected fraud into at least 26 states, inflicted millions of dollars in losses, and did a disservice to the qualified claimants across the country who actually needed the funds. I commend and thank our federal and state law enforcement partners for their work on this case.”

USDOL-OIG Acting Special Agent-in-Charge Cheryl Garcia said: “For several years, Villalobos assisted individuals in obtaining unemployment insurance benefits even though they were ineligible because they resided outside the United States. Villalobos’s submission of fraudulent claims siphoned funds intended for those who are qualified and eligible to receive the benefits. This office will continue to work with United States Attorney’s Office and our state partners to investigate fraud against the Department of Labor’s Unemployment Insurance Program.”

New York State Labor Commissioner Peter M. Rivera said: “When individuals defraud the system, they steal from all of us. They steal from law-abiding employers, from workers and their families, and from all of the taxpayers across New York State. I commend our staff members who work hard every day to prevent and detect fraud and catch the criminals who try to get away with it.”

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

From at least July 2006 through her arrest in 2013, VILLALOBOS, a resident of Texas and owner of a purported notary business, accepted payments from fraudulent unemployment benefit claimants in return for placing telephone calls to at least 26 different States in order to certify falsely that those fraudulent claimants were entitled to such benefits. Certain of these claimants would reside outside of the United States while receiving unemployment benefits. Through this scheme, VILLALOBOS made thousands of calls on behalf of fraudulent claimants and inflicted millions of dollars in losses to unemployment benefit funds across the United States.

VILLALOBOS, 59, of San Juan, Texas, pled guilty to one count of conspiracy to steal unemployment insurance benefits. She faces a 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 outstanding investigative work of both USDOL-OIG and NYDOL. He also thanked the Federal Bureau of Investigation and the United States Postal Service for their assistance in the Texas investigation. He added that the investigation is continuing.

The prosecution of this case is being overseen by the Office’s General Crimes Unit. Assistant U.S. Attorneys Andrew C. Adams and Rebecca G. Mermelstein are in charge of the prosecution.

U.S. v. Magdalena Villalobos Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ISAIAS FLORES-MENDEZ, 42, of Queens, New York, was sentenced today in Manhattan federal court to life in prison in connection with his leadership of a long-running sex trafficking conspiracy that employed force, fraud, and coercion to sell young women for sex against their wills. 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: “The defendant viciously robbed the victims in this case of their freedom, their dignity, and their fundamental human rights. Although the victims of the defendant’s crimes will never be made whole, his prosecution and today’s sentence hopefully signal to them and everyone else that such atrocities cannot be tolerated in our society and will be prosecuted and punished to the full extent of the law.”

In sentencing FLORES-MENDEZ Judge Forrest said: “On behalf of our system of justice I do want to say to the victims of this crime who are not here because of their undocumented status, because of their fear . . . I do know that no sentence can return to the victims that which has been so brutally taken from them . . . but today is a day that perhaps these victims have been waiting for – a day when our society would understand, and listen to what was happening to them, and see that this defendant, who committed such awful crimes using them, would be brought to justice and is brought to justice. The harm done to those victims is today recognized for what it is in all of its horror. For that which was taken from these women and cannot be returned by any sentence, the defendant is here today to be sentenced and to be brought to justice.”

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 1999, when he was first arrested for promoting prostitution, FLORES-MENDEZ has been sexually exploiting vulnerable women for his own financial gain. His predatory crimes have ranged in scope over the years.

He used violence and threats of violence to personally force at least one young woman (“Victim-1”) to engage in prostitution against her will. At the age of 17, Victim-1 was romanced by FLORES-MENDEZ, and lured to the U.S. with the promise of a better life for her and her baby. Once in New York, Victim-1 was made to sleep on a floor with her child, was repeatedly beaten, and was verbally abused on a regular basis by FLORES-MENDEZ, who sexually enslaved Victim-1 and made her work as a prostitute against her will for his own financial gain. When she tried to resist, she was beaten and abused. On one such occasion, FLORES-MENDEZ pushed her and her young child outside on a cold winter night, locked the door, and refused to let her back in. Afraid that her baby would die, Victim-1 succumbed to FLORES-MENDEZ’s demands that she continue to be sold for sex. After she escaped, FLORES-MENDEZ and his brother Bonifacio Flores-Mendez continued to torment her, on one occasion trying to run her over with his car.

FLORES-MENDEZ also used threats of violence to force another woman (“Victim-A”) to help teach Victim-1 how to handle customers, telling Victim-A that he would “break her in half” if she didn’t comply.

In addition to his direct sex trafficking by force, fraud, and coercion, 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 was required to have sex with up to 20 customers per day under abhorrent conditions. Many of the victims of this sex trafficking-prostitution enterprise were forced to engage in prostitution against their wills.

Sixteen defendants in this case, including Bonifacio Flores-Mendez, have pled guilty, and one has entered into a deferred prosecution agreement. All but four defendants have been sentenced. The defendants who have pled to date have agreed to forfeit, in total, more than $1.7 million.

Mr. Bharara praised the outstanding investigative work of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

The 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, announced today that MICHAEL LOGAN, a former manager of TestQuest, Inc. (“TestQuest”) — an educational services company that provided tutoring services to students attending underperforming public schools in New York City as part of a federally-funded program — was sentenced today in Manhattan federal court to 24 months in prison for his role in a scheme to defraud the federal government into paying for tutoring services that were never provided. LOGAN pled guilty in June 2013 before U.S. District Judge John F. Keenan, who also imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence Michael Logan must now pay with his liberty for exploiting a federal program meant to benefit students in need. I would like to thank the U.S. Department of Education’s Office of the Inspector General for their work in helping us to bring this important case.”

According to the Criminal Complaint, Information, and other documents filed in Manhattan federal court, as well as statements made at today’s sentencing and other proceedings:

Each year from 2005 through 2012, the New York City Department of Education (“NYCDOE”) received funds from the federal government to pay for New York City’s Supplemental Educational Services program (“SES”), which included after-school tutoring and other remedial and supplemental academic enrichment services for students attending underperforming public schools. NYCDOE entered into contracts with private entities and organizations to provide SES tutoring to public school students. Students were eligible to receive SES tutoring if they met certain criteria, such as attending a school that had been identified as needing improvement or restructuring for at least two years.

Private entities contracted by NYCDOE to provide SES tutoring were required to have each student who attended a class sign a standard attendance sheet. The tutor was also required to sign the sheet, attesting to the fact that he or she provided SES tutoring to those students whose names appeared on the sheet. Further, as a condition of getting paid for providing tutoring, the private entities were required to certify to NYCDOE that their attendance records were “true and accurate.”

From 2005 through 2012, TestQuest contracted with NYCDOE to provide SES tutoring. It provided individual tutoring to students at their homes and group tutoring at various New York City public schools, including the Monroe Academy of Business and Law/High School of World Cultures (“Monroe”) and the Global Enterprise Academy/Christopher Columbus High School (“Columbus”). TestQuest received tens of millions of dollars in federal funding for tutoring during this time period, including approximately $2.3 million for tutoring purportedly provided at Monroe and Columbus alone.

From 2005 through 2012, LOGAN was responsible for managing TestQuest’s SES tutoring program at Monroe and, later, at Columbus. LOGAN also worked as a long-term substitute teacher and computer technician at Monroe and, at times, coached its baseball team. From 2005 through 2012, LOGAN instructed TestQuest employees to forge student signatures on attendance sheets and to have students sign attendance sheets for tutoring classes they had not attended. On some occasions, he caused TestQuest employees to fraudulently obtain students’ signatures by collecting them from students assembled in the school cafeteria or participating in after-school activities such as baseball or basketball practice. LOGAN told these employees that they would not get paid if they did not collect signatures. One TestQuest employee (who did not actually provide any tutoring services for TestQuest but falsely certified that he had) periodically had conversations with LOGAN during which the employee asked what he was supposed to be doing, and LOGAN replied that the employee should tell anyone who asked that he was teaching English.

Further, when LOGAN learned of the criminal investigation, he coached other participants in the fraud to lie to federal investigators. In one recorded conversation, for example, LOGAN encouraged another TestQuest employee to lie about having taught classes that occurred when LOGAN and the employee were actually coaching after-school sports. As a result of LOGAN’s conduct, TestQuest employees repeatedly submitted bills to NYCDOE for tutoring that never occurred, and for which TestQuest was paid substantial sums of money.

In addition to the prison term, LOGAN, 50, of the Bronx, New York, was ordered to forfeit $250,000.

The case against LOGAN is part of a broader effort by this Office’s Criminal and Civil Divisions to hold SES providers and their employees accountable for fraudulent conduct. To date, this Office has brought coordinated proceedings against three New York City SES providers and their employees for falsifying attendance records and billing for tutoring they did not provide. In 2012 and 2013, this Office filed civil charges against The Princeton Review, Inc. (“Princeton Review”), and civil and criminal charges against several of its former employees. In 2013, this Office filed civil charges against TestQuest, and civil and criminal charges against several of its former employees, including LOGAN. In 2014, this Office filed civil charges against The Academic Advantage (“Academic Advantage”), and civil and criminal charges against several of its former employees. TestQuest settled the civil charges against it by admitting misconduct and agreeing to pay the Government $1.725 million. Princeton Review and Academic Advantage settled with the Government by admitting misconduct and committing to pay up to $10 million and $2 million, respectively. In addition to LOGAN, the following former employees of TestQuest, Princeton Review and Academic Advantage have pled guilty to criminal fraud charges, settled civil fraud charges, or both: Robert Stephen Green, Ana Azocar, Zorayma Azocar, Sandra Allen, Edwin Guzman and Luz Mercedes.

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

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Joseph P. Facciponti and Christopher B. Harwood 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 (“FBI”), announced today that JOSEPH DEL VALLE, an owner and partner of various investment companies, including Vanquish Acquisition Partners LLC and PM Capital Management LLC, which were based in Manhattan, New York, surrendered this afternoon on charges of wire fraud and wire fraud conspiracy for operating a fraudulent scheme related to a Florida real estate development project. DEL VALLE is alleged to have obtained approximately $6.4 million from investors for a real estate development project in Miami, Florida. DEL VALLE allegedly took more than $3 million of the investors’ money and used it for other investments and his personal expenses. He will be presented in the United States District Court for the Southern District of New York today.

Manhattan U.S. Attorney Preet Bharara stated: “Joseph Del Valle solicited and obtained over $6 million from people who thought they were investing in a Miami real estate development. But, as alleged, Del Valle misappropriated much of that money, using it for his own purposes, including for hotels, restaurants, and a cruise. There are inherent market risks in most investments, but being swindled is not one that investors should have to bear.”

Assistant Director-in-Charge George Venizelos stated: “This is the same old song. Del Valle promised lucrative real estate investments, but what he delivered was a house of cards. We expect people to make money legitimately, not by stealing from others as alleged in today’s complaint.”

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

Beginning in 2005, JOSEPH DEL VALLE, a co-conspirator (“CC-1”), and an employee of Vanquish Acquisition Partners LLC, began soliciting investors for a real estate development project in the Little Havana neighborhood of Miami (referred to herein as “Project Miami”). Project Miami involved two high-rise buildings in which the bottom floors would house retail shops and the top floors would be residential condominiums. Project Miami was designed to provide affordable housing to middle-income individuals and included an arrangement for financing so that purchasers of the condominiums would receive government-subsidized mortgages. From 2005 through 2007, DEL VALLE, CC-1, and the employee obtained approximately $6.4 million from investors for Project Miami.

Prior to making any investments, investors were told that the investment was solely for Project Miami. Investors were provided with various materials that specified the investments were for Project Miami, and provided that DEL VALLE and his company would only take a five percent management fee. However, almost immediately after investors transferred funds for Project Miami, almost all of which were sent to banks in Manhattan, New York, DEL VALLE and CC-1 transferred amounts far greater than five percent to other bank accounts and began using the funds for other purposes, including investments in a wine magazine and for DEL VALLE’s personal use. For example, in October 2007, DEL VALLE used $30,000 of investor money in Europe for, among other things, hotels, restaurants, a cruise, and cash withdrawals. In total, DEL VALLE and CC-1 used over $3 million for other investments or personal expenses.

When investors became suspicious and requested financial statements for their investments and a return of their money, DEL VALLE represented to investors in phone calls and e-mail communications that the investment funds were secure when, in fact, a large portion of the investors’ money had already been misappropriated and/or diverted to other uses. DEL VALLE also falsely told investors that financial statements were in the process of being prepared and would be mailed to them shortly, but in fact, DEL VALLE and CC-1 had not provided any financial information to the accountant responsible for the preparation of financial statements of the relevant entities.

DEL VALLE, 59, of Aventura, Florida, has been charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carry 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. The maximum potential sentence 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 FBI.

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 Parvin Moyne 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.

Del Valle, Joseph Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DOMINICK PIETRANICO and JOSEPH SARCINELLA were sentenced in Manhattan federal court in connection with their roles in a scheme to exert control over the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. Each defendant previously pled guilty to one count of loansharking in connection with the scheme. PIETRANICO and SARCINELLA were each sentenced today to five months in prison by U.S. District Judge P. Kevin Castel.

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

PIETRANICO and SARCINELLA were participants in a scheme, along with other members and associates of three different Organized Crime Families of La Cosa Nostra (“LCN”) – the Genovese, Gambino, and Luchese Crime Families – to control various waste disposal businesses in the New York City metropolitan area and multiple counties in New Jersey. Members of the scheme engaged in various crimes including extortion, loansharking, mail and wire fraud, and stolen property offenses.

PIETRANICO and SARCINELLA, who are made members of the Genovese Crime Family, provided protection and “backing” to a cooperating Government witness who operated a waste disposal company, and made an extortionate loan at a rate of interest exceeding 100% annually.

In addition to the prison terms, PIETRANICO, 83, of Mahopac, New York, and SARCINELLA, 79, of Scarsdale, New York, were each also sentenced to one year of supervised release. Additionally, PIETRANICO was ordered to forfeit $9,340 and pay a $2,000 fine, and SARCINELLA was ordered to forfeit $10,540 and pay a $5,000 fine.

PIETRANICO and SARCINELLA were charged as part of a large investigation led by the United States Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation (“FBI”), and the Westchester County Police Department. To date, 32 defendants have been charged with participating in the scheme to exert control over the commercial waste-hauling industry. Twenty-one of these defendants have been convicted for their roles in this scheme.

Mr. Bharara praised the investigative work of the FBI and the Westchester County Police Department.

The prosecution of this case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Brian R. Blais and Patrick Egan are 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.

Preet Bharara, the United States Attorney for the Southern District of New York, Robert E. Van Etten, Inspector General of the Port Authority of New York and New Jersey (the “Port Authority”), and Douglas Shoemaker, regional Special Agent-in-Charge of the U.S. Department of Transportation’s (“DOT”) Office of Inspector General, announced today that the United States has filed, and simultaneously settled, a civil fraud lawsuit against a subcontractor, MORETRENCH AMERICAN CORPORATION (“MORETRENCH”), for engaging in fraudulent conduct to exploit regulations designed to increase the role of minority-owned businesses in order to secure a subcontract on the federally-funded World Trade Center Transportation Hub project (the “HUB Project”). Specifically, MORETRENCH caused the prime contractor of the HUB Project to falsely represent to the Port Authority that MORETRENCH paid hundreds of thousands of dollars to a disadvantaged business enterprise (“DBE”) to perform legitimate work on the contract when, in fact, the DBE did not perform any significant work and instead simply received a kickback from MORETRENCH for the fraudulent use of its DBE status. In the settlement, approved in Manhattan federal court yesterday by U.S. District Judge Laura Taylor Swain, MORETRENCH admitted and accepted responsibility for violating the applicable regulations governing the Hub Project and agreed to pay $3 million. MORETRENCH further agreed to pay the Office of Inspector General of the Port Authority $50,000 for its investigative costs.

Manhattan U.S. Attorney Preet Bharara said: “The federal Disadvantaged Business Enterprise regulations and similar Port Authority rules serve the important function of increasing legitimate participation by minority-owned businesses in federally-funded construction projects. With this settlement, Moretrench has publicly admitted to fraudulently violating these rules and will pay a substantial fine as a consequence. I want to thank our partners at the Port Authority Office of Inspector General and the U.S. Department of Transportation’s Office of Inspector General for their work in this important case.”

Port Authority Inspector General Robert E. Van Etten said: “This investigation has shown how individuals in the construction industry have manipulated and circumvented the intent of the Port Authority’s Minority and Women’s Business Enterprise Program for the World Trade Center Transportation Hub project by utilizing firms as fronts to satisfy the Program goals. I would hope that this case serves as an incentive to the industry to adhere to the Program’s intent. I urge those with information of instances of other fraudulent practices to report them to law enforcement. Working with our law enforcement partners we will continue to vigilantly investigate allegations of fraud in the construction industry.”

Douglas Shoemaker, regional Special Agent-in-Charge of DOT’s Office of Inspector General, said: “As evidenced by Moretrench’s agreement to settle this lawsuit, we remain steadfast in our commitment to preventing and detecting fraud related to federally funded transportation programs. Working with our law enforcement and prosecutorial colleagues, we will continue to protect the taxpayers’ investment in our nation’s infrastructure from fraud, waste, abuse and violations of law.”

BACKGROUND ON DBEs

In 1980, the DOT issued regulations in connection with a program to increase the participation of minority and disadvantaged business enterprises in federally-funded public construction contracts. To become certified as a DBE, a company must, among other things, be owned and controlled by socially and economically disadvantaged individuals; be an independent business whose viability does not depend on its relationship with other firms; employ its own work force and own equipment necessary to perform its work; and be able to meet its financial obligations.

General contractors can count funds paid to DBEs toward the attainment of the DBE goals only if the DBEs performed a “commercially useful function.” A DBE subcontractor performs a commercially useful function only when it is responsible for the execution of the work of the contract; actually performs, manages, and supervises the work involved; and furnishes the supervision, labor, and equipment necessary to perform its work.

MORETRENCH’S FRAUD

According to the allegations in the complaint:

As a condition of receiving DOT funding, the Port Authority set Minority Business Enterprise (“MBE”) and Women’s Business Enterprise (“WBE”) goals for the HUB Project. DOT determined that, with respect to the HUB Project, the Port Authority was permitted to follow its own MBE and WBE rules as they were substantially equivalent to the federal DBE regulations. MORETRENCH was hired as a subcontractor on the HUB Project and, as part of its contract, was required to use its best efforts to obtain seventeen percent MBE/WBE participation. MORETRENCH represented that it had hired Environmental Energy Associates, LLC (“EEA”) as a subcontractor to operate the dewatering system for the HUB Project (dewatering is the removal of groundwater). However, EEA operated as a shell company. EEA and MORETRENCH had an arrangement whereby MORETRENCH hired the pump operators, supervised the job site and assembled bi-weekly payrolls. In order to give the appearance that EEA was performing a legitimate role as an MBE, several pump operators, who were already working on the job site as MORETRENCH employees, were switched to EEA’s payroll. EEA’s payroll paperwork was assembled by MORETRENCH employees, but listed EEA as the contractor. EEA received a mark-up on the payroll records as compensation for the use of its MBE status. As part of its requests for payment, MORETRENCH prepared reports to the Port Authority falsely representing that MORETRENCH paid EEA for work performed on the project when in fact MORETRENCH was performing the work itself.

Pursuant to the settlement agreement, MORETRENCH admitted, acknowledged, and accepted responsibility for making and causing false statements to be made in violation of applicable regulations designed to encourage the participation of disadvantaged business enterprises in federally-funded construction projects. MORETRENCH also agreed to pay the United States $3 million.

Mr. Bharara praised the Port Authority Office of Inspector General and the U.S. Department of Transportation’s Office of Inspector General for their invaluable work on this case. He also thanked the Metropolitan Transportation Authority Office of Inspector General and the United States Department of Labor Office of Inspector General for their assistance.

The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Mara Trager and Ellen London are in charge of the case.

Moretrench Complaint14cv3250
Moretrench endorsed stipulation

Preet Bharara, the United States Attorney for the Southern District of New York, and Bruce Foucart, Special Agent-in-Charge of U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”) Boston Office, announced today that a painting by Serge Poliakoff called “Composition abstraite [Abstract composition]” (the “Poliakoff”) was returned to Brazil at a repatriation ceremony at the United States Attorney’s Office in Manhattan, New York. The painting was smuggled into the United States in violation of U.S. customs law and was forfeited to the United States as a result of civil forfeiture action brought by the United States.

Manhattan U.S. Attorney Preet Bharara stated: “Art and antiquities have special value and meaning that cannot readily be quantified. As a result, they have long been the subject of theft and deception, as well as a means to launder illicit proceeds. Art should serve to inspire the mind and nourish the soul, and not be allowed to become a conduit for crime.”

HSI Special Agent-In-Charge Bruce Foucart stated: “During this seven year investigation, HSI along with our international law enforcement partners have located, detained and seized approximately 1,000 works of art in Switzerland, France, the United Kingdom and the United States, all belonging to Edemar Cid Ferreira. We hope this most recent painting being returned by HSI and the Manhattan U.S. Attorney’s Office to the government of Brazil assists in the recovery of financial losses. HSI remains committed to investigating the illicit importation of cultural property into the United States and the laundering of proceeds derived from illicit activities.”

In a related repatriation ceremony held on September 21, 2010, the U.S. Attorney’s Office for the Southern District of New York returned to Brazil two paintings – “Modern Painting with Yellow Interweave” by Roy Lichtenstein (the “Lichtenstein”) and “Figures dans une structure” by Joaquin Torres-Garcia (the “Torres-Garcia”) – that were smuggled into the United States.

The Poliakoff once belonged to Brazilian banker Edemar Cid Ferreira. Ferreira, the founder and former president of Banco Santos, S.A. (“Banco Santos”), was convicted in Brazil of crimes against the national financial system and money laundering. In December 2006, Ferreira was sentenced in Brazil to 21 years in prison.

As part of the case, a Sao Paulo Court Judge also ordered the search, seizure, and confiscation of assets that Ferreira, his associates, and members of his family had acquired with unlawfully obtained funds from Banco Santos. Those assets included the Poliakoff, the Lichtenstein, the Torres-Garcia, and other artwork valued at $20 million to $30 million. The artwork was kept in several locations, including Ferreira’s home in the Morumbi neighborhood of Sao Paulo, the main offices of Banco Santos, and at a holding facility. When Brazilian authorities searched these locations, they found that several of the most valuable works of art were missing, including the Poliakoff.

The Sao Paulo Court sought INTERPOL’s assistance after searching museums and institutions in Brazil for the missing artwork. In October and November 2007, INTERPOL and the Government of Brazil sought the assistance of the United States to locate and seize the missing works on behalf of the Brazilian government. In response, HSI special agents in New Haven, Connecticut located and seized a painting by Jean-Michel Basquiat called “Hannibal,” and the U.S. Attorney’s Office for the Southern District of New York filed a civil forfeiture Complaint alleging that “Hannibal” had been brought into the United States illegally. Since the filing of the original Complaint in February 2008, the United States seized additional works of art and filed two amended Complaints seeking the forfeiture of four additional artworks listed in the INTERPOL request for assistance.

The Southern District of New York and HSI investigation revealed that the Poliakoff, the Lichtenstein, and the Torres-Garcia were shipped on December 1, 2006, from the Netherlands to a secure storage facility in New York. The invoices, however, failed to comply with U.S. customs laws in a number of respects. For example, the shipping invoices did not identify the names of the paintings or their artists. The invoices also falsely claimed that the combined value of the paintings was $230. In fact, the combined appraisal value of the paintings was recently assessed in excess of $4 million, with the Poliakoff appraised at $500,000.

After the shipment containing the paintings was imported into the United States, the Lichtenstein and the Torres-Garcia were subsequently sold, but the purchasers later voluntarily surrendered the works to HSI. The Poliakoff was shipped to Switzerland, where it was seized by Swiss authorities in July 2008 at the request of the U.S. Attorney’s Office and HSI.

On October 15, 2010, the Poliakoff was forfeited to the United States. “Hannibal,” which was recently valued to be worth about $8 million, and a sculpture known as the “Roman Togatus” have also been forfeited to the United States. An appeal of that decision is pending.

Mr. Bharara praised the investigative work of HSI in helping to locate and seize the painting. He was grateful for the assistance of the Department of Justice’s Office of International Affairs. Mr. Bharara thanked Brazilian authorities for their assistance in the case. He also acknowledged the assistance of the U.S. Department of State and the U.S. Embassy in Brazil for its assistance in the investigation.

The case is being handled by the Money Laundering and Asset Forfeiture Unit of the U.S. Attorney’s Office. Assistant U.S. Attorneys Jason P. Hernandez and Alexander Wilson are in charge of the litigation.

Brazilian Paintings 2nd Amended Complaint

The Swisspartners Group Earned Non-Prosecution Agreement As a Result of its Extraordinary Cooperation and Self-Reporting

James M. Cole, the Deputy Attorney General of the Department of Justice, Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Tax Division of the Department of Justice, and Richard Weber, the Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that swisspartners Investment Network AG, a Swiss-based asset management firm, and three of its wholly-owned subsidiaries (collectively, the “Swisspartners Group”), entered into a non-prosecution agreement (“NPA”) with the U.S. Attorney’s Office for the Southern District of New York and agreed to pay $4.4 million to the United States. The NPA was entered into based on, among other things, the Swisspartners Group’s remedial measures, voluntary self-reporting, and extraordinary cooperation, including its voluntary production of approximately 110 client files for non-compliant U.S.-taxpayer clients, and provides that the Swisspartners Group will not be criminally prosecuted for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from in or about 2001 through in or about 2011. The NPA requires the Swisspartners Group to forfeit $3.5 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $900,000 in restitution to the IRS, representing the approximate amount of unpaid taxes arising from the tax evasion by the Swisspartners Group’s U.S. taxpayer-clients. The NPA applies only to the four specific entities that are party to it and does not apply to any other subsidiaries of swisspartners Investment Network AG or any individuals.

Deputy Attorney General James Cole said: “The extraordinary cooperation of Swisspartners has enabled us to identify U.S. tax cheats who have hidden behind phony offshore trusts and foundations. In this and other cases around the world we will continue to provide substantial credit for prompt and full cooperation.”

Manhattan U.S. Attorney Preet Bharara said: “This Office will continue to work aggressively to hold accountable not only those U.S. taxpayers who evade their tax obligations by hiding money overseas, but also those abroad who make such tax evasion possible. For its wrongdoing in assisting U.S. taxpayers to open and maintain undeclared accounts overseas, the Swisspartners Group is being made to pay $4.4 million in forfeiture and restitution. Swisspartners avoided criminal charges as a direct result of its decision to self-report its misconduct at a time when it was not even under investigation and its extraordinary cooperation, including its decision to turn over voluntarily the files and identities of U.S. taxpayer clients it helped hide money from the IRS. The case serves as a clear example of the benefits that can be obtained from early and complete cooperation with federal law enforcement.”

Assistant Attorney General Kathryn Keneally said: “As today’s announcement shows, we receive information about U.S. taxpayers with undisclosed accounts from many sources, some of which are not public. For many accountholders, the time to come forward voluntarily to avoid criminal prosecution has run out.”

IRS-CI Chief Richard Weber said: “I am very pleased that we have successfully concluded negotiations with the Swisspartners Group. In making amends, the Swisspartners Group has turned over 110 account files relating to U.S. taxpayer-clients who maintained undeclared assets overseas. This agreement marks yet another significant step forward in combating offshore tax evasion. Anyone who is hiding money or assets offshore with the intent of committing tax evasion will be found and prosecuted. It's not a matter of ‘if,’ it's a matter of “when.’”

The NPA was entered into between the U.S. Attorney’s Office, on the one hand, and swisspartners Investment Network AG and the following three wholly-owned subsidiaries, on the other: swisspartners Wealth Management AG, a Zurich-based company that establishes and manages entities such as foundations and trusts; swisspartners Insurance Company SPC Ltd., a Cayman Islands-based life insurance carrier that offers life insurance and annuity products; and swisspartners Versicherung AG, a Liechtenstein-based insurance carrier that offers a variety of insurance and annuity products

The NPA recognizes that, beginning in 2008, the Swisspartners Group voluntarily implemented a series of remedial measures to stop assisting U.S. taxpayers in evading federal income taxes. The NPA further recognizes that in 2012, at a time when it was neither a subject nor target of any investigation by the U.S. Department of Justice, the Swisspartners Group self-reported its conduct concerning U.S. taxpayer-clients to the Department of Justice. Additionally, the NPA recognizes the extraordinary cooperation of the Swisspartners Group, including its voluntary production of client files for 110 non-compliant U.S. taxpayers that included the identities of those U.S. taxpayers.

As part of the NPA, the Swisspartners Group admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct. Specifically, the Swisspartners Group admitted that it knew certain U.S. taxpayers were maintaining undeclared foreign bank accounts with the assistance of the Swisspartners Group in order to evade their U.S. tax obligations, in violation of U.S. law. The Swisspartners Group acknowledged that it helped certain U.S. taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by, among other things, creating sham foundations and other sham entities that served as the nominal account holders; placing accounts or insurance policies in the names of non-U.S. nationals; facilitating the transportation of large amounts of cash into the United States on behalf of U.S. taxpayer-clients; and arranging for the bulk deposit of cash at Swiss depository financial institutions on behalf of U.S. taxpayer-clients.

As part of the NPA, the Swisspartners Group has agreed to forfeit $3.5 million to the United States, representing certain fees it obtained in exchange for services that it provided to U.S. taxpayers with undeclared foreign bank accounts from in or about 2001 through in or about 2011. In connection with this forfeiture, the Swisspartners Group has agreed not to contest a civil forfeiture action filed by the United States. That action was filed on May 9, 2014, in the U.S. District Court for the Southern District of New York and assigned to U.S. District Judge Gregory H. Woods.

The U.S. Attorney’s Office entered into the NPA based on factors including:

• the Swisspartners Group’s voluntary implementation of various remedial measures beginning in or about May 2008;
• the Swisspartners Group’s voluntary self-reporting of its criminal conduct at a time when it was neither a subject nor target of any investigation by the U.S. Department of Justice;
• the Swisspartners Group’s voluntary and extraordinary cooperation, including its voluntary production of account files that include the identities of U.S. taxpayer-clients;
• the Swisspartners Group’s willingness to continue to cooperate to the extent permitted by applicable law; and
• the Swisspartners Group’s representation, based on an investigation by outside counsel, the results of which have been shared with the U.S. Attorney’s Office and the Tax Division, that the misconduct under investigation did not, and does not, extend beyond that described in the Statement of Facts.

The NPA requires the Swisspartners Group to continue to cooperate with the United States for at least three years from the date of the agreement. In the event that the Swisspartners Group violates the NPA, the U.S. Attorney’s Office may prosecute the Swisspartners Group.

Mr. Bharara thanked the IRS for its outstanding work in the investigation of this matter and the Tax Division of the Department of Justice for its assistance in the investigation.

This investigation is being overseen by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jason H. Cowley, Sarah E. Paul, and Jared P. Lenow are in charge of the matter.

U S v $3500000 (Swisspartners Forfeiture Complaint)

Preet Bharara, the United States Attorney for the Southern District of New York, Thomas J. Cannon, the Special Agent-in-Charge of the New York Field Office of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Chief Michael Clancy of the Town of Newburgh Police Department announced the unsealing of an Indictment against three defendants in connection with the December 28, 2013, armed robbery of a store on State Route 32 in the Town of Newburgh, New York.

U.S. Attorney Preet Bharara stated: “These charges are the product of outstanding cooperation among multiple law enforcement agencies. We will continue to work with our law enforcement partners, federal and local, to bring those who participate in violent, criminal conduct to justice.”

Special Agent-in-Charge of the New York Field Office of the ATF Thomas J. Cannon stated: “The defendants have been charged as result of the information-sharing and interagency cooperation that exists between the ATF and the Town of Newburgh Police Department, Ulster County Sherriff’s Office, the Town of New Windsor Police Department, the Town of Plattekill Police Department, and the New York State Police. This investigation should serve as a model to others that when law enforcement effectively collaborates, there is nothing that cannot be achieved.”

Town of Newburgh Chief Michael Clancy stated: “The Town of Newburgh Police Department would like to thank the various law enforcement agencies that assisted in this case including the Town of Plattekill Police Department, the Town of New Windsor Police Department, the Ulster County Sheriff’s Office, and the ATF, and the New York State Police. We would also like to thank U.S. Attorney Preet Bharara and the members of his staff for their efforts in bringing about this Indictment.”

The Indictment charges ANDREW HECHT, 20, MATTHEW MACKSON, 19, and GREGORY SCOTT, 25, with conspiracy to commit robbery, robbery, and the brandishing of a firearm in furtherance of the robbery conspiracy. The charge against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release. 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 Court.

The Indictment was unsealed yesterday. One of the defendants was arrested yesterday and one was already in state custody. They were presented in White Plains federal court yesterday before U.S. Magistrate Judge Paul E. Davison, and were ordered detained. One defendant remains at large.

Mr. Bharara praised the outstanding investigative work of the ATF, the Town of Newburgh Police Department, the Town of New Windsor Police Department, the Town of Plattekill Police Department, the Ulster County Sheriff’s Office, and the New York State Police.

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Michael Gerber is in charge of the prosecution.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that PETER STRAIN, a talent agent for film, television, and Broadway actors, was sentenced today in Manhattan federal court to three years’ probation, six months’ home confinement, and 500 hours of community service for engaging in a scheme to steal over $500,000 of his clients’ money, which he used to purchase, among other things, expensive artwork and luxury personal items. STRAIN pled guilty in March 2014 before U.S. District Judge George B. Daniels, who also imposed today’s sentence.

According to the Superseding Information and other documents filed in Manhattan federal court, and statements made at related court proceedings, including today’s sentencing:

Through his talent agency, Peter Strain & Associates (“PSA”), STRAIN represented television, film, and stage actors. As a talent agent, STRAIN received funds in trust for his clients for their acting work, and was required to remit those funds to his clients, less his commission, which was typically 10%. However, between approximately 2011 and 2013, STRAIN diverted money he received on behalf of three clients, and used it to, among other things, pay for personal luxury retail goods and artwork. In order to conceal his theft and ensure that his clients allowed him to continue receiving money on their behalf, STRAIN repeatedly lied to his clients about why he had failed to timely remit their money.

Between July 2011 and December 2011, STRAIN received more than $1.4 million in an account held in trust for his clients (“the Trust Account”) on behalf of an actor who earned that money for work on a currently broadcast television series (“Client-1”). However, STRAIN failed to remit approximately $500,000 of this money to Client-1, and diverted it for his own personal use. In order to conceal his theft from Client-1, when STRAIN and Client-1 discussed the missing payments by telephone, STRAIN asked Client-1 if he could delay making the payments because, according to STRAIN, he was short on funds as a result of his partners at PSA embezzling money from the firm. STRAIN further claimed that he had recently won a lawsuit against his partners related to the supposed embezzlement, and that he was waiting to receive settlement payments from his partners.

STRAIN’s statements to Client-1 regarding the lawsuit were false. In truth, as STRAIN well knew, STRAIN’s partners had filed a lawsuit accusing STRAIN of embezzling funds from PSA, and STRAIN agreed to settle the lawsuit by paying his partners more than $250,000 for their shares in PSA. Moreover, in order to make a payment required under the settlement, instead of using his own money, STRAIN withdrew $30,000 from the Trust Account.

Ultimately, during 2012, STRAIN repaid Client-1 by stealing money from a different client, Client-2, an actor who has appeared in several television shows, including a currently broadcast television series. STRAIN then lied to Client-2 in order to conceal his theft. Among other things, STRAIN falsely told Client-2 that STRAIN had recently hired a new business management team and that the new team must have misplaced Client-2’s money. In truth and in fact, as STRAIN well knew, STRAIN had used Client-2’s money to repay the money he had stolen from Client-1. STRAIN never fully repaid the money he took from Client-2, and still owes Client-2 in excess of $350,000.

In July 2012, STRAIN failed to timely remit over $200,000 in additional payments to Client-1 for Client-1’s television acting work. In an email to Client-1 asking for additional time to remit the money, STRAIN repeated his false claim that he had “won” the lawsuit with his partners and was waiting for his partners to pay him. STRAIN further falsely claimed that he had Client-1’s money in his possession, but that he was restricted from accessing the money due to court orders. Contrary to his representations to Client-1, STRAIN had not “won” the lawsuit, was not restricted from accessing the funds owed to Client-1, and did not have sufficient funds in the Trust Account to pay Client-1. In fact, in the same month that STRAIN claimed he was unable to access Client-1’s money, STRAIN withdrew more than $80,000 from the Trust Account, leaving the account overdrawn by more than $9,000.

Between November 2012 and February 2013, STRAIN also stole tens of thousands of dollars from another client who has appeared in several television shows, including a currently broadcast television series (“Client-3”). To cover up his theft, STRAIN offered several false excuses to Client-3 for why he had failed to remit Client-3’s money. For example, in November 2012, STRAIN falsely claimed that Client-3’s payments had been lost in the mail. STRAIN also later falsely told Client-3 that the delays in remitting Client-3’s money were caused by a lawsuit, but that a confidentiality clause prevented STRAIN from discussing the details.

STRAIN used the money he stole from his clients to, among other things, pay operating expenses of PSA and to pay for personal luxury retail goods and artwork, some of which he purchased in New York using client money from California bank accounts. Between July 2011 and August 2012, using his clients’ money, STRAIN bought more than $161,000 in jewelry, more than $310,000 in artwork, and more than $57,000 at luxury goods retailers.

Mr. Bharara praised the outstanding investigative work of the FBI.

In addition to probation, STRAIN, 64, of Los Angeles, California, was ordered to forfeit all artwork obtained as part of the fraud, and to pay $384,128.52 in restitution.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys James Pastore, Jr., and Jason Hernandez are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Tom O’Donnell, the Special Agent-in-Charge of the New York Field Office of the Inspector General, United States Department of Health and Human Services (“OIG-HHS”), announced the arrest yesterday of KURTISS L. TOMASOVICH for failure to pay child support. TOMASOVICH was arrested and presented in federal court in Ocala, Florida, before U.S. Magistrate Judge Philip R. Lammens.

U.S. Attorney Preet Bharara stated: “As alleged, Kurtiss Tomasovich failed to pay over $100,000 in child support, allegedly choosing to spend his money on his home and businesses, rather than fulfill his court-ordered obligation to pay support for his children. Such alleged conduct represents not only a failure to Tomasovich’s children, but a federal crime. I want to thank the excellent work of our partners at OIG-HHS in this case.”

Special Agent in Charge of the New York Field Office of OIG-HHS Tom O’Donnell stated: "Parents who try to avoid paying child support by moving to another state will instead face justice for their crime. Our investigators work hard to hold deadbeat parents accountable for skipping out on their financial responsibilities to care for their children.”

According to allegations in the Complaint previously filed in White Plains federal court:

Pursuant to a judgment of the New York State Supreme Court, Orange County, beginning in 2008, KURTISS L. TOMASOVICH was obligated to pay a minimum of $3,000 a month in child support with respect to his children, who reside in Tuxedo, New York. From at least in or about February 2008 until at least in or about April 2014, TOMASOVICH, who resides in Florida, failed to pay approximately $158,708 in child support. Notwithstanding TOMASOVICH’s repeated failure to make his child support payments, he has had sufficient assets available to him to pay. For example, TOMASOVICH and his second wife have purchased and developed property in Florida, including constructing a tennis court. In addition, during the relevant time period, TOMASOVICH and his second wife have had access to substantial funds and have owned and operated several businesses in Florida.

TOMASOVICH, 51, of Ocala, Florida, is charged with one count of failing to pay child support, which carries a maximum sentence 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 outstanding efforts of OIG-HHS and the Orange County Sheriff’s Department and thanked the Orange County Support Collections Unit for their assistance in the investigation.

This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Kathryn Martin 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.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JASON KONIOR, the founder and manager of a number of related business entities in New York City, collectively referred to as “Absolute,” was sentenced yesterday in Manhattan federal court to 46 months in prison for his participation in a Ponzi scheme. KONIOR previously pled guilty on July 9, 2013, to one count of wire fraud for his role in stealing at least $2.9 million from small hedge fund investors and using the funds to pay off prior investors and to pay himself. He was sentenced yesterday by U.S. District Judge Alvin K. Hellerstein.

According to the Information, statements made during KONIOR’s sentencing proceeding yesterday and his guilty plea on July 9, 2013, and a Complaint previously unsealed in Manhattan federal court:

From late 2011 through May 2012, KONIOR organized and managed a Ponzi scheme in which he misappropriated at least $2.9 million in funds he had solicited from hedge fund investors. He represented to these hedge funds that Absolute would provide additional trading funds of up to nine times the investment they made in Absolute. As part of Absolute’s “first loss” investment program, KONIOR claimed that he would place the combined funds – the investors’ funds and the additional funds to be provided by Absolute – in a brokerage account designated by Absolute. According to KONIOR, the hedge fund investors would then be able to trade securities utilizing that brokerage account. Under the arrangement, the hedge funds would be responsible for trading losses, and they would share any profits with Absolute.

Instead of establishing brokerage accounts for the victim hedge funds, KONIOR misappropriated the funds they provided by paying redemptions to prior investors, making payments to himself, and paying various personal and business expenses. In e-mails, text messages, and telephone conversations, KONIOR pretended that he was establishing brokerage accounts for the three hedge fund investors, when he had already stolen their money. In one case, after he repeatedly failed to set up a brokerage account for one of the hedge funds, the manager of the fund sent him a text message stating, “I want my money back. What did you do to it anyway? Are you going to tell me or do you want the SEC to find out?” KONIOR responded with a text message that said, “[w]e have your funds in our acct. Where else would they be?” At the time he wrote the message, he had already used that hedge fund’s investment to pay off other investors and his own expenses.

In addition to the prison term, Judge Hellerstein sentenced KONIOR, 40, of New York, New York, to three years of supervised release. KONIOR was also ordered to forfeit $2.9 million and to pay a $2.9 million fine.

Mr. Bharara praised the work of the Federal Bureau of Investigation and the 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 John T. Zach and Jason H. Cowley are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Janet DiFiore, the Westchester County District Attorney, Scott W. Brown, Tarrytown Police Chief on behalf of the Greenburgh Drug and Alcohol Task Force, and George Venizelos, Assistant Director-In-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of 11 defendants and the unsealing of an Indictment and a Superseding Indictment charging a conspiracy to distribute kilogram quantities of cocaine in and around the Bronx, across the Hudson Valley, and up to Albany, New York.

U.S. Attorney Preet Bharara stated: “These arrests are the product of the ongoing and unparalleled cooperation between our office and the Westchester District Attorney’s Office, and between federal and local law enforcement authorities. In particular, it is our privilege to work with District Attorney DiFiore and her team to prosecute alleged narcotics traffickers like the defendants. I want to thank our many federal and local law enforcement partners, representing villages, towns, cities and the nation all of whom coalesced to bring this case.”

Westchester District Attorney Janet DiFiore stated: “Law enforcement from all levels, federal, state and local, collaborated in a multi-jurisdictional effort that stretched from New York City to the Capitol District. This coordinated effort resulted in the takedown of a major narcotics trafficking operation in New York State. Our ongoing joint efforts with the United States Attorney’s office and the assistance of U.S. Attorney Preet Bharara in this and other prosecutions is a model of collaborative law enforcement and its results.”

Chief Scott W. Brown of the Tarrytown Police Department, speaking for the Greenburgh Drug and Alcohol Task Force, stated: “We are extremely proud of our officers and grateful for the assistance and cooperation of all agencies involved. The dedication and diligence of these law enforcement professionals will have a significant impact on the flow of illegal drugs in our communities.”

FBI Assistant Director-in-Charge George Venizelos stated: “Today, we were able to disrupt and dismantle yet another drug trafficking organization whose primary goal was to distribute cocaine in the surrounding areas. The arrests and searches were carried out today with our law enforcement partners working side by side to make the streets safer.”

According to allegations in the Indictments unsealed today:

The Indictments charge eleven people, PHILLIP LLENAS, a/k/a “Bemba,” 39, FRANKLIN ABREU, 28, SHERMAN ALSTON, a/k/a “Sherm,” 51, VICTOR ANDRADES, a/k/a “Fat Man,” 38, JAMES FERNANDEZ, a/k/a “Burg,” a/k/a “Burger,” 32, FERNANDO GUERRERO, 31, JOSE PEREYRA, a/k/a “Nano,” 33, MENSUR RADONCIC, a/k/a “Stu,” 31, KEENAN SOTO, a/k/a “Chinito,” 25, and KARL ZARATE, 38, with conspiring to distribute, and possess with intent to distribute, five kilograms or more of cocaine in Westchester County, New York, Orange County, New York, Albany County, New York and the Bronx, New York. The Superseding Indictment charges ANGEL APONTE, a/k/a “A,” 34, with conspiring to distribute, and possess with intent to distribute, five kilogram or more of cocaine. The charge against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release.

All eleven of the defendants charged in the Indictments unsealed today were arrested. Ten of the defendants were presented in White Plains federal court this afternoon before U.S. Magistrate Judge Paul E. Davison. One defendant, ALSTON, is scheduled to be presented at 2:00 p.m. tomorrow before Judge Davison.

Contemporaneous with the arrests, state and federal law enforcement officers executed search warrants at 24 locations and upon 4 vehicles. These searches resulted in the seizure of more than $800,000 cash, more than 5 kilograms of cocaine, approximately 40 pounds of marijuana, eight firearms, several kilo presses and other drug trafficking paraphernalia.

Mr. Bharara praised the outstanding investigative work of the FBI, the Greenburgh Drug and Alcohol Task Force, comprised of the police departments of the Town of Greenburgh, and the Villages of Ardsley, Dobbs Ferry, Elmsford, Hastings, Irvington, North Castle, Sleepy Hollow, and Tarrytown, the Westchester District Attorney’s Office, the New York State Police, the Yonkers Police Department, the U.S. Department of Homeland Security, the U.S. Drug Enforcement Administration, and the New York City Police Department.

The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Michael Gerber and Scott Hartman are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is responsible for the forfeiture aspects of the case.

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

United States v. Aponte, S1 14 Cr. 268
United States v. Llenas, et al., 14 Cr. 268
Takedown Chart

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ILLYA TRINCHER was sentenced today in Manhattan federal court to six months in prison followed by six months’ home confinement in connection with his leadership role in the operation of a high-stakes illegal sports gambling business. TRINCHER was also ordered to forfeit approximately $6.4 million. He was sentenced by U.S. District Judge Jesse M. Furman.

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

TRINCHER and defendant Hillel Nahmad, a/k/a “Helly,” operated and led a nationwide illegal gambling business in New York City and Los Angeles that catered primarily to multi-millionaire and billionaire clients. As part of this business, the organization ran a high-stakes, illegal sportsbook that utilized several online gambling websites operating illegally in the United States. The organization booked bets that were often in the hundreds of thousands of dollars, and at times a million dollars, on a single sporting event. The organization also made millions of dollars of sports bets each year.

Twenty-nine defendants in this case have pled guilty, and two have entered into deferred prosecution agreements. The defendants who have pled to date have agreed to forfeit, in total, more than $69,000,000. The following defendants have pled guilty, and have been or await sentencing:

• Bryan Zuriff pled guilty to gambling charges on July 26, 2013, and was sentenced on November 25, 2013.
• William Barbalat pled guilty to gambling charges on August 14, 2013, and was sentenced on December 16, 2013.
• Kirill Rapoport pled guilty to gambling charges on August 16, 2013, and was sentenced on December 19, 2014.
• Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013, and were sentenced on January 21, 2014, and January 6, 2014, respectively.
• Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013, and were sentenced on April 18, 2014, and February 14, 2014, respectively.
• Alexander Zaverukha pled guilty to gambling charges on October 10, 2013, and was scheduled on May 1, 2014.
• Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013, and was sentenced on February 25, 2014.
• Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013, and is scheduled to be sentenced on June 10, 2014.
• Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013, and was sentenced on March 25, 2014.
• Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013, and was sentenced on May 2, 2014.
• Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013, and was sentenced on April 9, 2014.
• Hillel Nahmad pled guilty to gambling charges on November 12, 2013, and was sentenced on April 30, 2014.
• Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013, and was sentenced on April 30, 2014.
• Eugene Trincher pled guilty to gambling charges on November 14, 2013, and is scheduled to be sentenced on June 9, 2014.
• Anatoly Golubchik pled guilty to conspiring to commit racketeering on November 15, 2013, and was sentenced on April 29, 2014.
• Illya Trincher pled guilty to gambling charges on November 15, 2013, and was sentenced on May 8, 2014.
• Ronald Uy pled guilty to structuring financial transactions on November 25, 2013, and was sentenced on March 27, 2014.
• Moshe Oratz pled guilty to gambling charges on December 3, 2013, and was sentenced on April 9, 2014.
• Michael Sall pled guilty to interstate travel in aid of an unlawful activity (illegal gambling), and Jonathan Hirsch pled guilty to gambling charges on December 4, 2013. Sall was sentenced on April 18, 2014, and Hirsch is scheduled to be sentenced on May 9, 2014.
• Noah Siegel pled guilty to gambling charges on December 5, 2013, and was sentenced on April 10, 2014.
• Molly Bloom pled guilty to gambling charges on December 12, 2013, and was be sentenced on May 2, 2014.
• Alexander Katchaloff pled guilty to gambling charges on January 16, 2014, and is scheduled to be sentenced on May 20, 2014.
• Donald McCalmont, John Jarekci, a/k/a “John Hanson,” and Abraham Mosseri pled guilty to making a fraudulent tax statement, to failing to file a tax return, and to causing a financial institution to participate in a lottery related matter, respectively, on January 24, 2014. McCalmont was sentenced on May 7, 2014, and Jarekci and Mosseri are scheduled to be sentenced on May 28, 2014, and May 21, 2014, respectively.
• William Edler and Peter Feldman entered into deferred prosecution agreements on April 11, 2014.
• Illya Rozenfeld pled guilty to interstate travel in aid of an unlawful activity (illegal gambling) on May 6, 2014, and is scheduled to be sentenced on August 14, 2014.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter J. Skinner, and Kristy J. Greenberg of the Violent and Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorney Alexander Wilson of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., Special Agent-in-Charge of U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations in New York (“HSI”), announced that RICHARD DINIZO, 59, entered a guilty plea today to a six-count Information that was filed on May 5. The Information to which DINIZO pled guilty charges that DINIZO engaged in sexually explicit conduct with seven different minors, all under the age of 11 at the time of the sexual abuse, and videoed the sexual abuse, and that DINIZO transported the videos he made of the minors engaging in sexual activity to recipients outside of New York.

On April 25, 2013, the Government unsealed a six-count Indictment charging DINIZO with engaging in sexual activity with five minors and videoing it and transporting the sexually explicit videos to recipients outside of New York. The six-count Information filed May 5 supersedes that Indictment and adds additional victims of DINIZO’s crimes.

U.S. Attorney Preet Bharara stated: “For the children preyed upon by Richard Dinizo, the encounter was a nightmare. This serial pedophile not only recorded his deviant criminal acts but shared those videos with others. This prosecution incapacitates and holds to account a dangerous man who threatened the well-being of children in our community.”

Special Agent in Charge James T. Hayes, Jr. stated: “Today’s guilty plea will ensure that one of the most heartless and depraved child predator this office has ever encountered can never again victimize another child. I am grateful for the tireless, diligent effort of the HSI Special Agents, Westchester and Putnam police officers and deputies, the New York State Police, and local and Federal prosecutors who investigated and prosecuted these crimes."

According to the Information filed on May 5, 2014, and court proceedings:

From 2007 through 2010, DINIZO engaged in sexually explicit conduct with seven different minors, all under the age of 11 and videoed that conduct. DINIZO’s homemade videos included multiple videos in which DINIZO appears on camera with a blindfolded victim and engages in trickery in order to manipulate the victim into engaging in sexual activity.

After editing the videos (and removing, among other things, images of himself and the voices that appear on the unedited videos), DINIZO transported his homemade sexually explicit videos to recipients outside of New York. In 2010 and 2011, the National Center for Missing and Exploited Children (“NCMEC”) received DINIZO’s homemade videos among other videos recovered by law enforcement in investigations throughout the country and internationally. Until DINIZO’s arrest in this case and the instant investigation, NCMEC had not been able to identify the child victims or the place of their abuse.

DINIZO is scheduled to be sentenced by U.S. District Judge Vincent L. Briccetti on September 12, 2014, and faces a minimum sentence of 15 years in prison and a maximum sentence 170 years (30 years on each of Counts One through Five and 20 years on Count Six). The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

On February 18, 2014, DINIZO was convicted in Westchester County Court of Predatory Sexual Assault against a Child Less Than 13 Years Old and sentenced to a term of imprisonment of 25 years to life.

Mr. Bharara praised the efforts of ICE HSI, the Westchester County District Attorney’s Office, the Putnam County District Attorney’s Office, Putnam County Sherriff’s Office, the New York State Police, and the National Center for Missing and Exploited Children in connection with this investigation.

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.

DINIZO supersedinginformation FINAL

Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Office of U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the return of the Duryodhana, a 10th Century sandstone sculpture, to the Kingdom of Cambodia. The return of the Duryodhana follows the settlement of a civil forfeiture action filed by the U.S. Attorney’s Office for the Southern District of New York, which alleged that the Duryodhana was stolen from the Prasat Chen temple at Koh Ker in 1972 by an organized looting network, and ultimately imported into the United States and offered for sale by Sotheby’s Inc. (“Sotheby’s”). The settlement of the civil forfeiture action, which was approved by United States District Judge George B. Daniels on December 16, 2013, required Sotheby’s and the customer selling the Duryodhana, Decia Ruspoli de Poggia Suasa (“Ruspoli”), to return the sculpture to the Kingdom of Cambodia.

Manhattan U.S. Attorney Preet Bharara said: “A priceless piece of Cambodia’s cultural history was stolen over 40 years ago. Once stolen, the Duryodhana should not have been for sale at any price. By bringing legal action to cause the return of the Duryodhana to the Kingdom of Cambodia, we have reaffirmed our commitment to ensuring that Manhattan does not become a Mecca for stolen art and antiquities. Everyone who sells, collects, or curates art should support doing what is right when it comes to repatriating priceless stolen artifacts. We are proud to have played a role in removing the Duryodhana from the stream of commerce, and pleased to commemorate its imminent return to its homeland.”

HSI Special Agent-in-Charge James T. Hayes, Jr., said: “HSI is proud to partner with the Southern District of New York to return this statue to the people of Cambodia after a more than 40-year absence. HSI is committed to continuing to be the dominant force in preserving and maintaining the integrity of cultural symbols throughout the world.”

According to an Amended Complaint filed in Manhattan federal court in April 2013, and other documents filed in the case:

From 928 to 944 A.D., Koh Ker was the capital of the ancient Khmer empire in Cambodia. The Khmer regime under Jayavarman IV constructed a vast complex of sacred monuments at Koh Ker, including the Prasat Chen temple and its statuary. These monuments have never been transferred to any private owner, and remain the property of the Cambodian state.

During the civil conflicts of the 1960s and 1970s, statues and other artifacts were stolen from Koh Ker and entered the international art market through an organized looting network. In the case of monumental statues like the Duryodhana, the heads would sometimes be forcibly detached from the torsos and transported first, with the torsos following later, due to the physical challenges of transporting the large torsos on dirt roads. The statues would then be transported to the Cambodia-Thailand border, and transferred to Thai brokers, who would in turn transport them to dealers of Khmer artifacts in Thailand, particularly Bangkok. These dealers would sell the artifacts to local or international customers, who would either retain the pieces or sell them on the international art market.

The Duryodhana, along with a companion statue, the Bhima, was stolen from Prasat Chen in 1972 via this looting network. The heads of the statues were removed and transported first, followed by the torsos, and ultimately delivered to a Thai dealer based in Bangkok. The Duryodhana and the Bhima were then obtained by a well-known collector of Khmer antiquities (Athe Collector@). The Duryodhana was sold to a Belgian businessman in 1975 and was ultimately transferred to his widow, Ruspoli.

In 2010, Ruspoli consigned the Duryodhana to Sotheby’s. Sotheby’s imported it into the United States and offered it for sale in 2011.

Mr. Bharara thanked HSI for its outstanding work on this investigation, which he noted is ongoing, and praised its ongoing efforts to find and repatriate stolen and looted cultural property. Mr. Bharara also thanked the United Nations Educational, Scientific, and Cultural Organization and L’Ecole Francaise d’Extreme-Orient for their assistance.

This matter is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U. S. Attorneys Sharon Cohen Levin, Alexander J. Wilson, Sarah E. Paul, and Christine I. Magdo are in charge of the case.

Duryodhana - Cambodian Scupture - Amended Complaint
Duryodhana - Cambodian Sculpture - Settlement Stipulation and Order

Preet Bharara, the United States Attorney for the Southern District of New York, Rafael A. Medina, the Special Agent-in-Charge of United States Postal Service, Office of Inspector General (“USPS-OIG”), and Cheryl Garcia, Acting Special Agent-in-Charge of the United States Department of Labor, Office of Inspector General (“DOL-OIG”), Office of Labor Racketeering and Fraud Investigations, today announced charges against 11 defendants for defrauding the Department of Labor’s federal workers’ compensation benefits program by claiming to be injured or disabled so that they could claim benefits to which they were not entitled. In addition, certain of the defendants failed to report income that they earned from other businesses they were running while allegedly too disabled to return to their federal employment. The 11 defendants include 10 United States Postal Service employees and one employee of the U.S. Navy, all but one of whom were arrested and presented today in Manhattan federal court before Magistrate Judge James C. Francis IV. One defendant was arrested on April 17, 2014, as part of the same operation.

Manhattan U.S. Attorney Preet Bharara said: “A federal employee is entitled to workers’ compensation benefits if he is in fact disabled by a workplace injury. As alleged, these defendants all showed remarkable strength and vigor for people claiming to have sustained debilitating injuries. They also showed a lack of integrity in exploiting a program meant to provide assistance to the truly disabled, not a source of easy money for the unscrupulous.”

Rafael A. Medina, Special Agent-in-Charge of the USPS-OIG, said: “Today’s arrests should send a clear message to every Postal Service employee that workers’ compensation fraud is a federal crime that carries serious consequences and will not be tolerated. The USPS-OIG, along with our law enforcement partners, will continue to aggressively investigate those who engage in fraudulent activities intended to defraud federal benefit programs and the Postal Service.”

According to the allegations in the Complaints unsealed today in Manhattan federal court:

The Regulatory Scheme

Postal Service and other federal employees are covered by the Federal Employees’ Compensation Act (“FECA”), which provides tax-free benefits to civilian federal employees who sustain injuries or an occupational disease as a result of their employment. Postal employees can receive up to 75 percent of the gross salary to which the employee is entitled if the employee has at least one dependent. The Postal Service is the largest participant in FECA, paying more than $1 billion in benefits and $60 million in administrative fees annually.

Pursuant to the DOL’s Office of Workers’ Compensation Programs (“OWCP”) guidelines, a claimant must prove that he or she is injured by submitting a claim, including medical documentation and other evidence, which attests to the severity of the claimant’s injury or disability. The employee’s claim and supporting medical evidence is evaluated by the OWCP to determine the claimant’s medical impairment and the effect of the impairment on the claimant’s ability to work on a sustained basis. Once approved, in order to receive FECA benefits on an ongoing basis, the claimant is required to update the OWCP periodically on, among other things, the status of his or her physical condition. In addition, the claimant is required to certify periodically whether he or she has had any other sources of income within the past 15 months. Claimants are advised that fraudulent concealment of income or other information which would have an effect on benefits may result in criminal prosecution.

The Defendants

The 11 defendants charged as part of this operation are JUANITA TOLBERT, SAMUEL MUNOZ, SHONTA HOLMES, ALICE BACA, FAITH PINKNEY, ANGEL CORUJO, PEDRO NUNEZ, RONALD WERNER, LASHONNE TUGGLES, CHARLES WALWYN and JEANNIE WIGFALL. The defendants defrauded the DOL’s OWCP in a variety of ways. For example:

SHONTA HOLMES, who had been employed by the Postal Service since 1989, submitted a federal workers’ compensation claim indicating that she sustained an occupational injury, Carpal Tunnel Syndrome, on or about April 17, 2002. Since May 2004, HOLMES has drawn federal benefits and has not reported to work. In January 2012, HOLMES was examined by a doctor to evaluate her capacity to work. The doctor’s report stated that HOLMES could not resume any type of work and that HOLMES was unable to handle even “10 pounds of weight up to one-third at a time even in a sedentary position.” In July 2012, another doctor submitted a report which concluded that HOLMES was “permanently and totally disabled.” In September 2013, HOLMES stated that her condition limits many of her daily activities including bathing, bike riding, doing her hair, driving, laundry, going to the store, and sexual activities. HOLMES indicated that she considered herself “totally disabled” and “unable to perform any assignment for the Postal Service.” Nevertheless, in the course of the investigation from October 2011 through September 2013, HOLMES has been observed in and around public places, such as stores and gyms, engaged in strenuous physical activity. For example, HOLMES has been observed in a gym using dumbbell free weights, each weighing approximately 10 to 20 pounds, and performing repetitive strengthening exercises such as bicep curls and chest presses; using a “Smith Machine,” which is a free standing piece of equipment used in weight training, to perform shoulder press exercises with the machine loaded with approximately 50 to 100 pounds of weights; participating in an “Ultimate Abs” class, which involved the use of weight training exercises with a barbell; exercising on a treadmill and a Stairmaster; and working out with a personal trainer, including punching a punching bag while wearing boxing gloves. In addition, HOLMES has been observed driving, shopping, and running errands. As of May 3, 2014, HOLMES has received FECA compensation totaling approximately $426,114.35.

ANGEL CORUJO, who had been employed by the Postal Service since 1987, submitted a federal workers’ compensation claim indicating he sustained a back injury on or about July 15, 2003. Since he began to draw federal benefits in or about August 2003, CORUJO has not reported for work. In October 2013, CORUJO certified that he had not worked for any employer during the past 15 months. In January 2014, CORUJO submitted a report by a doctor in which CORUJO reported pain as a “7/10 severity all the time” and represented that he used a motorized wheelchair while at home and a cane for ambulatory assistance in the community. Nevertheless, in the course of the investigation, CORUJO was observed in 2013 hanging holiday decorations at his home, including balancing on a stepstool; pushing a loaded shopping cart at a home improvement store without the aid of a wheelchair or cane; and, in 2014, using a snow blower to clear his driveway of snow. In addition, the investigation uncovered that CORUJO was employed periodically in 2013 and 2014 by another employer other than the Postal Service, something he did not report as required. As of April 5, 2014, CORUJO has received FECA compensation totaling $402,651.

RONALD JAMES WERNER, who had been employed as a civilian firefighter by the U.S. Navy prior to September 2005, submitted a federal workers’ compensation claim indicating he sustained a knee injury in September 2005. Since at least April 2008, WERNER has drawn federal benefits and has not reported for work. In January 2013, WERNER certified that he had not worked for any employer during the past 15 months and that he had not earned any income from other employment in that time period. In January 2012, WERNER submitted a report by a doctor which stated that he could not perform his usual job or another type of work even with restrictions. In May 2013, WERNER submitted a report by another doctor which stated that WERNER was “permanently unable to work” due to a “[t]otal knee replacement” and that he would be unable to, among other activities, sit, walk, stand, reach, twist, bend or operate a motor vehicle to work. Nevertheless, in the course of the investigation in 2013, WERNER was observed in the vicinity of a truck bearing the logo “Werner’s Home Improvements” at various worksites where residential construction was taking place; entering and shopping in various home improvement stores, including purchasing 2x4s and other construction supplies; loading and unloading building construction materials into and out of a pickup truck; and arriving at a recycling center and unloading various appliances from his vehicle. WERNER’s credit card records reflect over $180,000 in purchases from a home improvement store from 2010 to 2013. In addition, an employee of a home improvement store where WERNER shopped praised WERNER to law enforcement agents who asked for a recommendation for a contractor, saying that WERNER was highly recommended and had been known at the store for years. Between April 2008 and March 2014, WERNER has received FECA compensation totaling $340,812.

Ten of the defendants were taken into custody this morning and are expected to be presented in Manhattan federal court later this afternoon. ANGEL CORUJO was arrested on April 17, 2014, as part of the same operation. All 11 defendants are charged with theft of government funds, which carries a maximum sentence of 10 years in prison, and federal workers’ compensation benefits fraud, which carries a maximum sentence of five 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 will be determined by the Court.

Attached is a chart reflecting the age and place of residence for each of the charged defendants.

Manhattan U.S. Attorney Bharara praised the USPS-OIG, the DOL-OIG’s Office of Labor Racketeering and Fraud Investigations, the Social Security Administration – Office of Inspector General, and the Naval Criminal Investigative Service for their outstanding work in the investigation, which he noted is ongoing.

The Office’s General Crimes Unit is handling the case. Assistant U.S. Attorneys Richard Cooper, Andrew DeFilippis, Patrick Egan, Samson Enzer, Margaret Graham, Andrea Griswold, Jared Lenow, and Special Assistant U.S. Attorney Daniel Tracer are in charge of the prosecution.

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

Click here to view chart(s)

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 that ALEX V. EKDESHMAN, 41, of Holmdel, New Jersey, was arrested this morning on commodities fraud, wire fraud, and mail fraud charges. EKDESHMAN is expected to be presented today in Manhattan federal court before United States Magistrate Judge Michael H. Dolinger.

U.S. Attorney Preet Bharara said: “As alleged, Alex Ekdeshman took over a million dollars from more than a hundred investors under false pretenses, using money meant for foreign exchange transactions for other purposes, including to buy personal items and pay family members. When an investment manager lies about what he’s doing with your money, that is not just dishonest, it is a federal crime.”

Assistant Director in Charge George Venizelos said: "While risk is inherent in the investment world, that risk should not include reliance on a greedy investment professional who takes his client's money through misrepresentations, putting his own financial interests above those he promised to serve. As alleged, Ekdeshman broke the law when he traded on his client's trust and lied to investors for personal gain. The FBI is committed to protecting innocent investors and maintaining the integrity of the American financial markets."

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

From at least in or about May 2011 through May 2013, EKDESHMAN ran a fraudulent commodities trading scheme. EKDESHMAN, who was chief executive officer of Paramount Management, LLC (“Paramount Management”), located in New York, New York, represented to investors that Paramount Management was in the business of investing in foreign exchange currency transactions, or “forex.” Through various employees of Paramount Management, EKDESHMAN solicited investor funds on the understanding that the funds would be solely invested in forex. As a result of these solicitations, EKDESHMAN and his employees collected at least $1.58 million from approximately 115 investors.

Contrary to EKDESHMAN’s promise to invest the investors’ funds in forex, EKDESHMAN misappropriated the large majority of investor funds. More than $1 million in investor funds were never traded in forex. Instead, EKDESHMAN used those funds to make payments to himself and his family members, to buy personal items, to pay for business expenses related to Paramount Management, and to pay employees of Paramount Management.

EKDESHMAN is charged with one count of commodities fraud, one count of wire fraud, and one count of mail fraud. The commodities fraud count carries a maximum sentence of 10 years in prison and a maximum fine of $1 million, or twice the gross gain or loss from the offense. The wire and mail fraud counts each carry 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 Federal Bureau of Investigation, and thanked the United States Commodity Futures Trading Commission for its assistance. He added that the investigation is continuing.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jessica A. Masella and Benjamin Naftalis are 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.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANATOLY GOLUBCHIK and was sentenced yesterday in Manhattan federal court to five years in prison and VADIM TRINCHER was also sentenced today to five years in prison for participating in a racketeering conspiracy in connection with their roles as members of a Russian-American organized crime enterprise. GOLUBCHIK and TRINCHER were also each ordered to forfeit more than $20 million in cash, investments, and real property. They were charged in April 2013 along with 32 other alleged members and associates of two Russian-American organized crime enterprises in an indictment that included racketeering, money laundering, extortion, and various gambling offenses. GOLUBCHIK and TRINCHER were sentenced by U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “The sentences meted out to Anatoly Golubchik and Vadim Trincher are just and appropriate penalties for the roles the defendants played in this far-reaching, Russian-American organized crime ring. I’d like to thank the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service for their tireless efforts in working to ensure that the members of this underground enterprise were held to account for their crimes.”

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

The Taiwanchik-Trincher Organization (the “Organization”) was a criminal enterprise with strong ties to Russia and Ukraine. The enterprise operated a high-stakes, illegal sports gambling business out of New York City that catered primarily to Russian oligarchs living in Ukraine and Russia. GOLUBCHIK and TRINCHER were U.S.-based participants in the enterprise. GOLUBCHIK and TRINCHER booked sports bets that reached into the millions of dollars and laundered the proceeds of the Organization’s international sportsbook. Between 2006 and April 2012, the enterprise laundered approximately $100 million in proceeds from their gambling operation in Russia and Ukraine through shell companies and bank accounts in Cyprus; and of this $100 million, approximately $50 million was subsequently sent from Cyprus into the United States. Once the money had been transferred to the United States, it was either laundered through additional shell companies or invested in legitimate investments, such as hedge funds and real estate.

The Taiwanchik-Trincher Organization operated under the protection of Alimzhan Tokhtakhounov, who is known as a “Vor,” a term translated as “Thief-in-Law,” that refers to a member of a select group of high-level criminals from the former Soviet Union. Tokhtakhounov used his status as a Vor to resolve disputes with clients of the high-stakes illegal gambling operation with implicit and sometimes explicit threats of violence and economic harm. Between December 2011 and February 2013, Tokhtakhounov was paid at least approximately $12 million for his services by the Taiwanchik-Trincher Organization. Tokhtakhounov is also under indictment in the Southern District of New York for his alleged involvement in bribing officials at the 2002 Winter Olympics held in Salt Lake City, Utah. Tokhtakhounov is a fugitive and is still being sought.

Twenty-eight defendants in this case have pled guilty, and two have entered into deferred prosecution agreements. The defendants who have pled to date have agreed to forfeit, in total, more than $68 million. The following defendants have pled guilty, and have been sentenced or await sentencing:

• Bryan Zuriff pled guilty to gambling charges on July 26, 2013, and was sentenced on November 25, 2013.
• William Barbalat pled guilty to gambling charges on August 14, 2013, and was sentenced on December 16, 2013.
• Kirill Rapoport pled guilty to gambling charges on August 16, 2013, and was sentenced on December 19, 2014.
• Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013, and were sentenced on January 21, 2014, and January 6, 2014, respectively.
• Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013, and were sentenced on April 18, 2014, and February 14, 2014, respectively.
• Alexander Zaverukha pled guilty to gambling charges on October 10, 2013, and is scheduled to be sentenced on May 1, 2014.
• Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013, and was sentenced on February 25, 2014.
• Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013, and is scheduled to be sentenced on June 10, 2014.
• Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013, and was sentenced on March 25, 2014.
• Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013, and is scheduled to be sentenced on May 2, 2014.
• Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013, and was sentenced on April 9, 2014.
• Hillel Nahmad pled guilty to gambling charges on November 12, 2013, and was sentenced on April 30, 2014.
• Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013, and was sentenced on April 30, 2014.
• Eugene Trincher pled guilty to gambling charges on November 14, 2013, and is scheduled to be sentenced on June 9, 2014.
• Anatoly Golubchik pled guilty to conspiring to commit racketeering on November 15, 2013, and was sentenced on April 29, 2014.
• Illya Trincher pled guilty to gambling charges on November 15, 2013, and is scheduled to be sentenced on May 8, 2014.
• Ronald Uy pled guilty to structuring financial transactions on November 25, 2013, and was sentenced on March 27, 2014.
• Moshe Oratz pled guilty to gambling charges on December 3, 2013, and was sentenced on April 9, 2014.
• Michael Sall pled guilty to interstate travel in aid of an unlawful activity (illegal gambling) and Jonathan Hirsch pled guilty to gambling charges on December 4, 2013. Sall was sentenced on April 18, 2014, and Hirsch is scheduled to be sentenced on May 9, 2014.
• Noah Siegel pled guilty to gambling charges on December 5, 2013, and was sentenced on April 10, 2014.
• Molly Bloom pled guilty to gambling charges on December 12, 2013, and is scheduled to be sentenced on May 2, 2014.
• Alexander Katchaloff pled guilty to gambling charges on January 16, 2014, and is scheduled to be sentenced on May 20, 2014.
• Donald McCalmont, John Jarekci, a/k/a “John Hanson,” and Abraham Mosseri pled guilty to making a fraudulent tax statement, to failing to file a tax return, and causing a financial institution to participate in a lottery related matter, respectively, on January 24, 2014, and are scheduled to be sentenced on May 29, 2014, May 28, 2014, and May 21, 2014, respectively.
• William Edler and Peter Feldman entered into deferred prosecution agreements on April 11, 2014.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter J. Skinner, and Kristy J. Greenberg of the Violent and Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorney Alexander Wilson of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that HILLEL NAHMAD, a/k/a “Helly,” was sentenced today in Manhattan federal court to one year and one day in connection with his leadership role in the operation of a high-stakes illegal sports gambling business. NAHMAD was also ordered to forfeit $6,427,000 and all his right, title, and interest in the painting Carnaval à Nice, 1937 by Raoul Dufy to the United States. He was sentenced by U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Preet Bharara said: “For art gallery owner Helly Nahmad, running a multimillion-dollar illegal sports gambling business came with a steep price, forfeiture of over $6 million and time behind bars – a punishment he likely never pictured.”

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

NAHMAD operates the Helly Nahmad Gallery out of the Carlyle Hotel in New York, New York. NAHMAD and defendant Illya Trincher operated and led a nationwide illegal gambling business in New York City and Los Angeles that catered primarily to multi-millionaire and billionaire clients. As part of this business, the organization ran a high-stakes, illegal sportsbook that utilized several online gambling websites operating illegally in the United States. The organization booked bets that were often in the hundreds of thousands of dollars, and at times a million dollars, on a single sporting event. The organization also made millions of dollars of sports bets each year. NAHMAD was the primary source of financing for the illegal gambling business, and he was entitled to a substantial share of its profits.

Twenty-eight defendants in this case have pled guilty, and two have entered into deferred prosecution agreements. The defendants who have pled to date have agreed to forfeit, in total, more than $68 million. The following defendants have pled guilty, and have been sentenced or await sentencing:

• Bryan Zuriff pled guilty to gambling charges on July 26, 2013, and was sentenced on November 25, 2013.
• William Barbalat pled guilty to gambling charges on August 14, 2013, and was sentenced on December 16, 2013.
• Kirill Rapoport pled guilty to gambling charges on August 16, 2013, and was sentenced on December 19, 2014.
• Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013, and were sentenced on January 21, 2014, and January 6, 2014, respectively.
• Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013, and were sentenced on April 18, 2014, and February 14, 2014, respectively.
• Alexander Zaverukha pled guilty to gambling charges on October 10, 2013, and is scheduled to be sentenced on May 1, 2014.
• Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013, and was sentenced on February 25, 2014.
• Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013, and is scheduled to be sentenced on June 10, 2014.
• Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013, and was sentenced on March 25, 2014.
• Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013, and is scheduled to be sentenced on May 2, 2014.
• Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013, and was sentenced on April 9, 2014.
• Hillel Nahmad pled guilty to gambling charges on November 12, 2013, and was sentenced on April 30, 2014.
• Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013, and was sentenced on April 30, 2014.
• Eugene Trincher pled guilty to gambling charges on November 14, 2013, and is scheduled to be sentenced on June 9, 2014.
• Anatoly Golubchik pled guilty to conspiring to commit racketeering on November 15, 2013, and was sentenced on April 29, 2014.
• Illya Trincher pled guilty to gambling charges on November 15, 2013, and is scheduled to be sentenced on May 8, 2014.
• Ronald Uy pled guilty to structuring financial transactions on November 25, 2013, and was sentenced on March 27, 2014.
• Moshe Oratz pled guilty to gambling charges on December 3, 2013, and was sentenced on April 9, 2014.
• Michael Sall pled guilty to interstate travel in aid of an unlawful activity (illegal gambling) and Jonathan Hirsch pled guilty to gambling charges on December 4, 2013. Sall was sentenced on April 18, 2014, and Hirsch is scheduled to be sentenced on May 9, 2014.
• Noah Siegel pled guilty to gambling charges on December 5, 2013, and was sentenced on April 10, 2014.
• Molly Bloom pled guilty to gambling charges on December 12, 2013, and is scheduled to be sentenced on May 2, 2014.
• Alexander Katchaloff pled guilty to gambling charges on January 16, 2014, and is scheduled to be sentenced on May 20, 2014.
• Donald McCalmont, John Jarekci, a/k/a “John Hanson,” and Abraham Mosseri pled guilty to making a fraudulent tax statement, failing to file a tax return, and causing a financial institution to participate in a lottery related matter, respectively, on January 24, 2014, and are scheduled to be sentenced on May 29, 2014, May 28, 2014, and May 21, 2014, respectively.
• William Edler and Peter Feldman entered into deferred prosecution agreements on April 11, 2014.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter J. Skinner, and Kristy J. Greenberg of the Violent and Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorney Alexander Wilson of the Office’s Money Laundering and Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TCHAMY YALA and PAPIS DJEME, citizens of Guinea Bissau, pled guilty yesterday and today, respectively, in Manhattan federal court to narcotics importation conspiracy charges. YALA and DJEME were arrested on April 2, 2013, by the Drug Enforcement Administration’s (DEA) Special Operations Division, Bilateral Investigative Unit Narco-Terrorism Group and the DEA Foreign-deployed Advisory Support Team (FAST) off the coast of West Africa while on board a vessel under DEA control in international waters. They were transferred thereafter to the custody of the United States. YALA and DJEME pled guilty before U.S. District Judge Richard M. Berman.

Manhattan U.S. Attorney Preet Bharara said: “International drug traffickers pose a serious threat to the United States and its citizens. As this case makes clear, we are committed to halting the flood of narcotics from overseas into our nation, and to working with all of our law enforcement partners, both here and abroad, in bringing the exporters of this poison to justice.”

According to the Indictment previously unsealed in this case:

Beginning in the summer of 2012, YALA, DJEME, and a co-defendant engaged in a series of recorded meetings in Guinea-Bissau with confidential sources (the “CSs”) working with the DEA who purported to be representatives and/or associates of South American-based narcotics traffickers.

In an early meeting in which the defendants discussed the shipment of ton-quantities of cocaine from South America to Guinea Bissau by sea, a co-conspirator noted that the Guinea Bissau government was weak in light of the recent coup d’etat and that it was therefore a good time for the proposed cocaine transaction. In further meetings, YALA and DJEME agreed to assist the CSs by receiving a two-ton load of cocaine that would be transported to Guinea-Bissau by boat and stored in Guinea Bissau for distribution to Europe and the United States. For example, on November 17, 2012, YALA, DJEME and a co-conspirator met with two of the CSs in Guinea Bissau and discussed importing 1,000 kilograms of cocaine into the United States. Also during the meeting, a co-conspirator offered to utilize a company that he owned to facilitate the shipment of cocaine out of Guinea Bissau. YALA and a co-defendant agreed to receive a fee of $1,000,000 per 1,000 kilograms of cocaine received in Guinea Bissau.

YALA, 42, and DJEME, 30, each pled guilty to one count of conspiring to distribute cocaine, knowing and intending that the cocaine would be imported into the United States. Each defendant faces a maximum sentence of life in prison. YALA is scheduled to be sentenced by Judge Berman on September 4, 2014. DJEME is scheduled to be sentenced by Judge Berman on September 23, 2014. 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.

The charges against YALA and DJEME were the result of the extraordinary investigative efforts of DEA’s Special Operations Division. Mr. Bharara also praised the seamless, coordinated work of FAST, the DEA Lisbon Country Office, and the DEA Bogota Country Office, as well as the U.S. Department of Justice Office of International Affairs, and the U.S. State Department.

This case is being handled by the Office's Terrorism and International Narcotics Unit. Assistant United States Attorney Aimee Hector is in charge of the prosecution.

U.S. v. Jose Americo Bubo Na Tchuto et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and Shantelle P. Kitchen, the Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the arrest of SHLOIME TORIM on various fraud charges. TORIM was arrested today, and was presented this afternoon in White Plains federal court before U.S. Magistrate Judge Lisa Margaret Smith, who ordered him jailed pending the satisfaction of bail conditions.

U.S. Attorney Preet Bharara said: “As alleged, Shloime Torim evaded his responsibilities as a taxpayer to the IRS and ultimately to the American people. He will now face his responsibilities as a criminal defendant.”

Acting Special Agent-in-Charge Shantelle P. Kitchen stated: "In order to maintain the public's confidence in the tax system, it is important that the government thoroughly investigates and prosecutes those who willfully obstruct and impede the administration of the tax laws. IRS Criminal Investigation is committed to ensuring that everyone pays their fair share and our investigators are skilled in unraveling the complicated schemes that criminals use to conceal income."

According to the Indictment previously filed in White Plains federal court:

SHLOIME TORIM resided in Orange County, New York, and engaged in a variety of income-producing businesses, including car leasing, rentals and real estate. When conducting business, TORIM used multiple identities. At times he used his actual name, “Shloime Torim,” and the social security number assigned to him, and other times he used different social security numbers associated with his aliases, such as “Shloime Goldstein,” or “Max Gold.” TORIM controlled over 100 corporations and other business entities (the “Torim Entities”). Most of the Torim Entities were shell companies and served no purpose other than to conceal TORIM’s income.

From at least 2002 through April 2014, TORIM engaged in a course of conduct calculated to impede and impair the due administration of the Internal Revenue laws by obstructing the IRS in assessing and collecting United States income taxes. TORIM impeded the IRS by using shell companies and corresponding bank accounts to conceal his income, using family members as nominees to disguise his interests in various business accounts, commingling funds among nominee and business accounts, using multiple identities and social security numbers that he obtained under the names “Shloime Torim,” “Shloime Goldstein,” and “Max Gold,” and failing to file individual corporate income tax returns.

TORIM, 76, of Monroe, New York, is charged with one count of endeavoring to obstruct and impede the due administration of the Internal Revenue laws, which carries a maximum sentence of three years in prison, five counts of failing to file United States Individual Income tax returns for the tax years 2007 through 2011, each of which carries a maximum sentence of one year in prison, and two counts of making a false statement to a bank for the purpose of obtaining a loan, which carries a maximum sentence of 30 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 IRS-CI and United States Department of State Diplomatic Security Service. He also thanked the U.S. Department of Justice’s Tax Division for its significant assistance in the investigation

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.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that CARLOS URENA and LIMET VASQUEZ were both found guilty after trial of racketeering, racketeering conspiracy, and a drug conspiracy involving marijuana, crack cocaine, powder cocaine, and oxycodone. As part of the racketeering conviction, the jury found, among other things, that URENA and VASQUEZ participated in a conspiracy to murder Ka’Shawn Phillips in Yonkers, New York, in 2005, and in a separate attempted murder in Manhattan, New York, in 2005. URENA was also convicted of murder in aid of racketeering and the use of a firearm in connection with the murder in aid of racketeering, both in connection with the murder of Ka’Shawn Phillips. URENA and VASQUEZ were convicted following a seven-week jury trial presided over by U.S. District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Preet Bharara said: “The defendants, Carlos Urena and Limet Vasquez, now stand convicted after trial for perpetuating the crusade of crime for the Bronx Trinitarios Gang, including conspiring to murder a sixteen year-old rival gang member. The Bronx streets are safer because of the jury’s verdict and the continued efforts of our law enforcement partners – the NYPD, ATF, and the DEA – who help us in building these cases.”

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

URENA and VASQUEZ were members of the Bronx Trinitarios Gang (“BTG”), a criminal organization that operated primarily in the Bronx, New York. The BTG started in the prison system in the late 1980s and subsequently spread to the streets. URENA, VASQUEZ, and others carried out illegal activities as part of a racketeering conspiracy, and to accomplish BTG’s goals of enhancing its power, protecting its turf from rival gangs including the Dominicans Don’t Play, the Bloods, the Crips, the Latin Kings, and other gangs, and enriching its members. Those activities included murder, attempted murders, conspiracies to commit murders, robbery, and narcotics trafficking.

On September 2, 2005, URENA and VASQUEZ participated in an attempted murder of a rival gang member in the Fort Washington area of Manhattan. The next evening, on September 3, 2005, URENA and VASQUEZ participated in a conspiracy to murder a 16-year-old named Ka’Shawn Phillips, who they had been told was a member of a rival gang. On that evening, a group of Trinitarios attacked Phillips on Saratoga Avenue in Yonkers, stabbing and shooting him to death. URENA was one of the men who shot and killed Phillips. In addition, as part of their membership in the BTG, URENA and VASQUEZ also participated in other acts of violence and a narcotics conspiracy involving marijuana, crack cocaine, powder cocaine, and oxycodone.

URENA faces a mandatory minimum sentence of life in prison. VASQUEZ faces a maximum sentence of life in prison, with a mandatory minimum sentence of five years in prison. A sentencing date has not yet been scheduled. 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 investigative work of the New York City Police Department’s Bronx Gang Squad, the Bureau of Alcohol, Tobacco, Firearms and Explosives’ Joint Firearms Task Force, and the Drug Enforcement Administration.

This case is being prosecuted by the Office’s Violent and Organized Crimes Unit. Assistant United States Attorneys Ryan P. Poscablo, Timothy D. Sini, and Micah W. J. Smith conducted the trial.

U.S. v. Leonides Sierra et al S5 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, John P. Carlin, Assistant Attorney General for National Security, and George C. Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that LI FANGWEI, who is more commonly known by his alias “Karl Lee,” is charged with violating the International Emergency Economic Powers Act (“IEEPA”) by using United States-based financial institutions to engage in millions of dollars of U.S. dollar transactions in violation of economic sanctions that prohibited such financial transactions. In addition, LI FANGWEI is also charged with conspiring to commit wire fraud and bank fraud, a money laundering conspiracy, two separate violations of IEEPA, and two separate substantive counts of wire fraud, in connection with such illicit transactions. LI FANGWEI, a national of the People’s Republic of China, is a fugitive.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Li Fangwei has used subterfuge and deceit to continue to evade U.S. sanctions that had been imposed because of his illicit trade in prohibited materials with Iran. Previously having been exposed as a violator of those sanctions, Li spun a web of front companies to carry out prohibited transactions essentially in disguise. He now stands charged with serious crimes, and millions of his dollars have been seized. It is the hope of this Office not only that Li’s banned commerce cease once and for all, but that he be apprehended and brought before the bar of American justice.”

Assistant Attorney General for National Security John P. Carlin said: “These charges are an important part of the all tools approach our government is taking against Li Fangwei to shut down and deny him the profit from his proliferation activities. This case is an outstanding example of multiple agencies working together to focus various enforcement efforts on the significant threat to our national security posed by such proliferation networks.”

FBI Assistant Director in Charge George C. Venizelos said: “Whether motivated by greed or otherwise, Li Fangwei allegedly ignored sanctions imposed by the United States Government and hid behind front companies he developed to engage in a series of illegal transactions, including attempts to acquire ‘dual use’ items on behalf of Iran-based entities. IEEPA makes it a crime to willfully violate U.S. sanctions on designated countries such as Iran. Individuals and companies who evade U.S. sanctions and misuse our banking system to further their illegal activity not only undermine the integrity of our financial markets but also threaten U.S. National Security interests. The FBI is committed to ensuring that strategically important goods and technology, particularly those that could be used in the production or delivery of weapons of mass destruction, do not end up in the wrong hands.”

According to the Superseding Indictment previously filed in Manhattan federal court and other court documents:

LI FANGWEI controls a large network of industrial companies based in eastern China, one of which is LIMMT Economic and Trade Company, Ltd. (“LIMMT”). Over the years, LI FANGWEI’s companies have done millions of dollars of business with Iran. This business has included selling to Iranian entities various metallurgical goods and related components that are banned for transfer to Iran by, among others, the United Nations, because the items are controlled by the Nuclear Supplier’s Group (a multinational group that maintains “control lists,” which identify nuclear-related dual-use equipment, material, and technology). LI FANGWEI has been, among other things, a long-time supplier to Iran’s Defense Industries Organization and Iran’s Aerospace Industries Organization. In addition, LI FANGWEI has been a principal contributor to Iran’s ballistic missile program through China-based entities that have been sanctioned by the United States.

In light of his supply of restricted items to Iran, the United States has imposed targeted sanctions on both LI FANGWEI and LIMMT. Specifically, the United States Department of the Treasury’s Office of Foreign Asset Controls (“OFAC”) publicly added LIMMT (in 2006) and LI FANGWEI (in 2009) to its List of Specially Designated Nationals and Blocked Persons (the “SDN List”). By virtue of their inclusion on the SDN List, LI FANGWEI and LIMMT were effectively precluded from conducting any business within the United States without first obtaining a license or authorization from OFAC. Neither LI FANGWEI nor LIMMT has sought such a license or authorization.

The above-referenced restrictions have forced LI FANGWEI to operate much of his business covertly. In response to United States sanctions, LI FANGWEI has built an outsized network of China-based front companies – to conceal his continuing participation, and LIMMT’s continuing participation, in sanctioned activities. The front companies are listed in Exhibit A to the Superseding Indictment. As shown in Exhibit A, many of those front companies have used the same address as LIMMT, or a close variant thereof.

During the period from 2006 through the present, LI FANGWEI has used front companies to engage in more than 165 separate U.S. dollar transactions, with a total value in excess of approximately $8.5 million. Included in those illicit transactions have been transactions involving sales to U.S. companies, sales of merchandise by LI FANGWEI to Iran-based companies utilizing the U.S. financial system, as well as attempts to acquire on behalf of Iran-based entities so-called “dual use” items from the United States, China, and other countries that could be used in the production of weapons of mass destruction and/or devices used to deliver weapons of mass destruction.

The U.S. Attorney’s Office and the FBI announced the seizure of over $6,895,000 in funds attributable to the LI FANGWEI front companies, and the filing of a civil complaint seeking the forfeiture of those funds to the United States. The seized funds are substitutes for money held by LI FANGWEI’s front companies at banks in China, and were seized from accounts at U.S. banks held in the name of foreign banks used by these front companies to conduct U.S. currency transactions (the “correspondent accounts”). The funds were seized pursuant to seizure warrants issued on December 18, 2013, and April 25, 2014. The $6,895,000 represents funds used by the LI FANGWEI front companies to engage in transactions that violate the U.S. sanctions laws and thus are subject to forfeiture. There are no allegations of wrongdoing by the U.S. or foreign banks that maintain these accounts. Because the funds used in those transactions are held in banks overseas, the United States is unable to seize the funds directly. However, pursuant to U.S. law, the United States can seize funds located in a bank’s correspondent accounts in the United States if there is probable cause to believe that funds subject to forfeiture are on deposit with that bank overseas. Based on this provision and others, the seizure warrants were executed. These funds were transferred to a seized asset account maintained by the United States Marshals Service pending resolution of the forfeiture action.

Based on information developed in the course of the FBI’s investigation into LI FANGWEI that forms the basis of the Superseding Indictment, OFAC today is adding eight additional front companies used by LI FANGWEI to its List of Specially Designated Nationals and Blocked Persons.

Finally, the United States Department of Commerce announced today the addition of nine China-based suppliers of LI FANGWEI to its Entity List.

The Superseding Indictment charges LI FANGWEI with seven separate offenses:

• Count One: Conspiracy to violate the International Emergency Economic Powers Act;
• Counts Two and Three: Substantive violations of the International Emergency Economic Powers Act;
• Count Four: Money laundering conspiracy;
• Count Five: Conspiracy to commit wire fraud and bank fraud; and
• Counts Six and Seven: Wire fraud.

If convicted, LI FANGWEI faces a maximum sentence of 20 years in prison on each of Counts One through Four and Counts Six and Seven, and 30 years in prison on Count Five. 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.

The U.S. Department of State’s Transnational Organized Crime Rewards Program is offering a reward of up to $5 million for information leading to the arrest and/or conviction of LI FANGWEI.

Mr. Bharara praised the outstanding investigative efforts of the FBI and thanked the New York County District Attorney’s Office, which had charged LI FANGWEI and LIMMT in April 2009 for their use of front companies to commit books and records violations and to evade U.S. sanctions. Evidence developed by the New York County District Attorney’s Office greatly assisted the FBI's investigation of LI FANGWEI's more recent criminal conduct.

In addition, Mr. Bharara thanked the U.S. Department of Justice’s National Security Division Counterespionage Section, the U.S. Department of State, the U.S. Department of Treasury, and the U.S. Department of Commerce for their assistance in this matter.

The case is being handled by the Terrorism and International Narcotics Unit. Assistant United States Attorney Sean S. Buckley is in charge of the prosecution. Assistant United States Attorneys Micah W. J. Smith and Paul M. Monteleoni are in charge of the forfeiture aspects of the case.

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

U.S. v. Li Fangwei in Rem Complaint and S1 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the leaders of the fraud, kickback, and money laundering scheme targeting the City of New York’s (the “City’s”) CityTime information technology project, were sentenced today in Manhattan federal court and ordered to forfeit millions of dollars in cash and property. MARK MAZER, who managed the CityTime project for the City and who was convicted of defrauding the City, receiving kickbacks while managing the project for the City, and laundering the proceeds of his crimes, was sentenced to 20 years in prison. GERARD DENAULT, who managed the project on behalf of the prime contractor on the project, Science Applications International Corporation (“SAIC”), and who was convicted of defrauding the City, defrauding SAIC of its right to DENAULT’s honest services, and laundering the proceeds of his crimes, was sentenced to 20 years in prison. DIMITRY ARONSHTEIN, who managed a subcontractor on the project and who was convicted of paying kickbacks to MAZER and working with MAZER to launder crime proceeds, was sentenced to 20 years in prison. MAZER, DENAULT, and ARONSHTEIN were sentenced today by U.S. District Judge George B. Daniels, who also presided over the defendants’ six-week jury trial in the fall of 2013. Judge Daniels also ordered that the defendants forfeit over $40 million in cash and property tied to their crimes.

Manhattan U.S. Attorney Preet Bharara said: “Today’s sentences punctuate an epic scheme by Mark Mazer, Gerard Denault, Dimitry Aronshtein, and others to steal millions of dollars through kickbacks and fraud from the City of New York, and then squirrel away the proceeds. These defendants are being justly punished – through lengthy sentences and forfeiture of over $40 million in cash and property – for orchestrating one of the largest and most brazen frauds ever committed against the City. This Office’s CityTime prosecutions have held accountable culpable individuals, as well as SAIC, the contractor at the center of the scheme, and through penalties and restitution of over $550 million, has made the City economically whole.”

According to the evidence introduced at trial, public filings, and statements made in court:

The CityTime project was a City initiative to modernize its timekeeping and payroll systems across City agencies. In 2000, SAIC became the lead contractor on CityTime, which at the time had a contract value of approximately $73 million. In 2003, SAIC appointed DENAULT as Program Manager on CityTime. DENAULT later became a Vice President of SAIC and head of SAIC’s New York office. SAIC, at the behest of DENAULT, hired Technodyne LLC (“Technodyne”) as a “single source” subcontractor to provide staffing services on the CityTime project, and repeatedly renewed Technodyne’s “single source” arrangement on the project.

Technodyne’s principals, Reddy Allen and Padma Allen, agreed to pay kickbacks to DENAULT and others in connection with the CityTime project, in exchange for obtaining what ultimately became over $325 million in work on CityTime as an SAIC subcontractor. In 2004, MAZER began managing the CityTime project for the City. Soon thereafter, he arranged with DENAULT for a company controlled by ARONSHTEIN, who is MAZER’s uncle, to become a subcontractor to Technodyne. MAZER used his power on the project to steer over $65 million in business to ARONSHTEIN’s company, and another $23 million in business to a company controlled by Victor Natanzon. In exchange for the business, ARONSHTEIN and Natanzon paid MAZER over $30 million in kickbacks, representing 80% of their net profits on the project. DENAULT received a $5 kickback from Reddy Allen and Padma Allen for every hour Technodyne billed to the City for labor. He also received an additional $2 per hour billed by ARONSHTEIN and Natanzon, resulting in total kickbacks to DENAULT of over $9 million.

Further, in order to maximize the amount of kickbacks they received, DENAULT and MAZER worked together to defraud the City into overpaying for the CityTime project by, among other things, inflating the rates charged for CityTime labor sourced through Technodyne, and overstaffing the project. MAZER also submitted fraudulent timesheets for consultants who had been fired or were on vacation. In part as a result of the fraud and kickback schemes, the costs of the CityTime project ballooned to over $620 million by the time the defendants were arrested in December 2010.

MAZER, DENAULT, and ARONSHTEIN also devised and carried out elaborate schemes to launder the proceeds of their crimes. DENAULT arranged for the kickbacks to be laundered through companies controlled by Padma Allen’s mother in India before being deposited into a shell entity account in the United States that he controlled. MAZER devised a scheme whereby ARONSHTEIN and Natanzon would launder money through shell company bank accounts controlled by Larisa Medzon, Anna Makovetskaya, and Svetlana Mazer. ARONSHTEIN also laundered millions of dollars through wire transfers to shell entity bank accounts located abroad and through other entities that he himself controlled.

In addition to the prison terms, MAZER, 50, of Manhasset, New York, ARONSHTEIN, 53, of Oceanside, New York, and DENAULT, 52, of Danbury, Connecticut, were each sentenced to three years of supervised release. The defendants were also ordered to forfeit $40 million.

These sentences follow a number of earlier developments in the case, including the guilty pleas of co-defendants Medzon, Makovetskaya, Svetlana Mazer, Carl Bell, and Natanzon; SAIC’s entry into a deferred prosecution agreement (“DPA”) in which it agreed to forfeit over $500 million to the United States; forfeiture of over $10 million in cash and property belonging to fugitive defendants Reddy Allen and Padma Allen; and payment of record restitution to the City of over $466 million, which, along with cancellation of $40 million in debt owed to SAIC, brings the total amount recovered for the City’s taxpayers as a result of the investigation and prosecution to over $500 million. The charges contained in the Indictment against Reddy and Padma Allen are merely accusations and they are presumed innocent unless and until proven guilty.

The sentencings of Medzon, Makovetskaya, and Svetlana Mazer are scheduled to take place before Judge Daniels on June 24, 2014 at 10:00 a.m. The sentencings of Natanzon and Bell have not yet been scheduled.

Mr. Bharara thanked and praised the New York City Department of Investigation (“DOI”) for its outstanding work on the case.

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

Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEPHEN WALSH, an investment manager and principal of WG Trading Company, LP (“WG Trading Company”) and WG Trading Investors, pled guilty today in Manhattan federal court to securities fraud. WALSH and his partner Paul Greenwood ran a fraudulent commodities trading and investment advisory scheme that raised billions of dollars, misappropriated hundreds of millions of those dollars for their own personal benefit, and then created false promissory notes and account statements to conceal their theft. WALSH was originally charged in February 2009, and he pled guilty today before United States Magistrate Judge Kevin Nathaniel Fox.

Manhattan U.S. Attorney Preet Bharara said: “Stephen Walsh and his partner Paul Greenwood ran an investment operation that was a veritable money-making machine – for them. Their purported investing strategy wasn’t nearly as effective as their fraudulent sales pitch to investors. Walsh personally pocketed tens of millions in stolen investor dollars. He will soon surrender his money and himself to answer for this fraud.”

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

From at least 1996 through February 2009, WALSH and Greenwood solicited $7.6 billion in investor funds on the understanding that they would invest the funds in a program called “equity index arbitrage,” which they represented was a conservative trading strategy that had outperformed the results of the S&P 500 Index for more than 10 years. As a result, several institutional investors – including charitable and university foundations, and retirement and pension plans – invested billions of dollars. Investors either became limited partners in WG Trading Company or received promissory notes issued by WG Trading Investors that WALSH and Greenwood represented would pay interest at a rate equal to the investment returns earned by a limited partner of WG Trading Company.

Contrary to their representations to investors, WALSH and Greenwood misappropriated hundreds of millions of dollars in investor funds for their own personal use, and to satisfy obligations on investments that were unrelated to the “equity index arbitrage” trading business. Among other things, WALSH used the funds to finance his lifestyle, to make payments to his ex-wife totaling millions of dollars pursuant to their divorce settlement, and to finance business ventures of his children.

WALSH and Greenwood executed promissory notes in favor of WG Trading Investors, partly to conceal trading losses and their misappropriation of investor funds. These promissory notes totaled approximately $554 million, of which approximately $261 million were payable by WALSH to WG Trading Investors. These notes materially misstated the financial condition of WG Trading Company and misled investors. WALSH and Greenwood also created and caused others to create false account statements that were sent to clients to reflect fictitious returns consistent with the returns that had been promised to those clients.

WALSH, 69, of Sands Point, New York, pled guilty to Count Two of the Indictment, which charges him with securities fraud. This charge carries a maximum penalty of 20 years in prison. Pursuant to a plea agreement, WALSH agreed to entry of a forfeiture order in the amount of $50,743,779, which represents the amount of funds that WALSH misappropriated and by which he personally profited from the fraud. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

On July 21, 2009, Deborah Duffy, the former Chief Compliance Office of WG Trading Company, pled guilty to conspiracy, securities fraud, and money laundering for her role in the fraud scheme. On July 28, 2010, Greenwood, a managing general partner of WG Trading Company, pled guilty to conspiracy, securities fraud, commodities fraud, wire fraud, and money laundering for his role in the fraud scheme. Sentencing dates for Duffy and Greenwood have not yet been set.

Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the United States Securities and Exchange Commission, the United States Commodity Futures Trading Commission, and the National Futures Association, for their assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John J. O’Donnell, Jessica A. Masella, and Benjamin A. Naftalis are in charge of the prosecution.

U.S. v. Stephen Walsh & Paul Greenwood Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MAHAMADOU DAFFE, a tax preparer in Queens, New York, was sentenced today in Manhattan federal court to 102 months in prison for his participation in a conspiracy to steal government funds, theft of government funds, conspiracy to file false claims, wire fraud, and aggravated identity theft in connection with the preparation and filing of nearly 1,000 false income tax returns submitted online using stolen identities. DAFFE was also sentenced today in connection with his participation in a conspiracy to steal government funds, theft of government funds, and conspiracy to file false claims in connection with his use of stolen children’s identities to claim false dependents on his clients’ income tax returns. DAFFE was found guilty in January 2014 after a one-week trial before U.S. District Judge Naomi Reice Buchwald.

Manhattan U.S. Attorney Preet Bharara stated: “Tax preparer Mahamadou Daffe orchestrated schemes to file false returns on behalf of his clients and used stolen identities to deceive the IRS, all for his own unjust enrichment. His unscrupulous practices and flagrant violation of the law have now been justly punished.”

According to the Indictment, as well as evidence presented at DAFFE’s trial:

From 2008 through January 2013, DAFFE engaged in two separate schemes to defraud the Internal Revenue Service (“IRS”). DAFFE filed false tax returns for his tax preparation clients, in which he caused those clients to claim as dependents children who were in fact total strangers to them, and whose identities DAFFE stole. In exchange, DAFFE collected $1,000 per return.

In another scheme, during the same time frame, DAFFE used stolen identities to file hundreds of false tax returns, supported by bogus Forms W-2, through an online tax preparation service intended for use by individual taxpayers. He then funneled the resulting refunds into numerous bank accounts he controlled—accounts in his own name, the names of co-conspirators, and the names of aliases DAFFE and his co-conspirators used. DAFFE’s crimes resulted in a loss to the IRS of more than $1.5 million, during which he attempted to steal more than $4.5 million from the Government.

In addition to the prison term DAFFE, 31, of Queens, New York, was also sentenced to three years of supervised release.

Mr. Bharara praised the investigative work of the Internal Revenue Service, Criminal Investigation, and thanked the IRS for its assistance.

This case is being handled by the Office’s General Crimes Section. Assistant U.S. Attorneys Carolina A. Fornos and Sarah E. McCallum are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that YONG WANG was sentenced today in Manhattan federal court to 210 months in prison for advertising in connection with the sexual exploitation of children through 18 Chinese-language child pornography websites he owned and operated. WANG pled guilty in May 2013 and was sentenced today by U.S. District Judge Paul G. Gardephe.

Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence, Yong Wang will be punished – with a loss of his liberty – for earning a living at the expense of innocent children by operating a vast network of illicit child pornography websites from the comfort of his home. Those who conduct businesses that capitalize on the sexual exploitation of children should understand that this Office and its law enforcement partners have no tolerance for such operations and are actively working to shut them down.”

According to documents filed in Manhattan federal court and statements made in related court proceedings:

WANG maintained 18 Chinese-language websites out of his apartment in Flushing, New York. Members of the websites could access numerous links to an extensive child pornography collection that included images and videos of children exposing their genitals, engaging in sexually explicit conduct with adults, and in sadistic and/or masochistic depictions. To access the websites, individuals had to purchase a “VIP membership” or accumulate a certain number of points. WANG charged customers $25 for a quarterly membership and $100 for a lifetime membership. Undercover FBI agents registered for a VIP membership with WANG and gained access to one of the websites entitled - in Chinese - “Empire of the Young and Innocent Fragrances.” On the website, users were directed to different forums with links that were titled with descriptive names, such as “Young Young Empire,” “Young Girl Beauty Photos Military Region,” “Young Boy Movie Zone,” and “Exclusive Quality Young Girl Photos Set.” WANG made in excess of $700,000 in connection with his operation of these websites.

In addition to the prison term, WANG, 28, a citizen of China who resided in Flushing, New York, was ordered to pay $750,000 in forfeiture, representing the proceeds he obtained from operating the child pornography websites, and a $250,000 fine.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the Chinese Ministry of Public Security for their cooperation and assistance.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Rosemary Nidiry is in charge of the prosecution and Assistant U.S. Attorney Alexander Wilson is in charge of the forfeiture aspects of the case.

Preet Bharara, United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Mark G. Peters, the Commissioner of the New York City Department of Investigation (“DOI”), announced today the arrest of AKIM MURRAY, an employee of the Medicaid Reimbursement Unit of the New York City Human Resources Administration (“HRA”), for Medicaid fraud. The Complaint alleges that MURRAY, an HRA Eligibility Specialist whose job involved issuing reimbursements for Medicaid-eligible expenses, manipulated the system in order to have hundreds of thousands of dollars’ worth of checks issued to his friends and criminal associates, who in turn gave him a substantial cut of the proceeds. MURRAY was taken into custody this morning, and is expected to be presented this afternoon in Manhattan federal court before Chief U.S. Magistrate Judge Kevin Nathaniel Fox.

Manhattan U.S. Attorney Bharara said: “Akim Murray was supposed to make sure that Medicaid benefits went to people eligible for the program. Instead, as alleged, Murray abused his position as a New York City employee and diverted hundreds of thousands of dollars earmarked for people in need to line his own pockets and those of his friends. Such abuses cannot and will not be tolerated by this Office and our law enforcement partners.”

FBI Assistant Director-in-Charge Venizelos said: “As alleged in the complaint, Murray used his position as an HRA Eligibility Specialist to profit off of a system designed to help those in financial distress obtain medical assistance. Health care fraud increases costs for everyone, wastes tax dollars, and destroys the integrity of our health care system. The FBI, along with our federal, state and local law enforcement partners, is committed to investigating this type of fraud and hold accountable those who take advantage of our government health care programs.”

DOI Commissioner Peters said: “This public servant used Medicaid benefits as a treasure trove to enrich himself and his cohorts, creating an intricate criminal network of kickbacks, according to the charges. This investigation shows that gaming the system to siphon public funds away from eligible individuals will only lead to arrest.”

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

Medicaid is a federally-funded program designed to provide low-income families with affordable health care. The New York City Human Resources Administration oversees the program and processes applications from New York City residents. Under Medicaid, individuals who successfully apply for Medicaid coverage can be reimbursed for eligible expenses submitted in the approximately three-month period prior to the application (“Pre-Enrollment Services”). In order to be reimbursed for Pre-Enrollment Services, the successful Medicaid applicant requesting reimbursement must provide proof that he or she made eligible health care payments out of pocket before applying for Medicaid. City employees known as Eligibility Specialists, working for HRA’s Medicaid Reimbursement Unit, receive and process requests for reimbursement using a computer system, and make recommendations for HRA supervisors as to whether a request should be approved.

From at least July 2009 until September 2010, MURRAY, an HRA Eligibility Specialist, exploited loopholes in HRA’s computer systems to both recommend and then separately approve the issuance of Medicaid reimbursement checks without meaningful oversight. MURRAY used the personal identifying information of his co-conspirators to create and unilaterally approve requests for reimbursement checks in their names. When the checks were sent to his friends and other associates, MURRAY demanded that they cash the checks and give him between 50-70% of the proceeds. MURRAY approved hundreds of thousands of dollars in Medicaid reimbursement requests without proper oversight.

MURRAY, 52, of New York, New York, is charged with one count of conspiracy to commit mail fraud and health care fraud, one count of mail fraud, and one count of health care fraud, which carry maximum sentences of 20 years, 20 years, and 10 years in prison, respectively. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Bharara thanked and praised the DOI and 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 Public Corruption Unit. Assistant United States Attorney Martin S. Bell 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. Akim Murray Complaint

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, the Police Commissioner of the City of New York (“NYPD”), announced the unsealing of a seven-count Superseding Indictment yesterday charging eight members of a robbery crew operating across New York, New Jersey, Virginia, and Connecticut with robbery conspiracy and robberies of high-end jewelry and watch stores using violence, including firearms, and resulting in the theft of more than one million dollars in watches and other goods.

The Superseding Indictment charges SEAN ROBINSON, 42, ALLEN WILLIAMS, 35, ROBERTO GRANT, 33, TERRELL RATLIFF, 22, TYRONE DEHOYOS, 35, RALIK HANSEN, 28, RONALD MCINTYRE, 36 and KENDAL THOMPSON, 30, with robbery conspiracy, substantive robbery, and firearms offenses. Five of the defendants – WILLIAMS, GRANT, RATLIFF, DEHOYOS, and THOMPSON – were previously arrested and detained pending trial. Yesterday, ROBINSON was arrested in Brooklyn, New York, and McINTYRE was transferred into federal custody, and both were arraigned before Judge Robert P. Patterson and detained pending trial. HANSEN remains wanted by the FBI and is considered to be armed and dangerous.

According to the allegations contained in the Superseding Indictment, other court documents previously filed in federal court, and statements made in Court yesterday:

Between approximately July 1, 2013, and January 30, 2014, a highly organized crew engaged in a series of violent robberies of high-end jewelry and watch stores located in four states, smashed display cases with hammers, while customers and employees were in the stores, and stole more than one million dollars in luxury watches. The crew used violence as necessary to carry out the scheme. For example, during one robbery in September 2013 in Brooklyn, New York, two of the robbers displayed handguns, and a store owner was shot when he attempted to prevent members of the crew from fleeing with their stolen watches. In another robbery in August 2013 in Richmond, Virginia, the robbers used a handheld stun gun to subdue a female store employee before fleeing with more than a $100,000 in watches.

Among the stores robbed by the crew are: Cartier in Manhattan, New York; the Borgata Hotel and Casino in Atlantic City, New Jersey; Schwarzschild’s Jewelers in Richmond, Virginia; Martin Jewelers in Cranford, New Jersey; Henry Reid and Sons Jewelers in New Canaan, Connecticut, and Litan Jewelers in Brooklyn, New York.

Mr. Bharara praised the investigative work of the FBI and the NYPD. He also thanked the police departments of Cranford, New Jersey; Atlantic City, New Jersey; Richmond, Virginia; and New Canaan, Connecticut, and the Manhattan and Brooklyn District Attorneys’ Offices, and the Union County, New Jersey, Prosecutor’s Office, for their assistance in the investigation, which he noted is ongoing.

The case is being prosecuted by the Office’s General Crimes Unit. Assistant United States Attorneys Andrea Griswold and Richard Cooper are in charge of the prosecution.

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

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U.S. v. Allen Williams et al. S3 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOSEPH L. JUNKOVIC, a contractor who administered cancer screening services for low-income New Yorkers, pled guilty today to defrauding the New York State Department of Health (“NYSDOH”). JUNKOVIC pled guilty before U.S. District Judge Katherine B. Forrest.

Manhattan U.S. Attorney Preet Bharara said: “Joseph Junkovic used his contract position with the New York State Department of Health to enrich himself and cheat the public out of hundreds of thousands of dollars intended for low-income New Yorkers in need of potentially lifesaving services. With today’s guilty plea, Junkovic will be made to pay for short-term financial gain by a likely term in federal prison.”

According to the allegations made in previously filed Court papers and statements made at today’s plea proceeding:

From April 2008 through September 2011, JUNKOVIC used a not-for-profit corporation that he controlled, Cancer Service Network, Inc. (“CSN”), to obtain more than 18 separate contracts with NYSDOH to provide cancer screening services for indigent New Yorkers. CSN, however, was merely a pass-through organization run out of JUNKOVIC’s home in the Bronx, and JUNKOVIC directed the monies CSN received from NYSDOH to administer the cancer screening programs to his personal consulting company, JLJ Consulting Group, Ltd. (“JLJ”). In billing NYSDOH for his services, JUNKOVIC submitted separate invoices for each contract listing the total number of hours he claimed to have worked each month. When added together, JUNKOVIC frequently billed NYSDOH for well more than 600 hours per month – more than 140 hours per week (20 hours a day, including Saturdays and Sundays) – for his purported services, even while he was frequently on vacation or spending thousands of dollars at various casinos.

For some months, JUNKOVIC claimed he had worked so many hours on multiple contracts simultaneously that he billed a total of more than 24 hours a day for his services. On other occasions, he claimed he worked hundreds of hours while he was overseas. For example, for the month of August 2010, CSN billed NYSDOH for more than 590 hours of JUNKOVIC’s time, even though travel and bank records show that JUNKOVIC traveled to Vienna, Austria, on August 6, 2010 and did not return until August 30, 2010.

As part of his plea agreement, JUNKOVIC admitted to causing more than $360,000 in losses to NYSDOH.

JUNKOVIC, 49, of the Bronx, New York, pled guilty to one count of making false statements in connection with a health care program and faces a maximum sentence of five years in prison. As part of the plea agreement, JUNKOVIC has agreed to forfeit $360,556, and to pay restitution to the State of New York an amount up to $360,556. JUNKOVIC is scheduled to be sentenced by Judge Forrest on July 30, 2014, at 1:00 p.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.

Mr. Bharara praised the investigative work of the Office of the New York State Comptroller.

This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Andrew D. Goldstein is in charge of the prosecution.

U.S. v. Nick A. Jodha Information

Preet Bharara, the United States Attorney for the Southern District of New York, and James J. Hunt, the Acting Special Agent-in-Charge of the New York Field Division of the U.S. Drug Enforcement Administration (“DEA”), announced that CRAIG OLEKSOWICZ was sentenced today by U.S. District Judge Edgardo Ramos in Manhattan federal court to 120 months’ imprisonment. OLEKSOWICZ’s criminal conduct, for which he was sentenced, included illegally distributing oxymorphone, a Schedule II controlled substance, the use of which caused the July 2011 and October 2011 deaths of another individual, two young men in Pearl River, New York.

U.S. Attorney Bharara stated: “The illegal distribution of highly-addictive and dangerous prescription pills is the fastest-growing drug problem in the country. Painkillers that Craig Oleksowicz illegally dealt led to the overdose death of two young men. Today’s sentence of ten years in prison for Oleksowicz’s crimes shows how seriously this Office takes this public health epidemic.”

According to the Information, to which OLEKSOWICZ pled guilty, statements made during the plea and sentencing proceedings or associated court filings:

OLEKSOWICZ, 38, of Pearl River, New York, used worker’s compensation benefits to pay for prescriptions of oxymorphone, codeine, methadone, and other medications. Between at least February 2011 and October 2011, OLEKSOWICZ and others regularly distributed OLEKSOWICZ’s prescription oxymorphone pills for profit. Oyxmorphone is a powerful painkiller with a high potential for addiction and abuse, and its improper use may lead to fatality. Indeed, in July 2011 and in October 2011, the use of oxymorphone pills supplied by OLEKSOWICZ caused the overdose death of two young men, aged 20 and 21, respectively, both residents of Pearl River. In the months following those deaths, OLEKSOWICZ continued his illegal distribution of pills, selling codeine, methadone, and Valium pills for profit on at least four separate occasions in February 2012.

Mr. Bharara praised the investigative efforts of the DEA, the Westchester County Department of Public Safety, the Rockland County Drug Task Force, and the Orangetown Police Department.

The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Christopher J. DiMase and Abigail Kurland 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 Shantelle P. Kitchen, the Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of a twelve-count Indictment charging JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and PEI SHEN QIAN with orchestrating a $33 million scheme to create and sell paintings that they pretended were painted by world-famous artists but were, in fact, created by QIAN. The Indictment further charges JOSE CARLOS BERGANTINOS DIAZ and JESUS ANGEL BERGANTINOS DIAZ with laundering the proceeds of the fraud, and charges JOSE CARLOS BERGANTINOS DIAZ with hiding international bank accounts and millions of dollars in illicit income from the IRS. QIAN is also charged with lying to FBI agents investigating the scheme. JESUS ANGEL BERGANTINOS DIAZ and JOSE CARLOS BERGANTINOS DIAZ were arrested on April 14, 2014, and April 18, 2014, respectively, in Spain, and QIAN is believed to be located in China. The case has been assigned to U.S. District Court Judge Sidney H. Stein.

Manhattan U.S. Attorney Preet Bharara said: “Today’s charges paint a picture of perpetual lies and greed. As alleged, the defendants tricked victims into paying more than $33 million for worthless paintings which they fabricated in the names of world-famous artists. The Bergantinos Diaz brothers then laundered and hid their illegal proceeds overseas. With today’s Indictment, the defendants must now answer for their alleged roles as modern masters of forgery and deceit.”

FBI Assistant Director-in-Charge Venizelos said: “As alleged, a meeting on a New York street corner would lead to a worldwide art fraud scheme that netted the defendants more than $33 million over two decades. The charges announced today show the many facets the conspirators went through to peddle fraudulent creations as famous artwork to be sold for a large profit. These charges also show the FBI’s commitment to investigate and bring to justice those who use fraud as a means to make money.”

IRS Special Agent-in-Charge Shantelle Kitchen said: “This indictment represents a significant accomplishment in the unravelling of a major international art fraud conspiracy with underlying complex financial criminal activity. The Internal Revenue Service has made international tax administration a top priority and this investigation illustrates the government's resolve in uncovering, investigating and prosecuting tax evasion and money laundering schemes with international implications. Furthermore, it reminds the public that the proceeds from illegal sales, in this case, the sale of counterfeit paintings, can be taxable.”

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

From the early 1990’s through at least June 2009, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, PEI SHEN QIAN, and Glafira Rosales engaged in a scheme to create and sell paintings that they pretended were painted by world-famous abstract expressionist artists, including Mark Rothko, Jackson Pollock, Willem de Kooning, Richard Diebenkorn, Robert Motherwell, Barnett Newman, Sam Francis, and Franz Kline, among others (the “Fake Works”). By knowingly and falsely claiming that the Fake Works were painted by these famous artists, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, QIAN, and Rosales were able to trick purchasers into paying tens of millions of dollars in total for many of the Fake Works which, as the defendants and Rosales well knew, were essentially worthless. In fact, the Fake Works were created by QIAN, with guidance from Rosales and the other defendants.

JOSE CARLOS BERGANTINOS DIAZ first met QIAN on a street corner in Manhattan, where QIAN was selling paintings. Thereafter, QIAN created the Fake Works at the request of, and in exchange for payments from, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and Rosales.

JOSE CARLOS BERGANTINOS DIAZ purchased canvases of old paintings at flea markets, and stained newer canvases with tea bags, which he gave to QIAN to create the Fake Works, and thereby create the false appearance that the Fake Works had been created decades earlier. In addition, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and Rosales created false provenances (i.e., historical ownership records) for particular Fake Works in order to dupe purchasers into believing that those Fake Works were painted by particular famous artists, instead of by QIAN. All told, the defendants earned more than $33 million from the scheme to create and sell the Fake Works.

Further, to conceal the illegal nature and origin of the proceeds from the scheme, JOSE CARLOS BERGANTINOS DIAZ, JESUS ANGEL BERGANTINOS DIAZ, and Rosales laundered the fraud proceeds by transferring them through foreign and domestic bank accounts that they controlled. JOSE CARLOS BERGANTINOS DIAZ also hid over $7 million of his illicit income from the IRS and knowingly failed to report the existence of his foreign bank accounts, as required by law.

Finally, during an interview with FBI agents investigating the scheme, QIAN falsely claimed, among other things, that he did not recognize Rosales’s name, that QIAN was unfamiliar with the names of certain artists (including artists whose names QIAN had repeatedly signed on paintings he created in order to trick purchasers into believing those artists had created the paintings), and that QIAN had never attempted to create paintings mimicking the style of certain abstract expressionist artists.

JOSE CARLOS BERGANTINOS DIAZ, 58, of Sands Point, New York, is charged with one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, and one count of money laundering, each of which carries a maximum sentence of 20 years in prison. He is also charged with one count of conspiracy to defraud the IRS, which carries a maximum sentence of five years in prison, three counts of filing false tax returns, each of which carries a maximum sentence of three years in prison, and four counts of willful failure to file a Report of Foreign Bank and Financial Accounts, each of which carries a maximum sentence of five years in prison.

JESUS ANGEL BERGANTINOS DIAZ, 65, of Lugo, Spain, is charged with one count of conspiracy to commit wire fraud, one count of wire fraud, one count of conspiracy to commit money laundering, and one count of money laundering.

PEI SHEN QIAN, 75, of Queens, New York, is charged with one count of conspiracy to commit wire fraud and one count of wire fraud. He is also charged with one count of making false statements to agents of the FBI, which carries a maximum 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 defendants will be determined by the judge.

Rosales was previously charged in Indictment 13 Cr. 518. On September 16, 2013, Rosales pled guilty to all nine counts of the Indictment. Rosales awaits sentencing before the U.S. District Judge Katherine P. Failla.

Mr. Bharara praised the outstanding efforts of the FBI and IRS-CI in the investigation, which he noted is ongoing.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Jason P. Hernandez and Stanley J. Okula, Jr., are in charge of the prosecution.

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

U.S. v. Bergantinos Diaz, et al. Indictment